Lafayette Rentals, Inc. v. Low Cost Spay-Neuter Clinic, Inc. ( 2023 )

FILED
Mar 27 2023, 8:30 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Earl McCoy Brian A. Karle
Lafayette, Indiana Ball Eggleston, PC
Lafayette, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Lafayette Rentals, Inc., March 27, 2023
Appellant-Respondent, Court of Appeals Case No.
22A-PL-362
v. Appeal from the Tippecanoe
Superior Court
Low Cost Spay-Neuter Clinic, The Honorable Daniel Moore,
Inc., Judge
Appellee-Petitioner Trial Court Cause No.
79D07-2106-PL-68
Opinion by Judge May
Judges Mathias and Bradford concur.
May, Judge.
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[1] Lafayette Rentals, Inc. (“LR Inc.”) appeals the trial court’s judgment following
a bench trial in a suit against Low Cost Spay-Neuter Clinic, Inc. (“Clinic”) in
which each party alleged the other party breached a lease agreement, and the
Clinic cross-appeals. The parties raise three issues, which we revise and restate
as:
1. Whether the trial court erred when it found the Clinic did not
default on its lease by failing to timely pay its rent;
2. Whether the trial court erred when it ordered LR Inc. to replace
the exterior HVAC system if the system failed; and
3. Whether the trial court erred when it awarded LR Inc. $2,000 of
the $11,325 that LR Inc. sought in attorney fees and when it did not
award attorney fees to the Clinic.
We affirm in part, reverse in part, and remand.
Facts and Procedural History
[2] The Clinic is a not-for-profit corporation that provides low-cost veterinary
services at multiple locations in central Indiana. In 2018, the City of Lafayette,
the City of West Lafayette, and Tippecanoe County invited the Clinic to open a
Lafayette location and, to entice the Clinic to open such a location, offered to
pay the Clinic’s rent for its first three years of operation. The Clinic agreed to
open a Lafayette location, and it leased space in a strip mall owned by LR Inc.
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The Lease term ran from November 4, 2018, through December 31, 2023. In
relevant part, the Lease provided:
5. MINIMUM RENTAL.
a. Lessee, without demand or notice, shall pay Minimum Rental
(“Rent”) in monthly payments as follows:
*****
All such Rent shall be due and payable in advance, on or before
the 1st day of each month. Said Rent payment shall be made by
electronic payment from Lessee to Lessor, in accordance with
information provided by Lessor to Lessee.
*****
c. Rent shall be due and payable on the 1st day of each month
during the Term of this Lease. There shall be late charges for
failure to pay Rent commencing on the 3rd day of each month in
the amount of five percent (5%) of the minimum monthly rent.
The Lessee’s liability to pay Rent or perform any other promises
under this Lease shall be without relief from valuation and
appraisement laws.
*****
9. COLLECTION COSTS AND ATTORNEY FEES. In the
event any installment of the Rent or Common Area Maintenance
Costs herein or hereafter provided, or any other charges payable
to Lessor hereunder are not paid when due, a late charge as
provided by the paragraph labeled Minimum Rental, as well as
reasonable attorneys’ fees and collection costs incurred in the
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collection of said rent, shall be included as outstanding rent due
and owing.
10. USE OF PREMISES. … All deliveries of merchandise or
other items to Lessor’s Building shall be delivered at the rear of
the Building, through the back door of the Building. Parcel and
mail deliveries may, with the consent of Lessor, be made through
the front door of the Building.
11. MAINTENANCE OF LEASED PREMISES. Lessor shall
keep and maintain the roof and structural portions of the exterior
walls of the Leased Premises and Building, unless such
maintenance is a result of negligence on the part of the Lessee.
Lessee shall be responsible for damage to windows, doors,
window and door frames, and glass (plate glass or otherwise),
unless such damage is a result of structural failure or negligence
on the part of the Lessor. Lessee, at its sole cost and expense,
shall maintain in good and safe order, condition, repair, and
replacement, all other portions of the Leased Premises, ordinary
wear and tear excepted.
