Brendle's Stores, Inc. v. OTR on Behalf of Bd. of Trustees of State Teachers Retirement System of Ohio
| Decision Date | 26 October 1992 |
| Docket Number | Nos. 90-1848,90-1855,s. 90-1848 |
| Citation | 978 F.2d 150 |
| Parties | BRENDLE'S STORES, INCORPORATED; Brendle's Incorporated, Plaintiffs-Appellants, v. OTR, an Ohio General Partnership Acting on Behalf of the BOARD OF TRUSTEES OF the STATE TEACHERS RETIREMENT SYSTEM OF OHIO; TG & Y Stores Company, Defendants-Appellees, v. NALLEY CONSTRUCTION COMPANY, INCORPORATED; Easley Lumber Company, Third Party Defendants-Appellees, and Joe W. Hiller, Third Party Defendant. BRENDLE'S STORES, INCORPORATED; Brendle's Incorporated, Plaintiffs-Appellees, v. OTR, an Ohio General Partnership Acting on Behalf of the BOARD OF TRUSTEES OF the STATE TEACHERS RETIREMENT SYSTEM OF OHIO, Defendant-Appellant, and TG & Y Stores Company, Defendant, v. NALLEY CONSTRUCTION COMPANY, INCORPORATED; Easley Lumber Company; Joe W. Hiller, Third Party Defendants. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Orville Gibert Calhoun, Haynsworth, Marion, McKay & Guerard, Greenville, S.C., argued (Donald A. Harper, Amy M. Snyder, Haynsworth, Marion, McKay & Guerard, on the brief), for plaintiffs-appellants.
David W. Robinson, II, Robinson, McFadden & Moore, P.C., Columbia, S.C., argued (J. Kershaw Spong, Robinson, McFadden & Moore, P.C., on the brief), for appellee OTR.
Theron Garnett Cochran, Love, Thornton, Arnold & Thomason, Greenville, S.C., argued (Raymond A. Tate, Jr., Doyle & O'Rourke, Anderson, S.C., on the brief), for appellee Nalley.
Charles E. Carpenter, Jr., Franklin J. Smith, Jr., Deborah L. Harrison, Richardson, Plowden, Grier & Howser, Columbia, S.C., for appellee TG & Y.
Before RUSSELL and WIDENER, Circuit Judges, and WILLIAMS, Senior United States District Judge for the Eastern District of Virginia, sitting by designation.
Brendle's Stores, Inc. and Brendle's Incorporated (hereinafter jointly called "Brendle's") appeal from the district court's orders granting summary judgment for all defendants, including the third party defendants, and awarding damages to defendants OTR 1 and TG & Y Stores Company ("TG & Y"), and attorneys' fees to OTR. We find that the district court correctly decided all issues with the exception of the award of attorneys' fees. Accordingly, we affirm on all issues except the award of attorneys' fees.
In 1980, OTR entered into an arrangement with TG & Y whereby TG & Y would acquire store sites, arrange construction of stores, and then sell the stores to OTR for the cost of acquiring and building the facilities. OTR would then lease the stores back to TG & Y. Each lease provided that the tenant was responsible for paying all property expenses and stated that the lease generally would not terminate regardless of the condition of the premises. TG & Y could assign the lease without notice to OTR. One of the stores covered by this arrangement was located in Greenwood, South Carolina. TG & Y arranged for Nalley Construction Company ("Nalley") and its sister company, Easley Lumber Company ("Easley"), to build the store. After OTR leased this store to TG & Y, Nalley enlarged the shopping center and added stores adjoining the eastern wall ("east wall" or "party wall") of OTR's store. Nalley and OTR entered a Party Wall Agreement in 1982 which defined each party's ownership rights and future obligations concerning the east wall.
In 1986 TG & Y closed the Greenwood store and assigned all rights and obligations under the lease to Brendle's. In addition to the lease assignment, Brendle's and TG & Y entered into a Consideration Agreement under which Brendle's agreed to make yearly payments to TG & Y above the rent payments due to OTR.
Although no one had previously observed any problems with the east wall, in December 1988 employees of Brendle's noticed that pieces of cinder block were falling from the top of the wall. Brendle's immediately notified OTR verbally and in writing. An engineer retained by Brendle's found evidence of joist bearing failure and crumbling cinder blocks along the top of the wall at points where the roof joists were supported. Then on December 23, 1988, Brendle's notified OTR that unless OTR repaired the wall, it would vacate the store on January 10, 1989. Nalley began repair work on January 10, 1989, which it completed on January 16, 1989. However, Brendle's had vacated the premises on January 10, 1989. Brendle's stopped making rental payments after January 1989 and had stopped making the supplementary payments to TG & Y under the Consideration Agreement in 1988.
