Chang v. Louis & Alexander, Inc.

• Decision Date: 18 August 1994
• Docket Number: 90-CV-803.,No. 90-CV-748,90-CV-748
• Parties: Tsang CHANG, Appellant, v. LOUIS & ALEXANDER, INC., Appellee. LOUIS & ALEXANDER, INC., Appellant, v. Tsang CHANG, Appellee.
• Court: D.C. Court of Appeals

645 A.2d 1110

Tsang CHANG, Appellant, v. LOUIS & ALEXANDER, INC., Appellee.

LOUIS & ALEXANDER, INC., Appellant, v. Tsang CHANG, Appellee.

Nos. 90-CV-748, 90-CV-803.

District of Columbia Court of Appeals.

Argued October 19, 1993.

Decided August 18, 1994.

Frederic W. Schwartz, Jr., Washington, DC, for Tsang Chang.

Michael M. Hicks, Washington, DC, for Louis & Alexander, Inc.

Before TERRY, FARRELL, and KING, Associate Judges.

TERRY, Associate Judge:

These are cross-appeals arising from a commercial landlord-tenant dispute. The litigation stems from the fact that, although the property at issue is treated as one unit for the assessment of taxes and metering of utilities, it has been subdivided and rented out to at least three different tenants. One of those tenants in the late 1980's was Tsang Chang, who ran a small Chinese restaurant called "Mr. Eggroll." The landlord, Louis & Alexander, Inc., sued for possession, alleging that Mr. Chang had failed to pay pass-through charges for property taxes, electricity, and gas. Mr. Chang counterclaimed for the cost of roof repairs. Also at issue in the trial court was whether either of the parties was entitled to attorneys' fees as provided in the lease and, if so, which one. We affirm in part, reverse in part, and remand.

I

In November 1983 Louis & Alexander, Inc., leased the property from Gartenhaus Associates.¹ On August 23, 1987, Louis & Alexander subleased one part of the property to Mr. Chang for a term of seventeen and one-half years.² Paragraph 15 of the lease required the landlord (Louis & Alexander) to perform all roof repairs on the building that were not caused by the negligence of Mr. Chang. Under paragraph 23, Mr. Chang agreed to pay fifty percent of the real estate taxes "on the building and land on which the building is situated." Paragraph 24 stated that Mr. Chang "shall pay for all telephone and additional electrical services used in the demised premises."³

The lease between Mr. Chang and Louis & Alexander also incorporated the master lease between Louis & Alexander and Gartenhaus Associates.⁴ One provision in the master lease stated that "in the event of any breach or threatened breach by either Landlord or Tenant, the prevailing party shall be entitled to recover any and all reasonable expenses the prevailing party may incur in connection with its efforts to secure such injunctive relief or other remedy at law or in equity, such as court costs, printing costs and attorneys' fees."

On November 30, 1987, the parties modified the lease by a letter agreement,⁵ which included a provision for conducting an electrical usage study to determine Mr. Chang's share of the electric bill. Under this agreement, the landlord was to furnish Mr. Chang with the names of three electrical contractors who would do the study at a cost of not more than $1,500, to be shared equally by landlord and tenant; Mr. Chang would then select one of the three contractors on the list. Pending completion of the study, Mr. Chang agreed to pay eighty percent of the electric bill. Mr. Chang also agreed under the letter agreement to pay "one hundred percent (100%) of the gas bill." About two weeks later the landlord sent Mr. Chang the names of two (not three) contractors willing to conduct the electrical study, but at a cost of $3,000 to $4,000, not the agreed-upon $1,500. Mr. Chang did not select either of the two contractors; instead, he stopped paying his eighty percent share of the electric bill, beginning in February 1988.

After several months had passed, the landlord filed a complaint for possession of real estate alleging that, under the terms of the modified lease, Mr. Chang owed fifty percent of the real estate taxes and eighty percent of the electric bills that he had ceased to pay. Mr. Chang filed a counterclaim seeking reimbursement for roof repairs and moved for sanctions under Super.Ct.Civ.R. 11.