12. INSTALLATIONS AND ALTERATIONS. Lessee shall,
at Lessee’s sole cost and expense, at all times during the Term of
this Lease, keep the Leased Premises equipped with all trade
fixtures, equipment, furnishings, furniture, fixtures, floor
coverings, carpeting and exterior signs (only as permitted by
Lessor) and all other equipment and personal property necessary
for the first class operation of Lessee’s business on the Leased
Premises. Prior to commencing any construction work,
alterations, remodeling or the installation of any equipment other
than trade fixtures on the Leased Premises, Lessee shall submit to
Lessor plans and specifications of any such construction work.
All contractors to be used by Lessee to perform Lessee’s work, or
any work subsequent to Lessor’s Work shall be approved by
Lessor, in writing, which approval shall not be unreasonably
withheld, prior to the commencement of any such work.
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Lessee shall not make or permit to be made any alterations,
improvements, or additions of any kind or nature to the Leased
Premises or any part thereof except with the prior written consent
of Lessor, which consent shall not be unreasonably withheld. All
alterations, improvements and additions to the Leased Premises
shall be made in accordance with all applicable laws and codes
and shall, when made or installed, be deemed to have attached to
the freehold and to have become the property of Lessor and shall
remain for the benefit of Lessor at the end of the Term or the
earlier termination of this Lease except for any business trade
fixtures and equipment which items shall remain the property of
Lessee. In the event of making such alterations, improvements
and/or additions as herein provided, Lessee does hereby
indemnify and save harmless Lessor from all expenses, liens,
claims or damages to either person or property arising out of, or
resulting from the undertaking or making of such alterations,
improvements and/or additions.
*****
14. LESSEE PARKING. The Lessor shall make available from
time to time within the Common Area (including but not limited
to parking areas, driveways, truck ways, delivery passages, truck
loading areas, walkways, sidewalks) parking as the Lessor alone
from time to time deems appropriate. The Lessor may, from
time to time, change the size, location, elevation, nature, and the
use of any common areas and make installations thereon, and
move and remove the same. The Lessee and its officers,
employees, agents, customers and all others to whom the Lessor
has or may hereafter grant such right, to use the Common Areas
as designated from time to time by the Lessor subject to such
reasonable rules and regulations as the Lessor may from time to
time impose, including the designation of specific areas in which
cars operated by the Lessee, its officers, employees and agents
shall be parked. The Lessee agrees to abide by the rules and
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regulations and to use its best efforts to cause its officers,
employees, and agents to conform thereto.
*****
22. COST OF ENFORCING LEASE. For so long as Lessee
shall continue to perform its obligations under the Lease,
Lessee’s rights under the Lease shall not be impaired and
Lessee’s peaceful and quite [sic] enjoyment of the Leased
Premises shall not be disturbed by any party claiming by, through
or under Lessor. The Lessee shall pay all reasonable costs,
charges, attorney’s fees and expenses incurred by Lessor in
enforcing any of the terms of this Lease. In the event of
litigation, the prevailing party shall be entitled to recover all
reasonable costs, charges, attorney’s fees, and expenses incurred
in enforcing any covenant, agreement, and/or condition
contained in this Lease, unless such charges and expenses are
incurred in any dispute wherein the Lessor and Lessee are in
agreement and have a dispute with a third party.
*****
29. DEFAULT BY LESSEE. Upon the happening of any one
(1) or more of the events as expressed below in (a) through (h)
inclusive (“Event of Default”) the Lessor shall have any and all
rights and remedies hereinafter set forth in this Section:
(a) In the event Lessee shall fail to pay any one (1) or more of the
monthly installments of Minimum Rent, as and when the same
becomes due and the failure continues for ten (10) days after
written notice is given by Lessor to Lessee;
*****
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(h) In the event Lessee violates any other terms, conditions and
covenants on the part of Lessee herein contained, and fails to
commence and proceed with diligence and dispatch to remedy
the same within (10) days after written notice thereof is given by
Lessor and Lessee.
