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Fairmont/Monticello, LLC v. LXS Investments, Inc.

Court of Appeals of Missouri, Eastern District, Fourth Division

June 12, 2018

FAIRMONT/MONTICELLO, LLC, Plaintiff/Appellant,
v.
LXS INVESTMENTS, INC. d/b/a THE DRUNKEN FISH, Defendant/Respondent.

          Appeal from the Circuit Court of the City of St. Louis Honorable Jason M. Sengheiser

          OPINION

          LISA VAN AMBURG, JUDGE

         Fairmont/Monticello (Landlord) appeals the trial court's judgment in favor of LXS Investments (Tenant) in this action for unlawful detainer. We reverse and remand.

         Background

         Landlord owns real estate in the City of St. Louis. Tenant operates a restaurant called The Drunken Fish. In 2006, the parties entered into an agreement for the lease of commercial space at One Maryland Plaza in the Central West End neighborhood. As relevant here, that agreement provided as follows:

Default: In the event of any failure of Tenant to pay any rental due hereunder within thirty (30) days after the same shall be due, or any failure to perform any other of the terms, conditions, or covenants of this Lease to be observed or performed by Tenant for more than ten (10) days after written notice of such default ... Landlord, besides other rights or remedies it may have, shall have the immediate right of re-entry ... . ... Landlord does not waive its right to pursue any other right or remedy to which it may be entitled ... .
Waiver. The waiver by Landlord of any breach of any term, covenant, or condition ... shall not be deemed to be a waiver of such term, covenant, or condition. ... The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant, or condition of this Lease, other than the failure of Tenant to pay the particular rent so accepted. … Time is strictly of the essence of Tenant's performance of all covenants and agreements ... and in the payment of all sums to be paid.

         In 2015, the parties entered into an amendment to the original lease providing in pertinent part:

Renewal Option: Provided Tenant is not then in default and has not been in default during the term of this Lease and any prior option term, whether or not Landlord shall have notified Tenant in writing of such default and whether or not such default shall have been cured by Tenant, ... Tenant shall have the right and option ... to extend the term of this Lease [for five years commencing January 1, 2017].
6. ... In the event of any conflict between the Lease and this First Amendment, the terms and conditions of this First Amendment shall control.

         In 2016, Tenant notified Landlord of its intent to renew the lease for another 5-year term. Landlord rejected Tenant's attempt to renew, citing Tenant's failure to perform certain obligations during the existing term (e.g., to pay rent on time, furnish insurance policies and maintenance agreements, maintain windows, hydroflush sewer lines, maintain grease traps). Tenant refused to vacate the premises, asserting that it wasn't in default because Landlord never provided Tenant notice as contemplated in the Default clause. Landlord responded that notice wasn't required under the Renewal clause and filed suit against Tenant for unlawful detainer.

         At trial, Tenant testified as follows. Tenant negotiated a lower rent rate under the amendment due to the condition of the premises, and Tenant had since spent approximately $200, 000 on improvements. Though Tenant had not read or complied with the lease in the aforementioned respects, it had always maintained the policies, paperwork, and utilities in question, it just hadn't provided proof of the same to Landlord because Landlord never asked. Though some rent payments were posted after the due date, Tenant generally paid rent when it received an invoice, and, under the lease, late charges didn't apply until five days after the due date. Tenant suggested that Landlord was attempting to get out of the lease for a more lucrative deal. Tenant argued that its renewal was effective and enforceable - Landlord wasn't entitled to refuse. Landlord admitted that it had accepted late payments in the past but noted that the Waiver clause reserved Landlord's rights as to any instances of non-compliance. Landlord argued that, notwithstanding the Default clause, the Renewal clause specifically predicated Tenant's right to renew upon the absence of non-compliance, regardless of notice.

         The trial court entered judgment in favor of Tenant, reasoning that a conflict between the Renewal and Default clauses created an ambiguity, which should be construed against Landlord as the drafter. Thus, the court interpreted "default" in the Renewal clause to first require notice as provided in the Default clause. As such, the court concluded that Tenant was not in "default, " so Tenant effectively exercised its option to renew. Landlord appeals and asserts that the trial court's interpretation is erroneous as a matter of law.

         Standard ...


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