Scott-Reitz Ltd. v. Rein Warsaw Associates

• Decision Date: 27 November 1995
• Docket Number: No. 43A03-9403-CV-92,SCOTT-REITZ,43A03-9403-CV-92
• Citation: 658 N.E.2d 98
• Parties: LTD., an Indiana Corporation, Appellant-Substituted Defendant, and Scott's Food Stores, Inc., Appellant-Defendant, v. REIN WARSAW ASSOCIATES, an Indiana Limited Partnership, Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 98

658 N.E.2d 98

SCOTT-REITZ LTD., an Indiana Corporation, Appellant-Substituted Defendant, and Scott's Food Stores, Inc., Appellant-Defendant, v. REIN WARSAW ASSOCIATES, an Indiana Limited Partnership,

Appellee-Plaintiff.

No. 43A03-9403-CV-92.

Court of Appeals of Indiana.

Nov. 27, 1995.

Arthur P. Kalleres, Michael A. Wilkins, Ice Miller Donadio & Ryan, Indianapolis, M. Bruce Scott, DeVoss, Scott, Johnson & Baker, P.C., Decatur, for appellant.

Daniel K. Leininger, Lemon, Armey, Hearn & Leininger, Warsaw, Bernard L. Pylitt, Jeffrey A. Hearn, Katzman Katzman & Pylitt, P.C., Indianapolis, for appellee.

OPINION

HOFFMAN, Judge.

Appellant-defendant Scott-Reitz Ltd. (Scott) appeals from a judgment in favor of appellee-plaintiff Rein Warsaw Associates (Rein) ¹ in a breach of lease action.

In May of 1988, Rein purchased a shopping center in Warsaw, Indiana, known as Marketplace of Warsaw (Marketplace), along with an adjoining parcel of vacant land, and began negotiations with Scott for the lease of a retail grocery store which was to be built as part of an addition to the Marketplace.

On July 26, 1988, a letter of intent was executed by William G. Reitz, Scott's president. According to the letter, the Horizon Group, Rein's predecessor in interest, as lessor, was to construct a 57,000 square foot building which was to be used as a grocery store, while Scott, as tenant, agreed to finish the building by installing the necessary trade fixtures and equipment. The letter also provided that a satisfactory lease agreement was to be executed within 60 days. During the negotiations of the lease, Horizon Group sold its interest in the Marketplace to Rein.

Despite the previous 60-day time limit in the letter, the lease agreement ("Lease") between Rein and Scott was not executed by the parties until February 2, 1990. Sections 3.1(a) and (e) of the Lease required Rein to obtain the permits necessary for construction to begin. The Lease between the parties also required Rein to construct the store in accordance with plans and specifications that the parties were to cooperate in drafting (hereinafter referred to as the "Plan"). Although Rein was responsible for developing the over all Plan, it was not required to present the Plan until Scott furnished details as to the store fixture plan, pit and drain plan, general plumbing and electrical plan and refrigeration requirements. Within 30 days after Scott provided these details to Rein, Rein was to present the Plan.

After execution of the Lease, Scott became concerned about the start-up costs it faced for the Warsaw store which was the subject of the Lease with Rein and for another store which was to open in Kendallville, Indiana. At Scott's February 14, 1990 board meeting, the members of the board discussed slowing down both projects and postponing their openings until 1991. Meanwhile, Rein experienced problems obtaining the necessary wetlands permits for the construction of the store. Scott knew that the poor soil conditions at the Marketplace would necessitate pilings be used for the foundation work and would add to the construction costs for the store; however, Scott was unaware the site was "jurisdictional wetland soil."

As early as March of 1989, Rein's attorneys and engineers began gathering the data necessary to apply to the U.S. Army Corp of Engineers for a Section 404 permit and a Section 401 Water Qualification Permit from the Indiana Department of Environmental Management. The Army Corp advised Rein it would have to mitigate the loss of wetlands before a permit would be issued. Rein began negotiations with the owner of real estate adjacent to the Marketplace, Batalis, for the purchase of the property. However, it was discovered that the Batalis' property was not suitable for mitigation as it was already an existing wetlands. Thus, Rein's initial state and federal permits were denied without prejudice. Thereafter, Rein obtained Jimmy New, an environmental consultant, to develop a suitable mitigation plan. New began corresponding with the agencies involved. The Indiana Department of Natural Resources (IDNR) suggested to New that farmland owned by Robert Lozier was suitable mitigation property, which IDNR desired to add to its wetlands holdings. In late September or early October 1990, Lozier agreed to sell his land to Rein.