In the event of any such default or breach as specified above, the
Lessor shall have the right, at the option of Lessor, to terminate
this Lease and to thereupon reenter and take possession of the
Leased Premises with or without legal process.
(LR Inc.’s App. Vol. II at 15-25.)
[3] The Clinic invested approximately $553,000 into renovating and equipping the
leased space, and the Lafayette location opened for customers on February 9,
2019. The Clinic periodically sent LR Inc. e-mails seeking resolution of various
issues related to maintenance of the property. On July 22, 2020, the Clinic sent
LR Inc. a letter noting various building defects, including roof leaks, exterior
window leaks, issues with the building’s heating, ventilation, and air
conditioning (“HVAC”) system, and unsightly common areas. The Clinic
requested that LR Inc. make repairs to address the problems. At some point in
2020, the Clinic replaced one of two air conditioning units servicing the
Lafayette location, and the Clinic asked LR Inc. to reimburse it $4,700 for the
cost of replacement.
[4] On June 3, 2021, LR Inc. sent a letter to Tammy Sollenberger, the Clinic’s
Executive Director, alleging the Clinic had breached the rental agreement by
receiving deliveries in the front of the building, not using “Cozy.co” to submit
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payments electronically, failing to pay common area maintenance costs, and
failing to properly maintain the HVAC system. (Id. at 31.) This letter also
stated: “Please consider this your written notice to correct the above issues.
Failure to correct these issues in 10 days will be considered a violation of your
lease and subject to termination.” (Id. at 32.) On June 15, 2021, Huntington
Bank, acting on behalf of the Clinic, sent a physical check to LR Inc. to pay the
Clinic’s July rent. This physical check was never cashed. On June 22, 2021,
LR Inc. sent a second letter to Sollenberger that stated:
You are hereby notified that your lease has been terminated
effective Thursday July 22, 2021, at 12:00 pm (noon). This is a
result of your refusal to comply with the following terms of your
lease:
Parking – Notification given on June 3, 2021
Maintenance of leased premises – Notification given on June 3,
2021
(Id. at 33.)
[5] On June 29, 2021, the Clinic filed suit against LR Inc. alleging breach of
contract by LR Inc. because LR Inc. failed to make or pay for necessary repairs.
The complaint sought damages and declaratory relief. The Clinic also filed a
motion for a preliminary injunction requesting that LR Inc. be “enjoined from
entering the leased premises leased by the clinic, changing its locks, interfering
with the lease, or otherwise interfering with the leased premises without the
written consent of the Clinic or the permission of the Court.” (Id. at 36.)
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[6] On July 2, 2021, LR Inc. sent the Clinic another letter that stated:
As advised by our attorney we are submitting written notice of
the following items regarding your tenancy at [street address].
Payment of Rent & Common Area Maintenance Costs – You
have not paid the rent or Common Area Maintenance Costs
which was due July,[sic] 1 2021.
Please consider this your written notice to correct the above
issues. Failure to correct these items in 10 days will be
considered a violation of your lease and subject to termination.
(Id. at 51) (emphasis in original). On July 13, 2021, LR Inc. sent the Clinic an
additional letter that stated:
You are hereby notified that your lease has been terminated
effective Thursday July 22, 2021, at 12:00 pm (noon). This is a
result of your refusal to comply with the following terms of your
lease:
Rent & monthly CAM installment- Notification given on July 2,
2021
The above rent & monthly CAM installment is in addition to the
Parking, delivery and Maintenance termination notice provided
on June 22, 2021.
(Id. at 52.)
