DD 1/15/09 Settlement agreement on rent need not satisfy the Statute of Frauds, even when apparent intent is to terminate lease.

Daily Development for Monday, February 15, 2010
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri
dirt@umkc.edu

LANDLORD TENANT; LANDLORD’S REMEDIES; SETTLEMENT; STATUTE OF FRAUDS: The Statute of Frauds does not apply to the settlement of a lawsuit to collect damages in the form of rent due under a lease - the fact that the effect of the lawsuit may also result in the surrender of the lease does not draw the settlement into the Statute of Frauds.

St. Louis Union Station, Inc., v. The Discovery Channel, Inc., 2009 Westlaw 4823866 (Mo. App. 12/15/09)

Tenant had abandoned leased premises and landlord brought a suit for damages.  Simultaneously, apparently, landlord’s agent, counsel and others were engaged with tenant in discussions of the overall dispute, which would involve a lease termination.  No lease termination had been entered into as yet.  Ultimately, the landlord’s manager, a commercial broker, who had been involved in the negotiations, sent an email to tenant that stated;

“I am aware that you have had conversations with my colleague [named] and as well as our attorney [named] regarding the lease termination of Discovery Channel Store, and thus, after most recently speaking with our ownership, our owner will agree to counter your previous offers with $220,000.

Tenant responded:

“Your lease termination counteroffer of $220,000 “all incluse and as is condition is accepted for [tenant].  Kindly prepare the lease termination agreement and e-mail it to me for processing and review by [tenant].

Then problems arose, and four months later Tenant filed a motion to enforce settlement.        

The trial court entered summary judgment for Tenant, after a hearing in which the court examined the emails and their background.  Landlord appealed, arguing that the settlement agreement amounted to a modification or  termination of a real estate interest - the lease - and did not satisfy the requirements of the Statute of Frauds.  Landlord further pointed out that the lease itself required that the lease could not be modified or terminated without an agreement in writing.

The appeals court, noting that in this case it would provide “great deference” to the trial court as to the meaning and intent of the email exchange, affirmed the summary judgment for the tenant on the grounds that the lawsuit was entirely about money damages, even if the settlement negotiations were not, and that the email exchange constituted a complete settlement of the money claims.  The Statute of Frauds does not apply to agreements to settle a lawsuit for money damages. 

Landlord, not surprisingly, noted that both emails discussed a negotiation for a “termination agreement” and that Tenant’s counter offer included the phrase “all inclusive and as is condition,” which suggested that the agreement was indeed a “wrap up” of all claims between the parties.  The court does not indicate whether there was time left on the lease, but in Missouri the landlord is entitled to leave the premises vacant and to collect further rent in a subsequent lawsuit even after bringing a claim for past due rent.  No mitigation required.  Thus, the question of whether the settlement indeed provided for the termination of the lease was certainly significant.

The court dealt with the Landlord’s argument by stating that there was no clear explanation of what “all inclusive and “as is” condition” might mean, and that so far as the court was concerned the agreement was not about the termination of the lease, but simply about settlement of the disputed rent claim. 

Comment 1: There is no indication that the case has been certified for publication, and perhaps for good reason.  The court also ducked out when it said that it relied heavily on the trial court in the construction of the settlement agreement. 

Comment 2: So far as the editor can make out, the court is saying that there in fact was no settlement on the termination of the agreement - and the language suggesting that a termination agreement be sent for review was mere surplusage.  All that the court looked to the agreement for was a settlement of the money claim.  This may come as a surprise to the Tenant if indeed the landlord has not retaken possession of the premises and there is additional time left on the lease.  Have such claims been settled?  The Tenant clearly believed that any disputes about the condition of the premises were resolved by the agreement.  But were they?  This opinion, apparently, does not answer that question one way or the other.  Verrrrrry interesting. 

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