Litchfield Co. of South Carolina, Inc. v. Kiriakides, 0801

Citation349 S.E.2d 344,290 S.C. 220
Decision Date26 May 1986
Docket NumberNo. 0801,0801
CourtSouth Carolina Court of Appeals
PartiesLITCHFIELD COMPANY OF SOUTH CAROLINA, INC. (formerly Fairlane/Litchfield, Inc.), Respondent, v. Alex KIRIAKIDES, Jr. and John Kiriakides, Appellants. . Heard

Douglas F. Patrick and Kathryn Williams, of Foster, Covington & Patrick, Greenville, for appellants.

Jesse C. Belcher, Jr., of Haynsworth Law Firm, Greenville, for respondent.

CURETON, Judge:

This appeal involves a dispute between lessors Alex Kiriakides, Jr. and John Kiriakides, and their lessee, the Litchfield Company of South Carolina, Inc. (Litchfield), over lease provisions as to tax liability and termination on default. We affirm.

Litchfield, which had withheld two monthly rent payments as an offset against an alleged overpayment of property taxes, commenced this action to enjoin interference by Messrs. Kiriakides with the use and enjoyment of the leased premises. Litchfield further sought a declaratory judgment as to liability for taxes on the Parking Area adjacent to the leased premises, as well as damages in the amount of taxes already paid by Litchfield or, in the alternative, a declaration that the amount constituted prepayment of rent. Messrs. Kiriakides counterclaimed for a declaration as to the tax liability, and for ejectment of Litchfield from the leased premises. On cross-motions for summary judgment, the trial judge ruled that Litchfield was not responsible for taxes on the Parking Area, and that any breach of the lease was insubstantial and did not warrant termination. Messrs. Kiriakides appeal.

Two issues are before this court: (1) whether Litchfield is responsible for property taxes on the Parking Area, and (2) whether Messrs. Kiriakides are entitled to terminate the lease.

I.

Litchfield leased a parcel described in the lease as "an unnumbered theater lot," upon which it constructed at its own expense a movie theatre valued at approximately $1,500,000.

Paragraph 4 of the lease, entitled "Use of Additional Area," requires Messrs. Kiriakides to "make available" to Litchfield a "Parking Area" without further charge for the term of the lease. Tenants of neighboring parcels also have certain rights to the Parking Area, although Litchfield has sole responsibility for its paving, repair and maintenance. Litchfield has paved the Parking Area.

Paragraph 8, a net lease provision, states that Litchfield shall bear all obligations and expenses "with relation to the leased premises, the improvements thereon and appurtenances thereto."

Paragraph 9 provides that Litchfield shall pay all taxes "imposed upon the leased premises and improvements thereon, or any part thereof" during the term of the lease. The taxes are to be paid as additional rent.

The threshold question here is whether the Parking Area can be construed as part of the "leased premises." We hold that it cannot. As we construe the lease, Litchfield pays rent for the theatre lot only; access to the Parking Area is explicitly provided to Litchfield at no further charge. The fact that Litchfield has made improvements and is responsible for maintenance does not in itself convert the Parking Area into leased premises.

We reject the argument of Messrs. Kiriakides that Litchfield is liable for taxes because the Parking Area is an appurtenance to the leased premises. While Litchfield is to bear obligations and expenses generally of appurtenances under Paragraph 8, payment of taxes is governed expressly by Paragraph 9, which clearly does not embrace appurtenances.

The purpose of all rules of contract construction is to ascertain the intention of the parties as gathered from the contents of the entire document and not from any particular provision thereof. Florence City-County Airport Commission v. Air Terminal Parking Co., 283 S.C. 337, 322 S.E.2d 471 (Ct.App.1984). Without deciding whether the Parking Area is appurtenant to the leased premises, we affirm the trial judge's ruling that Litchfield has no obligation under Paragraph 9 of the lease to pay taxes on the Parking Area, and remand for a determination of damages.

II.

We turn now to the principal question of whether Messrs. Kiriakides are entitled to terminate the lease on the basis of default by Litchfield.

Messrs. Kiriakides argue that the trial judge erred in denying their motion for summary judgment because Litchfield breached the lease agreement. We disagree.

Paragraph 3 of the lease requires that rent be paid without deduction or set-off on or before the first of each month. Paragraph 16 gives Litchfield the right to cure its default within ten days after written notice of failure to pay. The same paragraph provides that upon expiration of the ten-day grace period, and "while such default or defaults shall continue," Messrs. Kiriakides have the right to elect to terminate the lease and repossess the premises and all improvements provided they "give the lessee notice of the lessor's intention to terminate this lease...."

