Star Dev. Corp. v. Urgent Care Assocs., Inc.

• Decision Date: 01 May 2014
• Docket Number: No. WD 76619.,WD 76619.
• Citation: 429 S.W.3d 487
• Parties: STAR DEVELOPMENT CORPORATION, Respondent, v. URGENT CARE ASSOCIATES, INC., et al, Appellant.
• Court: Missouri Court of Appeals

429 S.W.3d 487

STAR DEVELOPMENT CORPORATION, Respondent,

v.URGENT CARE ASSOCIATES, INC., et al, Appellant.

No. WD 76619.

Missouri Court of Appeals, Western District.

April 29, 2014.

As Corrected May 1, 2014.

Before Division Four: James E. Welsh, Chief Judge, Presiding, Lisa White Hardwick, Judge And Gerald D. McBeth, Special Judge.

Juliann W. Graves, Overland Park, KS, for appellant.

Scott R. Ast, Kansas City, MO, for respondent.

LISA WHITE HARDWICK, Judge.

Urgent Care Associates, Inc., d/b/a Liberty Urgent Care (“Urgent Care”), and its owner and operator, David Ochs, D.O., appeal the circuit court's judgment awarding damages and attorneys' fees to Star Development Corporation (“SDC”) based upon the parties' lease agreement. Urgent Care and Ochs contend the circuit court erred in: (1) ordering them to pay late charges; (2) finding that Urgent Care was required to give SDC a thirty-day written notice of termination of its month-to-month tenancy; and (3) awarding SDC attorney's fees. For reasons explained herein, we affirm the circuit court's judgment. Furthermore, we sustain SDC's motion for attorney's fees on appeal and remand the case to the circuit court for a hearing to determine the reasonableness of the amount requested.

Factual and Procedural History

SDC is a commercial leasing company that owns many properties and leases commercial space to numerous tenants. Tim Harris is the president of SDC. One of the commercial properties that SDC owns and operates is the Liberty Landing Shopping Center (“Liberty Landing”).

In December 2003, Urgent Care entered into a commercial lease agreement with SDC for space in Liberty Landing. Ochs signed a guaranty on the lease. Pursuant to the lease's terms, Urgent Care was to pay rent to SDC each month, plus its proportionate share of estimated common area maintenance (“CAM”) fees, insurance, and taxes. Within a reasonable time after the end of each calendar year, SDC was to calculate Urgent Care's share of the actual CAM fees, insurance, and taxes. If the actual allocable expenses were more than the estimated allocable expenses, then Urgent Care was required to pay the difference. Conversely, if the actual allocable expenses were less than the estimated allocable expenses, then Urgent Care was entitled to a credit. The lease was to expire on December 31, 2007, but it included two options to extend, each for three-year terms. In 2007, Urgent Care exercised its option to extend the lease to December 31, 2010.

On December 17, 2010, Harris and Sheryl Giambalvo, a broker for SDC, met with Ochs. During this meeting, Ochs expressed an interest in expanding Urgent Care's space in Liberty Landing. Ochs was unsure at that time, however, if he wanted to extend the lease for another three-year term. Consequently, the parties agreed that, when the lease expired on December 31, 2010, Urgent Care would become a month-to-month tenant, under the same rate and terms as the lease.¹ Ochs did not give notice at that time that Urgent Care would be vacating the premises.

After the December 2010 meeting, Giambalvo immediately contacted the tenant adjacent to Urgent Care to determine if that tenant would relinquish some of its space to Urgent Care. She then attempted to contact Ochs to discuss the possible expansion with him, but he never returned her call. There were no further meetings between SDC and Ochs.

In March 2011, Giambalvo was driving to lunch and saw Urgent Care's sign on another location in Liberty. She called Urgent Care, and the receptionist told her Urgent Care had moved. This was the first time that SDC became aware that Urgent Care was vacating the leased space in Liberty Landing, as SDC had not received any notice from Ochs or anyone else at Urgent Care. It was SDC's practice and policy to market leased space once it was notified that the space was to become available. This marketing was done immediately, through signs, showings of the space, and notifications to other brokers of the space's availability. SDC had not marketed Urgent Care's leased space in Liberty Landing between January 2011 and March 2011 because it had not received notice of Urgent Care's plans to vacate.

Urgent Care surrendered the keys to the leased space to SDC on April 4, 2011. On April 7, 2011, Urgent Care gave written notice to SDC that it was vacating the leased space.

On October 20, 2011, SDC filed a petition for damages against Urgent Care and Ochs. It amended the petition on September 25, 2012. In Count I of the amended petition, SDC sought damages for rent, CAM fees, insurance, taxes, and late charges that it claimed Urgent Care owed. In Count II, SDC sought attorney's fees under the lease agreement.² Urgent Care and Ochs filed counterclaims for an accounting and breach of contract. Urgent Care also sought attorney's fees and costs.