[7] On July 21, 2021, the trial court held a hearing on the Clinic’s motion for a
preliminary injunction. At the hearing, Sollenberger testified that she believed
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LR Inc.’s complaints regarding the Clinic’s performance of its lease obligations
were in retaliation for the Clinic’s maintenance requests. The trial court then
issued an order granting the Clinic’s motion. The trial court forbade LR Inc.
from “excluding [the Clinic] from occupancy or use of the leased premises
while this case is pending or until further order of the Court[.]” (Id. at 44.) The
trial court also ordered the Clinic to post a $25,000 bond as security for LR Inc.
[8] On July 23, 2021, LR Inc. filed an answer to the Clinic’s complaint and a
counterclaim alleging the Clinic breached the lease agreement and was in
default. On July 28, 2021, the Clinic electronically wired rent payments to LR
Inc. for the rent due covering the months of July and August 2021. The Clinic
then began electronically paying its rent every month.
[9] At a status conference on October 29, 2021, both parties agreed the preliminary
injunction order could be vacated because LR Inc. committed to not interfering
with the Clinic’s possession of the premises during the pendency of this action.
The Clinic explained it had never posted the bond because it relied on LR Inc.’s
assurance that it would not interfere. On November 1, 2021, the trial court
issued an order vacating its preliminary injunction order.
[10] The trial court held a bench trial on November 30, 2021. At trial, Brent
Driscoll, a heating and cooling technician, testified that the second air
conditioning unit servicing the Clinic’s Lafayette location “was definitely
struggling” and recommended that the unit be replaced. (Tr. Vol. II at 9.) He
explained this was the result of the unit’s age and not because of poor
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maintenance. Sollenberger testified the window leak and HVAC issues
remained unrepaired. She also testified the Clinic was current on its rent and
common area maintenance fees. Jeff Baker, LR Inc.’s Vice President, testified
he repaired the window air leak and the roof leak, but he stated he believed
HVAC maintenance was the tenant’s responsibility. Baker also testified the
Clinic was late in paying rent twenty-two times, but Baker acknowledged he
never charged the Clinic a late rent fee. At the conclusion of trial, LR Inc.’s
counsel submitted an affidavit attesting that LR Inc. incurred $11,325.00 in
attorney fees. The Clinic’s attorney submitted an affidavit in which he averred
the Clinic incurred $18,197.50 in attorney fees.
[11] LR Inc. requested the trial court enter findings of fact and conclusions of law in
accordance with Trial Rule 52, and on January 21, 2022, the trial court issued
its order. The trial court found:
8. The Lease was drafted by LR INC.
*****
30. The Clinic parks its delivery van overnight on the west end
of the parking lot in a lighted area. LR INC has designated an
area in the back of the business for overnight parking. The clinic
had been parking in front for nearly a year prior to the landlord’s
complaint and believes the front area to be a safer reasonable
parking space.
*****
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36. In June and July of 2021 rent checks for July and August of
2021 were mailed from Huntington Bank to LR INC. For
unknown reasons these checks were not received and not cashed.
The Clinic was unaware of this issue until receiving LR INC’s
ten-day notice on July 2, 2021. The Clinic remedied the issue
and LR INC received both payments prior to the end of July.
37. The Court does not find that the Clinic failed to pay rent as
contemplated by the lease. Neither party has established what
happened to the checks once mailed, but the evidence does
establish that said checks were timely sent to LR INC and then,
when informed of the lack of receipt, the Clinic acted timely in
stopping the checks and reissuing payment. The Clinic did not
fail to pay rent.
38. The Court does not credit LR INC’s testimony that 22
payments were late and notes that LR INC did nothing to
address those alleged late payments prior to the instant issues
between the parties.
*****
42. The Clinic filed its complaint on June 29, 2021. Plaintiff
also sought a temporary restraining order. On July 22, 2021 the
Clinic, after a contested hearing, was granted a preliminary
injunction with respect to LR INC retaking possession of the
property. The Clinic never posted the bond ordered by the Court
to perfect that injunction. LR INC was forced to retain counsel
to defend against the Clinic’s injunction request.
