Woodlands Corner, L.L.C. v. Kallhoff, No. 8-150/07-0635 (Iowa App. 5/14/2008), 8-150/07-0635
| Decision Date | 14 May 2008 |
| Docket Number | No. 8-150/07-0635,8-150/07-0635 |
| Parties | WOODLANDS CORNER, L.L.C., Plaintiff-Appellant, v. ALFRED W. KALLHOFF and BONNIE J. KALLHOFF, d/b/a HEAVENLY HAM, Defendants-Appellees. |
| Court | Iowa Court of Appeals |
Appeal from the Iowa District Court for Polk County, Robert A. Hutchinson, Judge.
The plaintiff appeals from the district court order denying its breach of contract claim against the defendants. AFFIRMED IN PART AND REVERSED IN PART.
Jason Springer of Springer & Laughlin Law Offices, P.C., Des Moines, for appellant.
Todd Elverson of Elvrson, Vasey & Peterson L.L.P., Des Moines, for appellee.
Heard by Sackett, C.J., and Miller and Baker, JJ.
Woodlands Corner, L.L.C. (Woodlands Corner) appeals from the district court order denying its breach of contract claim against Alfred and Bonnie Kallhoff and their business, Heavenly Ham. The court also denied the Kallhoffs' counterclaim, but awarded the Kallhoffs $14,596.75 in attorney fees under the contract. Woodlands Corner contends the court erred in denying its claim and in awarding the Kallhoffs their attorney fees. We affirm the district court's denial of Woodland Corner's breach of contract action, but reverse the award of the Kallhoffs' attorney fees.
I. Background Facts and Procedures
Arun and Saatchi Kalra are the owners of Woodlands Corner. They decided they wanted to become involved in commercial real estate in 1999. They originally owned a combined seventy-five percent share in Woodlands Corner, a commercial property they built, but in 2002 they bought the remaining twenty-five percent share from Randy Krohn. They own several other commercial properties as well as a construction business.
In the summer of 2000, Krohn received a call from the Alfred and Bonnie Kallhoff, owners of Heavenly Ham, seeking to lease a space at Woodlands Corner. On July 13, 2000, the Kallhoffs faxed to Woodlands Corner an economic proposal giving a lease commencement date of August 1, 2000, and stating the landlord was to provide the premises in vanilla-box condition.
On August 11, 2000, the Kallhoffs executed a lease with Woodlands Corner. In a section of the lease entitled "LEASE TERM," the lease states:
The term of this Lease shall be for a period of five (5) years from the "Commencement Date" hereafter provided unless sooner terminated. The Commencement Date shall be August 1, 2000. Tenant's obligation to pay rent shall commence on November 1, 2000 or when the business opens, whichever first occurs.
Under a section entitled "RENT," the lease states that the tenants shall pay $3000 per month in rent for months four through twelve. For months thirteen through twenty-four, this amount increases to $3200 per month. Finally, rent for months twenty-five through sixty was set at $3400 per month. The lease then reads, "Nothwithstanding the foregoing, the Tenant shall only be obligated to pay the sum of $2,500 per month for the monthly rental due 11/01/2000, 12/01/2000, and 01/01/2001." Under a section entitled "SURRENDER OF PREMISES," the lease reads:
The Demised Premises shall be surrendered to the Landlord at the end of the term or option term in a broom-clean condition. The Tenant agrees to place the Demised Premises in the same condition as the Demised Premises were delivered to Tenant by Landlord.
Exhibit C of the lease states:
Tenant agrees at the request of Landlord or Landlord's Mortgagee, to execute a Memorandum of Lease setting forth the Commencement and Termination dates of the lease, and any other pertinent information as may be requested by Landlord or Landlord's Mortgagee. Tenant agrees to execute such Memorandum by estoppel certification whenever it is requested by Landlord.
The "Memorandum of Lease" contemplated by Exhibit C, also dated August 11, 2000, states in part: "The Lease is dated as of Nov. 1, 2000."
A check in the amount of $5500 was provided to Woodlands Corner by the Kalhoffs on August 16, 2000. The check was either for first and last months' rent or first month's rent and a security deposit.
The rented premises were vacated on August 8, 2005. On that day, Arun Kalra received a check from the Kallhoffs in the amount of $2783.84. The memo line on the check stated "July & August rent and CAM charges" and on the back was written, "Tendered in complete accord and satisfaction." Arun Kalra crossed out the memo notation and initialed it. On the back, he crossed out what the Kalhoffs had written and wrote, "This sum tendered is NOT satisfactory and NOT in accordance with lease term."
