Stinler, Inc. v. Mall Road Investors, Ltd. Co. ( 2023 )

RENDERED: DECEMBER 15, 2023; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2022-CA-1366-MR
STINLER, INC. APPELLANT
APPEAL FROM BOONE CIRCUIT COURT
v. HONORABLE RICHARD A. BRUEGGEMANN, JUDGE
ACTION NO. 20-CI-00515
MALL ROAD INVESTORS, LTD. CO. APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CETRULO, KAREM, AND MCNEILL, JUDGES.
KAREM, JUDGE: Stinler, Inc. (“Stinler”) appeals from orders of the Boone
Circuit Court granting summary judgment and awarding damages and attorney’s
fees to Mall Road Investors, Ltd. Co. (“Mall Road”). Stinler leased property from
Mall Road to operate a sandwich shop. The trial court held that Stinler violated the
lease when it removed the HVAC unit and several fixtures upon vacating the
premises. On appeal, Stinler argues (1) that summary judgment was improper
because the lease was ambiguous, and (2) that the amount of attorney’s fees was
excessive. Upon careful review, we affirm.
Mall Road owns a shopping center containing several commercial
tenants. In 2009, Mall Road leased space in the center to Harper on a Roll, LLC
(“Harper”), a Jimmy John’s Gourmet Sandwiches franchisee, for a five-year term.
On August 11, 2014, Harper on a Roll and Mall Road entered into a first
amendment to the lease agreement, which extended the tenancy through September
30, 2019.
In 2017, Harper, with Mall Road’s consent, assigned its lease to
Stinler, which continued operating the Jimmy John’s franchise. Stinler has been a
Jimmy John’s franchisee for over twenty-five years and owns approximately
thirteen such restaurants in Illinois, Indiana, Ohio, and Kentucky. Mall Road and
Stinler agree that the terms of the 2009 lease and the first amendment were
incorporated into Stinler’s assignment and govern their business relationship.
The lease contained the following provisions relating to the HVAC
and fixtures in the shop:
Paragraph 2 provides in relevant part:
At or prior to expiration of the Lease Term, Tenant will
return possession of the Shop to Landlord in broom clean
condition with all of Tenant’s furniture, fixtures, signage
(with façade repaired) and inventory removed.
-2-
Paragraph 7 provides in part:
Landlord must assign any and all warranties associated
with the equipment at the shop to the tenant, including
heating, ventilating and air conditioning system which is
to be a new non reconditioned unit. Tenant will maintain
the Shop in good condition and repair (including any
necessary replacements), including, interior and exterior
doors, plate glass, windows, store front, all plumbing and
sewage facilities serving only the Shop, all fixtures,
heating, ventilating and air conditioning and electrical
systems serving only the Shop, walls, floors and ceilings,
meters serving the Shop and all installations made by
Tenant, including repairs caused by illegal acts. . . .
Tenant will enter into a maintenance contract for the
heating, ventilating and air conditioning system
providing for quarterly service inspections and necessary
repairs.
Additionally, Exhibit B of the lease includes the following provisions
relating to the HVAC and washrooms under a section entitled “DESCRIPTION OF
LANDLORD’S WORK AND TENANT’S WORK”:
6. HEATING, VENTILATING AND COOLING
The air conditioning will be installed on the basis of a
minimum of one ton of air conditioning for every two
hundred (200) square feet of interior Premises or as
deemed sufficient HVAC.
Distribution consisting of double wall, insulated spiral
duct will be provided. Exhaust and ventilation will be
provided in accordance with local building codes.
Combination heating and cooling unit will be installed on
the roof.
7. WASHROOMS
Landlord will provide two ADA washrooms per current
code, size and location to be designated by tenant.
Washroom walls will be framed and drywalled to the
-3-
roof deck, taped sanded and ready for paint. All fixtures,
doors, floor and wall finishes will be provided by
landlord per Tenant’s specifications and design.
In April 2019, Stinler paid for and installed a new HVAC system in
the shop, at a cost of $10,900.