In the late summer of 1990, during approximately the same time frame New confirmed the appropriateness of the Lozier property, Rein approached Jim Orn, of Scott, regarding the possibility of Scott instead moving into the Big Wheel Store, which was approximately the same size as required by Scott for the operation of its grocery store. Orn informed Scott's president, William Reitz, and the chairman of the board, Donald Scott, of this development. After inspecting the Big Wheel Store, Reitz and Scott encouraged Orn to look at the Big Wheel Store to see if it was possible to convert it into a Scott's grocery store. Sometime between the summer and early November of 1990, Orn inspected the Big Wheel Store and found the building to be of good construction and decided that the conversion would be possible. From late summer of 1990 through January 18, 1991, Scott engaged in a course of conduct evidencing the parties' interest in converting the Big Wheel Store into Scott's Warsaw grocery store in lieu of constructing a new store as called for in the Lease. On January 18, 1991, Scott and Big Wheel Store representatives met in Fort Wayne, Indiana to discuss construction details for the conversion of the Big Wheel Store. On the same day, Rein received notice from Scott that it repudiated the Lease.

On June 28, 1991, Rein filed this action against Scott for breach of the Lease. After a bench trial, the court entered judgment in favor of Rein and awarded Rein $1,610,000.00 in damages. Scott now appeals.

Scott raises two issues which are restated for review:

(1) whether sufficient evidence exists to support the trial court's determination that Scott breached the lease agreement; and

(2) whether the damage award is within the scope of the evidence.

As requested by Rein, the trial court entered findings of fact and conclusions of law pursuant to Ind.Trial Rule 52(A). When findings of fact and conclusions of law are requested by a party, this Court first determines whether the evidence supports the trial court's findings and second, whether the findings support the judgment. Bauer v. Harris (1993), Ind.App., 617 N.E.2d 923, 926. The judgment of the trial court will be reversed only if clearly erroneous. Id.

On appeal, the findings or judgment of the trial court will be reversed only when this Court is left with the definite and firm conviction that a mistake has been committed. Roark v. Roark (1990), Ind.App., 551 N.E.2d 865, 869. In determining whether the trial court's findings are clearly erroneous, this Court neither will reweigh the evidence nor determine the credibility of the witnesses and will consider only the evidence which supports the judgment and the reasonable inferences therefrom. Tomahawk Village Apartments v. Farren (1991), Ind.App., 571 N.E.2d 1286, 1291. It is the province of the trial court to determine which witnesses to believe when it hears the evidence. This Court cannot reverse upon the basis of conflicting evidence. Endsley v. Game-Show Placements, Ltd. (1980), Ind.App., 401 N.E.2d 768, 771.

A lease is construed in the same manner as any other contract. Whiteco Industries, Inc. v. Nickolick (1991), Ind.App., 571 N.E.2d 1337, 1339, trans. denied. This Court will give effect to the parties' intent as shown by their written expression in the lease. Edward Rose of Indiana v. Fountain (1982), Ind.App., 431 N.E.2d 543, 546. The lease will be read as a whole to ascertain its intended meaning, and in so doing, this Court gives the words of the lease their ordinary and common meaning unless a different meaning is clear from the lease's subject matter. Ogilvie v. Steele by Steele (1983), Ind.App., 452 N.E.2d 167, 170.

Scott contends that Rein was not entitled to recover for breach of the Lease because it failed to comply with certain conditions precedent of the contract. A condition precedent must be fulfilled before the duty to perform an existing contract arises. Krukemeier v. Krukemeier Mach. & Tool (1990), Ind.App., 551 N.E.2d 885, 889. Such conditions are disfavored and must be stated explicitly within the contract. Id.

Relying on subsections 3.1(a), (e) and (f), Scott asserts no obligation existed under the Lease until Rein obtained the necessary building permits, constructed the building, and tendered possession. Section 3.1 subsection (a) of the Lease states Rein shall construct a building that is in substantial accordance with the plans and specifications; subsection (e) sets forth, in part, the work to be done by Rein; and subsection (f) provides that Rein shall obtain the necessary permits for construction and shall begin construction within a reasonable time after their issuance. No language exists within these subsections which suggests that construction of the building is a condition precedent to the Lease. Rather, the construction is an integral part of the Lease, itself. Additionally, as Rein points out, Section 3.1(e)(I) of the Lease imposes upon Scott a duty to provide Rein with the tenant details prior to any obligation by Rein to develop the overall Plan and otherwise start the necessary steps leading to construction. Thus, both parties were obligated by the Lease upon its execution, even prior to the actual construction of the store.

Scott also argues Rein was not only unable to perform under the terms of the Lease, but also Rein was in material breach of the Lease prior to its repudiation and is therefore precluded from recovering damages. Scott contends the trial court's Finding No. 32 is not supported by sufficient evidence. Finding No. 32 provides:

"32. On January 18, 1991, when Defendant [Scott]...