Claire's Boutiques, Inc. v. Brownsburg Station Partners LLC

• Decision Date: 04 November 2013
• Docket Number: No. 32A01–1209–CC–438.,32A01–1209–CC–438.
• Citation: 997 N.E.2d 1093
• Parties: CLAIRE'S BOUTIQUES, INC., Appellant–Defendant, v. BROWNSBURG STATION PARTNERS LLC, Appellee–Plaintiff.
• Court: Indiana Appellate Court

997 N.E.2d 1093

CLAIRE'S BOUTIQUES, INC., Appellant–Defendant,

v.BROWNSBURG STATION PARTNERS LLC, Appellee–Plaintiff.

No. 32A01–1209–CC–438.

Court of Appeals of Indiana.

Nov. 4, 2013.

Alice M. Morical, Hoover Hull LLP, Indianapolis, IN, John S. Letchinger, EdwardsWildman Palmer LLP, Chicago, IL, Attorneys for Appellant.

G. John Cento, Cento Lane, LLC, Indianapolis, IN, Attorney for Appellee.

OPINION

NAJAM, Judge.

STATEMENT OF THE CASE

Brownsburg Station Partners, LLC (“Brownsburg Station”) filed a complaint against Claire's Boutiques, Inc. (“Claire's”) alleging that Claire's had breached its lease (“Lease”) for commercial retail space in Brownsburg Station Shopping Center. The parties filed cross-motions for summary judgment and, after a hearing, the trial court issued its order, with findings of fact and conclusions thereon, granting Brownsburg Station's motion for summary judgment and denying the cross-motion filed by Claire's (“Summary Judgment Order”). Claire's filed a motion to reconsider, which the trial court granted, vacating the Summary Judgment Order (“Reconsideration Order”). Following a two-day bench trial, the court issued findings of fact and conclusions thereon and entered judgment in favor of Brownsburg Station but denied its request for consequential damages (“Judgment”).

Claire's appeals the Reconsideration Order and the Judgment, and Brownsburg Station cross-appeals the Judgment denying consequential damages. We address two dispositive issues on appeal:

1. Whether the trial court erred when it construed the operating cotenancy provision in the Lease to allow Claire's to terminate the Lease if the occupancy level fell below seventy percent of the gross leasable area rather than “70% of the non-department retail store tenants in Buildings A1 and A3.”

2. If the trial court erred in its construction of the co-tenancy provision, whether the trial court also erred when it determined that Claire's had not terminated the Lease by vacating the premises before Brownsburg Station terminated the Lease by written notice.

We reverse and remand with instructions.¹

FACTS AND PROCEDURAL HISTORY

Brownsburg Station owns real estate commonly known as Brownsburg Station Shopping Center (“the Shopping Center”) in Hendricks County. The Shopping Center is comprised in relevant part of two anchor retail spaces and two buildings, Buildings A1 and A3, each of which is divided into smaller retail spaces. At all relevant times, CB Richard Ellis (“CBRE”) served as real estate manager of the Shopping Center.

In early 2007, Brownsburg Station negotiated a lease for retail space in the Shopping Center (“the Lease”) with Claire's. After negotiations regarding the lease language, Claire's and Brownsburg Station entered into the Lease for 1500 square feet of space in Building A3 with a term from November 17, 2007, to January 2013. The Lease included the following operating co-tenancy provision:

Section 2.06 Operating Co–Tenancy. Notwithstanding anything to the contrary contained in this Lease, in the event that the Shopping Center's occupancy level falls below 70% of the non-department retail store tenants in Buildings Al and A3 or either Kohl's or Lowe's and [sic] open for business, [Claire's] shall pay percentage rent only (at the rate of 5% of gross sales) and Basic Annual Rent and all other charges to [Claire's] hereunder shall abate until such time as the occupancy level increases to over 70% of the non-department retail store tenants in Buildings A1 and A3 and at least Kohl's and Lowe's or any comparable replacement thereof in terms of size and quality is open for business. If the occupancy level remains below the level specified herein for the period of one year or more, [Claire's] shall have the option of terminating this Lease effective immediately.

Appellant's App. at 134.

On May 15, 2009, Claire's decided to leave the premises in the Shopping Center because of that store's underperformance. On June 14, 2009, Claire's removed its personal property and vacated the leased space at the Shopping Center without notice to CBRE or Brownsburg Station. The following day, Brownsburg Station began trying to re-lease the retail space formerly occupied by Claire's. And on June 26, Brownsburg Station sent a notice of default to Claire's, terminating the Lease and the Lease term and demanding payment of the accelerated balance (“termination notice”). Claire's did not respond and made no further rent payments.