As we have noted, under the terms of the first amendment, the lease
agreement was set to terminate on September 30, 2019. Stinler had the right to
renew the lease by giving written notice by May 3, 2019. Stinler did not, however,
renew the lease nor did it vacate the premises. Mall Road negotiated an agreement
with Stinler and the new incoming tenant to give Stinler additional time to move
out. When Stinler failed to do so, Mall Road filed a forcible detainer complaint in
Boone District Court. Stinler and Mall Road reached a settlement of the case and
on February 3, 2020, the district court entered an agreed order which provided in
part that
Defendant shall vacate the . . . Property . . . by 5 pm on
Sunday, February 23, 2020. Defendant shall provide
Plaintiff a walk-through of the Property at that time
where all keys to the Property shall be returned to the
Plaintiff. Defendant shall leave the Property in the
condition as outlined in the lease between the parties.
Defendant has agreed that all personal property,
including coolers, ovens, racks, shelves, refrigerators,
iceboxes, etc., will be removed from the premises, and
Defendant will remove all signage for the Jimmy John’s
brand, and will leave the property in broom swept
condition on the day they move out.
-4-
If Defendant fails to vacate the Property as outlined
above, Defendant shall be liable to Plaintiff for
reasonable damages arising therefrom.
After the entry of the agreed order, Stinler informed Mall Road that it
wanted to remove the HVAC unit from the property. Mall Road communicated
with Stinler’s counsel that the HVAC unit belonged to Mall Road and was not to
be removed.
After Stinler vacated the building, Mall Road discovered that Stinler
had removed the HVAC unit, as well as two bathroom doors, two paper towel
holders, two toilet paper holders, and the bathroom sconces. Stinler also refused to
pay outstanding rent, water, or common area maintenance (“CAM”) charges.
Mall Road filed suit against Stinler, alleging breach of contract and
conversion of its property and seeking compensatory damages, punitive damages,
and attorney’s fees. Following a hearing, the trial court held that Stinler’s removal
of the HVAC and fixtures constituted not only breach of contract but conversion
and granted summary judgment to Mall Road. After a hearing on damages, the
trial court entered a final judgment awarding Mall Road $21,793.70 in damages,
$433.27 in costs, and $35,999.95 in attorney’s fees, plus post-judgment interest.
This appeal by Stinler followed.
-5-
STANDARD OF REVIEW
i. Summary judgment
In reviewing a grant of summary judgment, our inquiry focuses on
“whether the trial court correctly found that there were no genuine issues as to any
material fact and that the moving party was entitled to judgment as a matter of
law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996); Kentucky Rules of
Civil Procedure (“CR”) 56.03. The trial court is required to view the record “in a
light most favorable to the party opposing the motion for summary judgment and
all doubts are to be resolved in his favor.” Steelvest, Inc. v. Scansteel Service
Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). “[A] party opposing a properly
supported summary judgment motion cannot defeat it without presenting at least
some affirmative evidence showing that there is a genuine issue of material fact for
trial.” Id. at 482. “Not every issue of fact or conflicting inference presents a
genuine issue of material fact that requires denial of a summary judgment motion.”
Grass v. Akins, 368 S.W.3d 150, 153 (Ky. App. 2012). “An appellate court need
not defer to the trial court’s decision on summary judgment and will review the
issue de novo because only legal questions and no factual findings are involved.”
Hallahan v. The Courier-Journal, 138 S.W.3d 699, 705 (Ky. App. 2004).
ii. Interpretation of a contract
This case involves the interpretation of the lease and the terms of the
agreed order memorializing the settlement in the forcible detainer proceedings. “A
-6-
lease is a contract for the possession and profits of lands and tenements on the one
side, and the recompense of rent or property on the other[.]” Neighborhood
Investments, LLC v. Kentucky Farm Bureau Mut. Ins. Co., 430 S.W.3d 248, 251
(Ky. App. 2014) (citation omitted). “[S]ettlement agreements are a type of
contract and therefore are governed by contract law[.]” Frear v. P.T.A. Industries,
Inc., 103 S.W.3d 99, 105 (Ky. 2003).
