Trolley Square Associates v. Nielson

Decision Date17 November 1994
Docket NumberNo. 930445-CA,930445-CA
PartiesTROLLEY SQUARE ASSOCIATES, and TS1 Partnership, Limited Partnership, an Indiana limited partnership, Plaintiffs, Appellee, and Cross-Appellant, v. Elaine NIELSON, Mary Whitesides, and Somebody's Mother, Inc., Defendants, Appellants, and Cross-Appellees.
CourtUtah Court of Appeals

D. Kendall Perkins, Salt Lake City, for appellants and cross-appellees.

E. Nordell Weeks, Salt Lake City, for appellee and cross-appellant.

Before BENCH, JACKSON and WILKINS, JJ.

OPINION

WILKINS, Judge:

Appellants Elaine Nielson (Nielson), Mary Whitesides (Whitesides), and Somebody's Mother, Inc. (SMI), appeal the trial court's judgment awarding Trolley Square Associates (TSA) damages and attorney fees under obligations arising from a lease and month-to-month tenancy. TSA cross-appeals the trial court's decision not to award prejudgment interest. We affirm in part, and reverse and remand in part.

BACKGROUND

SMI is a maternity and children's clothing business owned and operated by Nielson and Whitesides. TSA owns Trolley Square, a specialty mall in Salt Lake City. On September 3, 1980, SMI and TSA executed a lease agreement involving a space at Trolley Square of approximately 2500 square feet. SMI had previously occupied a smaller space at Trolley Square. The trial court found that the lease term was to be for three lease years plus any partial lease year as defined in the lease agreement. Any holdover by SMI after the lease term expired was to be as a month-to-month tenant. Nielson and Whitesides personally guaranteed the obligations of SMI under the lease.

SMI occupied the new space and experienced a growth in its business through 1982. Beginning about mid-1982, however, SMI's revenues fell off. It began to accrue a rent arrearage by the end of 1983. This arrearage grew until SMI vacated the leased premises on May 15, 1987.

While SMI was accruing this rent arrearage, Nielson and Whitesides expressed disapproval of the manner in which the shopping center conducted its management and maintenance activities. The trial court found that various negotiations occurred concerning an adjustment or abatement of rent charges, but that no agreement abating or reducing rent was ever agreed upon.

After a bench trial, judgment was awarded against SMI, and Nielson and Whitesides as guarantors, in the amount of $115,840.70 for unpaid rent and other charges, and $9,195 for attorney fees, with no prejudgment interest. 1 During the course of the trial, TSA introduced three pages, numbered as Exhibits 51, 52, and 53, which were presented as a summary of monthly statements containing the amounts due to TSA for the months of December 1983 through December 1986. The summaries reflected monthly charges for base rent, common area fee, insurance, property tax, and merchant dues. These summaries were admitted into evidence as "business records" and were used by the trial court to determine the judgment against SMI and against Whitesides and Nielson as guarantors of the full amount.

ISSUES ON APPEAL

On appeal, appellants argue: (1) that the lease agreement was ambiguous, and thus the trial court should have construed the lease term as running for a total of three years, from December 1, 1980, until December 1, 1983; (2) that the trial court should have found that TSA's statements or actions estopped it from collecting the full rent arrearage; (3) that the trial court improperly admitted account summaries as evidence of what SMI owed TSA; and (4) that the trial court incorrectly concluded that Nielson and Whitesides are bound as guarantors for obligations incurred during the period of time that SMI occupied the premises, rather than just during the express term of the lease agreement.

ANALYSIS
I. Lease Term

The trial court found that TSA, SMI, Nielson, and Whitesides executed the lease agreement on September 3, 1980. The appellants contend that the lease agreement is ambiguous and should thus be construed against TSA, the drafter. Contract interpretation begins with an examination of the contract itself. The initial question of whether the lease agreement is ambiguous is a question of law, to be reviewed for correctness. Wade v. Stangl, 869 P.2d 9, 12 (Utah App.1994); Home Sav. & Loan v. Aetna Casualty & Sur. Co., 817 P.2d 341, 347 (Utah App.1991). If a contract is ambiguous, it will be construed against the drafter only if extrinsic evidence fails to clarify the intent of the parties. Wilburn v. Interstate Elec., 748 P.2d 582, 585 (Utah App.), cert. granted, 765 P.2d 1277 (Utah 1988), cert. dismissed, 774 P.2d 1149 (Utah 1989). The findings of the trial court regarding the intent of the parties, determined by extrinsic evidence, will be overturned only if clearly erroneous. Allstate Enter., Inc. v. Heriford, 772 P.2d 466, 468 (Utah App.1989).

