SouthTrust Bank v. Copeland One, LLC

• Decision Date: 05 September 2003
• Parties: SOUTHTRUST BANK v. COPELAND ONE, L.L.C., and Phenix Girard Bank.
• Court: Alabama Supreme Court

886 So.2d 38

SOUTHTRUST BANK v. COPELAND ONE, L.L.C., and Phenix Girard Bank.

1020727.

Supreme Court of Alabama.

September 5, 2003.

Opinion Overruling Rehearing March 12, 2004.

James J. Robinson and Jason D. Woodard of Burr & Forman, LLP, Birmingham; and Robert T. Meadows III of Capell & Howard, P.C., Opelika, for appellant.

Wayne T. Johnson, Phenix City, for appellee Copeland One, LLC.

J. Tutt Barrett of Dean & Barrett, Opelika, for appellee Phenix-Girard Bank.

HOUSTON, Justice.

This case involves the interpretation of a provision in a lease between SouthTrust Bank ("SouthTrust") and Copeland One, L.L.C. ("Copeland One"). The lease, drafted by SouthTrust, provided for a freestanding automated teller machine ("ATM") to be operated by SouthTrust on property owned by Copeland One (the "ATM lease"). The trial court determined that the provision in the ATM lease was ambiguous and entered a judgment for Copeland One. We affirm.

Facts and Procedural History

On April 1, 1983, SouthTrust entered into a lease with Octoco, Inc., pursuant to which SouthTrust leased from Octoco a building located on a parcel of property in Phenix City known as the Smiths Station Plaza Shopping Center ("Smiths Station Plaza") to use as a branch bank (the "branch lease"). The branch lease expired on December 15, 1992, and was renewed for an additional 10-year period, which was to expire on December 15, 2002.

On January 10, 1997, SouthTrust and Octoco entered into the ATM lease, a lease wholly separate from the branch lease, pursuant to which SouthTrust would operate a freestanding ATM at Smiths Station Plaza located several hundred yards from the building housing the branch bank. The ATM lease was drafted by SouthTrust and was SouthTrust's standard lease for freestanding ATMs. If SouthTrust exercises all of its options to renew the ATM lease, it will not expire until February 2008. The ATM lease provides that SouthTrust has the unilateral and sole authority to renew the ATM lease; Octoco does not have the option to cancel the ATM lease or to object to its renewal.

Section 5 of the ATM lease is entitled "Use of Premises." Section 5.3 of the ATM lease reads:

"Exclusive ATM or Bank. Tenant [SouthTrust] shall have the exclusive right during the term of this lease and any renewals to operate an ATM or any other type of banking facility on the Property.[¹] This exclusive use provision may be enforced in an action to enjoin any use in violation of this provision."

(Emphasis added.) (This lease provision is hereinafter referred to as "the exclusive-use provision.")

On April 23, 1997, Octoco sold Smiths Station Plaza to Big Buy Foods, Inc. As part of the sale, Octoco assigned all leases related to Smiths Station Plaza, including the branch lease and the ATM lease, to Big Buy Foods. Each month SouthTrust issued two checks to Big Buy Foods, one for the branch lease and one for the ATM lease.

Early in 2002, SouthTrust and Big Buy Foods began negotiations for the renewal of the branch lease. Those negotiations continued until SouthTrust learned that Big Buy Foods had agreed to sell Smiths Station Plaza to Copeland One. SouthTrust contacted Fred Copeland, the majority owner of Copeland One, regarding the renewal of the branch lease, but Mr. Copeland refused to discuss the matter until after the sale of Smiths Station Plaza to Copeland One had closed.

The sale of Smiths Station Plaza by Big Buy Foods to Copeland One closed on August 12, 2002. As part of the sale, Big Buy Foods assigned all leases for property in Smiths Station Plaza, including the branch lease and the ATM lease, to Copeland One.

For approximately a week after the sale, SouthTrust and Copeland One negotiated for the renewal of the branch lease. During that time, Copeland One received an offer from Phenix Girard Bank ("PGB") to lease the branch bank building for a rental amount higher than the amount that SouthTrust was offering. On August 19, 2002, Copeland One entered into a lease with PGB for the use of the branch bank building after the expiration of the branch lease (the "PGB lease").

After signing the PGB lease, Copeland One informed SouthTrust that it would have to vacate the branch bank building on December 15, 2002, at the expiration of its lease. SouthTrust vacated the building as directed and reopened in a new location approximately one block from the branch bank building.

