NRS Properties, LLC v. Resilient, LLC ( 2014 )

IN THE NEBRASKA COURT OF APPEALS
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
NRS PROPERTIES, LLC V. RESILENT, LLC
NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION
AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).
NRS PROPERTIES, LLC, APPELLANT AND CROSS-APPELLEE,
V.
RESILENT, LLC, DOING BUSINESS AS DIGITAL DEFENSE, APPELLEE,
AND STEVE CAMPISI, APPELLEE AND CROSS-APPELLANT.
Filed July 29, 2014. No. A-13-494.
Appeal from the District Court for Douglas County: GREGORY M. SCHATZ, Judge.
Reversed and remanded for further proceedings.
Daniel S. Ryberg for appellant.
James D. Sherrets and Diana J. Vogt, of Sherrets, Bruno & Vogt, L.L.C., for appellee
Steve Campisi.
INBODY, Chief Judge, and IRWIN and BISHOP, Judges.
IRWIN, Judge.
I. INTRODUCTION
NRS Properties, LLC (NRS), entered into a commercial lease agreement with Resilent,
LLC, doing business as Digital Defense. Steve Campisi signed a “personal guarantee” for lease
obligations on behalf of Resilent. NRS brought this breach of contract action, alleging that
Resilent breached the lease agreement and seeking damages. NRS appeals the district court’s
verdict, which awarded NRS damages. On appeal, NRS asserts that the district court erred in
finding a damages provision in the contract to be ambiguous and in computing damages under a
different damages provision in the contract. Campisi cross-appeals the district court’s verdict.
Campisi asserts on cross-appeal that the district court erred in finding that NRS proved its prima
facie case, in failing to grant a directed verdict to Campisi, and in awarding any damages to
NRS.
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We find no error in the district court’s conclusion that one provision of the lease
agreement was ambiguous, but we reverse the district court’s conclusion that another provision is
applicable. We find no merit to the cross-appeal. As such, we reverse, and remand for further
proceedings.
II. BACKGROUND
In May 2005, a commercial lease was entered into between SMWK LLC, a predecessor
in interest to NRS, and Resilent. Campisi signed a “personal guarantee” of “the payment of the
rent and the performance of all of the covenants under the Lease and all renewals and extensions
thereof by [Resilent].” At the time, Campisi was the president of Resilent.
The lease was for a term of 10 years, beginning August 1, 2005, and ending July 31,
2015. The lease required Resilent to pay base rent, as well as a pro rata share of operating
expenses for the building, parking areas, and grounds. The lease included provisions for late
charges for any monthly rent payment that was not timely made, and required a security deposit.
The lease included a provision prohibiting assignment or subletting “without the prior
written consent of [NRS].”
Paragraph 17 of the lease provided a list of specific events which would “constitute a
default or a breach of [the lease] by [Resilent].” Those events included Resilent’s failing to pay
any rent or other payments when due; Resilent’s vacating or abandoning the premises; Resilent’s
filing for bankruptcy or reorganization; the commencement of involuntary bankruptcy or
insolvency proceedings against Resilent; and Resilent’s failing to perform or comply with any
other term or condition of the lease, if such nonperformance continued for a period of 10 days
after notice thereof by NRS.
Paragraph 18 of the lease provided for the “EFFECT OF DEFAULT.” That paragraph
provided as follows:
18. EFFECT OF DEFAULT. In the event of any default or breach hereunder, in
addition to any other right or remedy available to [NRS], either at law or in equity, [NRS]
may exert any one or more of the following rights:
(a) [NRS] may re-enter the Premises immediately and remove the property and
personnel of [Resilent], and shall have the right, but not the obligation, to store such
property in a public warehouse or at a place selected by [NRS], at the risk and expense of
[Resilent], [NRS] must give notice to [Resilent] ten (10) days prior to removal of
property and personnel.
(b) [NRS] may retake the Premises and may terminate this Lease by giving
written notice of termination to [Resilent]. Without such notice, [NRS’] retaking will not
terminate the Lease. On termination, [NRS] may recover from [Resilent] all damages
proximately resulting from the breach, including the cost of recovering the Premises and
the difference between the rent due for the balance of the Lease term as though the Lease
had not been terminated, and the fair market rental value of the Premises, which sum
shall be immediately due from [Resilent].