When the premises were vacated, there was a tiled floor, plumbing in the dining area, additional electrical wiring installed, an exhaust fan, wallpaper or paint, a fan, and customized windows with wood framing that was not there when the lease began. However, the electrical fixtures were removed, leaving open wiring. Some ceiling tiles had also been pulled out. The entire estimate obtained by the Kalras to return the premises to the condition they believed it was rented in was $50,800.
On November 3, 2005, Woodlands Corner sent by certified mail a letter informing Heavenly Ham it owed $6905.25 payable within fourteen days or it would file suit. On March 27, 2006, Woodlands Corner filed a petition alleging breach of contract against the Kallhoffs. The Kallhoffs answered on April 28, 2006, denying Woodland Corner's claim and alleging that they had been overcharged for property taxes, utilities, and common area maintenance (CAM) cost. They sought an award of their damages, costs, and attorney fees.
At trial, Arun Kalra testified the lease was five years in length with the first three months of the lease, November 1, 2000, through January 2001, having a reduced rent of $2500 before increasing to $3000 for the remainder of the year. It was his intent that sixty months of rent be received. He believed the lease ended on October 31, 2005. Arun Kalra also believed that the premises were to be returned in "vanilla-box" condition, which means with the bare drywall ready to paint and no tile. He stated the premises were delivered to the Kallhoffs in vanilla-box condition.
Alfred Kallhoff testified that the lease commenced on August 1, 2000. He did not have to pay rent until November 1, 2000. He testified that the purpose of the language about rent starting on November 1 or when the store opened, whichever came first, was because he wanted the store to be opened as quickly as possible as seventy percent of his business would be conducted over Thanksgiving, Christmas, and Easter. He anticipated the lease would terminate on July 31, 2005. When he vacated the premises, he left it in the same condition as other previously-leased commercial properties he looked at appeared; the plumbing and gas outlets capped, the electricity turned off, the trade fixtures removed, the floor and ceiling tile left in place, etc. The extra furnace and hot water heater he had installed were left in place. Kallhoff believed that when he tendered his final rent payment to Woodlands Corner, he was free of his obligation. He factored his deposit money into the amount he paid and made payment for the eight days in August he stayed past the end of the lease.
Randy Krohn testified that the lease was five years long and commenced on August 1, 2000. He agreed that the lease provision for not starting rental payments until November 1, 2000 was a "carrot stick" so Woodlands Corner would finish the property sooner. He testified that rent was not due on the first three months of the lease. He did not believe the property was in "vanilla-box condition" when it was rendered to the Kallhoffs. Krohn believed that the Kallhoffs left the property in similar condition to how other tenants leave commercial properties at strip malls. He did not believe leaving tile on the floor or paint on the walls would cause monetary damage to the landlord.
Edward Karnes, a contractor and owner of General Construction with over forty years experience in the construction business testified that the estimates provided by Woodlands Corner for the work needed on the property after the Kallhoffs vacated it were "not even close" to what he believed would be a reasonable estimate. He stated the estimate was eight to ten times higher than what he would bid. He also testified he was not familiar with the term "vanilla-box condition."
Susan Clark, a commercial real estate broker and property manager for over twenty years testified. Looking at pictures of how the leased space was left, she stated that it was left in standard condition. She further stated her belief that it typically benefits the landlord for the tenant improvements to remain in the leased space. She testified to her belief that based on the lease terms, the lease commenced on August 1, 2000. She further stated her opinion that the estimates for demolition were not reasonable. She testified that the "Memorandum of Lease," in which the November 1, 2000 date is given as the commencement date, was not the lease but rather a document to confirm the information in the lease.
Following the bench trial, the district court entered its ruling on March 6, 2007. It denied Woodlands Corner's breach of lease claim, finding the lease terminated on July 31, 2005. It further declined to award Woodlands Corner any damages for its claim the Kallhoffs damaged the lease property. It denied the Kallhoffs' counterclaim, noting they conceded they had been unable to prove an amount of damage for excessive CAM charges, but awarded them attorney fees in the amount of $14,596.75.
III. Standard of Review
We review the judgment of a district court following a bench trial in a law action for correction of errors at law. Chrysler Fin. Co. v. Bergstrom, 703 N.W.2d 415, 418 (Iowa 2005). The district court's fact findings have the force of a special verdict and are binding on us if supported by substantial evidence. Id. Evidence is substantial if a reasonable person would accept it as...
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