(LR Inc.’s App. Vol. II at 57, 61-62.) The trial court also concluded the Clinic
breached the Lease Agreement by having oxygen delivered to the front of the
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building and by failing to make electronic payments of rent before July 2021.
With respect to the HVAC system, the trial court concluded:
2. The lease is ambiguous as to the responsibility for the HVAC
system. Paragraphs 11 and 12 generally make the Clinic
responsible for maintenance and replacement of the "leased
premises” and all fixtures and equipment therein. Paragraph 1
generally defines the “leased premises” as a 6,000 square foot
interior space. (emphasis added). The HVAC system, while
being a fixture, has both interior and exterior components. LR
INC is generally responsible for structural and exterior matters.
The Court concludes that with respect to the HVAC system the
lease generally leaves Clinic responsible for maintenance of the
same but requires that LR INC be responsible for replacement of
the exterior portions of the system should they fail to work.
3. The Clinic has not met its burden that replacement is
necessary. The testimony is that replacement was advisable and
financially beneficial, but that repair was possible. Should Clinic
choose to replace rather than repair said units for its benefit, the
lease does not prevent the same, but the Court does not
determine that LR INC is responsible for that cost. Should
replacement be necessary of the exterior portions of the units, LR
INC is responsible pursuant to the lease.
(Id. at 63.)
[12] The trial court granted the Clinic’s request for a declaratory judgment that the
lease between the parties remain valid and ordered the Clinic was entitled to
possession of the leased premises. The trial court denied the Clinic’s request for
damages with respect to the HVAC replacement, but the trial court did grant
the Clinic’s request that LR Inc. repair the window air leak. The trial court
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denied LR Inc.’s request to terminate the lease. The trial court did grant LR
Inc.’s “counterclaim with respect to the designated parking of the Van and
other minor breaches.” (Id. at 65.) The trial court then entered judgment in
favor of LR Inc. on its counterclaim for $1.00. With respect to attorney fees,
the trial court concluded:
10. Both sides have incurred attorney’s fees in this matter. LR
INC incurred some attorney’s fees in defending against an
injunction that the Clinic received but refused to perfect.
Further, while not awarding possession or termination of the
lease, LR INC has prevailed in its counter-claim for breach and
incurred attorney’s fees therein. The Court finds that $2,000.00
is reasonable fees related to defending the injunction and the
issues on which LR INC has prevailed.
(Id.)
Discussion and Decision
[13] LR Inc. contends that, because LR Inc. did not receive the July 2021 rent
payment on time, the trial court should have found the Clinic was in default
and ordered the Clinic to vacate. LR Inc. also argues the trial court
misinterpreted the parties’ lease agreement in assigning LR Inc. responsibility
for the exterior portions of the HVAC system. Both parties assert the trial court
erred in its apportionment of attorney fees.
[14] “A lease is construed in the same manner as any other contract.” Floyd v.
Rolling Ridge Apartments, 768 N.E.2d 951, 954 (Ind. Ct. App. 2002). Our
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primary objective in interpreting a contract is to determine the intent of each
party when they entered the contract. Celadon Trucking Serv., Inc. v. Wilmoth, 70
N.E.3d 833, 839 (Ind. Ct. App. 2017), trans. denied. “We do this by examining
the language used in the instrument to express the parties’ rights and duties.”
Trustcorp Mortg. Co. v. Metro Mortg. Co., Inc., 867 N.E.2d 203, 213 (Ind. Ct. App.
2007), reh’g denied. We read the contract “as a whole and attempt to construe
the contractual language so as not to render any words, phrases, or terms
ineffective or meaningless.” Id. We look to interpret the contract in a manner
that “harmonizes its provisions, rather than one that places the provisions in
conflict.” Id. Moreover, “when the language of a contract is ambiguous and
susceptible to more than one interpretation … we construe the contract against
the party responsible for the wording[.]” Id.[15] Here, upon LR Inc.’s written motion, the trial court entered findings of fact and
conclusions of law pursuant to Trial Rule 52. Thus, we employ a well-settled
two-tiered standard of review. Trabucco v. Trabucco, 944 N.E.2d 544, 548 (Ind.
