Hermes Associates v. Park's Sportsman

• Decision Date: 18 June 1991
• Docket Number: No. 900299-CA,900299-CA
• Citation: 813 P.2d 1221
• Parties: HERMES ASSOCIATES, Plaintiff and Appellee, v. PARK'S SPORTSMAN, Defendant and Appellant.
• Court: Utah Court of Appeals

Page 1221

813 P.2d 1221

HERMES ASSOCIATES, Plaintiff and Appellee, v. PARK'S SPORTSMAN, Defendant and Appellant.

No. 900299-CA.

Court of Appeals of Utah.

June 18, 1991.

Jackson Howard (argued), Kevin J. Sutterfield, Leslie W. Slaugh, Howard, Lewis & Petersen, Provo, for defendant and appellant.

Nick J. Colessides (argued), Salt Lake City, for plaintiff and appellee.

Before BILLINGS, GREENWOOD and JACKSON, JJ.

JACKSON, Judge:

Appellant appeals from a judgment awarding appellee principal and prejudgment interest on a "Lease Cancellation Agreement." We affirm.

FACTS

Hermes Associates (Hermes) operates a shopping center known as The Family Center at Midvalley, located in Salt Lake County, Utah. On May 20, 1982, Park's Sportsman (Park) leased 13,500 square feet of space at The Family Center. Park operated its retail sporting goods store at The Family Center until April 1987. Hermes and Park agreed to terminate the lease and executed a Lease Cancellation Agreement on April 2, 1987.

The Lease Cancellation Agreement provided that obligations under the lease would terminate when a lease agreement between Hermes and a new tenant, Gart Brothers Sporting Goods, Inc. (Gart), became effective. The parties agreed that beginning on May 1, 1987, Park would pay to Hermes $1,000 per month for sixty months or until Gart made a percentage rental payment exceeding $10,000 in any twelve-month period. When Gart made a percentage rental payment exceeding $10,000, Park's obligation to pay $1,000 per Hermes entered into a lease agreement with Gart on April 7, 1987, for 13,500 square feet. The rent was fixed at a minimum of $54,000 per year plus three percent of the annual gross receipts in excess of $1,800,000. Park was not a party to this agreement, and therefore was not notified of the lease terms. On October 26, 1987, Hermes and Gart amended their lease agreement without notice to, or consent of, Park. The amount of lease space increased to 20,820 square feet, the minimum rent increased to $96,972 per year, and the breakpoint for calculating the percentage rent increased to $3,232,400.

month would end and Hermes would refund to Park the amount it paid, up to $12,000, during the previous twelve-month period.

Park made eleven $1,000 monthly payments in accordance with the terms of the Lease Cancellation Agreement; Park did not pay the April 1, 1988 payment or any thereafter. Park contacted Hermes for information regarding Gart's gross receipts; Hermes stated that it could not provide Gart's sales figures due to the terms in its lease with Gart. Hermes, however, did state that it had not received any percentage rental payments from Gart. When Park did not make any further payments, Hermes sued for the sum due under the Lease Cancellation Agreement. The trial court awarded judgment to Hermes in the sum of $22,000 plus $2,189.92 in prejudgment interest.

ISSUES

Appellant has raised three issues: (1) whether the trial court erred, as a matter of law, in holding that Park did not assume the role of surety for Gart's obligations; (2) whether the trial court erred, as a matter of law, in awarding Hermes prejudgment interest; and (3) whether the trial court erred, as a matter of law, in holding that it did not have the discretion to award Park attorney fees.

STANDARD OF REVIEW

The trial judge concluded there was no surety relationship as a matter of law, focusing only on the words of the contract without resort to extrinsic evidence of intent. We therefore review the trial court's action under a correctness standard. See Kimball v. Campbell, 699 P.2d 714, 716 (Utah 1985); accord 50 West Broadway Assocs. v. Redevelopment Agency, 784 P.2d 1162, 1171 (Utah 1989); Prudential Capital Group Co. v. Mattson, 802 P.2d 104, 106 (Utah App.1990). Appellant's prejudgment interest issue is a question of law which we review for correctness. See Vali Convalescent & Care Insts. v. Division of Health Care Financing, 797 P.2d 438, 444 (Utah App.1990).

CREATION OF SURETY RELATIONSHIP

Park argues that it was placed in a surety role of answering for Gart's rental obligations by guaranteeing that Hermes would receive a minimum sum from its lease with Gart. As a surety of Gart's lease, Park argues that its obligations under the Lease Cancellation Agreement ceased when Hermes and Gart amended their lease without Park's consent.

Park appeals the legal conclusion that it was not a surety of the Gart lease. Suretyship is defined as "a contractual relationship in which one party engages to be answerable for the debt or default of another." Trane Co. v. Randolph Plumbing & Heating, 44 Wash.App. 438, 440, 722 P.2d 1325, 1328 (1986). See generally Utah Technology Fin. Corp. v. Wilkinson, 723 P.2d 406, 410 (Utah 1986). Park's argument, however, fails because neither the case law it cites nor the terms of the agreement support its position.

Park cites Andrus v. Zion's First Nat'l Bank, 99 Idaho 724, 588 P.2d 452 (1978) and State v. McKinnon, 667 P.2d 1239 (Alaska 1983) as illustrations of a surety relationship. However, in these cases, a surety relationship was created because one party explicitly agreed to be liable for a third party's debts. Park does not stand in a similar relationship to Gart; Park did not mortgage its property to secure Gart's Further, Park's position is untenable because the effect of the Lease Cancellation Agreement was not to make Park answerable for Gart's obligations in Gart's lease with Hermes. Gart and Hermes negotiated their own lease agreement; Park did not assign its 1982 lease to Gart. The Lease Cancellation Agreement was a separate contract and was not dependent on the lease between Hermes and Gart except for the termination and rebate provisions. Although Park would be released from its monthly payments when Gart made a percentage rental payment exceeding $10,000, Park's role was not to guarantee Gart's debt. If Gart had breached its lease agreement with Hermes, Park would not have been liable to pay Gart's minimum base rent, but Park would have still had to pay $1,000 per month as agreed. Since Park is not answerable for any default or debt of Gart, we conclude that Park was not a surety of the Gart lease. Thus, Park's obligation under the Lease Cancellation Agreement did not cease when Hermes and Gart amended their lease.

debt, nor did Park sign an agreement to be liable for Gart's rental payments.

PREJUDGMENT INTEREST

Park argues that it was excused from making monthly $1,000 payments because Hermes refused to give it the information necessary to calculate the amount due; thus, Park claims that the trial court erred in awarding Hermes prejudgment interest. To support its claim that no interest should be awarded when the delay is caused by the wrongful conduct of the party entitled to payment, Park cites Amoss v. Bennion, 23 Utah 2d 40, 456 P.2d 172 (1969) and Blomquist v. Bingham, 652 P.2d 900 (Utah 1982). However, Amoss and Blomquist are not on point because both cases involved buyers suing for specific performance of property sales agreements where the sellers willfully refused to perform their contracts. In both cases the Utah Supreme Court adjusted the date interest would accrue on the unpaid balance of the purchase price.

Moreover, Hermes did not willfully refuse to perform its obligations under the Lease Cancellation Agreement, as Park claims. ¹ According to Hermes's lease agreement with Gart, Hermes was bound to keep any information regarding Gart's gross receipts in strict confidence. While Hermes could not report Gart's sales figures as Park requested, Hermes did report that Gart had not made any percentage rental payments.

Under ...