Brown's Shoe Fit Co. v. Olch

• Decision Date: 02 April 1998
• Docket Number: No. 970199-CA,970199-CA
• Citation: 955 P.2d 357
• Parties: 340 Utah Adv. Rep. 9 BROWN'S SHOE FIT CO., an Iowa partnership; Tom Brown; and Brown's General Offices, an Iowa corporation, Plaintiffs and Appellants, v. Jon OLCH, Janet Olch, Henry Sigg, and 330 Main Street Partners, Defendants and Appellees.
• Court: Utah Court of Appeals

Page 357

955 P.2d 357

340 Utah Adv. Rep. 9

BROWN'S SHOE FIT CO., an Iowa partnership; Tom Brown; and Brown's General Offices, an Iowa corporation Plaintiffs and Appellants, v. Jon OLCH, Janet Olch, Henry Sigg, and 330 Main Street Partners, Defendants and Appellees.

No. 970199-CA.

Court of Appeals of Utah.

April 2, 1998.

R. Paul Van Dam and Bruce E. Wycoff, Salt Lake City, for Plaintiffs and Appellants.

Richard D. Burbidge, Stephen B. Mitchell, and Robert M. Felton, Salt Lake City, for Defendants and Appellees.

Before DAVIS, P.J., and BILLINGS and JACKSON, JJ.

OPINION

DAVIS, Presiding Judge:

Brown's Shoe Fit Company, Tom Brown, and Brown's General Office (collectively Brown's Shoe) appeal the trial court's summary dismissal of their claims of specific performance, fraud, and breach of contract in favor of appellees Jon Olch, Janet Olch, Henry Sigg, and 330 Main Street Partners (collectively Partners). Partners appeal the trial court's summary dismissal of their counterclaim for abuse of process.

FACTS

Brown's Shoe brought this action to specifically enforce, as a binding commercial lease agreement with Partners, a one-page document entitled "Basic Lease Provisions" or, in the alternative, to recover damages resulting from Partners' breach of that agreement. Partners counterclaimed alleging abuse of process.

Brown's Shoe Fit Company is a partnership organized to operate a shoe store in Park City, Utah. Tom Brown and Brown's General Offices are the two partners in the proposed Park City store and were also partners in other Brown's Shoe partnerships operating family shoe stores in Colorado, South Dakota, Arizona, and California.

Partners is a partnership formed for the purpose of owning land and developing an office building at 340 Main Street, Park City, Utah (the Property). ¹ Jon Olch, Janet Olch, and Henry Sigg are partners in 330 Main Street Partners.

In early 1989, Tom Brown began researching the possibility of opening a shoe store in Park City. After reviewing information on the Park City market, Brown decided to move ahead and open a Park City store. Brown contacted a Park City realtor regarding available retail space suitable for a proposed shoe store. After investigating several locations over the next two years, Brown concluded that only locations in the Historic Main Street area would be of interest. On one of his trips to Park City, while responding to a "For Lease" sign on one of the "best" retail locations in Park City, Brown contacted Henry Sigg. Sigg offered to help Brown find a suitable Main Street location.

On October 8, 1993, Sigg called Brown and told him of the Property, which would be available during the fourth quarter of 1994. Sigg indicated the general leasing terms and asked Brown to send a "letter of intent" to Jon Olch, the prospective landlord. Brown prepared and sent to Sigg a letter paralleling a letter already prepared by a prospective tenant at the Property, which Sigg had telecopied to Brown. Brown and Sigg had further discussions about Brown's Shoe's occupancy of a part of the Property, and on February 12, 1994, Brown finally met with John Olch to discuss occupancy terms.

On February 15, upon his return to California, Brown sent a letter addressed jointly to Olch and Sigg summarizing the lease terms discussed at the February 12 meeting. Then, on February 16, during a phone conversation between Sigg and Brown, Sigg indicated that he and Olch had discussed the February 15 letter and that Olch required some changes to Brown's February 15 proposal. On February 18, Brown sent Sigg a revised outline of lease terms incorporating Sigg's requested changes.

On March 18, 1994, Brown, acting for Brown's Shoe, and Sigg, acting for Partners, executed a document entitled "Basic Lease Provisions" (the BLP) ² setting forth certain terms the parties had agreed to up to this point. The BLP provided for an initial three-year term and for two three-year option periods. The BLP explicitly stated that the terms were "agreed upon" by the parties and were "to be incorporated into a final lease." The BLP further provided that the rent for the initial period, and for each option period, would be based on (1) agreed-upon per-square-foot rental rates and (2) a percentage override on Brown's Shoe's Park City sales above a certain gross-volume threshold. The gross-volume threshold was specified for the first three-year lease period. However, although the BLP established minimum per-square-foot rents for the option periods, it did not contain agreed-upon percentage rent for those periods. Instead, the BLP specifically provided that prior to the beginning of each option period, the parties "would agree on the gross volume figure from which to base additional rent during each year" of that option period. Neither the term "gross volume" nor the actual "gross volume" were defined by the BLP.