On January 31, 1989, Brendle's sued OTR and TG & Y to recover damages allegedly incurred due to the structurally defective wall. TG & Y and OTR counterclaimed against Brendle's and filed third party complaints against Nalley and Easley. In addition, OTR cross claimed against TG & Y. 2 Brendle's then brought third party claims against Nalley and Easley. OTR, TG & Y, Nalley, and Easley all moved for summary judgment on the claims Brendle's asserted against them. The district court granted the motions and then held a jury trial to determine the amounts Brendle's owed to OTR and TG & Y under the lease and Consideration Agreement. The court directed verdicts for both defendants, awarding OTR $272,497.13 and TG & Y $106,530.00. Pursuant to post-trial motions filed by OTR and TG & Y, the district court awarded OTR and TG & Y prejudgment interest and costs and awarded OTR attorneys' fees. Following its unsuccessful motion for judgment notwithstanding the verdict, Brendle's timely appealed.
In the district court, Brendle's alleged that OTR breached the lease by failing to repair the east wall. On appeal, Brendle's asserts that the district court erroneously found that Brendle's was responsible for repairing the east wall. The central finding made by the district court, however was that OTR was under no express or implied obligation to repair the wall. Whether Brendle's had a duty to repair the wall is irrelevant to the issue of OTR's lease obligations. If OTR had no contractual duty to repair the wall, then Brendle's has no claim against OTR for breach of the lease.
As TG & Y's assignee under the lease between OTR and TG & Y, Brendle's acquired only those rights and obligations afforded to TG & Y under the lease. See W.M. Kirkland, Inc. v. Providence Washington Ins. Co., 264 S.C. 573, 216 S.E.2d 518, 521 (1975) (). There are no express provisions in the lease obligating the lessor to repair the property. The only provisions concerning repairs address the lessee's obligations.
Absent an express agreement, a landlord in South Carolina has no obligation to maintain commercial leased property in good repair because South Carolina law does not recognize an implied warranty of fitness or habitability in a commercial lease. Edwards, Inc. v. Arlen Realty & Dev. Corp., 466 F.Supp. 505, 509 (D.S.C.1978). As the district court noted, the original lessee, TG & Y, actually handled the construction of the store and then conveyed it to OTR with a warranty that the building was built "in a good workmanlike manner and such improvements meet all existing applicable codes and ordinances." Thus, no warranties from the landlord concerning the fitness of the building could be implied in this situation because the landlord would be guaranteeing the building's fitness to the party responsible for constructing the building or that party's assignee. Because OTR neither expressly nor implicitly agreed to maintain and repair the Greenwood store, it owed no such duty to Brendle's, and the district court properly granted OTR's motion for summary judgment.
Brendle's complaint alleged that the Party Wall Agreement contained express warranties for the benefit of the building occupant and that OTR and Nalley breached those warranties due to the structural defects in the east wall. It also claimed that the Party Wall Agreement amended the lease, releasing the tenant or the tenant's assignee from any obligations to maintain or repair the wall. Finally, Brendle's argued that by executing the Party Wall Agreement, OTR was retaining control over the east wall and was obligated to maintain and repair it. The district court rejected all these arguments.
On appeal, Brendle's claims that there is an issue of fact precluding summary judgment because neither TG & Y nor Brendle's was a party to the Party Wall Agreement. Therefore, Brendle's argues, the Agreement is in "derogation" of the lease between OTR and TG & Y and may have released the tenant from responsibility for maintaining the east wall. The fact that TG & Y and Brendle's did not sign the Party Wall Agreement does not mean that the Agreement was in "derogation" of the lease. "Derogation" is defined as "[t]he partial repeal or abolishing of a law, as by a subsequent act which limits its scope or impairs its utility and force." Blacks Law Dictionary 444 (6th ed. 1990). The Party Wall Agreement did not partially repeal or abolish the lease. Under paragraph two of the lease, the landlord gave the tenant exclusive control over the Greenwood store. When Nalley expanded the shopping center and converted the east wall into a party wall, TG & Y not only did not object, but actually drafted the Party Wall Agreement for OTR and Nalley. Thus, TG & Y waived its right to exclusive possession of the east wall. Because Brendle's received only those rights to which TG & Y was entitled when the lease was assigned, Brendle's never had the right to exclusive possession of the east wall. However, the fact that Brendle's did not have exclusive possession of the wall did not affect its obligation to maintain the wall.
Through the Party Wall Agreement, OTR and Nalley, the wall's owners, divided between themselves the responsibility for maintaining and repairing the wall. The Agreement did not reduce the lessee's obligations...
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