Nielsen v. Gold's Gym

• Decision Date: 16 September 2003
• Docket Number: No. 20010510.,20010510.
• Citation: 2003 UT 37,78 P.3d 600
• Parties: James D. NIELSEN, Plaintiff and Appellant, v. GOLD'S GYM and Troy Peterson & Associates, Defendants and Appellees.
• Court: Utah Supreme Court

78 P.3d 600

2003 UT 37

James D. NIELSEN, Plaintiff and Appellant, v.GOLD'S GYM and Troy Peterson & Associates, Defendants and Appellees.

No. 20010510.

Supreme Court of Utah.

September 16, 2003.

Don R. Petersen and Leslie W. Slaugh, Provo, for plaintiff.

Brian C. Harrison, Provo, for defendants.

WILKINS, Justice:

¶ 1James Nielsen, owner and lessor of commercial real estate in Spanish Fork, Utah, appeals the trial court's dismissal of his complaint against Troy Peterson, a Gold's Gym manager, for breach of a commercial lease agreement.We affirm.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 Peterson signed a standard, pre-printed commercial lease agreement with Nielsen on August 18, 1997.The property in question was described in the lease as a "premises" located at "A Strip Mallat 1341 E Center Spanish Fork, UT," to be used solely as a "Health Club & Gym."The lease term was three years, commencing on November 1, 1997, at an annual rate of $0.85 per square foot.

¶ 3 When the lease was signed by the parties, the building in question was still under construction, and the land was not zoned for a health club.The lease contained an addendum stating, among other things, that the lease was subject to Peterson obtaining a zoning change.The requisite zoning change was obtained in October.After signing the lease, Nielsen referred Peterson to a contractor, who in turn recommended an architect for preparation of interior improvement plans.The contractor prepared an estimate, based on the architectural plans, of approximately $168,000 for tenant improvements to the building shell.After receiving this estimate, Peterson returned to Nielsen to discuss payment for the improvements.The parties failed to reach agreement, no improvements were ever initiated, and Peterson never made any lease payments.After unsuccessfully attempting to re-negotiate with Peterson, Nielsen eventually rented to another tenant and allegedly suffered over $112,000 in damages from the breach.

¶ 4 Nielsen brought suit for breach of contract.At trial, Nielsen testified that he believed the lease obligated him to deliver a building shell.Peterson testified that he believed Nielsen was obligated to pay for tenant improvements and provide a completed building under the lease.Both parties testified that the first discussion about who would pay for tenant improvements did not occur until after the cost estimates were received.

¶ 5 After a bench trial, the trial court ruled that the lease agreement was unenforceable for lack of mutual assent as to the nature and extent of the property to be leased.Specifically, the court ruled that Nielsen failed to establish that there was a meeting of the minds as to which party was to pay for the tenant improvements.Nielsen appeals.

STANDARD OF REVIEW

¶ 6We review for correctness the trial court's legal conclusion that the contract is ambiguous.Parduhn v. Bennett,2002 UT 93, ¶ 5, 61 P.3d 982.If a contract is deemed ambiguous, and the trial court allows extrinsic evidence of intent, interpretation of the contract becomes a factual matter and our review is strictly limited.Kimball v. Campbell,699 P.2d 714, 716(Utah1985).

ANALYSIS

¶ 7The trial court held that the lease agreement in this case is ambiguous because certain essential terms, namely, terms governing the payment for tenant improvements, were missing.A lease agreement, like any contract, "is ambiguous if it is capable of more than one reasonable interpretation because of `uncertain meanings of terms, missing terms, or other facial deficiencies.'"Winegar v. Froerer Corp.,813 P.2d 104, 108(Utah1991)(quotingFaulkner v. Farnsworth,665 P.2d 1292, 1293(Utah1983)).When determining whether a contract term is ambiguous, the court is not limited to the contract itself.Peterson v. Sunrider Corp.,2002 UT 43, ¶ 19, 48 P.3d 918;Ward v. Intermountain Farmers Ass'n,907 P.2d 264, 268(Utah1995).Relevant, extrinsic evidence "of the facts known to the parties at the time they entered the [contract]" is admissible to assist the court in determining whether the contract is ambiguous.Yeargin, Inc. v. Auditing Div. of Utah State Tax Comm'n,2001 UT 11, ¶ 39, 20 P.3d 287.

¶ 8The trial court allowed extrinsic evidence to assist it in the task of determining ambiguity.At the time the parties signed the lease agreement, the building shell was still under construction.Both parties understood that Peterson intended to operate a health club on the premises and that the property would require significant interior improvements before it could be used for the stated purpose.The trial court concluded that "the lease document itself is utterly silent on the topic of payment for the improvements."It further found that the subject of improvements was not addressed by the parties, orally or otherwise, prior to or contemporaneously with the signing of the lease agreement.In fact, the trial court noted that the issue of who was to pay for improvements was not even raised until "well after" the lease was signed.

¶ 9 Nielsen argues on appeal that payment of tenant improvements is implicitly addressed in his definition of the term "premises," which he asserts refers only to the building shell that was already planned and under construction at the time the lease was signed.According to Nielsen, the premises could not reasonably consist of both a building shell already planned and any additional, unknown (at the time) tenant improvements.Thus, according to Nielsen, the lease is unambiguous, the duty to pay for tenant improvements lies with Peterson, and the trial court should have enforced the lease according to its terms.

¶ 10We agree with the trial court's conclusion that this lease agreement is ambiguous.Nielsen's arguments serve only to reinforce the absence of mutual assent as to the one issue that eventually terminated this relationship.While the parties on appeal focus on the term "premises" as a source of contractual ambiguity, our reading of the trial court's ruling reveals that it believed the ambiguity is found in the absence of any contractual language addressing payment for the improvements.Thus, this is more a case about missing terms than indefinite terms.

¶ 11 On appeal, Nielsen's only argument was that the trial court erred when it ruled that the contract was ambiguous.Since we agree with the trial court's conclusion of ambiguity, we will only briefly note the ultimate basis for the court's dismissal of Nielsen's action; namely, that there was no meeting of the minds on the essential terms of the lease."It is fundamental that a meeting of the minds on the integral features of an agreement is essential to the formation of a contract.An agreement cannot be enforced if its terms are indefinite."Richard Barton Enters. v. Tsern,928 P.2d 368, 373(Utah1996)(citingPingree...