Fibreglas Fabricators, Inc. v. Kylberg
| Decision Date | 24 September 1990 |
| Docket Number | No. 89SC228,89SC228 |
| Citation | 799 P.2d 371 |
| Parties | FIBREGLAS FABRICATORS, INC., Petitioner, v. Richard L. KYLBERG, and Edgewater Redevelopment Authority, a Colorado Urban Renewal Authority, a body corporate and politic, Respondents. |
| Court | Colorado Supreme Court |
Chrisman, Bynum & Johnson, P.C., Robert L. Matthews, Ann E. Byrne, Boulder, for petitioner.
Faegre & Benson, Joseph M. Montano, Leslie A. Fields, Denver, for respondent Richard L. Kylberg.
No appearance on behalf of Edgewater Redevelopment Authority.
Fibreglas Fabricators, Inc. (Fibreglas), petitioned for certiorari review of the court of appeals decision in Edgewater Redevelopment Authority v. Fibreglas Fabricators, Inc., 773 P.2d 617 (Colo.App.1989). In Edgewater Redevelopment Authority, the court of appeals reversed the trial court's ruling that Fibreglas as lessee was entitled to share in the condemnation proceeds that were to be paid to Richard L. Kylberg (Kylberg), the respondent in this case and the former owner and lessor of the property acquired by Edgewater Redevelopment Authority in a condemnation action. We affirm the court of appeals in part and reverse in part.
In May 1982, Kylberg entered into an agreement with Fibreglas to lease property he owned in Edgewater, Colorado, to Fibreglas. The lease agreement provided for a five-year primary term with three unconditional renewal options of five years each. The primary term was to end April 30, 1987, "unless this Lease Agreement shall be canceled or sooner terminated as hereinafter provided." The agreement also provided for a "condemnation clause," which stated:
10.1 Full Condemnation--Termination. If, during the term of this Lease Agreement, the entire Leased Premises shall be taken as a result of the exercise of the power of eminent domain or sold to the governmental authority in lieu of condemnation (hereinafter in this Article called a "Proceeding"), this Lease Agreement shall terminate and the rent shall be apportioned as of the date the governmental authority takes possession of the Leased Premises pursuant to such Proceeding.
In April 1986, the Edgewater Redevelopment Authority (Authority) initiated a condemnation action 1 to acquire, among other properties, the property Kylberg had leased to Fibreglas. Kylberg and the Authority subsequently stipulated to the validity of the condemnation action, and the Authority deposited $1,900,000 2 with the court as preliminary compensation to Kylberg. See § 38-1-105(6)(a), 16A C.R.S. (1982). On August 20, 1986, the court ordered that title to the condemned property be vested in the Authority.
During the condemnation proceedings, Fibreglas asserted an interest in the condemnation proceeds of not less than $600,000, which Fibreglas stated was the fair market value of its leasehold interest in the property. Kylberg objected to Fibreglas's sharing in the condemnation proceeds. After concluding that the lease agreement was ambiguous on the issue of whether the parties intended Fibreglas to share in condemnation proceeds, the trial court held hearings on the issue.
Following the hearings, the court in January 1987 ruled that Fibreglas was entitled to a portion of the condemnation proceeds. Fibreglas's portion of the condemnation proceeds would be based on the remaining value of the primary term of the lease--to be measured from August 20, 1986, the date Fibreglas's leasehold interest terminated pursuant to the condemnation proceedings, to April 30, 1987, the date the primary term would have ended under the lease agreement. 3 Thus, under the court's order, Fibreglas would receive no compensation for its lease renewal options.
After the court's ruling, Kylberg filed three separate motions for assessment of attorney fees and costs against Fibreglas, pursuant to section 13-17-101, 6A C.R.S. (1987) (), and pursuant to the lease agreement. The lease agreement provided in relevant part:
12.6 Indemnification. ... [Fibreglas] shall pay, and indemnify [Kylberg] against, all legal costs and charges, including attorneys' fees and expenses, lawfully and reasonably incurred in obtaining possession of the Leased Premises after default by [Fibreglas] hereunder or upon expiration or any earlier termination of this Lease Agreement (if [Fibreglas] wrongfully holds over) or in enforcing any covenant or agreement of [Fibreglas] contained in this Lease Agreement.
The court denied the motions for assessment of attorney fees and costs against Fibreglas.