Ct. App. 2011), trans. denied.
First, we determine whether the evidence supports the findings
and second, whether the findings support the judgment. In
deference to the trial court’s proximity to the issues, we disturb
the judgment only where there is no evidence supporting the
findings or the findings fail to support the judgment. We do not
reweigh the evidence but consider only the evidence favorable to
the trial court’s judgment. Challengers must establish that the
trial court’s findings are clearly erroneous. Findings are clearly
erroneous when a review of the record leaves us firmly convinced
a mistake has been made. However, while we defer substantially
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to findings of fact, we do not do so to conclusions of law.
Additionally, a judgment is clearly erroneous under Indiana Trial
Rule 52 if it relies on an incorrect legal standard. We evaluate
questions of law de novo and owe no deference to a trial court’s
determination of such questions.
Carmichael v. Siegel, 754 N.E.2d 619, 625 (Ind. Ct. App. 2001) (internal citations
omitted) (cleaned up).
1. Rent
[16] LR Inc. contends the trial court erred in Findings 36 through 38 when it did not
find the lease agreement terminated after LR Inc. did not receive the July 2021
rent payment within ten days after sending the July 2, 2021, letter. LR Inc.
contends the lease agreement terminated at that point pursuant to both Indiana
Code section 32-31-1-6 and the terms of the lease agreement. Indiana Code
section 32-31-1-6 provides: “If a tenant refuses or neglects to pay rent when due,
a landlord may terminate the lease with not less than ten (10) days notice to the
tenant unless: (1) the parties otherwise agreed; or (2) the tenant pays the rent in
full before the notice period expires.” Likewise, the lease agreement provided
the Clinic would be in default “[i]n the event Lessee shall fail to pay any one (1)
or more of the monthly installments of Minimum Rent, as and when the same
becomes due and the failure continues for ten (10) days after written notice is
given by Lessor to Lessee.” (LR Inc.’s App. Vol. II at 24.)
[17] Chad Gingrich, an employee of Huntington Bank, testified at trial that a paper
check meant to cover the Clinic’s July 2021 rent payment was issued on June
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15, 2021, and a check meant to cover the Clinic’s August 2021 rent was issued
on July 15, 2021. The trial court credited this testimony and found “[n]either
party has established what happened to the checks once mailed, but the
evidence does establish that said checks were timely sent to LR INC and then,
when informed of the lack of receipt, the Clinic acted timely in stopping the
checks and reissuing payment.” (Id. at 62.) Until July 2021, the Clinic
consistently paid its rent by means of a paper check. Baker accepted the checks
and never charged the Clinic a fee for late payment of rent. Consequently, the
trial court found Baker’s testimony that the Clinic was habitually late in paying
rent not credible. Thus, evidence supported the trial court’s finding that the
Clinic was not in default for failing to pay rent. See, e.g., Richardson v. Hansrote,
883 N.E.2d 1165, 1177 (Ind. Ct. App. 2008) (holding Father who paid child
support by means of an income withholding order was not in arrears when the
trial court clerk received the support payment on the first working day after the
end of the month), reh’g denied. LR Inc.’s request that we reverse this finding is
nothing more than an invitation to reweigh the evidence and judge witness
credibility, which our standard of review precludes us from doing. See Trabucco,
944 N.E.2d at 556 (“Husband’s argument is simply a request to reweigh the
evidence, which we will not do on appeal.”).
2. HVAC
[18] The trial court concluded “with respect to the HVAC system the lease generally
leaves Clinic responsible for maintenance of the same but requires that LR INC
be responsible for replacement of the exterior portions of the system should they
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fail.” (LR Inc.’s App. Vol. II at 63.) LR Inc. challenges this conclusion and
argues “[t]he trial court incorrectly interpreted the lease agreement when
making its finding in regard to the HVAC system.” (LR Inc.’s Br. at 17.) LR
Inc. contends from “the plain language of the agreement…it is clear that the
HVAC unit was to be considered a fixture and not an exterior structure making
the Clinic was [sic] responsible for replacing.” (Id.)
