Towers Hotel Corp. v. Rimmel

• Decision Date: 05 April 1989
• Docket Number: No. 87-1896,87-1896
• Citation: 871 F.2d 766
• Parties: TOWERS HOTEL CORPORATION, a Corporation, Appellant, v. Gerald A. RIMMEL, Receiver, Mansion House Center Properties, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 766

871 F.2d 766

TOWERS HOTEL CORPORATION, a Corporation, Appellant, v. Gerald A. RIMMEL, Receiver, Mansion House Center Properties, Appellee.

No. 87-1896.

United States Court of Appeals Eighth Circuit.

Submitted June 17, 1988.

Decided April 5, 1989.

John Michael Clear, St. Louis, Mo., for appellant.

Gene Zafft, St. Louis, Mo., J. Christopher Kohn, Washington, D.C., for the U.S. (receivership) at the request of the Court.

Before ARNOLD, Circuit Judge, ROSS, Senior Circuit Judge, and WOLLE, District Judge. ^*

ROSS, Senior Circuit Judge.

Appellant Towers Hotel Corporation (Towers) appeals the district court's denial of Towers' motion to enforce the Second Restated Settlement Agreement (SRSA) which was executed between Towers and the appellee, Gerald A. Rimmel, the court-appointed Receiver (Receiver) of the Mansion House Center. Towers argues that the district court erred in refusing to order the immediate enforcement of the SRSA and in finding that Towers was not entitled to $500,000 held in escrow by the Receiver pursuant to paragraph 2(D)(iii) of the SRSA. For the reasons set forth below, we reverse and remand the case for further proceedings.

BACKGROUND

This case concerns the South Tower of the Mansion House Center, which appellant Towers operates as a hotel in downtown St. Louis, Missouri. In 1978, Towers entered into a twenty-year renewable lease of the South Tower (Lease) with appellee Gerald A. Rimmel, the court-appointed Receiver of the Mansion House properties. ¹ In 1980, Towers filed this action alleging that the Receiver had breached the Lease. The Receiver counterclaimed alleging wrongful conduct by Towers.

On January 19, 1984, after protracted negotiations in this lawsuit and other related Mansion House actions, Towers and the Receiver entered into the Second Restated Settlement Agreement (SRSA). ² This agreement provided, inter alia, for the dismissal of all litigation between the parties (paragraph 3); for the execution of certain lease modifications (paragraph 5); for the crediting of certain rental payments (paragraph 6); and for the exchange of certain releases (paragraphs 8, 10, 11, 12, 13). Paragraph 7 also required Towers to expend at least $1.8 million for improvements and renovations to the South Tower.

Paragraph 2 of the SRSA further required Towers to construct a banquet facility adjacent to the South Tower. As the Receiver's capital contribution or "costs" for that facility, the Receiver agreed to escrow the sum of $500,000, which would be paid to Towers upon the lien-free completion of the project. Paragraph 2(D) provided, however, that if the lowest acceptable bid for the project exceeded $1.7 million or if Towers was unable to obtain acceptable financing for the project, then Towers had the right not to construct the facility. In that event, paragraph 2(D)(iii) of the SRSA provided that Towers would still be entitled to draw upon the escrowed $500,000 provided that it make certain other capital additions or structural improvements which would enhance the value and economic viability of the South Tower.

Although the SRSA was unconditionally approved by the district court on December 2, 1985, the parties to date have failed to consummate any of the various provisions of their agreement. This failure apparently has been primarily due to the present dispute concerning whether Towers' expense for the installation of a new sprinkler system in the South Tower is eligible for reimbursement from the escrow fund under paragraph 2(D)(iii). ³

Installation of the sprinkler system began in the spring of 1986. In September 1986, as the sprinkler system neared completion, Towers elected under paragraph 2(D) not to construct the banquet facility because the lowest acceptable bid for such construction exceeded $1.7 million. After taking this election, Towers asserted that it was entitled to reimbursement for the new sprinkler system, claiming that the new system qualified as a "capital addition or structural improvement" under paragraph 2(D)(iii). The Receiver, however, refused to recognize the sprinkler system as a reimbursable capital addition or structural improvement, claiming that the expense of the sprinkler system was already Towers' obligation under the terms of the Lease.