“The interpretation of a contract is a question of law. In the absence
of ambiguity a written instrument will be enforced strictly according to its terms.
Courts will interpret the contract terms by assigning language to its ordinary
meaning without resort to extrinsic evidence.” Stowe v. Realco Limited Liability
Company, 551 S.W.3d 462, 465-66 (Ky. App. 2018) (internal quotation marks and
citations omitted). On the other hand, “[w]here a contract is ambiguous or silent
on a vital matter, a court may consider parol and extrinsic evidence involving the
circumstances surrounding execution of the contract, the subject matter of the
contract, the objects to be accomplished, and the conduct of the parties.” Cantrell
Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 385 (Ky. App. 2002) (internal
quotation marks omitted). If a contract is determined to be ambiguous, the
ambiguity is construed against the drafter. Phoenix American Administrators, LLC
v. Lee, 670 S.W.3d 832, 840 (Ky. 2023) (citation omitted). Because the
construction and interpretation of a lease are questions of law, our standard of
review is de novo. Community Trust Bancorp, Inc. v. Mussetter, 242 S.W.3d 690,
-7-
692 (Ky. App. 2007) (citation omitted). “However, once a court determines that a
contract is ambiguous, areas of dispute concerning the extrinsic evidence are
factual issues and construction of the contract become subject to resolution by the
fact-finder.” Cantrell, 94 S.W.3d at 385.
ANALYSIS
i. The lease and settlement agreement were not ambiguous
Stinler argues that the trial court erred in ruling that the lease and
agreed order were unambiguous and in construing them against Stinler. Stinler
contends that the HVAC was an especially powerful unit required by Jimmy
John’s and the bathroom fixtures were trade fixtures also mandated by Jimmy
John’s. Because the lease is silent about these types of items, Stinler argues that it
is ambiguous and therefore the trial court erred in ruling as a matter of law that the
HVAC and fixtures belong to Mall Road. “A contract is ambiguous if a reasonable
person would find it susceptible to different or inconsistent interpretations.”
Kentucky Shakespeare Festival, Inc. v. Dunaway, 490 S.W.3d 691, 694-95 (Ky.
2016) (citation omitted).
ii. The HVAC
The lease specifies under Section 6 of Exhibit B, as set forth above,
that the landlord is required to install the HVAC. Paragraph 7 requires the landlord
to assign the warranty on the unit, which must be new, to the tenant. The tenant is
required to maintain the HVAC in good condition and repair, including necessary
-8-
replacements. When Stinler assumed the lease from Harper, a unit was in place
which presumably met Jimmy John’s standards as Stinler continued to do business
without complaint for two years before replacing it.
There is no ambiguity in the lease regarding the HVAC. The lease
does not convey ownership of the HVAC to the tenant, nor does it permit the
tenant to remove the HVAC upon expiration of the lease. As the trial court aptly
observed in construing Paragraph 7 of the lease,
According to [Stinler’s] argument, the fact that it was
required to maintain – even replace – the HVAC unit
constitutes ownership. If that were so, then [Stinler]
would also own the plate glass, windows, store front, all
plumbing and sewage facilities, and electrical systems
that served only the shop. Clearly, that is not the case.
The lease imposes an obligation on tenant to maintain
these fixtures because they belong to the landlord. It
does not convey ownership of these fixtures to tenant.
ii. The fixtures
Stinler argues that the paper towel and toilet paper holders, bathroom
doors, and sconces it removed were trade fixtures mandated by Jimmy John’s and
the lease was unclear regarding the ownership of these fixtures. As evidence for
this alleged ambiguity, Stinler points to the reference of fixtures in Paragraph 2,
which requires the tenant to remove fixtures upon the expiration of the lease but
does not explain which fixtures are included in this category.
