Columbia Associates v. Propper Oil Co.
| Decision Date | 17 March 1987 |
| Docket Number | No. C2-86-1258,C2-86-1258 |
| Citation | 402 N.W.2d 223 |
| Parties | COLUMBIA ASSOCIATES, Respondent, v. PROPPER OIL COMPANY, Appellant. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
1. The evidence sustains the trial court's conclusion that, pursuant to the lease agreement, the tenant was obligated to pay its pro rata share of increased taxes and special assessments levied during the last year of tenancy but not payable until after the lease had terminated and the building had been vacated.
2. The evidence sustains the trial court's conclusion that, pursuant to the lease agreement, the tenant was obligated to pay its pro rata share of increased utility costs incurred during the last year of tenancy but not payable until after the lease had terminated and the building had been vacated.
John A. Warchol, Brian L. Sobol, Katz, Davis & Manka, Ltd., Minneapolis, for respondent.
Thomas F. Miller, Minneapolis, for appellant.
Heard, considered and decided by RANDALL, P.J., and FOLEY, JUDGE and WOZNIAK, JJ.
Propper Oil Company, d/b/a 10,000 Auto Parts, appeals from a money judgment entered in favor of respondent Columbia Associates for unpaid taxes and utilities under a lease agreement. Propper Oil contends that its obligation as tenant to pay these charges terminated with termination of the lease and vacation of the premises and that if the lease is ambiguous on this point, it should be construed against Columbia, successor to the drafter of the lease agreement. We affirm.
Propper Oil entered into a lease for commercial space in a building owned by Besser & Associates in February 1976. In October 1978, Propper Oil exercised its option to renew the lease through February 28, 1982. Columbia purchased the building in March 1981 and assumed all rights and liabilities of Besser under its lease agreement with Propper Oil. On or about February 28, 1982, Propper Oil vacated the premises.
A dispute arose between the parties over payment of taxes and special assessments and utility costs levied against the property in 1981 but not payable until 1982. 1 The lease terms at issue provide:
4. The LESSOR agrees to pay all of the real estate taxes and installments of special assessments levied against the property so long as they do not exceed $payable in 1976 in a calendar year, this amount being equal to __________ cents per square foot based upon a total net rentable area of 76,033 square feet. In the event such real estate taxes and installments of special assessments exceed this amount in any calendar year, the excess shall be called additional taxes and special assessments. The LESSEE agrees to pay its prorata share of such additional taxes and special assessments in the form of additional rent. As the LESSEE is occupying 39170 square feet of the net rentable building area, the LESSEE shall pay 51.5% of such additional taxes and special assessments.
The annual additional taxes and special assessments due from the LESSEE shall be divided by twelve (12), and paid monthly along with regular rents. If the real estate taxes and installments of special assessments for the property have not been determined by the First of January for any year the LESSEE agrees to continue to pay the monthly rental amount that was due the previous month. Then, when the real estate taxes and installments of special assessments are determined, an adjustment retroactive to the First of January will be made in the following month's rental.
The above provisions shall not be effective until January 1, 1977 and the LESSOR shall verify the real estate taxes and installments of special assessments with copies of the actual bills.
* * *
7 & 8. The lessor shall pay for gas, oil, electricity and water and sewer charges during the term of the lease. LESSEE agrees, however, to pay 51.5% of any increase over said utility charges paid by the LESSOR in the calendar year of 1975 for the entire building * * *. The annual additional utilities due from the LESSEE shall be divided by twelve (12) and paid monthly along with regular monthly rental payments. First additional monthly payment for increase costs of utilities will be due on June 1, 1977. LESSOR shall verify the utility costs with copies of the actual billing for both years involved. LESSOR shall have the right during the term of the lease to install individual electric meters for each tenant located at [the business address]. LESSOR must advise LESSEE in writing at least sixty (60) days prior to making the change to individual meters. It is mutually agreed that monthly rental payment will be reduced Four Hundred dollars per Month ($400.00) to compensate LESSEE for their direct electricity payment to Northern States Power Company.
(Emphasis supplied.)