Thereafter, on December 5, 1986, Towers filed a motion in district court seeking enforcement of the SRSA and an order requiring the Receiver to release the $500,000 escrowed funds as reimbursement for its sprinkler system expenses. A hearing was held on January 20, 1987, and supplemental materials were subsequently filed with the court. On June 2, 1987, the district court denied Towers' motion to enforce the SRSA on the grounds that Towers had not complied with its obligation under paragraph 2(D) of the SRSA. Specifically, the district court concluded that under paragraph 2(D):

Towers is required to obtain prior written approval, from both HUD and the Receiver, to treat a specific capital improvement as the alternate capital improvement to be constructed pursuant to paragraph 2(D) of the SRSA. Towers did not obtain such prior written approval. Further, and more importantly, the Court concludes that the sprinkler system does not qualify as an alternate capital improvement under paragraph 2(D) of the SRSA because: (1) Towers is required to expend $1,700,000 [the amount of the upset bid price] on an alternate capital improvement, and (2) Towers was required to construct the sprinkler system under the Lease.

Towers Hotel Corp. v. Rimmel, 661 F.Supp. 1013, 1051 (E.D.1987) (emphasis original). The district court also held that under paragraph 2(D), "the Receiver is entitled to have Towers construct one single project for $1,700,000. Towers should not be allowed unilaterally to break that up into several smaller projects." Id. at 1023. Towers now appeals.

DISCUSSION

A. Jurisdiction

Before addressing the merits of Towers' appeal, we first consider the threshold question of whether this court has jurisdiction. Towers asserts that appellate jurisdiction is conferred under 28 U.S.C. Sec. 1292(a)(1), Sec. 1292(a)(2), and the collateral order exception to Sec. 1291. The Receiver, on the other hand, asserts that we have no jurisdiction because the district court's order was merely an administrative order relating to the implementation and consummation of the SRSA. We find that 28 U.S.C. Sec. 1292(a)(1) and Sec. 1292(a)(2) do not provide an appropriate basis for jurisdiction. ⁴ We conclude, however, that the collateral order exception to 28 U.S.C. Sec. 1291 confers appellate jurisdiction in this instance.

28 U.S.C. Sec. 1291, commonly referred to as the final judgment rule, provides that the courts of appeals have jurisdiction of appeals "from all final decisions of the district courts * * * except where a direct review may be had in the Supreme Court." As a general rule, an appeal may not be taken under Sec. 1291 until the district court has rendered a decision that "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633, 89 L.Ed. 911 (1945). However, in Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), the Supreme Court recognized that there is a small class of decisions which are immediately appealable under Sec. 1291, although such decisions do not terminate the proceedings before the district court. Id. at 546, 69 S.Ct. at 1225. The Supreme Court held that decisions which fall into this exception, now commonly referred to as the collateral decision exception or doctrine, are those which "finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated." Id. More recently, in Coopers & Lybrand v. Livesay, 437 U.S. 463, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978), the Supreme Court held that "[t]o come within the 'small class' of decisions excepted from the final-judgment rule by Cohen, the order must conclusively determine the disputed question, resolve an important issue completely separate from the merits of the action, and be effectively unreviewable on appeal from a final judgment." Id. at 468, 98 S.Ct. at 2458 (citations and footnote omitted).

In this case, the district court's order satisfies the criteria of the collateral order doctrine. First, the order conclusively determined the parties' rights vis-a-vis one another, and set forth a clear and final interpretation of paragraph 2(D) of the SRSA.

Second, by interjecting certain preconditions, the order resolves the important issue of when Towers is entitled under paragraph 2(D) to the $500,000 escrowed by the Receiver. The issue of Towers' entitlement to this fund is unquestionably separate from the merits of the underlying action in which Towers alleged breach of the South Tower Lease and the Receiver counterclaimed for wrongful conduct under the Lease. The escrow fund now in issue was negotiated and established subsequent to the lease disputes and conduct giving rise to the underlying action. Therefore, there is no danger that this court's review of the district court's interpretation of the SRSA would involve "considerations that are 'enmeshed in the factual and legal issues comprising the [parties'] cause[s] of action.' " Coopers & Lybrand, supra, 437 U.S. at 469, 98 S.Ct. at 2458 (quoting Mercantile Nat'l Bank v. Langdeau, 371 U.S. 555, 558, 83 S.Ct. 520, 522, 9 L.Ed.2d 523 (1963)) (footnote omitted).

Third, as a practical matter, the district court's order will not be subject to review "on appeal from a final judgment" at a later point in time. The parties' settlement agreement, in which the parties agreed to dismiss the underlying causes of action, has been approved and is binding upon them, notwithstanding...