Opinion
No. 75-592
Decided June 3, 1976. Rehearing denied July 15, 1976. Certiorari granted October 12, 1976.
Action concerning interpretation of lease provision that provided for increase in rental to be a function of consumer price index. From judgment in favor of plaintiff's interpretation of lease, defendant appealed.
Affirmed
1. LANDLORD AND TENANT — Interpretation — Escalation Clause in Sublease — Formulas — Language of Clause — Intention of Parties. Where both parties had a different formula for determining the applicable consumer price index figure for lease rental adjustment and both parties had expert testimony thereon, but defendants' formula was contrary to express language of the escalation clause and was inconsistent with intention of parties, plaintiff's formula was properly accepted.
2. PLEADING — Rental Issue — Evidence Admitted — No Objection — Tried by Implied Consent — Failure to Amend — Not Affect Result. Where, in action by landlord against tenant, plaintiffs' complaint referred solely to rent due for year 1972-73, but the rental payment for 1973-74 was due by trial time and testimony and exhibits relating to such rental were admitted without objection, the issue of the amount of the rental for the latter year was tried with defendants' implied consent, and plaintiffs' failure to amend the pleadings as to this issue does not affect the result.
Appeal from the District Court of the City and County of Denver, Honorable John Brooks, Jr., Judge.
Williams, Erickson Wallace, P.C., Wayne D. Williams, Westel B. Wallace, for plaintiffs-appellees.
Litvak, Schwartz Karsh, Lawrence Litvak, J. Jeffrey Mojcher, for defendant-appellant.
This case involves the interpretation of an escalation or linkage clause in a sublease dated June 1, 1972, between the parties. The trial court adopted the plaintiffs' interpretation of the clause and defendant appeals. We affirm.
For an extensive discussion of such clauses, see N. Hecht, Variable Rental Provisions in Long Term Ground Leases, Colum. L. Rev. 625 at 652.
The clause in question provides:
"The annual minimum lease fee payable to Lessors shall be adjusted at one year intervals commencing with the lease fee due June 1, 1973, and every year thereafter to reflect the average change in the purchasing power of the dollar. Such adjustments shall be on the following basis: The Consumers Price Index as prepared by the United States Department of Labor shall be used as the basis of computation. Said index shall be taken for May 1 of each year during the term of this agreement and the price index thus obtained shall be considered the applicable index for the rent payable during the next ensuing fiscal year. Said index obtained shall be compared with the price index figure for May 1, 1972 and the $78,000 annual rent figure shall be varied (either increased or decreased) in the same ratio that the price index for the period bears to the price index figure of May 1, 1972. The formula for the rent is as follows: New rent for the next succeeding year is to $78,000 as the average price index for the past year period is to price index of May 1, 1972. . . ."
The dispute between the parties is over what should be considered the applicable index figure to be used in the computation. Plaintiffs contend, and the trial court agreed, that the applicable index is the May 1, 1973, figure for rent due June 1, 1973. Relying upon the phrase in the last sentence, "the average price index for the past year," defendant contends that the applicable index is to be arrived at by adding the monthly figures for the past 12 or 13 months, and dividing that sum by 12 or 13, respectively.
[1] Both parties presented expert testimony to support their respective formulas. Plaintiffs' experts testified that the May 1, 1973, Price Index figure was itself an average, and that the method used by plaintiffs would most closely reflect the change in purchasing power of the dollar from one June 1 to the next June 1. Plaintiffs' experts further testified, and defendant's expert agreed, that plaintiffs' formula reflected the average change in the purchasing power of the dollar during the past year, and that the Price Index is a weighted average of price changes.
Bureau of Labor Statistics, BLS Handbook of Methods for Surveys of Studies, Bulletin 1711, p. 87, describes the Price Index as "a weighted average of price changes for a sample of priced items . . . . ."
Thus, plaintiffs' experts disputed defendant's contention that the phrase, "average price index for the past year," required averaging the monthly Price Index figures for the preceding twelve months.
Furthermore, attached to the sublease was a copy of the lease between plaintiffs and the owners of the property, and, in contrast to the escalation clause here, the clause in the original lease specifically provided for the type of formula that defendant asserts should be applicable here. Consequently, had the plaintiffs and defendant intended the same type of formula, they could have used a clause similar to that in the main lease.
A lease should be construed, if possible, to give effect to every provision. Carleno v. Vollmert Tire Co., 36 Colo. App. 446, 540 P.2d 1149. Defendant's formula is contrary to the express language of the escalation clause which provides that "said index shall be taken for May 1 of each year . . . ." (emphasis added) Plaintiffs' formula, on the other hand, as supported by expert testimony, gives effect to the entire clause and is consistent with the intention of the parties, as expressed in the sublease itself, to wit: That the adjustment should "reflect the average change in the purchasing power of the dollar." See Collins v. Shanahan, 34 Colo. App. 82, 523 P.2d 999, aff'd in part, rev'd in part, on other grounds, 189 Colo. 169, 539 P.2d 1261.
Accordingly, defendant's numerous allegations of error, all of which in effect challenge the lower court's interpretation of the lease, are without merit.
[2] Nor do we agree with defendant's contention that the trial court erred in granting judgment for plaintiffs on rent due for the period from June 1, 1973, to June 1, 1974. Although plaintiffs' complaint referred solely to rent due for the year June 1, 1972, to June 1, 1973, the rental payment for the latter period was due by the time of trial, and testimony and exhibits relating to the rental due for this period were admitted into evidence without objection. Thus, the issue of the amount of rental due for June 1, 1973, to June 1, 1974, was tried with defendant's implied consent and the failure to amend the pleadings does not affect the result of the trial on this issue. C.R.C.P. 15(b); Shively v. Board of County Commissioners, 159 Colo. 353, 411 P.2d 782.
Judgment affirmed.
JUDGE PIERCE and JUDGE SMITH concur.