Networks U.S. X Inc. v. Nationwide Mut. Ins. Co.

• Decision Date: 14 September 2010
• Docket Number: No. 3:06–CV–63.,3:06–CV–63.
• Parties: NETWORKS USA X, INC., Plaintiff,v.NATIONWIDE MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Tennessee

748 F.Supp.2d 836

NETWORKS USA X, INC., Plaintiff,
v.
NATIONWIDE MUTUAL INSURANCE COMPANY, Defendant.

No. 3:06–CV–63.

United States District Court,E.D. Tennessee,Knoxville Division.

Sept. 14, 2010.

[748 F.Supp.2d 837]

Thomas M. Leveille, Hagood, Tarpy & Cox, PLLC, Knoxville, TN, for Plaintiff.Erica T. Greene, Greene Law Firm PLC, Morristown, TN, Weldon E. Patterson, Spicer Rudstrom, PLLC, Knoxville, TN, for Defendant.

MEMORANDUM OPINION LEON JORDAN, District Judge.

This civil action is before the court for consideration of “Plaintiff's Motion for Summary Judgment” [doc. 81] and “Defendant's Motion for Summary Judgment” [doc. 91]. The parties have filed responses to the motions [docs. 92, 95], and each party has also submitted a reply [docs. 96, 95]. Oral argument is not necessary, and the motions are ripe for the court's determination. For the reasons that follow,

[748 F.Supp.2d 838]

plaintiff's motion will be denied, defendant's motion will be granted, and the case will be dismissed.

I. Background

In August 1991, defendant, Nationwide Mutual Insurance Company (“Nationwide”), entered into a lease with the predecessor in interest to plaintiff, Networks USA X, Inc. (“Networks”). The lease agreement was for the rental of an office building “of approximately 6,000 square [feet] ..., which includes an approximately 900 square foot drive-thru claims inspection area to be constructed by Landlord.” The property is located in Knox County, Tennessee. Networks purchased the property in March 1993 and assumed the lease. Nationwide continued to be the tenant on the premises until March 2007. Networks filed its original complaint in Knox County Chancery Court on December 29, 2005, and Nationwide removed the case to this court on February 16, 2006. On October 24,2006, Networks filed an amended complaint [doc. 36].

The case was referred to a special master by an agreed order to answer the following question: “Whether, under the commercial lease agreement between the parties, Nationwide has underpaid or overpaid rent and/or common-area maintenance charges to Networks?” The special master concluded that he could assist the parties in determining certain amounts at issue between the parties but could not decide what if any amounts are due Networks because the disputes are primarily legal in nature. The special master, with the assistance of the parties, determined the following amounts to be appropriate for specific items identified as “operating expenses”:

+-------------------------------------------+
                ¦ ¦roof repairs ¦$14,370¦ ¦
                +----+-------------------------+-------+----¦
                ¦ ¦management fees ¦18,096 ¦ ¦
                +----+-------------------------+-------+----¦
                ¦ ¦accounting fees ¦5,000 ¦ ¦
                +----+-------------------------+-------+----¦
                ¦ ¦security guard services ¦18,527 ¦ ¦
                +----+-------------------------+-------+----¦
                ¦ ¦real estate tax credit ¦(873) ¦ ¦
                +----+-------------------------+-------+----¦
                ¦ ¦ ¦ ¦ ¦
                +----+-------------------------+-------+----¦
                ¦ ¦Total operating expenses ¦$55,120¦ ¦
                +-------------------------------------------+
                

The special master also concluded that Nationwide was entitled to a credit for overpayment of insurance. The case is now before the court on the parties' cross motions for summary judgment.

II. Summary Judgment Standard

Pursuant to Federal Rule of Civil Procedure 56(c), summary judgment “should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R.Civ. P. 56(c). The moving party may discharge its burden by demonstrating that the non-moving party has failed to establish an essential element of that party's case for which he or she bears the ultimate burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party need not support its motion with affidavits or other materials negating the opponent's claim. Id. at 323, 106 S.Ct. 2548. Although the moving party has the initial burden, that burden may be discharged by a “showing” to the district court that there is an absence of evidence in support of the non-moving party's case. Id. at 325, 106 S.Ct. 2548 (emphasis in original).

After the moving party has carried its initial burden of showing that there are no genuine issues of material fact in dispute, the burden shifts to the non-moving party to present specific facts demonstrating that there is a genuine issue for trial.