Under paragraph 4, Propper Oil is obligated to pay its pro rata share (51.5%) of real estate taxes and assessments levied against the property to the extent that such real estate taxes and assessments exceed those payable in 1976. Taxes and installments of special assessments payable in 1976 were $13,095. During 1981, real estate taxes and special assessments of $25,782.80 were levied against the property, an increase of $12,687.72 over real estate taxes payable in 1976. Columbia claimed that Propper Oil was responsible for 51.5% of that increase or $6,534.18, less payments of $1,089.04, leaving an unpaid balance of $5,445.14.
Paragraph 7 & 8 provides that Propper Oil is obligated to pay its pro rata share of utility charges to the extent these charges exceed utility costs incurred in the base year 1975. The provision also provides that utilities should be paid "with the regular monthly rental payments." In 1981, Columbia paid utility charges of $48,699.70, an increase of $20,060.73 over utility costs incurred in 1975. Columbia sought recovery for 51.5% of that increase or $10,331.28 and for $859.77 in unpaid utility charges incurred in 1980.
Propper Oil denied that it was responsible for the payment of any charges following expiration of the lease and vacation of the premises. During its tenancy, Propper Oil made payments representing its share of additional taxes and special assessments along with monthly rental payments. With the exception of the $859.77 Columbia claimed for 1980 utility charges, Propper Oil also made monthly payments for increased utility charges until it vacated the premises in February 1982.
Donald Propper, president of Propper Oil, testified that when he signed the lease he understood the terminology used and intended to bind Propper Oil to its terms. He acknowledged that the utilities provision, as drafted by Besser, was discussed during negotiations with Columbia representatives but remained unchanged. He further explained:
[I]t was always the interpretation, at least, my interpretation, and I think even in the way the lease was written, that the term of the lease, at the end of the term of the lease, that was the extent of our obligation to pay increases in utilities and taxes, because we assumed the obligation in 1975 when we negotiated the lease for the new rent in 1976 and thereon.
(Emphasis supplied.)
Olaf Lee, real estate manager for Columbia at the time the lease was executed, stated that when exact expenses cannot be established in the year a lease originates, payment of operating expenses is often allowed after those expenses are incurred. Lee explained that base rent is established by reference to expenses existing on the property in that particular year, including an amount reflecting taxes and utilities. He also testified that although Columbia paid utility charges as incurred and then recouped the amounts owed from individual tenants the following year, it also had the option under the lease to separately meter individual tenants in the building. If this option had been exercised, Propper Oil would have been required to pay the utility company directly.
The trial court found that under paragraph 4 of the lease, Propper Oil was liable for its pro rata share of taxes and special assessments levied in 1981 but not actually payable until 1982. The trial court further found that under paragraph 7 & 8 of the lease, Propper Oil was liable for its pro rata share of utilities used in 1981 but payable until 1982. Judgment with interest was entered for $16,636.19, representing unpaid utilities incurred in 1980 plus utilities, taxes and special assessments payable in 1982. Columbia was also awarded attorney's fees of $4,270.
On appeal, Columbia additionally seeks attorney's fees under a provision of the lease.
1. Did the trial court err in determining that Propper Oil was obligated to pay its pro rata share of increased taxes and special assessments levied on the property during its last year of tenancy but not payable until after the lease had terminated and the building had been vacated?
2. Did the trial court err in determining that Propper Oil was obligated to pay its pro rata share of increased utility costs incurred during the last year of tenancy but not payable until after the lease had terminated and the building had been vacated?
Propper Oil did not move for a new trial or amended findings. This court's review is limited to whether the evidence sustains the findings of fact and whether such findings sustain the conclusions of law and the judgment. See Brakemeier v. Wittek, 386 N.W.2d 408, 409-10 (Minn.Ct.App.1986).
The focal issue here is interpretation of documentary evidence that is supplemented by oral testimony. In In re Trust Known as Great Northern Iron Ore Properties, 308 Minn. 221, 243 N.W.2d 302, cert. denied, 429 U.S. 1001, 97 S.Ct. 530, 50 L.Ed.2d 612 (1976), the Minnesota Supreme Court set out standards for reviewing a trial court's findings as to the meaning and credibility of documentary evidence:
Where the evidence is partly oral and the balance is written or deals with undisputed facts, then we may ignore the trial judge's finding and...
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