Lonoke Nursing Home, Inc. v. Wayne & Neill Bennett Family Partnership

James R. Cooper, Judge.

This appeal arises from a dispute between the appellants, who leased two buildings from the appellee for nursing home purposes, and the appellee lessor over the terms of the lease and option to renew. The chancellor declared the option to renew void for lack of definiteness, and enjoined the appellants from moving their nursing home business. From that decision, comes this appeal.

Around 1962, the appellee’s predecessor, J.O. Bennett 8c Sons, a family partnership, built two facilities to serve as nursing homes in Lonoke and Marvell. The homes were leased to Mrs. Mason Pennock, who operated them until 1969 when she and her partner subleased the premises to the appellants. In 1973 and 1978 the appellants leased the premises directly from the Bennetts. The 1973 lease provided for an option to renew for an additional five year term on the same terms as the 1973 lease, except for the rental. The 1978 lease contained the following language:

The second parties shall have the right and option to renew this lease upon terms and conditions and rentals to be agreed upon by the parties prior to the renewal date, which shall be compatible to similar facilities within the State of Arkansas.

In early 1983, the appellee agreed to sell the properties to a third party, subject to the lease. The appellants, at the same time, were making plans to expand other nursing home facilities which they owned and to transfer their State-allocated bed capacity from the leased homes to one in Cabot which they owned. That plan apparently began in 1980, but was stalled because of a moratorium on nursing home construction. Thus, in order for the expanded Cabot facility to utilize the Lonoke and Marvell bed capacity, those two homes would have to be closed. Neither the Lonoke nor Marvell homes met current construction requirements, but were allowed to operate under waiver. The waiver would be forever lost as to those homes if they ceased to be operated as nursing homes, absent remodeling to bring them into compliance with current standards. The appellee, fearful that the leased homes would be closed by the appellants, instituted this action, seeking to require the appellants to continue to operate the leased premises as nursing homes through the lease term, and to declare the alleged option void for indefiniteness.

For reversal, the appellants first argue that the option is valid, contrary to the chancellor’s finding that it was void because the terms of the renewal were not included in the option. Generally, courts will not supply missing terms in a lease when the parties have not stated in their agreement a definite bases to guide the court’s effort to effectuate the parties’ agreement. The Arkansas Supreme Court has held that “an option in a written lease to renew upon terms and conditions to be agreed upon is void for uncertainty.” Ferrill v. Collins, 225 Ark. 247, 281 S.W.2d 959 (1955). However, in Nakdimen v. Atkinson Imp. Co., 149 Ark. 448, 233 S.W. 694 (1921), the Court upheld an option which did not provide for the amount of the rental, but where the parties had agreed that a board of arbitrators would fix the rental. This method of fixing the rent was upheld because of its objective nature. The appellants argue that the language in the option which provides that the renewal is to be on terms “compatible to similar facitlities” in Arkansas is objective enough to guide the court in fixing the terms. We disagree. This option is fatally defective in that no definite method for determining the rental was established. As this Court has stated:

Where the annual rental is not agreed upon and the contract does not otherwise provide a manner for its definite determination, the contract does not meet [the test for definiteness].

Phipps v. Storey, 269 Ark. 886, 601 S.W.2d 249 (Ark. App. 1980).

Rental rates in Arkansas, according to the testimony, ranged from $55.82 per bed to $88.66 per bed. We cannot say that the chancellor’s decision not to select a figure within this range was wrong. Further, and perhaps more important, no terms of the renewal period were fixed. The chancellor’s decision was neither clearly erroneous, nor against a preponderance of the evidence, and therefore we must affirm. ARCP, Rule 52(a).

The appellants next argue that the chancellor’s injunction effectively requires them to forfeit their business, thus, it is alleged, resulting in a windfall to the appellees of over one million dollars. We disagree. The appellants own their business, and the appellee own its buildings and land free from the lease (which has expired), and the chancellor’s order simply protected the interests of both parties. The court found that the appellants should not be allowed to move the nursing home patients out of the leased premises, except in the ordinary course of business, and that decision was correct. The lease required that the appellants use the leased premises for nursing homes, and, because of the “grandfathered” status of the homes, moving the patients out would have caused a serious reduction in the fair market value of the leased premises.

Further, the spirit and purpose of the lease would have clearly been violated had the appellants been allowed to breach the lease, move out of he premises, and thereby destroy the usefulness of the premises as nursing homes.

The landlord-tenant relationship between the parties is over, the premises are free to be sold or leased by the appellee, and the assets of the nursing home business belong to the appellants. Both parties have substantial interests at stake which need protection, and the patients in the two nursing homes must be protected from unnecessary disruption. Therefore, we remand the case to the chancellor so that such orders as are necessary to ensure an orderly transition may be entered.

Affirmed, and remanded for further orders consistent with this opinion.

Cracraft, C.J., and Glaze, J., agree.

Supplemental Opinion on Denial of Rehearing November 28, 1984

679 S.W.2d 823

Appeal & error — record not fully developed — case remanded. — Where the record on an issue was not fully developed below, that point will be remanded to the chancellor for a decision.

Petition for Rehearing; denied.