Brown testified at his deposition that "[t]he effect of this document is that I moved ahead feeling that I had an agreement for a lease for a location." He further testified that his intent when signing the BLP was "to firm up and have a written document reflecting the negotiations up to this point." Brown considered the BLP to be an agreement that would be incorporated into a future lease.

On March 28, 1994, ten days after the BLP was signed, Brown sent a memorandum to prospective partners in the Park City store in which he stated: "There is [sic] still a lot of things that have to be worked out with the landlord, but it looks like it is going to be a go." In the memorandum, Brown acknowledged that a final lease agreement still needed to be worked out with Partners.

When the parties signed the BLP on March 18, 1994, no building yet existed on the Property. In fact, construction did not commence until November of that year and was not completed until December 1995. To obtain a construction loan for the Property, Partners presented to a lending institution the BLP as a commitment letter from a prospective tenant. ³

Immediately following the execution of the BLP, Brown's Shoe proceeded to order inventory for the Park City store and to make plans to occupy the Property later that year. Sigg volunteered to store the approximately $170,000 worth of shoes Brown's Shoe had ordered in a storage facility Sigg owned in Park City. Brown's Shoe instead decided to have the shoes shipped to its Grand Junction, Colorado store and then later have them sent to Park City when the Property became available. Brown testified that Partners knew Brown's Shoe was ordering inventory and transferring personnel in reliance on Partners' promises and the BLP. On August 5, 1994, Olch sent a letter to Brown stating his position that the BLP was not a binding agreement, but indicating a willingness to try to work out an agreeable lease with Brown's Shoe. In response, on August 12, 1994, Brown's Shoe's attorney wrote Olch arguing that the BLP was a binding document and indicating a willingness to work out a final lease agreement for the Property.

During the fall of 1994 and early 1995, the parties exchanged correspondences and draft lease agreements for the Property, but never agreed to a final lease document. Brown's Shoe claimed that Partners' proposed final lease was commercially unreasonable, not proposed in good faith, and contained terms directly contrary to the agreed-upon provisions in the BLP.

On February 26, 1995, Brown's Shoe submitted to Partners a lease Brown's Shoe asserted was consistent with the BLP. Partners never responded to Brown's Shoe's proposals. Accordingly, Brown's Shoe filed this action on April 19, 1995.

Several months after Brown's Shoe filed its complaint, Partners rented the Property to nonparty tenants (the Tenants). The Tenants' leases with Partners contained a higher rental rate and none of the provisions Brown's Shoe had repeatedly claimed were commercially unreasonable and proposed in bad faith.

The trial was scheduled for June 11, 1996. On June 6, 1996, a hearing was held to discuss which issues would be decided by the court and which issues would be decided by the jury. At that time, the judge decided to hold a hearing at the beginning of trial on June 11 to argue and decide various legal matters, including whether Brown's Shoe's claims should go to the jury or be decided by the court and whether there were any disputed material facts concerning those claims. Although Brown's Shoe argues otherwise, both sides understood that the pretrial hearing on June 11, 1996, would effectively be a summary judgment hearing.

Immediately before the trial on June 11, 1996, the hearing was held. After substantial argument, the court dismissed with prejudice Brown's Shoe's claims of specific performance, fraud, and breach of contract to the extent of the two three-year option periods referred to in the BLP. The court reserved the issue of whether the BLP was an enforceable agreement for the initial three-year term and ruled it would submit that issue to the jury.

During this hearing, Brown's Shoe stipulated that the breach of contract claim for the initial three-year term of the lease could also be dismissed with prejudice, because it was Brown's Shoe's position that if it only had the initial three-year term of the lease it would lose money. ⁴ Under the stipulation, if it successfully appealed the trial court's dismissal of the breach of contract claim as to the option periods, Brown's Shoe could refile the breach of contract claim as to the initial three-year term. The court accepted the stipulation and entered an order dismissing Brown's Shoe's claims as well as Partners' counterclaims for abuse of process and fraud.

Brown's Shoe filed a timely Notice of Appeal and Partners' filed a timely Notice of Cross Appeal concerning dismissal of their abuse of process counterclaim.

ISSUES AND STANDARD OF REVIEW

Based on the terms of the two three-year option periods in the BLP, Brown's Shoe argues the trial...