Fairpark, LLC v. Healthcare Essentials, Inc.

• Decision Date: 23 February 2011
• Docket Number: No. CA 10–772.,CA 10–772.
• Citation: 381 S.W.3d 852,2011 Ark. App. 146
• Parties: FAIRPARK, LLC; Tracy Hoskins; and Lori Celeste Hoskins, Appellants v. HEALTHCARE ESSENTIALS, INC.; Lawrence Williams; Timothy Scott; and Brynne Scott Williams, Appellees.
• Court: Arkansas Court of Appeals

2011 Ark. App. 146

381 S.W.3d 852

FAIRPARK, LLC; Tracy Hoskins; and Lori Celeste Hoskins, Appellants

v.HEALTHCARE ESSENTIALS, INC.; Lawrence Williams; Timothy Scott; and Brynne Scott Williams, Appellees.

No. CA 10–772.

Court of Appeals of Arkansas.

Feb. 23, 2011.

Russell Charles Atchley, Fayetteville, for appellant.

Anthony William Noblin and Andrew T. Curry, Rogers, for appellee.

DAVID M. GLOVER, Judge.

[Ark. App. 1]This case involves the lease of commercial property in Fayetteville. In January 2008, appellees relinquished their tenancy prior to expiration of a five-year lease, claiming that appellants, as landlords, failed to repair the heating-and-air-conditioning system and failed to address excessive-noise issues involving an adjacent tenant. As a result, appellants sued appellees for the remaining rent due over the full lease term and to recover certain finish-out costs incurred at the beginning of the lease. The circuit judge, sitting as fact-finder, found in favor of appellees and dismissed appellants' complaint. Appellants then moved for a new trial, which the circuit court denied, leading to this appeal. We find no abuse of discretion in the court's ruling and affirm.

I. Facts

During the times relevant to this case, appellants Tracy Hoskins, Lori Celeste Hoskins, [Ark. App. 2]and Fairpark, LLC, owned the Fairpark Center in Fayetteville. The center is a large building containing several bays measuring approximately 1800 square feet each. In June 2006, Tracy Hoskins hired real-estate agent Clinton Bennett to lease the bays to commercial tenants. Because the bays were mere shells that required finishing out before occupancy, Hoskins told Bennett that he would provide an allowance of eight dollars per square foot, or approximately $14,400 per bay, to finish out the leased spaces.

In December 2006, appellees Lawrence Williams, Brynne Scott Williams, and Timothy Scott contacted Bennett to inquire about leasing warehouse and office space in the Fairpark Center for a proposed medical-equipment company, appellee Healthcare Essentials, Inc. Lawrence Williams conducted most of appellees' business dealings and would later testify that the property was advertised as build-to-suit, with Bennett telling him that Tracy Hoskins would construct the space “however we wanted it.” Williams viewed the property and met with Hoskins and Bennett to negotiate the lease terms. During this meeting, the parties discussed finish-out costs, and their versions of those discussions differ significantly.

According to Hoskins, the site chosen by appellees consisted of two bays (approximately 3600 square feet), and he told Lawrence Williams that he would furnish eight dollars per square foot, or approximately $28,000, to finish out the bays. Williams's recollection is as follows. He told Hoskins that appellees wanted a two-year lease, but Hoskins stated that, anytime he committed money for a finish-out, he required a five-year lease. Williams agreed to a five-year lease on that basis. He understood that Hoskins had a budget for the finish-out, but he was not told that any of the finish-out costs exceeding the budget [Ark. App. 3]would be charged to appellees.

Soon after the meeting, the parties executed a written lease dated December 23, 2006, setting forth a five-year term with initial rent of $4800 per month. The lease was drafted by Hoskins and stated that the tenants would receive possession on a certain date “or upon completion of Lessor constructed finish out.” The lease did not mention any tenant responsibility for the finish-out costs.

In early January 2007, Hoskins received an architect's drawing of a floor plan for the two bays chosen by appellees. The drawing showed three office-type areas and a warehouse space. Based on the floor plan, Hoskins determined that the finish-out costs would be just under $65,000. In an email dated January 11, 2007, he informed Lawrence Williams of the finish-out costs and told Williams that the tenant's portion would be $36,873. Williams responded that appellees would not pay for the finish-out costs and that he understood Hoskins would be responsible for the costs. Hoskins replied that he had mentioned several times during the parties' discussions that the finish-out allowance was approximately $28,000 for the two bays. He said, however, that he would contribute more and would accept from appellees, as the tenant's portion, a combination of a cash payment and an adjusted lease rate. Williams did not respond to Hoskins's offer.