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Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). “The ‘mere possibility’ of a factual dispute is not enough.” Mitchell v. Toledo Hosp., 964 F.2d 577, 582 (6th Cir.1992) (citing Gregg v. Allen–Bradley Co., 801 F.2d 859, 863 (6th Cir.1986)).

In order to defeat the motion for summary judgment, the non-moving party must present probative evidence that supports its complaint. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The non-moving party's evidence is to be believed, and all justifiable inferences are to be drawn in that party's favor. Id. at 255, 106 S.Ct. 2505. The court determines whether the evidence requires submission to a jury or whether one party must prevail as a matter of law because the issue is so one-sided. Id. at 251–52, 106 S.Ct. 2505.

III. Analysis Nationwide's Motion for Summary Judgment

Nationwide has moved for summary judgment on all claims asserted in the amended complaint [doc. 36]. In its supporting memorandum, it has also combined its arguments in response to Networks's motion for summary judgment, which it states are essentially the same. Nationwide has structured its brief by addressing the categories of damages sought by Networks under the asserted claims and has numbered them one through ten. For clarity, the court will address each category in the order it appears in Nationwide's motion.

1. Roof Repairs

Networks contends it is owed $14,369.60 for replacement of roof shingles in 2005. Networks attempted to charge the roof replacement cost as an operating expense; however, Nationwide refused to pay it. Nationwide argues that under the terms of the lease it is not responsible for roof repairs or replacement. Networks contends that shingles and their replacement on the roof do not fall within the exclusionary language of “Operating Expenses” as set out in the lease.

Paragraph 4(B) of the lease states that the Tenant “agrees to pay to Landlord, as additional rent, the estimated costs and expenses to Landlord (“Operating Expenses”).” Paragraph 4(C) of the lease states, “The term Operating Expenses does not include any capital improvement to the building or amounts expended by Landlord for repairs to structural elements of the building including the roof.” Networks argues that the lease does not define “structural elements” and that the term “structural” as used in the lease does not refer to shingles but to the underlying framework of the roof including the trusses and substructure.

Nationwide argues that Networks's interpretation rewrites the lease agreement and results in a finding not intended by the original parties to the lease. Nationwide also contends that the plain language of the lease supports its position that there are two reasons why it is not responsible for the roof replacement: the roof is a capital improvement and it involves a structural element of the building.

The court agrees with Nationwide that it is not responsible for the roof replacement. Initially, the court finds that Networks's attempt to redefine “structural” and to make replacement of the shingles a separate expense from the roof replacement itself to be a distortion of the plain language of the lease. “It is the Court's duty to enforce contracts according to their plain terms. Further, the language used must be taken and understood in its plain, ordinary and popular sense. The courts, of course, are precluded from creating a new contract for the

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parties.” Alcazar v. Hayes, 982 S.W.2d 845, 848 (Tenn.1998) (internal citations omitted) (quoting Bob Pearsall Motors, Inc. v. Regal Chrysler–Plymouth, Inc., 521 S.W.2d 578, 580 (Tenn.1975)). “If the language of the contract is clear and unambiguous, then its literal meaning should control the outcome of the dispute.” McPherson v. William E. George, Inc., No. W2008–02450–COA–R3–CV, 2010 WL 1565528, at *8 (Tenn.Ct.App. April 20, 2010).

The language of the lease plainly states that Operating Expenses do not include “repairs to structural elements of the building including the roof.” The shingles are part of the roof, and there is no need to engage in the type of strained interpretation and argument promoted by Networks. Nationwide is not responsible for the roof replacement based upon the “structural elements” language in the lease. Any other interpretation would be rewriting the lease and creating a new contract, which the court is not permitted to do. See Alcazar, 982 S.W.2d at 848.

The court also agrees with Nationwide that it is not responsible for the roof replacement because the roof is a capital improvement. The lease also states that Operating Expenses do not include “any capital improvement to the building.” Nationwide argues that courts from a variety of jurisdictions have considered roofs to be capital improvements. Networks attempts to distinguish these cases by saying that they were not on point or that the tenant was responsible for the repair or replacement of the roof. The fact remains, however, that the purpose of the authority is to show that a roof is a capital expense or improvement, not that the particular facts of a given case called for the tenant to be responsible for the repairs or replacement. This court notes that numerous courts have considered a roof to be a capital improvement. In re Nahas, 161 B.R. 927, 932 (W.D.Pa.1993) (shopping...