Pie Kitchen, LLC d/b/a Homemade Ice Cream and Pie Kitchen v. Merchant, LLC ( 2013 )

Pursuant to Ind. Appellate Rule 65(D), this
Memorandum Decision shall not be
regarded as precedent or cited before any
court except for the purpose of establishing
the defense of res judicata, collateral
estoppel, or the law of the case.
ATTORNEYS FOR APPELLANT: ATTORNEY FOR APPELLEE:
JOHN A. KRAFT C. GREGORY FIFER
JENNIFER KRAFT KUCHLE Applegate Fifer Pulliam LLC
Young, Lind, Endres & Kraft Jeffersonville, Indiana
New Albany, Indiana
FILED
Feb 15 2013, 9:19 am
IN THE
CLERK
COURT OF APPEALS OF INDIANA of the supreme court,
court of appeals and
tax court
PIE KITCHEN, LLC, d/b/a HOMEMADE )
ICE CREAM AND PIE KITCHEN, )
)
Appellant-Defendant, )
)
vs. ) No. 10A01-1207-CC-322
)
MERCHANT, LLC, )
)
Appellee-Plaintiff. )
APPEAL FROM THE CLARK CIRCUIT COURT
The Honorable Steven M. Fleece, Senior Judge
Cause No. 10C02-1109-CC-1175
February 15, 2013
MEMORANDUM DECISION - NOT FOR PUBLICATION
CRONE, Judge
Case Summary
Pie Kitchen, LLC, d/b/a Homemade Ice Cream and Pie Kitchen (“Pie Kitchen”) and
Chalfant Industries, Inc. (“Chalfant”), executed a letter of intent (“LOI”) in which Chalfant
would lease commercial space to Pie Kitchen to use as a restaurant. The LOI set forth terms
that were later incorporated into the lease. Six months after the parties executed the lease,
Chalfant sold the shopping center to Merchant, LLC (“Merchant”), and assigned to it the
commercial leases of the shopping center’s tenants.
A contract dispute later arose between Merchant and Pie Kitchen as to whether a five-
percent annual cap on additional rent increases included Pie Kitchen’s pro rata share of real
estate taxes on the shopping center. Claiming that the taxes were subject to the five-percent
cap, Pie Kitchen paid the taxes commensurate with the cap. Claiming that the cap did not
include real estate taxes, Merchant filed an action against Pie Kitchen for unpaid rent in the
amount by which the taxes exceeded the cap. Both parties sought summary judgment. The
trial court interpreted the lease as excluding the taxes from the five-percent cap and granted
summary judgment in favor of Merchant, awarding Merchant over $48,000 in damages and
interest.
Pie Kitchen appeals the summary judgment order, claiming that the trial court
erroneously construed the lease and LOI as excluding the real estate taxes from the five-
percent cap. Finding no error, we affirm.
2
Facts and Procedural History
On October 20, 2006, Chalfant and Pie Kitchen executed an LOI concerning Pie
Kitchen’s leasing of certain commercial space (“the Premises”) in Chalfant’s shopping
center. The LOI states in pertinent part as follows:
Taxes, Insurance and CAM:
Tenant shall pay its pro rata share of real estate taxes and insurance based on
the Tenant’s square footage divided by the total gross leasable area of the
center. Tenant shall be responsible for its pro rata share of Common Area
Maintenance charges, taxes and insurance as set forth in the Lease as
“Additional Rent”. Common Area Maintenance, taxes and insurance charges
for the “Base Year” shall not exceed $2.00 per square foot. All Common Area
Maintenance, taxes and insurance shall be billed to the Tenant at the cost the
Landlord was charged for them. The “Base Year” will be established on
January 1st, 2007. After the “Base Year”, additional Rent (CAM) increases
shall be capped at 5% annually over the “Base Year”. Landlord is responsible
for outside of building including but not limited to, common areas, roofs,
awnings, windows and walkways. Landlord must present proof of CAM
expenses before the “Base Year” begins and each year of the lease thereafter.
All CAM expenses must be passed to the Tenant at the actual cost of the
maintenance charge based on the percentage of space used for the center.
Management fees may only be included as part of the CAM.
….
Upon the signed acceptance of this Letter of Intent, this document shall
become a binding agreement and an obligation to the Landlord to provide a
valid and agreeable Lease meeting the terms and conditions of this LOI, within
15 working days. The Lease shall not negate any conditions and or terms
included herein, and conditions normally found in a commercial lease.
Landlord and Tenant reserves the right to correct or adjust any errors included
herein. The LOI shall remain a part of the lease as Exhibit: “LOI”.
Appellant’s App. at 25-26, 29.