The trial court, after a non-jury trial, found Mr. Chang liable for half of the real estate taxes, but only on the portion of the property occupied by Mr. Eggroll. As to the electricity, the court directed that an electrical usage study be performed to determine Mr. Chang's share; in the meantime, Mr. Chang was ordered to deposit $23,165.63 in the court registry to cover his eighty percent share of the electric bills through August 1989. The cost of the study was to be borne by both parties, but Mr. Chang's portion of that cost was limited to $750, his half of the originally agreed-upon sum of $1,500. The court also ruled that Mr. Chang was liable for "all natural gas charges" for the entire premises, including 1789 Columbia Road. It denied his request for Rule 11 sanctions, finding that "there was no conduct on the part of the landlord or counsel which warrants the imposition of sanctions." In addition, the court denied Mr. Chang's counterclaim for roof repairs, noting that the evidence was in conflict regarding the cause of the roof damage and that Mr. Chang had not submitted any documentary evidence in support of his claim. Finally, after allowing the landlord to amend its pleadings, the court awarded $20,935.57 in attorneys' fees to the landlord "as the substantially prevailing party," offset by an award of $10,000 in attorneys' fees to Mr. Chang. Both parties filed timely notices of appeal.⁶

II

Most of the parties' contentions on appeal, reduced to their essence, are challenges to the factual findings of the trial court. The tenant contests the court's rulings on the electric and gas bills and the roof repairs; the landlord disputes the resolution of the property tax issue. Because this case was tried without a jury, we review it "both as to the facts and the law, but the judgment may not be set aside except for errors of law unless it appears that the judgment is plainly wrong or without evidence to support it." D.C.Code § 17-305(a) (1989); see, e.g., Hershon v. Hellman Co., 565 A.2d 282, 284 (D.C. 1989); Auxier v. Kraisel, 466 A.2d 416, 418 (D.C.1983). Applying this familiar standard, we affirm all of the challenged rulings except the one involving the gas bill.

A. The Electric Bill

The calculation of the electricity pass-through charge required an electrical usage study. The trial court found that the landlord had supplied Mr. Chang with the names of two contractors who would conduct the study for $3,000 to $4,000, although the landlord had agreed to name three contractors, not two, and to keep the cost at or below $1,500. The court also found that Mr. Chang did not select a contractor from the landlord's list, but instead stopped paying for electricity altogether. Because neither party had fully complied with the letter agreement, the court ruled that it was still "in effect and enforceable" and ordered the parties to have the usage study completed within five weeks, with the landlord to pay all but $750 of the cost.

Mr. Chang contends that the court misread the contract. Under the original lease signed by the parties on August 23, 1987, Mr. Chang agreed to pay "for all telephone and additional electrical services used in the demised premises." Mr. Chang asserts that under this provision he is responsible only for "additional" electrical services over and above some undetermined baseline. Arguing that the landlord failed in its proof because it presented no evidence of what "additional" meant, Mr. Chang concludes that he is not obliged to pay for any electricity at all.

This is an unreasonable and erroneous argument. Regardless of what "additional" may have meant in the original lease, that provision was nullified and superseded by the letter agreement of November 30, 1987. "The parties to a contract are free to modify that contract by mutual consent." Hershon, supra, 565 A.2d at 283 (citations omitted). Moreover, "a contract containing a term inconsistent with a term of an earlier contract between the same parties regarding the same subject matter should be interpreted to rescind the inconsistent term in the earlier contract." Egan v. McNamara, 467 A.2d 733, 740 (D.C.1983) (citation omitted). Mr. Chang's argument, relying as it does on a nullified clause from the earlier contract, therefore fails. The trial court did not err in its resolution of the electricity issue.

B. The Gas Bill

Mr. Chang also challenges the trial court's ruling that he must pay for "all natural gas charges under the lease and letter agreement of November 30, 1987, which itself refers to premises at 1789 Columbia Road." Under the terms of the letter agreement, the parties agreed that Mr. Chang would "pay one hundred percent (100%) of the gas bill." The issue at trial was whether this language obligated Mr. Chang to pay for all of the gas used on the entire property, including the premises occupied by the other tenants, or whether he was required to pay for only the gas used by Mr. Eggroll.

We hold that, to the extent that there is any ambiguity about the gas usage, Mr. Chang is liable only for the gas he used while operating Mr. Eggroll. In interpreting the letter agreement, we must "determine what a reasonable person in the position of the parties would have thought the disputed language meant." 1010 Potomac Associates v. Grocery Manufacturers of America, Inc., 485 A.2d 199, 205 (D.C.1984) (citation omitted); see Dodek v. CF 16 Corp., 537 A.2d 1086, 1093 (D.C.1988) (when interpreting a contract, court should look to the intent of the parties). Because the letter agreement was a modification of the earlier lease of the Mr. Eggroll premises at 1801 Adams Mill Road, no reasonable person in the position of these parties would read the letter agreement and conclude, merely on the basis of a mistake in the caption of the letter, that the letter agreement actually applied to 1789 Columbia Road rather than, or in addition to, 1801 Adams Mill Road. Thus, assuming that any of the other tenants used natural gas,⁷ Mr. Chang is liable only for the gas used by Mr. Eggroll.

C. Real Property...