PNS Stores, Inc. v. Capital City Props.

• Decision Date: 19 August 2022
• Docket Number: S-21-0294
• Citation: 2022 WY 101
• Parties: PNS STORES, INC. d/b/a "BIG LOTS", Appellant (Defendant), v. CAPITAL CITY PROPERTIES, LLC, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

2022 WY 101

PNS STORES, INC. d/b/a "BIG LOTS", Appellant (Defendant),
v.
CAPITAL CITY PROPERTIES, LLC, Appellee (Plaintiff).

No. S-21-0294

Supreme Court of Wyoming

August 19, 2022

Appeal from the District Court of Laramie County The Honorable Steven K. Sharpe, Judge.

Representing Appellant: Andrew F. Sears and Patrick M. Brady of Sundahl, Powers, Kapp & Martin, LLC, Cheyenne, Wyoming. Argument by Mr. Sears.

Representing Appellee: Mary Katherine "Katye" Ames of Woodhouse Roden Ames & Brennan, LLC, Cheyenne, Wyoming.

Before FOX, C.J., and KAUTZ, BOOMGAARDEN, GRAY, and FENN, JJ.

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KAUTZ, JUSTICE.

[¶1] Capital City Properties, LLC (Capital City Properties) and PNS Stores, Inc. d/b/a Big Lots (Big Lots) entered into a lease which required Capital City Properties to deliver commercial property to Big Lots by a certain date. Capital City Properties did not timely deliver the property but claimed the failure to do so was the result of Big Lots' breach of the lease and the implied covenant of good faith and fair dealing. After a bench trial, the district court found Big Lots breached the lease and the implied covenant. Because the evidence supports the district court's finding that Big Lots breached the implied covenant, we need not decide whether Big Lots also breached the lease. We affirm.

ISSUE

[¶2] Big Lots raises two issues but one is dispositive:

Did the district court err by finding Big Lots breached the implied covenant of good faith and fair dealing

FACTS

Execution of Lease

[¶3] Joe Anderson is the sole member of Capital City Properties, which owns a large commercial building in Cheyenne. In Fall 2017, Capital City Properties offered the building for lease through its realtor, Bob Phillips. Soon thereafter, Big Lots informed Mr. Phillips that it was interested in leasing a portion of the building for the operation of its retail store.

[¶4] On February 12, 2018, Capital City Properties and Big Lots signed a lease for the property. Under the lease, Capital City Properties would be primarily responsible for remodeling the building to meet Big Lots' store layout specifications. The lease required Capital City Properties to provide Big Lots with (1) "a complete set of 'as built' drawings (CAD format) of the Demised Premises adequate for [Big Lots] to produce [its] plans and specifications" (hereinafter "tenant specifications"),^[1] and (2) final construction plans within 180 days following execution of the lease. Big Lots had to approve the final construction plans before Capital City Properties could begin remodeling the building. For its part, Big Lots was required to submit plans for construction and signage permits to the City of Cheyenne within 90 days of the effective date of the lease and "thereafter diligently pursue obtaining such [p]ermits." The lease called for Capital City Properties to deliver the remodeled property to Big Lots no sooner than January 1, 2019, but no later than March 1, 2019.

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If Capital City Properties failed to deliver the property by April 15, 2019, it was to pay Big Lots liquidated damages of $2,500 per day from April 16 to April 30, 2019, and $5,000 per day thereafter.

[¶5] Capital City Properties hired Michael Potter, a local architect, to prepare the as-built drawings and the final construction plans for the remodel project. On November 14, 2017, while the parties were negotiating the lease, Mr. Potter completed the as-built drawings; they were sent to Big Lots three days later. The November 2017 as-built drawings consisted of a single page showing the current layout of the entire building (including existing offices, restrooms, and a warehouse), its dimensions, and the proposed location of the demising wall which would separate Big Lots' portion of the building from the remaining space. According to the trial testimony, Big Lots would create its tenant specifications from the as-built drawings, and Capital City Properties would use Big Lots' tenant specifications to produce the final construction plans.

Post-Lease Conduct of Parties

[¶6] On April 20, 2018, approximately two months after the lease was signed and five months after the as-built drawings were delivered to Big Lots, Mr. Potter contacted Michael Neu, Big Lots' store planning manager, via email to see if there was any progress on Big Lots finishing its tenant specifications so he could begin preparing the final construction plans. Mr. Neu did not respond. On May 1, 2018, Mr. Potter again reached out to Mr. Neu seeking an update on Big Lots' tenant specifications. Mr. Neu responded the same day, stating:

We've been pretty busy this year and the leasing dept pushed [the Cheyenne] location back on my list. We won't work on that location for a couple months yet.