Kylberg appealed the court's ruling that Fibreglas could share in the condemnation proceeds, and the court's ruling on attorney fees and costs. 4 Fibreglas appealed the court's ruling that Fibreglas was not entitled to compensation for its renewal options. After the appeals were consolidated, the court of appeals held that the lease agreement was not ambiguous, and that because the lease terminated when title to the property was vested in the Authority on August 20, 1986, Fibreglas had no compensable interest in the property after August 20, 1986. Edgewater Redev. Auth. v. Fibreglas Fabricators, Inc., 773 P.2d 617, 618-19 (Colo.App.1989). The court of appeals also held that pursuant to the lease agreement Kylberg was entitled to attorney fees and costs.
Fibreglas and Kylberg have maintained throughout this case that the condemnation clause is unambiguous, but each argues that the condemnation clause results in a different legal effect. The trial court found that the condemnation clause was ambiguous because the clause could have more than one legal effect. We conclude that the condemnation clause is not ambiguous.
Interpretation of a written contract and the determination of whether a provision in the contract is ambiguous are questions of law, and this court need not defer to the trial court's interpretation of the contract. See, e.g., Pepcol Mfg. Co. v. Denver Union Corp., 687 P.2d 1310, 1313 (Colo.1984); Buckley Bros. Motors v. Grand Prix Imports, 633 P.2d 1081, 1083 (Colo.1981); Radiology Professional Corp. v. Trinidad Health Ass'n, 195 Colo. 253, 256, 577 P.2d 748, 750 (1978).
In determining whether a provision in a contract is ambiguous, the instrument's language must be examined and construed in harmony with the plain and generally accepted meaning of the words used, and reference must be made to all the agreement's provisions. Radiology Professional Corp., 195 Colo. at 256, 577 P.2d at 750. The mere fact that the parties differ on their interpretations of an instrument does not of itself create an ambiguity. E.g., id. at 256-57, 577 P.2d at 750. A provision in a lease agreement is ambiguous if it is fairly susceptible to more than one interpretation. See Davis v. M.L.G. Corp., 712 P.2d 985, 989 (Colo.1986). If a contract is not ambiguous, extrinsic evidence is not admissible to prove the parties' intent, and the parties' intent must be determined from the terms of the contract. Buckley Bros. Motors, 633 P.2d at 1083; Radiology Professional Corp., 195 Colo. at 256, 577 P.2d at 750.
The condemnation clause unambiguously states in relevant part that if, during the term of the lease agreement, "the entire Leased Premises shall be taken as a result of the exercise of the power of eminent domain or sold to the governmental authority in lieu of condemnation ..., this Lease Agreement shall terminate and the rent shall be apportioned as of the date the governmental authority takes possession" of the premises. The clause is not reasonably susceptible to an interpretation other than that the lease agreement "terminates" when the "governmental authority" takes possession. Neither party suggests that the condemnation clause may be reasonably interpreted in more than one way; rather, the parties disagree only on the legal effect of the clause.
Although the clause may have different legal effects in different jurisdictions, as the trial court noted, the existence of such different legal effects does not render the clause ambiguous for purposes of interpreting the clause. See, e.g., Weil v. Colorado Livestock Prod. Credit Ass'n, 30 Colo.App. 301, 302, 494 P.2d 134, 136 (1971), cert. denied (1972); accord Ryan v. Harrison, 40 Wash.App. 395, 396, 699 P.2d 230, 232 (1985), review denied (1985). Similarly, the absence of a provision in the condemnation clause specifying whether Fibreglas is entitled to share in the condemnation proceeds does not render the clause ambiguous. 5
The parties dispute the legal effect that should be given the lease agreement. Fibreglas argues that because the clause, and the lease agreement in general, does not specifically exclude Fibreglas from sharing in the condemnation proceeds, as a matter of law Fibreglas is entitled to a portion of the proceeds for compensation for loss of its leasehold interest in the property. Kylberg argues that when the Authority gained title to the property, under the terms of the condemnation clause any leasehold interest Fibreglas held in the property was terminated, and Fibreglas thereafter held no compensable interest in the property.
A lessee generally is entitled to compensation for the condemnation of the lessee's unexpired leasehold interest in property. See Colo. Const. art. II, § 15; Roth v. Wilkie, 143 Colo. 519, 522, 354 P.2d 510, 512 (1960); Alamo Land & Cattle Co. v. Arizona, 424 U.S. 295, 303, 96 S.Ct. 910, 916, 47 L.Ed.2d 1 (1976). However, it is well established that a lessee may forego his or her right to compensation--and permit the landlord to receive all the condemnation proceeds--where the lease agreement contains a legally adequate "condemnation clause" or "automatic termination clause." E.g., United States v. Petty Motor Co., 327 U.S. 372, 376, 66 S.Ct. 596, 599, 90 L.Ed. 729 (1946); see generally 2 Nichols' The Law of...
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