(c) [NRS] may relet the Premises or any part thereof for any term without
terminating this Lease, at such rent and on such terms as it may, choose. [NRS] may
make alterations and repairs to the Premises. In addition to [Resilent’s] liability to [NRS]
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for breach of this Lease, [Resilent] shall be liable for all expenses of the reletting, for any
alterations and repairs made, for the rent due for the balance of the Lease term, which
sum shall be immediately due [NRS] from [Resilent]. The amount due [NRS] will be
reduced by the net rent received by [NRS] during the remaining term of this Lease from
reletting the Premises, r [sic] any part thereof. If during the remaining term of this Lease
[NRS] receives more than the amount due [NRS] under this sub-paragraph, [NRS] shall
pay such excess to [Resilent], but only to the extent [Resilent] has actually made payment
pursuant to this sub-paragraph.
Campisi testified that shortly after the lease agreement was executed, he sold Resilent and
“became a minority partner.” He testified that he sold Resilent to an individual who “came in . . .
and brought in his own management team to basically take it over and push [Campisi] out.”
Campisi testified that he had no contact with people at Resilent as of December 2008, until
discussions about assets and disposition shortly prior to the trial in this case.
At some point, Resilent ceased doing business and ceased using the leased office space.
Resilent made its last payment under the lease agreement in April 2010.
Anthony Siahpush, the owner and president of NRS, testified that he contacted Resilent
in May 2010 concerning its abandonment of the leased premises. He testified that he was notified
that Resilent had abandoned the lease and that Resilent had “responded” to NRS that Campisi
was “the personal guarantor for the lease.”
Siahpush was asked, “So you decided not to consider the lease terminated; is that right?”
He responded, “That is correct.” He testified that NRS eventually retook possession of the leased
premises in July 2010.
In June 2010, NRS filed a complaint in the district court, alleging breach of contract and
seeking damages. NRS named both Resilent and Campisi as defendants. NRS alleged that
Resilent had refused and failed to pay rent and had abandoned the leased premises, and alleged
that notice of the breach and intent of NRS to reenter the leased premises had been mailed from
NRS to Resilent.
In its complaint, NRS alleged that Resilent owed outstanding rent payments, late charges,
operating expenses, and other damages set forth in the lease agreement. NRS alleged that
Campisi had personally signed the lease and a “personal guarantee” of Resilent’s performance
and that, as a result, he was liable in the same amounts as Resilent. NRS sought a minimum of
$79,630.12 in damages.
NRS was unsuccessful in its attempt to secure service against Resilent, leaving Campisi
as the only defendant. In April 2012, a jury trial was held on NRS’ complaint. The jury returned
a verdict in favor of NRS and awarded damages in the amount of $49,779.18. NRS filed a
motion for new trial or to alter or amend the verdict. Campisi filed a motion for remittitur,
seeking to have the verdict reduced to $0.
The district court granted NRS’ motion for new trial and vacated the jury’s verdict. The
court concluded that the jury had erred in its assessment of damages, the verdict was not
sustained by the evidence, and the court had erred in its jury instructions. The court denied
Campisi’s motion for remittitur.
Campisi then attempted to appeal to this court. This court dismissed the appeal for lack of
jurisdiction.
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In May 2013, the parties agreed to waive a jury trial and instead conducted a bench trial.
Prior to trial, the district court indicated its belief that paragraph 18(b) (Paragraph 18(b)) was the
appropriate provision for computing NRS’ damages. NRS argued to the district court that it had
not elected to terminate the lease and was not seeking damages under Paragraph 18(b) of the
lease agreement. The district court granted a motion in limine to prevent NRS from calling an
expert witness to testify about the fair market rental value of the premises, specifically finding:
And that being the case, that [NRS] does not consider the lease terminated[, NRS]
will not be allowed to call an expert and probably doesn’t need one and we will proceed
under the -- the claim of [NRS] that it does not consider the lease . . . to have been
terminated by [Resilent].
The trial primarily consisted of the testimony of Siahpush on behalf of NRS and Campisi
in his own behalf.
