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Grove Business Park LC v. Sealsource International LLC

Court of Appeals of Utah

May 9, 2019

Grove Business Park LC, Appellee,
v.
Sealsource International LLC, Appellant.

          Fourth District Court, Provo Department The Honorable M. James Brady No. 130401429

          Mark A. Nickel, Joseph Z. Alisa, and Stacy J. McNeill, Attorneys for Appellant

          Ryan B. Hancey, Attorney for Appellee

          Judge Jill M. Pohlman authored this Opinion, in which Judges Kate Appleby and David N. Mortensen concurred.

          OPINION

          POHLMAN, JUDGE

         ¶1 Sealsource International LLC (Tenant) leased commercial property from Grove Business Park LC (Landlord). After dealing with a noisy neighbor and other problems with the premises, Tenant moved out before the expiration of the parties' lease agreement (the Lease). Landlord sued Tenant, claiming that Tenant breached the Lease when it vacated the premises early. Tenant denied liability for breach, asserting that Landlord first breached the Lease by constructively evicting it from the premises when Landlord breached the covenant of quiet enjoyment. Tenant also asserted that before it vacated the premises, Landlord breached the warranty of suitability.

         ¶2 After the district court granted partial summary judgment to Landlord regarding four of Tenant's complaints about the premises, the case proceeded to trial. The jury found in favor of Landlord, concluding that Landlord did not breach the covenant of quiet enjoyment or the warranty of suitability and that Tenant breached the Lease.

         ¶3 Tenant now appeals the district court's judgment in favor of Landlord, raising three main issues for our consideration. First, Tenant contends that the district court erred in granting partial summary judgment on four of its complaints about the premises. Second, Tenant contends that the court abused its discretion in excluding evidence at trial that Landlord allegedly promised to address those four complaints. Third, Tenant contends that the court erred in awarding attorney fees to Landlord. We affirm.

         BACKGROUND

         ¶4 In September 2011, Tenant leased a commercial property from Landlord for a term of five years and eight months. Soon after moving in, Tenant discovered that the abutting neighbor was a dance studio and that loud music from the studio interfered with its business. Tenant complained to Landlord about the loud music, and it also complained to Landlord about other perceived problems with the premises. When the noise and other issues continued, Tenant vacated the premises in April 2013 even though more than four years remained on the Lease.

         ¶5 Landlord sued Tenant, claiming that Tenant breached the Lease when it left the premises early. In response to the complaint, Tenant asserted that Landlord had constructively evicted Tenant by failing to address a number of Tenant's complaints about the premises: (1) heating and cooling problems with the HVAC system in Tenant's unit; (2) the front door of Tenant's unit would swing open from wind; (3) the below-standard height of the loading dock; (4) inadequate parking for Tenant and its customers; (5) pervasive insect problems; (6) unmaintained parking and common areas; and (7) noise emanating from the dance studio.[1]

         ¶6 Landlord moved for partial summary judgment on Tenant's counterclaims to the extent they were based on the first four of these complaints: the HVAC, the front door, the loading dock, and the inadequate parking (collectively, the Four Alleged Defects). According to Landlord, it had no obligation under the Lease to remedy those specific complaints. The district court agreed and granted partial summary judgment in favor of Landlord. It ruled that Tenant's "counterclaims for quiet enjoyment and warranty of suitability, to the extent they concern [the Four Alleged Defects were] dismissed with prejudice and on the merits."

         ¶7 Before trial, and in light of the district court's ruling that Landlord had no obligation to fix the Four Alleged Defects, Landlord moved to exclude from trial emails with unredacted references to the Four Alleged Defects. Landlord asserted that, under rule 403 of the Utah Rules of Evidence, that evidence would unfairly prejudice Landlord by exposing the jury to "what appear[ed] to be facts of [Landlord] not doing something that, in fact, it didn't have to do under the [Lease]." Tenant opposed the motion, asserting that its evidence regarding the Four Alleged Defects-including emails in which Landlord allegedly told Tenant that it would fix those problems, as well as Landlord's internal emails wherein Landlord mentioned its efforts to address Tenant's complaints-was relevant to its theory of constructive eviction because it showed Landlord's pattern of stalling, which allegedly induced Tenant to stay longer in the premises than it otherwise would have. The court granted Landlord's motion, stating that it would not admit evidence regarding the Four Alleged Defects "when it's contrary to the summary judgment ruling."

         ¶8 The case proceeded to a five-day jury trial. Landlord sought approximately $40, 000 from Tenant for unpaid rent; Tenant sought $300, 000 from Landlord for alleged lost profits and other losses arising from Landlord's alleged breaches of the covenant of quiet enjoyment and the warranty of suitability. As a result of the court's partial summary judgment ruling and evidentiary decision, Tenant's constructive eviction theory at trial was based only on Landlord's alleged failures to fix the insect and noise problems and to maintain the parking and common areas.

         ¶9 The jury returned a verdict in favor of Landlord. On the special verdict form, the jury indicated it found that Landlord did not breach the covenant of quiet enjoyment by constructively evicting Tenant and that Landlord did not breach the warranty of suitability. Rather, the jury found that Tenant breached the Lease by vacating the premises early and awarded $14, 452.14 in damages to Landlord.

         ¶10 Landlord moved for an award of attorney fees on the ground that it was entitled to fees under the terms of the Lease. The district court granted Landlord's motion, concluding that Landlord was the prevailing party and that its incurred fees, with a few exceptions, were reasonable. Accordingly, the district court awarded attorney fees and costs to Landlord in the amount of $124, 429.97, and it entered a judgment against Tenant in the total amount of $138, 882.11. Tenant appeals.