[19] The lease agreement does not specifically mention maintenance or replacement
of the HVAC system. Section 11 of the lease agreement provides LR Inc. “shall
keep and maintain the roof and structural portions of the exterior walls of the
Leased Premises and Building, unless such maintenance is a result of
negligence on the part of the Lessee.” (LR Inc.’s App. Vol. II at 18.) The
agreement then assigns the Clinic the responsibility for damage to windows,
doors, window and door frames, and glass unless the damage is the result of a
structural failure or negligence of LR Inc. The agreement also states that the
Clinic “at its sole cost and expense, shall maintain in good and safe order,
condition, repair and replacement, all other portions of the Leased Premises,
ordinary wear and tear excepted.” (Id.) Likewise, section 12 of the lease
agreement governs installations and alterations to the “Leased Premises” by the
Clinic. (Id. at 18-19.) The lease agreement defines the “Leased Premises” as
“approximately 6,000 sq. ft., of gross interior space[.]” (Id. at 15) (emphasis
added). Because the lease agreement defines the Leased Premises as the
interior space rented by the Clinic and assigns responsibility for the roof and
external structural portions of the building to LR Inc., the trial court did not err
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in concluding LR Inc. was responsible for the eventual replacement of the
external portions of the HVAC system. See Simon Prop. Grp., L.P. v. Mich.
Sporting Goods Distrib., Inc., 837 N.E.2d 1058, 1074 (Ind. Ct. App. 2005)
(holding plain language of lease agreement supported trial court’s ruling that
tenant’s exclusive remedy was a reduction in rent), trans. denied.
3. Attorney Fees
[20] Both parties contest the trial court’s award of attorney fees. LR Inc. contends
the trial court abused its discretion when it reduced LR Inc.’s attorney fee
award without providing an appropriate rationale. The Clinic asserts the trial
court erred when it awarded attorney fees to LR Inc. because the Clinic was the
prevailing party and, pursuant to section 22 of the lease agreement, the trial
court should have awarded attorney fees to the Clinic. We review the amount
of a trial court’s award of attorney fees under an abuse of discretion standard.
White v. Szalasny, 191 N.E.3d 260, 263 (Ind. Ct. App. 2022). “An abuse of
discretion occurs when the trial court’s award is clearly against the logic and
effect of the facts and circumstances before the court.” Id.[21] Indiana follows the “American Rule” whereby “each party pays its own
attorney’s fees; and a party has no right to recover them from the opposition
unless it first shows they are authorized.” River Ridge Dev. Auth. v. Outfront
Media, LLC, 146 N.E.3d 906, 912 (Ind. 2020). “A contract that allows for the
recovery of attorney fees will be enforced according to its terms unless it is
violative of public policy.” Salcedo v. Toepp, 696 N.E.2d 426, 235 (Ind. Ct. App.
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1998). Section 22 of the parties’ lease agreement provides: “In the event of
litigation, the prevailing party shall be entitled to recover all reasonable costs,
charges, attorney’s fees, and expenses incurred in enforcing any covenant,
agreement, and/or condition contained in this Lease[.]” (LR Inc.’s App. Vol.
II at 23.)