On July 17, 2009, Brownsburg Station filed a complaint for breach of lease against Claire's.² On August 31, Claire's filed its answer, affirmative defenses, and request for jury trial. In its answer, Claire's asserted in part that it had terminated the lease as a result of Brownsburg Station's “failure to exceed 70% occupancy of non-department retail store tenants for more than one year.” Appellant's Supp.App. at 222. On December 27, 2010, Brownsburg Station filed its motion for partial summary judgment, supporting brief, and designation of evidence. On January 31, 2011, Claire's filed its cross-motion for summary judgment, opposition to Brownsburg Station's partial summary judgment motion, supporting memoranda, and designation of evidence or, in the alternative, its motion for partial summary judgment. On February 28, Brownsburg Station filed its brief in opposition to Claire's cross-motion for summary judgment and to its alternative motion for partial summary judgment and designation of evidence in support of its brief in opposition. And on April 27, Brownsburg Station filed its sur-reply brief in support of its motion for partial summary judgment and in opposition to Claire's cross-motion for summary judgment and to its alternative motion for partial summary judgment.

The trial court held a hearing on the motions for summary judgment on May 11. On June 6, the court granted partial summary judgment in favor of Brownsburg Station as to liability. On August 16, Claire's filed a motion for reconsideration, and on December 12, the trial court entered the Reconsideration Order, granted Claire's' motion for reconsideration, found the lease provision in dispute to be ambiguous, denied both motions for summary judgment, and set all issues for trial.

A bench trial was held on April 23–25 and June 14–15, 2012, and the parties submitted proposed findings and conclusions. And on August 30, 2012, the trial court issued its “Findings of Fact, Conclusions of Law and Judgment” in favor of Brownsburg Station on all issues except its request for consequential damages. Appellant's Brief Addendum at 9. The trial court held that, under the operating co-tenancy provision, the occupancy level should be calculated based on the percentage of gross leasable area, that Claire's had breached the Lease, and that Claire's did not have an option to terminate the Lease. Claire's now appeals the Reconsideration Order and the Judgment, and Brownsburg Station cross-appeals the Judgment denying its claim for consequential damages.

DISCUSSION AND DECISION

Standard of Review

The issues on appeal turn on the meaning of a provision in a commercial lease, a contract. “Construction of the terms of a written contract is a pure question of law for the court, reviewed de novo.” Harrison v. Thomas, 761 N.E.2d 816, 818 (Ind.2002). If an instrument's language is unambiguous, the parties' intent is determined from the four corners of the instrument. City of Indianapolis v. Kahlo, 938 N.E.2d 734, 744 (Ind.Ct.App.2010), trans. denied. If a contract is ambiguous or uncertain, its meaning is determined by extrinsic evidence and its construction is a matter for the fact-finder. Kahlo, 938 N.E.2d at 744. An ambiguity exists where a provision is susceptible to more than one interpretation and reasonable persons would differ as to its meaning. Gregg v. Cooper, 812 N.E.2d 210, 215 (Ind.Ct.App.2004). But the fact that the parties disagree over the meaning of the contract does not, in and of itself, establish an ambiguity. Everett Cash Mut. Ins. Co. v. Taylor, 926 N.E.2d 1008, 1013 (Ind.2010) (citation omitted).

When interpreting a written contract, the court should attempt to determine the parties' intent at the time the contract was made, which is ascertained by the language used to express their rights and duties. Kahlo, 938 N.E.2d at 744. A court should construe the language of a contract so as not to render any words, phrases, or terms ineffective or meaningless. Hammerstone v. Ind. Ins. Co., 986 N.E.2d 841, 846 (Ind.Ct.App.2013).

Here, Claire's appeals the Reconsideration Order denying Claire's motion for summary judgment. As discussed below, we conclude that this case should have been resolved at the summary judgment stage. A motion for summary judgment is properly granted only when the pleadings and designated evidence reveal that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Hair v. Schellenberger, 966 N.E.2d 693, 697 (Ind.Ct.App.2012) (citations omitted), trans. denied. Where, as here, the dispute is one of law rather than fact, our standard of review is de novo. Villegas v. Silverman, 832 N.E.2d 598, 604 (Ind.Ct.App.2005).

Issue One: Operating Co–Tenancy Provision

Claire's first contends that the trial court erred when it construed the operating co-tenancy provision in the Lease. Again, the relevant portion of the Lease provides:

Section 2.06 Operating Co–Tenancy.Notwithstanding anything to the contrary contained in this Lease, in the event that the Shopping Center's occupancy level falls below 70% of the non-department retail store tenants in Buildings A1 and A3 or either Kohl's or Lowe's and [sic] open for business, [Claire's] shall pay percentage rent only (at the rate of 5% of gross sales) and Basic Annual Rent and all other charges to [Claire's] hereunder shall abate until such time as the occupancy level increases to over 70% of the non-department retail store tenants in Buildings A1...