         ISSUES AND STANDARDS OF REVIEW

         ¶11 Tenant advances three main challenges on appeal. First, Tenant contends that the district court erred in granting partial summary judgment on its claims as they related to the Four Alleged Defects. A motion for summary judgment shall be granted "if the moving party shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Utah R. Civ. P. 56(a). "In reviewing a trial court's grant of summary judgment, we consider only whether it correctly applied the law and correctly concluded that no disputed issues of material fact existed." Pigs Gun Club, Inc. v. Sanpete County, 2002 UT 17, ¶ 7, 42 P.3d 379 (cleaned up). "In so doing, we view all facts and reasonable inferences drawn therefrom in a light most favorable to the nonmoving party." Id. Similarly, questions of contract interpretation that "are confined to the language of the contract itself are questions of law, which we review for correctness." iDrive Logistics LLC v. IntegraCore LLC, 2018 UT App 40, ¶ 30, 424 P.3d 970 (cleaned up).

         ¶12 Second, Tenant contends that the district court abused its discretion in excluding evidence referring to the Four Alleged Defects. When reviewing a district court's exclusion of evidence, we grant the court "broad discretion to admit or exclude evidence and will disturb its ruling only for abuse of discretion." Daines v. Vincent, 2008 UT 51, ¶ 21, 190 P.3d 1269. But "error in the district court's evidentiary rulings will result in reversal only if the error is harmful." Anderson v. Larry H. Miller Commc'ns Corp., 2015 UT App 134, ¶ 17, 351 P.3d 832.

         ¶13 Third, Tenant contends that the district court erred in awarding attorney fees to Landlord, attacking its determinations that Landlord was the prevailing party and that the amount of Landlord's claimed fees was reasonable. We review the district court's "determination as to who was the prevailing party under an abuse of discretion standard." R.T. Nielson Co. v. Cook, 2002 UT 11, ¶ 25, 40 P.3d 1119. Likewise, the district court "has broad discretion in determining what constitutes a reasonable fee, and we will consider that determination against an abuse-of-discretion standard." Dixie State Bank v. Bracken, 764 P.2d 985, 991 (Utah 1988).

         ANALYSIS

         I. The Partial Summary Judgment Ruling

         ¶14 Tenant first challenges the district court's grant of partial summary judgment to Landlord on Tenant's claims for breach of the covenant of quiet enjoyment and breach of the warranty of suitability. Tenant asserts that the premises had the Four Alleged Defects, which it believes Landlord was obliged to remedy. In Tenant's view, Landlord was obligated to make the repairs pursuant to the Lease and, at a minimum, the jury should have been allowed to decide whether Landlord was required to fix any of the Four Alleged Defects.

         ¶15 Landlord responds that because it "had no obligation to address the Four Alleged Defects," it was not in breach and the district court correctly granted summary judgment. According to Landlord, "the Four Alleged Defects do not fall within the plain language of [the] limited repair obligation" contained in the Lease, and therefore it "could not be held liable for failure to address" them.

         ¶16 Before reaching the specific arguments of the parties, we note that in challenging the district court's grant of partial summary judgment, Tenant does not engage with the nature of, or the particular protections afforded by, its affirmative claims for breach of the covenant of quiet enjoyment and breach of the warranty of suitability. But because Tenant's arguments focus on whether the Lease, or modifications of the Lease, expressly required Landlord to repair the Four Alleged Defects, [2] we likewise focus on the Lease to resolve its challenge to the district court's summary judgment decision.

         ¶17 In turning our attention to the terms of the Lease, we employ the rules for contract interpretation. Those rules require that "we first look to the writing alone to determine its meaning and the intent of the contracting parties." Skolnick v. Exodus Healthcare Network, PLLC, 2018 UT App 209, ¶ 14, 437 P.3d 584 (cleaned up). "If the language is unambiguous, the parties' intentions are determined from the plain meaning of the contractual language, and the contract may be interpreted as a matter of law." Id. (cleaned up). "A contractual term is ambiguous if, looking to the language of the contract alone, it is reasonably capable of being understood in more than one way such that there are tenable positions on both sides."[3] Id. (cleaned up); see also Brodkin v. Tuhaye Golf, LLC, 2015 UT App 165, ¶ 21, 355 P.3d 224 ("[E]xtrinsic evidence cannot be used to create an ambiguity not reasonably supported by the text of the contract." (citing Daines v. Vincent, 2008 UT 51, ¶ 27, 190 P.3d 1269)). "But terms are not ambiguous simply because one party seeks to endow them with a different interpretation according to [its] own interests." Skolnick, 2018 UT App 209, ¶ 14 (cleaned up).

         ¶18 The pertinent provisions of the Lease are as follows. Paragraph 6 states that "Tenant accepts the Premises in the condition they are in at the inception of this Lease." Paragraph 8 states that Tenant agrees "to pay for all labor, materials and other repairs to the . . . heating and air conditioning systems in or serving the Premises." And Paragraph 9 states:

Landlord agrees for the term of this Lease, to maintain in good condition and repair any latent defects in the exterior walls, floor joists, and foundations of the building in which the Premises is located, and to repair any defects in the plumbing and electrical lines, facilities and equipment in the common areas, (subject to the provisions of paragraph 3(b)), for one year after date of occupancy, as well as any damage that might result from acts of Landlord or Landlord's representatives. Landlord shall not, however, be obligated to repair any such damage until written notice of the need of ...

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