After it opened its branch bank at the new location, SouthTrust notified Copeland One that, pursuant to the exclusive-use provision of the ATM lease, SouthTrust had the exclusive right to operate a branch bank at Smiths Station Plaza. On September 5, 2002, Copeland One filed a complaint seeking a judgment declaring the parties' rights under the ATM lease. SouthTrust filed an answer and a counterclaim; the counterclaim sought an injunction prohibiting PGB, or any other bank, from conducting banking operations at Smiths Station Plaza. In its counterclaim, SouthTrust contended that the exclusive-use provision of the ATM lease gave SouthTrust "the exclusive right to conduct banking operations on the Property. Copeland One is therefore prohibited from leasing any portion of the Property to any entity that would conduct any type of banking operations on the Property." Both Copeland One and SouthTrust requested that PGB be added to the declaratory-judgment action as a real party in interest, and the court granted that request.

A three-day bench trial at which ore tenus evidence was presented was held beginning on December 12, 2002. At the conclusion of the bench trial, the trial court ordered the parties to submit written briefs. On January 23, 2003, the trial court entered a judgment in favor of Copeland One and PGB and against SouthTrust. The entirety of the trial court's findings are as follows:

"The above-styled case has been submitted upon the pleadings herein, evidence heard ore tenus by this Court, and the briefs and arguments of the parties. After hearing the evidence presented and carefully observing the demeanor of each witness as each testified, the Court is of the opinion that this case should be decided in favor of Copeland One, L.L.C. and against SouthTrust Bank. The Court further finds as follows:

"(a) The Court has jurisdiction of this case and the parties.

"(b) A justiciable controversy exists between the parties.

"(c) The document referred to in this case as the `ATM lease' is ambiguous, and as such, must be construed against the party drafting it, SouthTrust Bank.

"It is, therefore, ADJUDGED AND ORDERED:

"1. Judgment is entered in favor of Copeland One, L.L.C. and [PGB] on the counterclaim and claims of SouthTrust Bank.

"2. Copeland One, L.L.C. may enter into an agreement with [PGB] or any person or entity for the use as a branch bank of the building referred to in this case as the `branch bank building.'"

(Emphasis added.) In its holding, the trial court did not indicate the specific provision or provisions of the ATM lease it found ambiguous. This appeal followed.

Analysis

This Court set out the applicable standard for reviewing a trial court's determination that a contract is ambiguous in Winkleblack v. Murphy, 811 So.2d 521, 525-26 (Ala.2001):

"The question whether a contract is ambiguous is for a court to decide. State Farm Fire & Cas. Co. v. Slade, 747 So.2d 293 (Ala.1999). As long as the contractual terms are clear and unambiguous, questions of their legal effect are questions of law. Commercial Credit Corp. v. Leggett, 744 So.2d 890 (Ala.1999). Thus, we apply a de novo review to a trial court's determination of whether a contract is ambiguous and to a trial court's determination of the legal effect of an unambiguous contract term.

"Once the trial court determines that an ambiguity exists in a contract, the meaning of that contract is to be determined by the trier of fact. Employees' Benefit Ass'n v. Grissett, 732 So.2d 968 (Ala.1998); Glenlakes Realty Co. v. Norwood, 721 So.2d 174 (Ala.1998). In this case, the trier of fact was the trial court, and the court heard ore tenus evidence.

"`Where ore tenus evidence is presented to the trial court in a nonjury case, a judgment based on that evidence is presumed to be correct and will not be disturbed on appeal unless a consideration of the evidence and all reasonable inferences therefrom reveals that the judgment is plainly and palpably erroneous or manifestly unjust.'

"Bertolla v. Bill, 774 So.2d 497, 503 (Ala.1999)(quoted in Redden v. State, 804 So.2d 196 (Ala.2001))."

In this case, the trial court was the trier of fact and heard ore tenus evidence. Following the standard set out in Winkleblack, supra, we must engage in a two-part analysis. First, we must review de novo the trial court's determination that the ATM lease is ambiguous. Second, if we find (as we do) that the ATM lease is ambiguous, we must then determine whether the trial court's holding that Copeland One may enter into a lease agreement with PGB for the use of the branch bank building was "plainly and palpably erroneous or manifestly unjust."

Ambiguity of the ATM Lease

This controversy circulates around the language in the exclusive-use provision of the ATM lease, which states, in pertinent part, that "[SouthTrust] shall have the exclusive right during the term of this lease and any renewals to operate an ATM or any other type of banking facility on the Property." (Emphasis added.) SouthTrust argues that the trial court erred in holding that the ATM lease is ambiguous and thus that it must be construed against SouthTrust, as the drafter of the ATM lease. According to SouthTrust, the language in the exclusive-use provision is clear and it gives SouthTrust the sole right to operate a bank at Smiths Station Plaza during the period the ATM lease is in effect.

In briefs submitted to this Court, the parties focus on the term "banking facility" as that term is used in the ATM lease.² SouthTrust argues that the meaning of that term is clear and...