This case interprets two provisions of a lease agreement. The first provision allowed the tenant to remove its fixtures, while the second provided that any condemnation award would be the sole property of the landlord, unless a separate award was made for the tenant's property. Here is the language of the two provisions:
" . . . Tenant shall have the right to remove any trade fixtures or other fixtures installed by Tenant, provided Tenant shall be responsible for repair of any damages to the freehold occasioned by the removal thereof.Following an exercise of eminent domain, the county paid an award to the landlord. The tenant remained in occupancy for a period following the county's taking title (the court does not explain whether the tenant paid rent, or to whom). The tenant removed most of its fixtures and vacated the premises. A suit by the tenant followed, seeking a portion of the condemnation award. The court below concluded that the tenant was not entitled to compensation for the items removed and that it had abandoned the rest.
. . . If the whole or any part of the demised premises shall be taken under the power of eminent domain . . . then this lease shall terminate as to the part so taken or sold on the day when Tenant is required to yield possession thereof . . .. . . . In any and all events, all compensation awarded or paid for any such taking or sale of the fee and the leasehold, or any part thereof, shall belong to and be the property of the Landlord, except for any separate specific award as shall be made to Tenant for relocation of his business, or on account of the taking of fixtures installed by the Tenant, which shall not have become a part of the leasehold property of the Landlord. . . ."
On appeal, the appeals court affirmed the result, but on different reasoning. The appeals court found that the tenant had no compensable interest in the award because the lease allocated the entire award to the landlord. In fact, there could not have been any separate award to the tenant because the eminent domain procedure did not provide for such an eventuality.
The court read the language of the lease to require that there be a "separate specific award" of damages to the tenant in order for the tenant to recover. Such a "separate specific" award was not possible in Missouri condemnation cases (except - under federal law - for relocation purposes), as Missouri follows the unitary theory of condemnation damages - one payment for one value, regardless of the number of interests involved. The court said that "separate specific award" is what the parties wrote and what they intended the tenant to be entitled to claim.
Comment: The tenant's case on these facts was not a strong one in any event, but the poor drafting of the lease agreement from the tenant's standpoint obviously hurt its position. The court's interpretation would also apply where a tenant's fixtures constituted a significant element of the value taken.
It is probable that the tenant's counsel didn't spend much time on this clause to begin with. But if tenant's counsel had paid any attention to this clause, counsel probably intended that the "separate specific award" language applied only to the relocation expenses, and that otherwise tenant would be entitled to a damages for fixtures of tenant that constituted a demonstrable part of the award, whether or not the court made a "separate, specific award."
The court's contrary literal reading of the lease language is quite correct, of course. This is a good example of grammatical nuance affecting the result, even where the result arguably was not the interpretation intended by the parties.
Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Laprica Mims at the ABA. (312) 988 6233.
Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.