Litchfield's failure to pay rent stems from the parties' ongoing property tax dispute. On June 6, 1983, Messrs. Kiriakides gave written notice that Litchfield had failed to make its monthly rental payment, due June 1. Litchfield replied that the rental amount had been applied to Messrs. Kiriakides' debt for taxes paid on the Parking Area, as well as other land owned by Messrs. Kiriakides and not covered by the lease. On June 16, 1983, Messrs. Kiriakides made a partial reimbursement for the overpaid taxes, but maintained that Litchfield was obligated for taxes on the Parking Area. Litchfield continued to demand full reimbursement.

Messrs. Kiriakides notified Litchfield in writing that the July rent had not been received. Litchfield refused to pay a second time, but reversed its position on July 12, 1983, when it tendered a check for $8,833.34 in full payment of the rent due in June and July 1983. Messrs. Kiriakides refused the tender by letter postmarked July 13, 1983. The record reflects that a letter from Messrs. Kiriakides' attorney dated July 8, 1983 with no postmark (but with a postal meter stamp of July 12, 1983), purportedly enclosing a notice of termination, was received by Litchfield on July 14, 1983. That same day Litchfield wrote Messrs. Kiriakides advising them that the letter it had received did not contain the notice. Again, Litchfield sought to tender the rent for June and July. On July 18, 1983, Messrs. Kiriakides' attorney forwarded by mail the notice of termination to Litchfield. 1

Litchfield petitioned in equity for an injunction against eviction on grounds that eviction would work a forfeiture of all their rights under the lease. The trial judge agreed and ruled that the amount of money in controversy is of relatively little importance when viewed in the context of an investment in improvements worth more than $1,500,000 and a lease that does not expire for more than thirty years.

To hold that Litchfield breached the lease and that Messrs. Kiriakides are entitled to possession of the leased premises would work a forfeiture of more than $1,500,000 in improvements made to the property by Litchfield. Forfeitures are not favored in law or equity. South Carolina Tax Commission v. Metropolitan Life Insurance Co., 266 S.C. 34, 221 S.E.2d 522 (1975). Moreover, forfeitures will be allowed only when intent is clear and no other reasonable construction is possible. Hardin v. Horger, 252 S.C. 298, 166 S.E.2d 215 (1969). Courts will seize upon even slight evidence to prevent a forfeiture. Clardy v. Sovereign Camp, W.O.W., 193 S.C. 444, 8 S.E.2d 748 (1940).

Because the lease set forth the acts which would result in default, and the mode of terminating the tenancy, the parties' rights are to be determined by a fair construction of the contract, not by statutory ejectment principles. Biber v. Dillingham, 111 S.C. 502, 98 S.E. 798 (1919).

The issue as we see it is whether Messrs. Kiriakides are entitled to refuse Litchfield's tender of the past due rents and terminate the lease. If Litchfield's tender in full of the June and July rents preceded Messrs. Kiriakides' mailing of notice of termination of the lease, then Messrs. Kiriakides would be precluded from terminating the lease. Mayron's Bake Shops, Inc. v. Arrow Stores, Inc., 149 Conn. 149, 176 A.2d 574 (1961); see Village Development Co. v. Hubbard, 214 N.W.2d 178, 182 (Iowa 1974). See also 49 Am.Jur.2d Landlord and Tenant Section 1030 (1970); 51C C.J.S. Landlord and Tenant Section 110b (1968). Cf. Allendale Furniture Co. v. Carolina Commercial Bank, 284 S.C. 76, 325 S.E.2d 530 (1985) (where a mortgage instrument provided that after default the mortgagee could accelerate the balance due without notice, the Supreme Court held that no notice of acceleration was required to precede the rejection of the untimely tender of arrears payments).

It is clear that Litchfield did not tender the June and July payments when due. Nevertheless, according to the terms of the lease, nonpayment of the rent did not, in itself, terminate the lease; rather, it merely gave Messrs. Kiriakides the option to terminate by notice, and repossess the leased premises and improvements. See, 49 Am.Jur.2d Landlord and Tenant Section 1034 (1970).

We recognize that arguably, the July 8 letter from Messrs. Kiriakides satisfied the notice requirements of the lease. 2 We cannot determine from the record, however, when this letter was mailed. 3 Messrs. Kiriakides had the burden, as appellants, of furnishing this court an adequate record to permit review of this point. Hamilton v. Greyhound Lines East, 281 S.C. 442, 316 S.E.2d 368 (1984). Messrs. Kiriakides, who sought court determination that the lease had been breached, also had the burden of showing that they had complied with the terms of the lease regarding notice. Biber v. Dillingham, 111 S.C. at 505, 98 S.E. at 799. Forfeiture provisions of a lease are strictly construed and when a forfeiture...

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