An examination of the lease agreement leads us to conclude that it is not ambiguous and that the trial court correctly interpreted the lease by reference to the terms of the document itself as expiring on December 31, 1984. Article I of the lease agreement, under the heading "Fundamental Lease Provisions," describes the lease term as:

Three Years

( 3 ) consecutive full lease years, (plus a partial lease year, if any, prior to the first full lease year)

This provision refers to another section of the lease, section 3.04, which defines a "lease year" and a "partial lease year" as follows:

The term "lease year" as used herein shall mean a period of twelve (12) consecutive full calendar months commencing on the first day of January of each year during the term hereof. The first lease year shall begin on the date of commencement of the term hereof if such date of commencement shall occur on the first day of January; if not, then the first lease year shall commence upon the first day of January next following the date of commencement of the term hereof. Each succeeding lease year shall commence upon the anniversary date of the first lease year. Any portion of the term hereof prior to commencement of the first lease year shall be deemed a "partial lease year"....

Arguably, the term of the lease is also described by the "Minimum Annual Rental" language under the "Fundamental Lease Provisions":

Nineteen Thousand Eight Hundred Forty* Dollars ($19,840.00) 2 per annum, payable in twelve (12) equal monthly installments during each year.

* First 24 months

Last 12 months--$29,760.00 3

A document titled "Lease Worksheet" is also part of the lease document, and lists:

ANNUAL MIN. RENT $19,840--first 24 months

$29,760--last 12 months

....LEASE TERM 3 Years COMMENCING Opening for

Business

In addition, a rider was attached to the lease with the following two sections:

Section 28.20. Commencement of Lease. This lease shall commence and be in full effect when tenant opens for business or December 1, 1980, whichever occurs first. ["December 1, 1980" is lined through, with a line drawn to a handwritten "February 15, 1981," initialed by M.W. and W.W. 4 ]

Section 28.21. Partial Lease Year. Any additional months of occupancy due to partial lease year shall be charged rent at the rate of $8.00 per square foot prior to the last 12 months of occupancy, or the calendar year 1983. [The "3" in "1983" is overwritten with a "4," initialed by M.W. and W.W.]

The trial court concluded that the lease term began February 15, 1981, and that the lease agreement expired December 31, 1984. Appellants argue that the conspicuous use of "3 years" on the lease worksheet to describe the lease term, coupled with the description of rent as $19,840 for the first twenty-four months and $29,760 for the last twelve months, listed on the lease worksheet and under the "Fundamental Lease Provisions," should compel a construction of the lease agreement in favor of the lease term running three years, and not three years and ten and one-half months. However, a careful reading of the lease agreement discloses that the lease term begins on February 15, 1981, and includes a ten and one-half month partial lease year before the three full lease years begin. The term of the lease ended on December 31, 1984.

On the first page of the lease agreement, under the heading "Fundamental Lease Provisions," the lease term is described as three full lease years plus a partial lease year prior to the first full lease year. A partial lease year is defined as any portion of the term before the first of January, when the first full lease year begins. According to the two sections contained in the rider to the lease agreement, the lease was to commence on February 15, 1981, with a rental rate of $8.00 per square foot until the last twelve months, or the calendar year 1984.

While the lease agreement is not a model of clarity, we find the lease term is defined sufficiently within the four corners of the document, obviating the necessity to look at extrinsic evidence of the parties' intent. The trial court found Nielson and Whitesides to be "sophisticated businesswomen who had resources and the ability to contact counsel and made an informed decision when they executed the lease." The trial court accordingly held appellants to the lease term as disclosed in the lease agreement--commencing February 15, 1981, and ending December 31, 1984. We agree.

II. Equitable Estoppel

Appellants claimed at trial that TSA made representations that the rent arrearage problem would be resolved to the mutual benefit of both parties; encouraged SMI not to leave the mall; and used SMI's continued presence in the mall to TSA's benefit; therefore, TSA should be estopped from claiming the full rent arrearage. The necessary elements of an equitable estoppel claim are:

(1) a statement, admission, act, or failure to act by one party inconsistent with a claim later asserted; (2) reasonable action or inaction by the other party taken on the basis of the first party's statement, admission, act, or failure to act; and (3)...

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