Acad., Inc. v. Paradigm Bldg., LLC, CV–16–258

• Decision Date: 08 February 2017
• Docket Number: No. CV–16–258,CV–16–258
• Citation: 513 S.W.3d 850
• Parties: The ACADEMY, INC., d/b/a Haas Hall Academy, and Martin Schoppmeyer, Jr., Appellants v. PARADIGM BUILDING, LLC, Appellee
• Court: Arkansas Court of Appeals

513 S.W.3d 850

The ACADEMY, INC., d/b/a Haas Hall Academy, and Martin Schoppmeyer, Jr., Appellants

v.PARADIGM BUILDING, LLC, Appellee

No. CV–16–258

Court of Appeals of Arkansas, DIVISION IV.

Opinion Delivered: February 8, 2017

Rehearing Denied March 15, 2017

Cullen & Co., PLLC, by: Tim J. Cullen ; Henry Law Firm, Fayetteville, by: Mark Murphey Henry, and Adam L. Hopkins, for appellants.

Kutak Rock, LLP, by: Jeff Fletcher, for appellee.

DAVID M. GLOVER, Judge

Appellant, The Academy, Inc. d/b/a/ Haas Hall Academy ("Haas Hall"), appeals from the circuit court's ruling that it renewed two commercial leases and owed its landlord, appellee, Paradigm Building, LLC ("Paradigm"), $41,540 in rent, plus $50,000 in attorney's fees. Paradigm cross-appeals the court's calculation of the rent and the denial of late fees. We affirm on direct appeal and on cross-appeal.

I. Background

Haas Hall is a public charter school in Fayetteville, Arkansas. During the times relevant to this case, the school was located in the Paradigm Building pursuant to two multi-year leases executed in January 2009 and September 2010. The leases covered a total of 13,400 square feet and ran concurrently, containing essentially the same terms. Importantly for our purposes, they shared an expiration date of June 30, 2014, and contained a one-time renewal option for three additional years.

The renewal clause in the January 2009 lease provided, in pertinent part, as follows:

2.2 Renewals . Tenant shall have the option to renew this Lease Agreement for one renewal term(s) of thirty-six (36) months. The renewal term shall be subject to all of the same terms and conditions as are set forth herein, except as otherwise provided in Section 3.2. Each option shall be exercised by written notice to Landlord, received no later than sixty (60) days prior to the expiration of the term then in effect.

The September 2010 lease contained a similar renewal provision. Both leases also required that all notices be in writing and sent by certified or registered mail. Hereafter, we will refer to the leases as a single lease, unless the context requires otherwise.

During the lease term, Haas Hall experiencing growth and frequently expressed an interest in acquiring more space for its students. In 2012, for example, the school began utilizing an adjacent, 800–square-foot space known as the "dance room" pursuant to an oral agreement with Paradigm. Additionally, Martin Schoppmeyer, on behalf of Haas Hall, and Tracy Hoskins, on behalf of Paradigm, occasionally discussed the possibility of Haas Hall's either leasing more space or purchasing the Paradigm Building.

In mid–2013—approximately one year before the lease expired—Schoppmeyer asked Hoskins if they could discuss "extending" the lease. Thereafter, Hoskins provided Schoppmeyer with a form letter, which stated that Haas Hall "would like to exercise our Renewal Option on both Leases per paragraph 2.2 Renewals of the Agreements." This letter was never used, and no further steps were taken toward renewal at that time.

In the ensuing months, Hoskins continued to propose solutions to Haas Hall's need for additional space, including the possibility of Haas Hall's entering into a longer-term lease, such as five or ten years, and occupying more square footage. No agreements were reached as to these matters.

In April 2014, Schoppmeyer and Hoskins began discussions in earnest about the upcoming end of the lease term. In doing so, they exchanged a series of emails and other written communications that are pertinent to this appeal. On April 14, 2014, Schoppmeyer sent an email to Hoskins that stated,

I want to renew our lease. Do you want me to send you a letter stating as much? Can you send me a renewal lease so that I can sign it?

Hoskins responded, "As for renewing the lease, are you going to want to expand into the remaining space next door?" Schoppmeyer replied that he was not sure about additional space and needed to think about it.

Two days later, on April 16, 2014, Schoppmeyer sent another email to Hoskins. This email contained the subject line "Renewal" and asked Hoskins,

Do you want me to send you a formal letter for the renewal as stated in the lease or will this suffice? Can you send me a contract? I need to build my budget for 2014.2015.

Hoskins responded, "Do you want me to do a new lease? Or do you want to extend the lease you have?" Schoppmeyer did not respond by email but instead sent a certified letter to Hoskins on April 22, 2014, in which he stated,

Please allow this communication to be my official request to extend Haas Hall Academy's lease at [address]. We have communicated via email and I await our new lease agreement from you.

