Cecil Lawter Real Estate School, Inc. v. Town & Country Shopping Center Co., Ltd., s. 1

• Decision Date: 11 December 1984
• Docket Number: CA-CIV,Nos. 1,s. 1
• Citation: 694 P.2d 815,143 Ariz. 527
• Court: Arizona Court of Appeals
• Parties: CECIL LAWTER REAL ESTATE SCHOOL, INC., an Arizona corporation, Plaintiff-Appellee, v. TOWN & COUNTRY SHOPPING CENTER CO., LTD., Defendant-Appellant. TOWN & COUNTRY SHOPPING CENTER CO., LTD., Third Party, Plaintiff-Appellee, v. TRANSAMERICA DEVELOPMENT COMPANY, Third Party, Defendant-Appellant. 6441, 1 6400.

Page 815

694 P.2d 815

143 Ariz. 527

CECIL LAWTER REAL ESTATE SCHOOL, INC., an Arizona corporation, Plaintiff-Appellee, v. TOWN & COUNTRY SHOPPING CENTER CO., LTD., Defendant-Appellant.

TOWN & COUNTRY SHOPPING CENTER CO., LTD., Third Party, Plaintiff-Appellee, v. TRANSAMERICA DEVELOPMENT COMPANY, Third Party, Defendant-Appellant.

Nos. 1 CA-CIV 6441, 1 CA-CIV 6400.

Court of Appeals of Arizona Division 1, Department D.

Dec. 11, 1984.

Mohr, Hackett, Pederson, Blakley & Randolph, P.C. by Arthur W. Pederson, Charles I. Kelhoffer, Phoenix, for Town & Country Shopping Center Co., Ltd.

Murphy & Posner by K. Bellamy Brown, Phoenix, for Transamerica Development Co.

Burch & Cracchiolo, P.A. by Edwin C. Bull, Frank Haze Burch, Arda S. Rutherford, Phoenix, for plaintiff-appellee, Cecil Lawter Real Estate School, Inc.

OPINION

OGG, Judge.

These consolidated appeals arise out of a lease agreement entered into by plaintiff-appellee, Cecil Lawter Real Estate School (Lawter) and third party defendant-appellant, Transamerica Development Company (Transamerica).

Prior to discussing the legal issues presented, we review the facts giving rise to these appeals. On September 14, 1970, Cecil B. Lawter and his wife, Isabelle Lawter, entered into a lease agreement with Transamerica, through its vice-president, Don Owen. The terms of the lease were negotiated by Cecil Lawter and Velma Ludtke, assistant secretary and project manager of Transamerica. The 1970 lease provided that Lawter would lease from Transamerica certain premises located in the Town & Country Shopping Center at 2095 East Camelback Road, Phoenix, Arizona. The parties agreed that Lawter would pay a "fixed minimum rent" of $742.88 per month, plus additional charges for utilities, common area maintenance and other expenses. During the time the 1970 lease was in effect, the additional charges fluctuated between $881.09 and $1,010.01 per month.

Eventually a second lease was executed between Lawter and Transamerica on February 14, 1972. Once again, Cecil Lawter and Velma Ludtke negotiated the terms of the 1972 lease. The lease was signed by Cecil Lawter and by Don Owen on behalf of Transamerica. Under the heading "FUNDAMENTAL LEASE PROVISIONS AND EXHIBITS", the lease provided: "FIXED RENT: $1,566.34 per month ..." Further on in the lease, clauses provided that Lawter would be required to pay, upon demand by Transamerica, a proportionate share of all real estate tax increases ¹, any rent tax imposed ², a proportionate share of the utilities furnished ³ and a proportionate share of common area charges. ⁴

Transamerica accepted Lawter's monthly checks in the amount of $1,566.34 from commencement of the lease until the property was acquired by defendant-appellant Town & Country Shopping Center Company, Ltd. (Town & Country) in December, 1972. ⁵ Town & Country thereafter accepted Lawter's monthly checks of $1,566.34 until January, 1977. At that time, Lawter was notified by Town & Country that Lawter was responsible for Town & Country's actual costs of supplying Lawter's premises with electricity and common maintenance. Town & Country demanded that Lawter pay arrearages in the amount of $154.94 for rent and other charges and $668.86 for payment of Lawter's share of property taxes. Lawter refused to pay the sums requested and subsequently, on August 15, 1978, filed an action for declaratory relief against Town & Country. Town & Country subsequently counterclaimed for declaratory relief against Lawter.

In August, 1979, Town & Country filed a third party complaint against Transamerica, claiming that, if Lawter was successful in its action against Town & Country, "Transamerica has breached its warranties and agreements by failing to disclose amendments and modifications to the lease and additional agreements between Transamerica and Lawter, which have resulted in additional costs and damages to Town & Country." The complaint sought recovery from Transamerica for any costs, damages or judgments suffered by Town & Country as a result of Lawter's action, as well as reasonable attorney's fees and costs. In its answer, Transamerica affirmatively raised the defense of the statute of limitations with respect to the breach of warranty claim.