Unless something has changed I don't know about, it will be a short while before I can get that to you.

[¶7] On June 19, 2018, Mr. Phillips, Capital City Properties' realtor, emailed Mr. Neu seeking his "best estimate" of when Mr. Potter could expect to receive Big Lots' tenant specifications. Mr. Phillips emphasized Capital City Properties was "interested in having Mr. Potter complete the design so that [it could obtain construction] bid[s] on the project and complete [its] remodel requirements in a timely manner." Mr. Neu never responded to this email.

[¶8] On July 2, 2018, Mr. Anderson emailed Ryan Romes, Big Lots' real estate manager, stating he was "very disturbed" to learn Big Lots had made no effort to obtain any construction or signage permits even though the lease deadline for doing so was May 13, 2018, 90 days from the lease's effective date. He asked Mr. Romes to "let [him] know

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right away what [he] intend[ed] to do about this lease violation." Mr. Romes responded the next day, informing Mr. Anderson that the only permit Big Lots needed for the project was a signage permit. He stated Big Lots could not apply for a signage permit without the final construction plans, which Capital City Properties was required to deliver to Big Lots by August 11, 2018, 180 days from execution of the lease. Mr. Romes asked when those plans would be completed.

[¶9] Mr. Anderson responded to Mr. Romes the same day, informing him that Mr. Potter had been "trying . . . for months" to obtain the tenant specifications needed to complete the final construction plans and the only response he received was the May 1 email from Mr. Neu stating Big Lots was busy and he would not work on the project for a couple months. In reply, Mr. Romes apologized for "any perceived delay or lack of communication from [Big Lots]." He claimed Big Lots' store planning team was "wrapping up 200+ projects for 2018 and has had [its] plate full." He also stated Mr. Neu and his team had been hesitant to create the tenant specifications "given the lack of information" on the November 2017 as-built drawings, which Mr. Romes referred to as a lease outline drawing (LOD). He claimed Big Lots had been anticipating additional as-built drawings from Mr. Potter before it began the tenant specifications so it could "understand where the utilities, riser, sewer, etc. are all located and adapt [the] floor plan as needed." While Mr. Romes indicated Mr. Neu and his team could proceed to create Big Lots' tenant specifications with the November 2017 as-built drawings, if they did so, they would "need to trade many more redlines and it could prove more costly."

[¶10] Upon receiving this email, Mr. Anderson immediately called Mr. Potter, who was unaware Big Lots needed additional information, and asked him to obtain the requested information. On July 24, 2018, Mr. Potter provided updated as-built drawings to Mr. Phillips, who forwarded them to Mr. Neu. The updated as-built drawings consisted of four pages depicting the building's existing utility, floor, roof, and north elevation plans, as well as the location of the proposed demising wall.

[¶11] On August 1, 2018, Mr. Anderson and Mr. Romes again exchanged emails. Mr. Anderson asked Mr. Romes to send him Big Lots' tenant specifications so the building remodel could "get back on track." Mr. Phillips contacted Mr. Neu on August 2, 2018, to ensure he received the updated as-built drawings. When Mr. Neu did not respond to Mr. Phillips by August 6, Mr. Phillips e-mailed Mr. Romes seeking his assistance in obtaining Big Lots' tenant specifications. The next day, Mr. Neu responded to Mr. Phillips' August 2 email, stating he received the updated as-builts and would begin preparing Big Lots' tenant specifications in the next few days.

[¶12] On August 13, 2018, Mr. Romes responded to Mr. Phillips' August 6 email. Mr. Romes apparently was unaware Capital City Properties had provided Big Lots with additional as-built drawings and Mr. Neu had already informed Capital City Properties that Big Lots would begin working on its tenant specifications. Mr. Romes told Mr. Phillips:

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"From our perspective, we are in need of a full set of as-builts of the space in order for our Store Planning team to accurately design our store/footprint. I apologize if there was a lack of communication from our team in that regard . . . ." He claimed that once Big Lots received a full set of as-built drawings, including information regarding the location of the power, sewer, and sprinkler systems, it could complete its tenant specifications. He reiterated that Big Lots would need only a signage permit and admitted it did not apply for one within 90 days as required by the lease. However, he claimed the failure to timely apply for a signage permit was a "nonissue" because "[s]ignage approval happens much later in the process and candidly, we need the completed as-builts of the façade so our signage renderings can be accurate."

[¶13] Mr. Potter responded to Mr. Romes that day and included the updated as-built drawings which had been sent to Mr. Neu on July 24, 2018. Mr. Romes thanked him and said...