The lease, executed by Chalfant and Pie Kitchen on November 20, 2006, states in
pertinent part as follows:
3
ARTICLE 5 ADDITIONAL RENT FOR COMMON AREA EXPENSES
Tenant shall pay as additional rent, “Tenant’s pro rata share” of all
operating costs and expenses incurred by Landlord for the property and
improvements known as Lowe’s Center. “Tenant’s pro rata share” of all
additional rent shall be computed on the basis that the total number of square
feet of the gross floor area in the Tenant’s premises, be [sic] 2,380 square feet,
bears to the total number of the gross rentable square feet of the building,
being 40,000 square feet for a pro rata percentage of 6%. These operating
costs and expenses shall include: All property taxes and licenses accessed by
any governmental unit; all insurance premiums for liability, fire, and extended
coverage with respect to the building and improvements; all common area
utilities for lighting, parking and driveway lighting, electricity or gas for
operating any equipment deemed as common area equipment, such as signs,
pumps, etc., but shall not include any special utility usage for the sole benefit
of any one tenant such as a sign or etc.; all maintenance and operating
expenses for the lawn, parking, and driveway facilities including gardening,
landscaping, moving, management fees and repairing asphalt, sealing, line
stripping, removal of snow, ice, trash, rubbish and refuse, all maintenance and
operating costs for repairing and repainting the building and common areas.
All expenses for garbage collection unless it is deemed more practical for each
Tenant or any one Tenant to provide this service for themselves, then such
Tenant or all Tenants will provide for their own collection, and their “pro rata
share” for such costs shall be exempted from Additional Rent. OPERATING
COSTS AND EXPENSES SHALL NOT INCLUDE: Cost of any capital
improvement made after the completion of the building, unless capital
improvement shall constitute a substantial labor or cost saving device or
operation in which case Operating Expenses in each year shall continue to
include the expenses which would have been incurred if said capital
improvement had not been made; expenses for painting, redecorating, or other
work performed for the other tenants in the building; expenses for repairs or
other work occasioned by fire, windstorm or other insurable casualty; expenses
incurred in leasing or procuring new tenants including lease commissions
advertising expenses and expenses of renovating space for new tenants; legal
expenses incurred in enforcing the terms of any lease, interest or amortization
payment of any mortgages. Landlord and Tenant agree to fix additional rent
for Common Area Maintenance in an amount not to exceed $2.00 per square
foot for Base Lease Year 1.
4
ARTICLE 6 PAYMENT OF ADDITIONAL RENT FOR COMMON AREA EXPENSES
For each lease year and partial lease year, the additional rental provided for in
Article 6 shall be paid by Tenant in monthly installments, in advance, on the
first day of each calendar month. The amount for additional rent for the first
lease year shall be $4,760.00 annually paid in monthly installments of $396.67.
If the total amount by Tenant under this Article for 2004 or any future year be
less than the actual amount paid by Landlord for the expenses referred to in
Article 5, then Landlord shall furnish Tenant with a detailed statement of the
actual amount of Tenant’s proportionate share of such costs and expenses for
such period. Tenant shall pay to Landlord the deficiency between the amount
paid by Tenant and the amount due within thirty (30) days after the furnishing
of each statement. Landlord shall then, based on the preceding years’
experience, increase the monthly additional rent paid by Tenant, Tenant’s
proportionate share of such deficiency divided by twelve. Landlord grants
Tenant the right to review Landlord’s records relating to said Center for the
purpose of confirming actual expenses annually. Exclusive of any increase in
property taxes, Landlord and Tenant agree that additional CAM increases shall
be capped at 5% annually over the “Base Year”.
….
17.9 Entire Agreement: This lease, the attached Letter of Intent, and
any guaranty, riders or exhibits attached hereto and forming a part hereof, set
forth all the promises, agreements, and conditions and understandings between
Landlord and Tenant, or Tenant’s agent, relative to the leasing of the Premises,
and there are not other promises, agreements, conditions or understandings,
either oral or written, between them other than those herein set forth.
Id. at 18-19.
In the spring of 2007, Chalfant sold the shopping Center to Merchant. As part of the
sale, Chalfant assigned Pie Kitchen’s lease to Merchant, and Merchant assumed the lease. A
dispute arose between Pie Kitchen and Merchant when Merchant attempted to collect from
Pie Kitchen a proportionate share of real estate taxes that exceeded the five-percent cap. Pie
Kitchen refused to pay the excess, claiming that the real estate taxes were included within
that cap.
5
Merchant filed a contract action against Pie Kitchen, seeking eviction and possession
as well as damages for the unpaid rent representing Pie Kitchen’s excess pro rata tax bills
from 2009 to the date of judgment. Pie Kitchen filed a counterclaim for damages against
Merchant. Both parties filed motions for summary judgment. After a hearing, the trial court
granted summary judgment in favor of Merchant for $48,523.20 in damages and issued
contingent orders of eviction and possession. Pie Kitchen filed a motion to correct error,
which the trial court denied. Pie Kitchen now appeals. Additional facts will be provided as
necessary.