In February and March, 1981, Town & Country and Lawter, respectively, filed cross motions for summary judgment. Town & Country's motion was denied, while Lawter's motion was granted. The trial court subsequently entered findings of fact, conclusions of law and its formal judgment. Town & Country's motion for a new trial was denied, giving rise to the first of the two appeals before us.

As concerns Town & Country's third party claim against Transamerica, both parties filed cross motions for summary judgment. Town & Country's motion was denied and Transamerica's was granted. Town & Country filed a motion for new trial, which was granted. Transamerica then filed a notice of appeal giving rise to the second appeal before us.

TOWN & COUNTRY'S APPEAL

We first address the appeal taken by Town & Country from the trial court's order granting summary judgment in favor of Lawter and denying Town & Country's motion for summary judgment. The trial court concluded that the lease agreement was ambiguous as a matter of law and that, after considering extrinsic evidence, it was established as a matter of law that Lawter's rental obligation under the 1972 lease was $1,566.34 per month. The trial court also concluded that Lawter properly and timely exercised the second of three five-year renewal options. Moreover, the trial court held that, subject to good faith negotiations and agreement, Lawter had the right to exercise a third five-year renewal which, if exercised, would run through December 31, 1990.

Town & Country raises several issues pertaining to the trial court's judgment in favor of Lawter. We will discuss each, though not in the order raised by Town & Country. Since we are considering a summary judgment proceeding, we must view the facts and evidence in a light most favorable to the party against whom summary judgment was entered. Gulf Insurance Company v. Grisham, 126 Ariz. 123, 613 P.2d 283 (1980); Matter of Estate of Kerr, 137 Ariz. 25, 667 P.2d 1351 (App.1983).

We begin by looking at the lease agreement. As we previously noted, on the first page of the lease entitled "FUNDAMENTAL LEASE PROVISIONS AND EXHIBITS" appears the following: "FIXED RENT: $1,566.34 per month ..." Alongside this clause the parties have initialed, indicating that both recognized deletion of the word "minimum". Thus, the lease provides for a "fixed rent" of $1,566.34 per month. The word "fixed" is defined as: "not subject to change or fluctuation". WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 861 (1969). However, further into the lease, there are clauses providing for adjustment of the rent based upon increases in taxes, utilities or maintenance expenses. ⁶ Based upon these inconsistencies, the trial court found the lease ambiguous. We agree.

The initial determination of whether an agreement is ambiguous, and thus subject to interpretation through the use of parol evidence, is a question of law to be determined in the first instance by the trial court. Associated Students of the University of Arizona v. Arizona Board of Regents, 120 Ariz. 100, 584 P.2d 564 (App.1978), cert. denied 440 U.S. 913, 99 S.Ct. 1226, 59 L.Ed.2d 462 (1979). However, an appellate court is not bound by the trial court's conclusions of law. The interpretation of an instrument is a question of law to be determined by this court independently of the trial court's determination. Polk v. Koerner, 111 Ariz. 493, 533 P.2d 660 (1975); Associated Students, supra.

An agreement is ambiguous if the language used by the parties can reasonably be construed in more than one sense and such construction cannot be determined within the four corners of the instrument. Associated Students, supra. The lease agreement, considered as a whole, does not clearly and unambiguously set forth the rights of the parties as concerns the amount of rent to be paid by Lawter. The lease provides that the monthly rent is fixed at $1,566.34, while it also provides that the rent may be adjusted as the lessor's expenses increase. The lease is not so worded that it can be given a certain or definite meaning or interpretation and is therefore ambiguous. See Associated Students, supra.

Once a contract is determined to be ambiguous, extrinsic (parol) evidence may be resorted to for the purpose of ascertaining its real meaning. Associated Students, supra. Thus, Town & Country's claim that the trial court erred in considering parol evidence fails.

Since we have determined that the lease is ambiguous on the point of monthly rent to be paid, it becomes necessary to resolve the ambiguity by considering matters outside the written lease agreement. Fairway Builders, Inc. v. Malouf Towers Rental Company, Inc., 124 Ariz. 242, 603 P.2d 513 (App.1979). Where there is a conflict in the evidence presented to resolve the ambiguity, it is for the trier of fact to resolve the conflict by determining the intent of the parties in executing the instrument. Fairway Builders, supra; Ash v. Egar, 25 Ariz.App. 72, 541 P.2d 398 (1975). In such cases, summary judgment is not appropriate. However, where there is no conflict in the evidence presented to resolve the ambiguity, summary judgment may be appropriate. Cf. Fairway Builders, supra.

We consider now the evidence presented to resolve the ambiguity. Affidavits of Cecil Lawter, Velma Ludtke, Don Owen and Frank Thurman were before the trial court. Cecil Lawter's affidavit states that he, Velma Ludtke and Don Owen agreed that Lawter's obligation to Transamerica was fixed at $1,566.34 per month. Town & Country claims that Cecil Lawter's affidavit contains statements amounting to "mere conclusions, legal conclusions, opinions and speculative comments, which would not be admissible in a trial." See Rule 56(e...