“Trade fixture” is defined as “property which a tenant has placed on
rented real estate to advance the business for which it is leased[.]” Scanlon v.
-9-
Scanlon, 545 S.W.3d 311, 316 (Ky. App. 2018) (citation omitted). “While an
ordinary fixture is considered a part of the real property to which it is attached,
trade fixtures are considered personal property and may be removed when vacating
real property.” Id. To determine whether an item is a trade fixture, we inquire
“whether the lessee installed the item with the intent that it be used to aid him in
carrying on his trade or business on the premises.” Id. (internal quotation marks
omitted).
Under the terms of Exhibit B of the lease, the landlord, Mall Road,
was required to provide two washrooms as well as fixtures, doors, floor, and wall
finishes per the tenant’s specifications and design. Stinler does not dispute that
Mall Road installed the Jimmy John’s branded fixtures in accordance with its
duties under Exhibit B of the lease. Therefore, because the fixtures were not
installed by Stinler, they do not meet the definition of a trade fixture and they are
not Stinler’s personal property.
Stinler points to the affidavit of its principal, Kenneth Butler, in which
he claims that each of the disputed items was mandated and selected by Jimmy
John’s in accordance with its particular branding or specifications and installed on
the premises in connection with and to advance the Jimmy John’s business
operated there initially by Harper and later by Stinler. Stinler contends that Harper
“knew” at the time it entered the lease that Jimmy John’s would dictate and
ultimately require removal of these branded items. If the removal of the branded
-10-
items was required by Jimmy John’s, Stinler was free to do so but would also have
to replace the items or reimburse Mall Road for these fixtures.
iii. Rent, water, and CAM charges
Stinler further argues that it understood it would not be responsible for
charges for rent, CAM, and water charges for the period during which it occupied
the shop after the termination of the lease. It claims the parties agreed to this
arrangement in their discussions during the resolution of the forcible detainer
proceedings. As evidence for this, Stinler relies on the statement in Butler’s
affidavit that parties “reached an oral agreement on February 3, 2020, that Stinler
would owe no rent or other monetary amounts for the month of February 2020, as
part of Stinler’s agreement to cease further legal challenge to its eviction.” This
purported agreement was not memorialized in the settlement agreement. Butler’s
claim that there was such an oral agreement, without any other evidence, is simply
not sufficient to read such an alteration of the lease into the settlement agreement.
“A party’s subjective beliefs about the nature of the evidence is not the sort of
affirmative proof required to avoid summary judgment.” Haugh v. City of
Louisville, 242 S.W.3d 683, 686 (Ky. App. 2007).
iv. The attorney’s fees
The trial court awarded Mall Road $9,609.70 for liquidated damages,
consisting of the rent, CAM, and other charges under the lease; $12,184 for the
property found to be converted; and $35,999.95 in attorney’s fees. The attorney’s
-11-
fees were awarded in accordance with the express terms of the lease, which states:
“The prevailing party in any litigation or other proceedings to enforce such party’s
rights under the Lease will be entitled in such litigation or proceeding to an award
of the costs of such litigation or proceeding, including attorney’s fees and
expenses.”
Stinler argues that the amount of attorney’s fees, which is more than
one-and-a-half times the total amount of compensatory damages, is not reasonable
in the context of a commercial lease dispute. It argues that it did not damage the
premises or leave them in disrepair; it removed the HVAC professionally and
without damage; and it left the space clean and swept. It further argues that a
portion of the damages sought, but not ultimately recovered by Mall Road,
included costs to repair and replace alleged damage to the premises. Stinler argues
that these speculative damages improperly inflated the amount of attorney’s fees.
Mall Road argues that Stinler has provided no authority showing that
the ratio of fees to damages was unreasonable or that recovering less than the full
amount of damages sought warrants a reduction in attorney’s fees.