Following a bench trial, the court found that: (1) because Urgent Care did not provide written notice to SDC that it was vacating the premises until April 7, 2011, Urgent Care and Ochs owed rent and late charges for April and May 2011 in the amount of $4,018.67; (2) Urgent Care and Ochs owed a total of $19,122 in late charges on 39 rental payments made between 2006 and 2010 because those payments were not made by the tenth of the month; (3) even though SDC sold a portion of Liberty Landing in 2007, Urgent Care's allocable percentage of CAM fees, insurance, and taxes did not increase but remained the percentage stated in the lease; (4) Urgent Care and Ochs owed SDC $3,213.78 in CAM fees, insurance, and taxes for 2010 and January through May 2011; (5) under the lease, SDC was entitled to reasonable attorney's fees and costs in the amount of $12,465.60 from Urgent Care and Ochs; and (6) Urgent Care and Ochs did not present any evidence to support their counterclaims. Accordingly, the court entered judgment in favor of SDC and against Urgent Care and Ochs on all claims except SDC's claim for adjusted CAM fees for 2008 and 2009. Urgent Care and Ochs appeal.

Standard of Review

We will affirm the circuit court's judgment unless there is no substantial evidence to support it, it is against the weight of the evidence, it erroneously declares the law, or it erroneously applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). We view the evidence and inferences therefrom in the light most favorable to the court's judgment and disregard all contrary evidence and inferences. Cowbell, LLC v. BORC Bldg. & Leasing Corp., 328 S.W.3d 399, 404 (Mo.App.2010). We defer to the court's determination of the witnesses' credibility and the weight to be given their testimony. Underwood v. Hash, 67 S.W.3d 770, 774 (Mo.App.2002). The circuit court was “free to accept or reject all, part, or none of the testimony of any witness.” Maskill v. Cummins, 397 S.W.3d 27, 34 (Mo.App.2013).

Analysis

Urgent Care and Ochs's first three points on appeal challenge the circuit court's award of late charges on 39 rental payments Urgent Care made between 2006 and 2010, for a total of $19,122. Article 3 of the lease required Urgent Care to make monthly rental payments “in advance upon the first day of each and every month during the term.” Article 3(c) of the lease required Urgent Care to pay a late charge equal to 15% of any rental payment not made by the tenth of the month:

Late Charges: Tenant acknowledges that Landlord shall be required to expend certain administrative efforts in the event Tenant shall fail to timely remit payments due under the terms of this Lease. Accordingly, and in addition to interest which Tenant may be required to pay Landlord on late remittances (but without waiving Landlord's right to treat such late remittances as a default on or a breach of this lease), Tenant agrees to pay Landlord a late charge of fifteen percent (15%) of any remittance which is not made within (10) days after the due date for such remittance.

In Points I and II, Urgent Care and Ochs contend the court erred in awarding SDC late charges because SDC failed to present sufficient evidence establishing that the late charge provision was a liquidated damages clause and not a penalty clause.

Generally, liquidated damages clauses in contracts are enforceable, while penalty clauses are not. Paragon Group, Inc. v. Ampleman, 878 S.W.2d 878, 880 (Mo.App.1994). This is because “the objective behind contractual remedies is to effect a compensatory award, not to provide a penalty for the breach of an agreement.” Luna v. Smith, 861 S.W.2d 775, 779 (Mo.App.1993). “Liquidated damages are a measure of compensation which, at the time of contracting, the parties agree shall represent damages in case of breach.” Paragon, 878 S.W.2d at 880. In contrast, penalty clauses serve as punishment for a default or breach. Diffley v. Royal Papers, Inc., 948 S.W.2d 244, 246 (Mo.App.1997).

Missouri has adopted the Restatement of Contracts rules to aid in determiningwhether a damages clause is an enforceable liquidated damages clause or an unenforceable penalty provision. Luna, 861 S.W.2d at 779. To be a liquidated damages clause: “(1) the amount fixed as damages must be a reasonable forecast for the harm caused by the breach; and (2) the harm must be of a kind difficult to accurately estimate.” Paragon, 878 S.W.2d at 881 (citing Restatement (Second) of Contracts § 356 (1979)). Additionally, the non-breaching party must show some actual harm. Goldberg v. Charlie's Chevrolet, Inc., 672 S.W.2d 177, 179 (Mo.App.1984). “While this need not be a precise dollar amount, it nevertheless must be shown that some harm or damage, in fact, occurred” to trigger the liquidated damages clause. Id.;Paragon, 878 S.W.2d at 881.

As with any contract, “the intention of the parties in each case governs the construction.” Wilt v. Waterfield, 273 S.W.2d 290, 295 (Mo.1954). Thus, in deciding “whether an agreement sets forth a penalty or liquidated damages, we look to the intention of the parties as ascertained from the contract as a whole.” Diff...