Caldwell Land & Cattle, LLC v. Johnson Thermal Sys., Inc.
| Decision Date | 15 November 2019 |
| Docket Number | Docket No. 46056 |
| Citation | 452 P.3d 809,165 Idaho 787 |
| Parties | CALDWELL LAND AND CATTLE, LLC, an Idaho limited liability company, aka Caldwell Land & Cattle Company, LLC, Plaintiff-Respondent, v. JOHNSON THERMAL SYSTEMS, INC., an Idaho corporation, Defendant-Appellant. |
| Court | Idaho Supreme Court |
Hawley, Troxell, Ennis & Hawley, LLP, Boise, for appellant. Lynnette Michele Davis argued.
Strong & Hanni, Salt Lake City, Utah, for respondent. William Ingram argued.
This appeal stems from an unlawful-detainer and breach-of-contract action filed by Caldwell Land and Cattle, LLC, ("CLC") after purchasing a building where the holdover tenant, Johnson Thermal Systems ("JTS"), asserted a right to remain on the property. The dispute centers on the interpretation of a lease between JTS and the original property owner which granted JTS an option to extend the lease. JTS contends it properly exercised the option; CLC contends JTS did not. The district court held that JTS failed to exercise the option and thus became a holdover tenant. The court further held that when JTS did not vacate within the proper timeframe, JTS unlawfully detained the premises and was liable for the ensuing damages. JTS timely appeals.
In February 2012, JTS, a producer of industrial refrigeration equipment, entered into a lease agreement (the "Lease") with the Gilbert Family Trust ("Gilbert") for a commercial property located in Caldwell, Idaho. The Lease granted JTS an option to renew for two one-year terms but required JTS to give Gilbert at least 60 days’ prior written notice of its intent to do so before the Lease's expiration. In addition, all amendments, modifications, or changes to the Lease were to be made in writing and signed by the parties. In March 2013, JTS and Gilbert1 signed a written amendment to the Lease which expressly stated that JTS was exercising its option to extend the Lease for one of its additional one-year terms. The amendment extended the Lease until April 15, 2014.
During 2014, JTS began constructing a new facility at a different location. In the meantime, JTS and Gilbert's agent discussed plans for renewing the Lease beyond its expiration on April 15, 2014. Gilbert was aware that JTS planned to move its operation once the new facility was completed, and JTS knew Gilbert was hoping to sell the property. During negotiations, Gilbert presented possibilities of month-to-month, 6-month, and one-year terms at different rates. On April 10, 2014 JTS told Gilbert via email that it "would like to do a 6 month lease with the option to go month to month for an additional 3–6 months."
JTS and Gilbert drafted and signed an amendment extending the Lease until October 15, 2014 (the "Extension Amendment"). The Extension Amendment set rent for the 6-month term at $6,000 per month. If JTS wished to extend the Lease at the conclusion of the 6-month term, the Extension Amendment provided two possible arrangements: JTS could extend the Lease either for an additional 6-month term at $6,000 per month, or on a month-to-month basis at $6,250 per month. All other terms and conditions remained "in full force and effect" unless "specifically amended."
During this 6-month extension term, JTS and Gilbert's agent discussed extending the lease beyond October 15th. However, JTS never definitively answered whether it would elect to extend the Lease or which arrangement it would select if it did choose to extend. JTS consistently gave Gilbert possible vacation dates that were considerable time before April 15, 2015 (the would-be termination date if the second 6-month extension were selected). For example, JTS informed Gilbert in August 2014 that it was "hoping on the December move in on the new building, but it could be January." A month later, Gilbert's agent asked JTS to keep him informed of their planned vacancy of the building. The agent advised JTS that he had told Gilbert that JTS was "shooting for December 15th." He also informed JTS that Gilbert would be signing a listing agreement and installing a "For Sale" sign on the property in the coming week.
October 15, 2014 passed without a written or oral agreement extending the lease. JTS continued to occupy the building and paid $6,000 in rent for November and December 2014. In November 2014, Gilbert entered into an agreement to sell the property to CLC. CLC is a single-purpose LLC created to own and manage the property. Its sole purpose was to lease the property to Caldwell Peterbilt. In the first week of December, Gilbert's agent informed JTS that Gilbert was selling the property and that she and CLC aimed to close by December 31, 2014. JTS was also informed that CLC would issue a 30-day eviction notice. JTS then asserted that it had exercised the 6-month extension. Less than a week later, Gilbert sent JTS a written "Notice of Termination" which required JTS to surrender possession on January 31, 2015, at which point the lease would terminate. The termination notice also required JTS to leave the property in the same condition it was in upon entering the Lease including the removal all trade fixtures.