When, as in this case, recovery of attorney’s fees is permitted by
contract, the amount of the award is reviewed for an abuse of discretion. Royal
Consumer Products, LLC v. Saia Motor Freight Line, Inc., 520 S.W.3d 753, 757
(Ky. App. 2016) (citation omitted). “What constitutes a reasonable [attorney’s] fee
is within the discretion of the court. . . . An abuse of discretion occurs if the
-12-
court’s ruling is arbitrary, unreasonable, unfair, or unsupported by sound legal
principles.” Dawahare v. Cabinet for Health and Family Services, 662 S.W.3d
745, 747 (Ky. App. 2023) (internal quotation marks and citations omitted).
The trial court acknowledged that the amount of damages is a factor in
determining the amount of attorney’s fees, but also noted that
Plaintiffs had to expend attorney fees wholly separate
from the damages sought in this case. Agreements were
reached to extend the date for Defendant to vacate.
Then, when Defendant failed to do so, Plaintiff had to
file a forcible detainer action and litigate in District Court
to retake the premises. Consequently, the amount of
attorney fees is not unreasonable.
The trial court appropriately and carefully considered the overall
history of the case, including the increase in the cost of the proceedings attributable
to Stinler’s failure to timely vacate the premises, in determining the amount of
attorney’s fees. The trial court rejected Stinler’s argument that the fees were
inflated because two attorneys worked on the case for Mall Road by pointing out
that because the associate attorney billed at a lower rate, employing two attorneys
ultimately resulted in lower fees. The trial court also pointed out that Stinler had
been unable to identify any duplication of work or charges.
Stinler further contends that the attorney’s fees were improperly
calculated on damages that were speculative and legally unrecoverable. Mall Road
made claims for the cost of repairing Stinler’s alleged damage to the shop and
replacing the items removed by Stinler. Stinler points to evidence presented at the
-13-
damages hearing that Mall Road had not actually repaired much of the damage or
replaced many of the items. This was due in part to the fact that the new tenant,
EyeMart, was undertaking material renovations to convert the premises to an eye
doctor’s office. Mall Road argued that the risk remained that EyeMart would seek
to recover the cost of the repairs from Mall Road or would remove the fixtures it
had installed when its tenancy ended. In other words, Mall Road still had potential
liability. In its judgment, the trial court rejected this argument, stating:
Defendant knowingly removed fixtures from the
premises he leased belonging to the Plaintiff. Inasmuch
as the Court has found that this constituted conversion,
Defendant must pay the value of the items converted.
Based upon testimony at the hearing, it appears that
Plaintiff did not suffer financial injury from the removal
of those fixtures because the subsequent tenant provided
other materials during the build-out. Consequently, the
damages proposed by Plaintiff for new replacement and
installation costs would not be appropriate. Rather, the
Court accepts Defendant’s evidence as to the total value
of those items being $12,184 ($10,900 for the HVAC
unit, $800 for two bathroom doors, $102 for two toilet
paper holders, and $382 for two paper towel holders).
Further, because the evidence shows Plaintiff’s new
tenant renovated the space, and had placed a new sign in
the same place as that removed by Defendant, the Court
finds no damages for repair would be appropriate.
Although the trial court did not grant damages for repair and
replacement costs, it did not make a finding that Mall Road’s claims for these
items were frivolous or improper. There is no indication that Mall Road’s
attorneys inflated their fees by knowingly pursuing meritless claims. It is not the
-14-
place of this Court to second-guess the professional judgment of counsel in
deciding which claims to pursue in the course of litigation.
The trial court’s award of attorney’s fees was not an abuse of
discretion. It was firmly founded on the evidence presented and it was neither
arbitrary, unreasonable, unfair, nor unsupported by sound legal principles.
CONCLUSION
For the foregoing reasons, the Boone Circuit Court’s order of October
20, 2022, granting summary judgment to Mall Road and its order of June 3, 2022,
awarding damages, attorney’s fees, costs, and post-judgment interest are affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Daniel A. Hunt Jason P. Renzelmann
Covington, Kentucky Louisville, Kentucky
Michael E. Nitardy
Florence, Kentucky
Nathaniel L. Truitt
Cincinnati, Ohio
-15-