Siahpush testified that upon learning that Resilent had vacated the leased premises, NRS
reviewed the lease to consider its options. He testified that NRS never sent a notice of
termination of the lease to Resilent. He testified that, instead of sending a notice of termination
under Paragraph 18(b) of the lease agreement, NRS opted to seek enforcement of rights under
paragraph 18(c) (Paragraph 18(c)) of the lease agreement.
At the conclusion of the trial, the district court entered an order in which the court made a
variety of findings. The court found that Paragraph 18(c), as set forth above, was “ambiguous as
a matter of law, as it does not make grammatical sense, and in the plain and ordinary meaning of
the provisions of the paragraph,” and the court found that “part of a sentence in the paragraph
had been lined out, and neither Siahpush nor Campisi was able to give evidence as to how or
why that was done.” The court further found that it “must look to the balance of the agreement,
as well as other extrinsic evidence before the Court to determine the intent of the parties when
the agreement was entered into by them.”
Despite Siahpush’s testimony, as set forth above, the district court found that
“abandonment of the leased premises by Resilent, coupled with NRS’ reentry of the premises,
and attempting to relet the premises on the open market, makes it clear that a termination of the
lease agreement was intended by NRS and Resilent” and that as such, “the provisions of
Paragraph 18(b) of the lease agreement must be applied to determine” NRS’ damages. The court
then concluded that the appropriate measure of damages, under Paragraph 18(b) was “the
difference between the rent due for the balance of the lease term, as though the lease had not
been terminated, and the fair market rental value of the premises, together with unpaid rent
before termination, and the cost of recovering the premises.”
The court found that NRS “did not offer competent evidence as to the fair market rental
value of the premises, and therefore is not entitled to recover rent due for the balance of the lease
term.” The court then awarded rental payments that had been due in May, June, and July 2010;
Resilent’s share of operating expenses for the same period of time; and late fees. The court
concluded that the total damages owed to NRS was $29,632.14. The court entered a verdict
against Campisi and in favor of NRS. This appeal followed.
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III. ASSIGNMENTS OF ERROR
On appeal, NRS has assigned three errors. First, NRS asserts that the district court erred
in finding that Paragraph 18(c) is ambiguous. Second, NRS asserts that the court erred in
determining that Paragraph 18(b) is the applicable provision for measuring NRS’ damages.
Third, NRS asserts that the court erred in finding that NRS had terminated the lease agreement.
On cross-appeal, Campisi has assigned three errors, all of which challenge the sufficiency
of NRS’ evidence to prove a prima facie case and the court’s subsequent awarding of any
damages to NRS.
IV. ANALYSIS
1. NRS’ APPEAL
(a) Ambiguity
NRS first asserts that the district court erred in finding that Paragraph 18(c) is ambiguous.
The district court based its conclusion in large part on the fact that a portion of Paragraph 18(c)
was presented as “lined out” and that, as a result, the provision is grammatically incorrect. NRS
argues that Paragraph 18(c) is not ambiguous and that any difficulty in understanding or reading
the provision concerns only an aspect of damages that NRS was not seeking. We find no merit to
this assignment of error.
The interpretation of a lease is a question of law that an appellate court decides
independently of the district court. Beveridge v. Savage, 285 Neb. 991, 830 N.W.2d 482 (2013).
See, also, Ruble v. Reich, 259 Neb. 658, 611 N.W.2d 844 (2000) (construction of contract is
matter of law). In interpreting a contract, a court must first determine, as a matter of law, whether
the contract is ambiguous. Bedore v. Ranch Oil Co., 282 Neb. 553, 805 N.W.2d 68 (2011); Ruble
v. Reich, supra.
An appellate court views a contract as a whole in order to construe it. Ruble v. Reich,
supra. A contract is ambiguous when a word, phrase, or provision in the contract has, or is
susceptible of, at least two reasonable but conflicting interpretations or meanings. Beveridge v.
Savage, supra; Bedore v. Ranch Oil Co., supra; Ruble v. Reich, supra. When the terms of a
contract are clear, a court may not resort to rules of construction, and the terms are to be
accorded their plain and ordinary meaning as the ordinary or reasonable person would
understand them. Bedore v. Ranch Oil Co., supra. A contract written in clear and unambiguous
language is not subject to interpretation or construction and must be enforced according to its
terms. Ruble v. Reich, supra.