Hoskins replied by email on April 23, 2014, that the certified letter was not necessary. He also asked Schoppmeyer,

Are you wanting a new 5 year lease as we spoke about, to include any additional space (at least the former dance room)?

To this, Schoppmeyer responded,

I just wanted to follow the rules. You have been good to me. I want to have a renewal. Yes, I need the formal dance room. If you could just tell me how much a build out would cost for the rest then I could look at an expansion. I need to see how many scholars will cover the additional space.

Hoskins advised Schoppmeyer to consider renting the entire remaining space in the building for a five-year or ten-year period in order to save money.

A short time later, Schoppmeyer sent a text message asking if Hoskins had prepared a lease contract. Hoskins replied that he had not because Schoppmeyer had not yet said what he wanted to do about additional space. Schoppmeyer replied, "As of today let's just renew. I am dealing with a lot of issues. Not good." Still, Hoskins continued to inquire about a new lease with either a five-year or ten-year term. According to Schoppmeyer, he chose five years "as the path of least resistance." Hoskins ultimately drafted a ten-year lease agreement for 14,280 square feet, which included the dance room.

Schoppmeyer and his attorney voiced numerous objections to the proposed ten-year lease, and, as of July 2014, the parties had not agreed on its terms. Nevertheless, Haas Hall continued to occupy the space in the Paradigm Building that was covered by the written lease, paying monthly rent of $20,770, which was consistent with the lease's renewal rate. Schoppmeyer and his attorney would later testify that they considered Haas Hall's occupancy at this point to be on a month-to-month basis rather than under a renewal of the original lease.

On August 6, 2014, Hoskins sent Schoppmeyer an email stating, "It seems there are some misunderstandings about the status of your lease." In the email, Hoskins continued to tout the advantages of Haas Hall's having a new, longer-term lease, but he stated that, at the present time, Haas Hall had a three-year lease that would expire in June 2017—an apparent reference to Haas Hall's exercise of the three-year renewal option.

Haas Hall continued to stay in the Paradigm Building and pay monthly rent. Then, on February 19, 2015, it sent Paradigm written notice that it would "vacate the originally leased premises" by June 2015. Paradigm filed suit seeking a declaratory judgment that Haas Hall had renewed its lease for three years, through June 30, 2017.¹ By amended complaint, it also sought late fees that it had not collected from Haas Hall over the course of the original lease. Haas Hall answered that it had not renewed the lease agreement but rather had held over at the Paradigm Building on a month-to-month basis. It also asserted that Paradigm's claim for late fees had been waived. Haas Hall eventually left the building in July 2015.

A bench trial was held, and the circuit court ruled that Haas Hall had exercised the three-year option to renew the written lease. The court stated that its decision was based "in no small measure" on its ability to observe the witnesses' testimony. The court also determined that Haas Hall owed Paradigm rent of $20,770 per month for August and September 2015, for a total of $41,540.² Additionally, the court ruled that Paradigm had waived its right to recover late fees by failing to collect them for over six years. These rulings were incorporated into a written order dated October 7, 2015, and the court later awarded Paradigm $50,000 in attorney's fees as the prevailing party. Haas Hall filed a timely notice of appeal, and Paradigm filed a timely notice of cross-appeal.

II. Direct Appeal by Haas Hall

Haas Hall's sole argument on direct appeal is that the circuit court erred in ruling that it had renewed its lease with Paradigm.

The standard of review on an appeal from a bench trial is whether the circuit court's findings were clearly erroneous or clearly against the preponderance of the evidence. Crenshaw v. McFalls , 2015 Ark. App. 186, 457 S.W.3d 705. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that an error has been committed. Duvall v. Carr–Pool , 2016 Ark. App. 611, 509 S.W.3d 661, 2016 WL 7233859. We give due deference to the trial court's superior ability to determine the credibility of the witnesses and the weight to be accorded their testimony. Jez v. Jez , 2016 Ark. App. 594, 509 S.W.3d 1, 2016 WL 7118289.

We first address Haas Hall's argument that we must apply a de novo standard of review in this case because it involves questions of law rather than disputed questions of fact. See Travelers Cas. & Sur. Co. of Am. v. Cummins Mid–South, LLC , 2015 Ark. App. 229, 460 S.W.3d 308 (holding that questions of law are reviewed de novo on appeal). We disagree. Even if, as Haas Hall argues, "there is no dispute about the meaning of paragraph 2.2 of the lease [and] no dispute about emailed and written communication between the parties," the intent behind the parties' communications was, and remains, in great dispute. Intent is a question of fact. Dugal...