During this time, real-estate agent Clinton Bennett contacted Williams and apologized for the confusion regarding the finish-out costs. Bennett suggested, as a solution, that Williams either scale back the construction or add the finish-out costs to appellees' rent payments. Williams subsequently emailed Hoskins and asked what cost savings he would realize if they [Ark. App. 4]did away with one of the offices. Apparently in response to this request, Hoskins asked his architect to prepare a scaled-down version of the floor plan for the two bays. When the plan was complete, Hoskins showed it to Williams and cautioned him that it would not “cure our entire budget problem” and would save only twenty percent at the most. He stated that the parties should “figure out how we are going to handle the overage; the tenant's portion.” During the next few weeks, the parties exchanged emails regarding the availability of the space for move-in but made no further mention of the tenant's responsibility for the finish-out costs. In March 2007, Hoskins gave Williams the keys for move-in.

In a later email to Williams, Hoskins mentioned that the tenant's portion of the finish-out costs amounted to approximately $20,000. Hoskins received no direct response from Williams and began to questionwhether appellees would pay the costs. Consequently, Hoskins proposed that the parties execute a revised lease to address the tenant's responsibility for the finish-out costs, and the parties met to discuss the matter in June 2007.

Again, the parties' versions of the meeting are in sharp conflict. Hoskins claims that the parties agreed that he would absorb a greater portion of the finish-out costs, about twelve dollars per square foot, and that appellees would pay the remainder as increased rent over a five-year period. Hoskins drafted a new lease to this effect, which called for appellees to pay an additional $318 per month in rent for five years. Williams denied that the meeting ended in an agreement, and he refused to sign the revised lease. Although he later proposed certain changes to the lease unrelated to the finish-out costs, neither Williams nor the other appellees ever executed the revised lease or paid any finish-out costs.

[Ark. App. 5]While the controversy over the finish-out costs was taking place, another conflict arose between the parties concerning the air-conditioning system in the leased space. Williams complained to Hoskins in March 2007, shortly after move-in, that the air conditioner was not cooling the space. Hoskins sent his property manager, Duane Kovach, and the air-conditioner installer, Abshier Heating and Air, to repair the unit, but, according to Williams, the problems persisted. In July and August 2007, Williams emailed Hoskins again, complaining that the extreme heat in the office (eighty-three degrees and eighty-five degrees on various days) made for miserable working conditions on the premises. Williams would also state, during trial, that he complained about the air-conditioning problems in person to Duane Kovach on an almost daily basis.

Hoskins responded to one of Williams's complaints by saying that he had asked Kovach to “hold off” on meeting with Williams about the air conditioning until Kovach could pick up an executed copy of the revised lease. In another response to Williams's complaints, Hoskins proposed either closing off the air-conditioner vents in the warehouse in order to make the office cooler or adding another unit to cool the warehouse. Williams expressed an interest in adding another unit, but Hoskins did not provide the unit. Instead, in September 2007, Hoskins emailed Williams that, because the weather was cooler, the air conditioner should be able to “keep up” and that he would revisit the issue the following summer. He also told Williams that he had “put together an invoice for your portion of the tenant finish-out costs, which I have no doubt you'll object to” and that the parties needed to get their “current situation,” meaning the finish-out costs, resolved. Based on these emails and the [Ark. App. 6]earlier email in which Hoskins asked Kovach to delay meeting with Williams, Williams believed that Hoskins was refusing to fix the air conditioner until the finish-out costs were paid or the revised lease was signed.

As fall and winter approached in 2007, Williams began to experience problems with the heat in the building. He did not email any complaints to Hoskins but purportedly addressed the issue with Kovach in person. Williams also began experiencing noise problems with a daycare center that had rented the space next door, and he claimed that he informed Hoskins, Kovach, and Clinton Bennett about these problems, to no avail.

In January 2008, Williams hired an attorney to put Hoskins on formal notice of the heating, air-conditioning, and noise problems. The attorney requested a viable plan from Hoskins to correct the problemswithin seven days or appellees would vacate the premises. Hoskins did not submit a plan but turned the matter over to Duane Kovach, who concluded that the heating-and-air-conditioning system was operable and that there was no excessive noise on the premises. Hoskins's attorney reported these findings to Williams's attorney on January 29, 2008, and provided no plan to address the alleged problems. Williams's attorney therefore advised appellees to move from the premises, which they did at the end of ...