Gilbert and CLC closed on the property in late December 2014. After this, CLC and JTS had discussions centering on when JTS could be out by the earliest. The parties were unable to reach an agreement. On January 22, 2015, CLC filed a complaint for unlawful detainer based upon JTS's representation that it would not surrender the property on January 31. The complaint sought possession of the property. A week later, on January 29, JTS reiterated its position that it had exercised the 6-month extension and stated that it did not plan to vacate the premises until April 15, 2015.
However, JTS vacated the property around February 12, 2015, after the City of Caldwell approved an early move into its new facilities. JTS made no repairs to the property and left in place a leased 480V electrical transformer which JTS had installed a year earlier. On February 23, 2015, JTS contacted Idaho Power to request that they remove the transformer. After Idaho Power removed the transformer, Peterbilt called Idaho Power to reinstall the transformer on March 2. Peterbilt would take possession of the property in May 2015.
CLC amended its complaint on March 24, 2015. The complaint no longer sought possession of the property, but sought damages associated with JTS's alleged unlawful detainer. In addition, the amended complaint alleged breach of contract; breach of the implied covenant of good faith and fair dealing; and intentional and malicious injury to property. JTS counterclaimed for breach of contract; constructive eviction; and for a refund of the security deposit and the unearned portion of the February 2015 rent.
More than two years later, in August 2017, the district court held a three-day bench trial. In the written decision which followed, the district court ruled that the plain language of the Lease required all amendments, modifications, or changes to be in writing and signed by the parties. Determining that the Extension Amendment did not alter or eliminate the writing requirement, the court ruled that the Extension Amendment's 6-month extension needed to be put in writing. Since the parties failed to create a written extension, the district court ruled that JTS and Gilbert created a "month-to-month" or "at-will" tenancy when JTS paid, and Gilbert accepted, $6,000 in rent after the extension deadline passed. For the unlawful-detainer claim, the court found JTS liable for failing to vacate by the Notice of Termination's January 31, 2015 deadline. For the breach-of-contract claim, the court found JTS liable for failing to vacate after its term expired, removing the transformer without CLC's permission, and failing to make repairs. The district court also found that JTS breached the implied covenant of good faith and fair dealing by failing to give timely notice to CLC of when it would vacate the property and by failing to pay the higher rent for the month-to-month option. Finding that JTS agreed to indemnify CLC in the Lease, the court ruled that CLC was entitled to $86,389.26 in damages for unpaid rent, damages and costs caused by removal of the transformer, costs to repair the property, and damages related to Peterbilt's inability to move into the building on February 1st (such as rent due on extending Peterbilt's prior lease, costs of an idle employee, and lost profits).
After the district court's findings of facts and conclusions of law were entered, CLC requested attorney's fees under Idaho Code section 6-324, Idaho Rule of Civil Procedure 54(e)(1), and the Lease. Meanwhile, JTS moved to reconsider, alter, or vacate the judgment. The court summarily denied JTS's motion. The district court awarded CLC $150,000 in attorney's fees under the Lease and Idaho Code section 6-324 in addition to around $3,400 in costs as a matter of right. The district court then entered a final judgment awarding damages, costs, and attorney's fees. JTS timely appeals.
1. Did the district court err in concluding that the JTS did not intend to exercise the 6-month option to extend the Lease?
2. Did the district court err by hearing CLC's contract claims in a proceeding that began as an unlawful detainer claim for damages?
3. Did the district court err in awarding damages to CLC based on unlawful detainer or breach of contract?
4. Did the district court properly award attorney's fees to CLC below?
5. Is either party is entitled to attorney's fees on appeal?
"Review of a trial court's conclusions following a bench trial is limited to ascertaining whether the evidence supports the findings of fact, and whether the findings of fact support the conclusions of law." Borah v. McCandless , 147 Idaho 73, 77, 205 P.3d 1209, 1213 (2009) (citing Benninger v. Derifield , 142 Idaho 486, 488–89, 129 P.3d 1235, 1237–38 (2006) ). "This...
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