Discussion and Decision
Pie Kitchen asserts that the trial court erred in granting Merchant’s motion for
summary judgment. We review the trial court’s decision to grant or deny summary judgment
using the same standard as the trial court. Worman Enters., Inc. v. Boone Cnty. Solid Waste
Mgmt. Dist., 805 N.E.2d 369, 373 (Ind. 2004). A motion for summary judgment is properly
granted only when the pleadings and designated evidence reveal that there is no genuine
issue of material fact and that the moving party is entitled to judgment as a matter of law.
Ind. Trial Rule 56(C); Bank of New York v. Nally, 820 N.E.2d 644, 648 (Ind. 2005). In
determining whether issues of material fact exist, we must accept as true those facts
established by evidence favoring the nonmoving party and resolve all doubts against the
moving party. Id.
Indiana courts have long recognized the contractual nature of leases and applicability
of contract law to leases. Stewart v. TT Comm’l One, LLC, 911 N.E.2d 51, 55 (Ind. Ct. App.
6
2009), trans. denied. We construe a lease in the same manner as any other contract. T-3
Martinsville, LLC v. US Holding, LLC, 911 N.E.2d 100, 111 (Ind. Ct. App. 2009), clarified
on reh’g, 916 N.E.2d 205, trans. denied (2010). The construction of a written contract’s
terms is purely a question of law, which we review de novo. Id.
When construing the meaning of a contract, our primary task is to determine
and effectuate the intent of the parties. First, we must determine whether the
language of the contract is ambiguous. The unambiguous language of a
contract is conclusive upon the parties to the contract and upon the courts. If
the language of the instrument is unambiguous, the parties’ intent will be
determined from the four corners of the contract. If, on the other hand, a
contract is ambiguous, its meaning must be determined by examining extrinsic
evidence and its construction is a matter for the fact-finder. When interpreting
a written contract, we attempt to determine the intent of the parties at the time
the contract was made. We do this by examining the language used in the
instrument to express their rights and duties. We read the contract as a whole
and will attempt to construe the contractual language so as not to render any
words, phrases, or terms ineffective or meaningless. We must accept an
interpretation of the contract that harmonizes its provisions, rather than one
that places the provisions in conflict.
Id. (citation omitted). “If an ambiguity arises because of the language used in the contract
and not because of extrinsic facts, its construction is purely a question of law to be
determined by the trial court.” Bicknell Minerals, Inc. v. Tilly, 570 N.E.2d 1307, 1310 (Ind.
Ct. App. 1991), trans. denied (1992). The mere fact that the parties disagree as to the proper
interpretation of a contract’s terms does not render the terms ambiguous. Arrotin Plastic
Materials of Ind. v. Wilmington Paper Corp., 865 N.E.2d 1039, 1041 (Ind. Ct. App. 2007).
Instead, “[a] contract is ambiguous only where a reasonable person could find its terms
susceptible to more than one interpretation.” Id. (citation omitted).
7
Here, the contract indisputably comprises both the lease and the LOI.1 In examining
the language of the contract as a whole, so as not to render any words, phrases, or terms
ineffective or meaningless, we note first the closing language in Article 6 of the lease, which
states, “Exclusive of any increase in property taxes, Landlord and Tenant agree that
additional CAM increases shall be capped at 5% annually over the ‘Base Year.’” Id. at 19
(emphasis added). Pie Kitchen asserts that such language cannot be harmonized with the
language of the LOI pertaining to the five-percent cap on rent increases and that it violates
the term of the LOI that states, “The lease shall not negate any conditions and or terms
included herein, and conditions normally found in a commercial lease.” Id. at 29.
We disagree. With respect to the cap on “Additional Rent” during the first year of the
lease, the section of the LOI titled “Taxes, Insurance and CAM” plainly states, “Common
Area Maintenance, taxes and insurance charges for the ‘Base Year’ shall not exceed $2.00
per square foot.” Id. at 25 (emphases added). With respect to all subsequent years, the LOI
lists only common area maintenance, stating, “After the ‘Base Year’, additional Rent (CAM)
increases shall be capped at 5% annually over the ‘Base Year’.” Id. at 26 (emphasis added).
Thus, taxes are clearly separate from CAM, and only CAM increases are capped at five
percent.2 As such, we conclude that the lease did not negate the terms of the LOI by
excluding property taxes from the five-percent cap. Based on the foregoing, we conclude
1
We note that the parties to the original LOI and lease were Pie Kitchen and Chalfant and that
Merchant later assumed the lease as an assignee when it purchased the shopping center from Chalfant.
2
The inclusion or exclusion of insurance is not an issue in this appeal.
8
that the trial court did not err in granting summary judgment in favor of Merchant.
Accordingly, we affirm.
Affirmed.
KIRSCH, J., and MATHIAS, J., concur.
9