[22] The Clinic contends it was the “prevailing party” because it was victorious on
the “main issue” which was “termination of the lease and possession of the
premises.” (Clinic’s Br. at 16.) In Reuille v. E.E. Brandenberger Constr. Inc., our
Indiana Supreme Court explained the “prevailing party” is “‘[t]he party to a
suit who successfully prosecutes the action or successfully defends against it,
prevailing on the main issue, even though not necessarily to the extent of his
original contention. The one in whose favor the decision or verdict is rendered
and judgment entered.’” 888 N.E.2d 770, 771 (Ind. 2008) (quoting Black’s Law
Dictionary 1188 (6th ed. 1990)). The Clinic’s complaint sought damages for
LR Inc.’s alleged failures to make repairs and “a Declaratory Judgment that the
plaintiff is not in breach of the Lease Agreement, and the defendant is not
entitled to terminate the Lease Agreement[.]” (LR Inc.’s App. Vol. II at 14.)
Likewise, LR Inc.’s counterclaim alleged the lease agreement terminated as a
result of a default by the Clinic, and LR Inc. asserted it was entitled to and
requested “the Court to enter an order granting it possession of the leased
premises and ordering [the Clinic] to vacate the property.” (Id. at 49.) Thus,
the primary issue being litigated by the parties was possession of the premises,
and the Clinic won on that issue. In fact, LR Inc. concedes “[t]he Court did not
Court of Appeals of Indiana | Opinion 22A-PL-362 | March 27, 2023 Page 20 of 22
find that LR INC prevailed in its main issue, being the termination of the
lease.” 1 (LR Inc.’s Br. at 21.) Therefore, because the Clinic prevailed on the
main issue, it was entitled to an award of attorney fees based on the terms of the
lease agreement. See Baker v. Paschen, 188 N.E.3d 486, 492-93 (Ind. Ct. App.
2022) (holding—in litigation unrelated to the instant case—that tenant was
entitled to recovery of attorney fees against Jeffery Baker and LR Inc. pursuant
to terms of lease agreement), reh’g denied, trans. denied. LR Inc. did receive an
award of nominal damages, and the trial court vacated its preliminary
injunction order prior to trial. However, the lease agreement limited recovery
of attorney fees to the “prevailing party” and the Clinic was the prevailing
party. (LR Inc.’s App. Vol. II at 23.) Consequently, LR Inc. was not entitled to
an award of attorney fees. Therefore, we reverse the trial court’s award of
attorney fees to LR Inc. and remand for the trial court to award attorney fees to
Clinic. See Bruno v. Wells Fargo Bank, N.A., 850 N.E.2d 940, 951 (Ind. Ct. App.
2006) (holding remand was necessary to calculate attorney fees award).
1
In its reply brief, LR Inc. asserts:
Although it was stated in the Appellant’s Brief that the trial court did not find that LR Inc
prevailed in its main issue, this was clearly an accidental misstatement in the Appellant’s
Brief . . . . The main issue in the Appellant’s counterclaim was whether or not the Clinic
had breached the terms of the lease.
(LR Inc.’s Reply Br. at 8.) However, it is well-settled that a party may not raise an argument for the first time
in its reply brief, and LR Inc. did not argue it was the prevailing party in its initial brief. See Akin v. Simons,
180 N.E.3d 366, 375 (Ind. Ct. App. 2021) (“the law is well settled that grounds for error may only be framed
in an appellant’s initial brief and if addressed for the first time in the reply brief, they are waived”).
Moreover, while both parties asserted breaches of the lease agreement by the other, each party sought
possession of the leased premises, and the Clinic was awarded possession of the leased premises.
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Conclusion
[23] The trial court did not err in finding the Clinic was not in default for failure to
pay rent in July 2022. Moreover, the trial court did not err in concluding LR
Inc. was responsible for maintenance and/or replacement of the exterior
portions of the HVAC system because the lease agreement defined the Leased
Premises as 6,000 square feet of interior space. However, the trial court did
abuse its discretion in failing to award the Clinic attorney fees and in awarding
LR Inc. attorney fees. Pursuant to the terms of the lease agreement, the Clinic
was entitled to attorney fees as the “prevailing party” because it was successful
on the main issue of the litigation. We accordingly affirm in part, reverse in
part, and remand.
[24] Affirmed in part, reversed in part, and remanded.
Mathias, J., and Bradford, J., concur.
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