Kenneth,
This is a bug caused by half-walls. I've run into plenty of times and I will explain my path around the problem.
Build>Trim>Molding Polyline and Build>Trim>Molding Line are the tools you will be using to work the molding around your half-walls.
First, you'll create a Molding Line on the south wall. This should be pretty straight forward. Match the molding with the other molding and you'll be done there.
The other walls will be a bit trickier. Create a Molding Polyline that starts at the south wall and runs to the corner of that upstairs inset where the molding needs to end. that is your length. the width doesn't matter because the final Molding Polyline will blend in with the room's existing molding. Open the dialogue box up for your new Molding Polyline you just created and specify the molding to match the room's molding. Then simply select the Molding Polyline, copy in place and reflect about the stairs.
You should be good to go with this fix. If you have questions or are confused at all, let me know. I don't have time to take/post pics of any example I've done.
Best regards,
Jimmy