A determination as to whether ambiguity exists in a contract is to be made on an
objective basis, not by the subjective contentions of the parties. Ruble v. Reich, supra. The fact
that the parties have suggested opposing meanings of a disputed instrument does not necessarily
compel the conclusion that the instrument is ambiguous. Bedore v. Ranch Oil Co., supra; Ruble
v. Reich, supra.
The meaning of an unambiguous contract is a question of law. Ruble v. Reich, supra. If a
contract is ambiguous, the meaning of the contract is a question of fact, and a court may consider
extrinsic evidence to determine the meaning of the contract. Id. Ambiguous contracts are
construed against the drafter. Beveridge v. Savage, supra.
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In this case, NRS asserted that it was seeking to recover damages pursuant to Paragraph
18(c) of the lease agreement. The district court recognized this prior to the bench trial and
granted a motion in limine preventing NRS from adducing the testimony of an expert witness
concerning the fair market rental value of the leased premises and indicated that trial would
proceed “under . . . the claim of [NRS] that it does not consider the lease in this case to have
been terminated.”
Paragraph 18 of the lease agreement provides that “[i]n the event of any default or breach
[of the lease agreement], in addition to any other right or remedy available to [NRS], either at
law or in equity, [NRS] may exert any one or more of the following rights,” and then includes
subparagraphs (a) through (c), setting forth different potential remedies or methods for
calculating damages. Subparagraph (a), set forth above in the “Factual Background” section,
provided NRS with the right to “re-enter the Premises immediately and remove the property and
personnel of [Resilent],” if NRS gave Resilent notice 10 days prior to any such removal.
Subparagraphs (b) and (c) both provided NRS with rights of possession of the premises, as well
as a right to monetary damages.
Paragraph 18(b), set forth above in the “Factual Background” section, provided that NRS
“may retake the Premises and may terminate this Lease by giving written notice of termination to
[Resilent]. Without such notice, [NRS’] retaking will not terminate the Lease.” (Emphasis
supplied.) Under Paragraph 18(b), NRS was also entitled to “recover . . . all damages
proximately resulting from the breach, including the cost of recovering the Premises and the
difference between the rent due for the balance of the Lease term as though the Lease had not
been terminated, and the fair market rental value of the Premises.”
Paragraph 18(c) provided as follows:
(c) [NRS] may relet the Premises or any part thereof for any term without
terminating this Lease, at such rent and on such terms as it may, choose. [NRS] may
make alterations and repairs to the Premises. In addition to [Resilent’s] liability to [NRS]
for breach of this Lease, [Resilent] shall be liable for all expenses of the reletting, for any
alterations and repairs made, for the rent due for the balance of the Lease term, which
sum shall be immediately due [NRS] from [Resilent]. The amount due [NRS] will be
reduced by the net rent received by [NRS] during the remaining term of this Lease from
reletting the Premises, r [sic] any part thereof. If during the remaining term of this Lease
[NRS] receives more than the amount due [NRS] under this sub-paragraph, [NRS] shall
pay such excess to [Resilent], but only to the extent [Resilent] has actually made payment
pursuant to this sub-paragraph.
The district court concluded that Paragraph 18(c) is ambiguous because “it does not make
grammatical sense, and in the plain and ordinary meaning of the provisions of the paragraph, and
part of a sentence in the paragraph had been lined out, and neither Siahpush nor Campisi was
able to give evidence as to how or why that was done.” The court concluded that “reasonable
persons would not understand the provisions of Paragraph 18(c).” We agree.
During the trial, after NRS’ counsel had conducted direct examination and Campisi’s
counsel had conducted cross-examination, the court conducted its own examination of Siahpush.
The court specifically inquired of Siahpush about the portion of Paragraph 18(c) that had been
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“lined out.” The court inquired about how the “lining out” occurred and about whether the
parties had intended the “lined out” language be excluded from the lease. Siahpush indicated that
he did not know how or why it happened or what was intended.
We conclude that a reasonable person would read Paragraph 18(c) and conclude that the
portion that is “lined out” was not intended to be part of the paragraph. It would not be
reasonable to infer an intention for the portion of the paragraph that includes text with a line
through it to be included--indeed, the very purpose of striking through text is typically to
demonstrate an intent to remove that language or make it no longer a part of the surrounding text.
If the “lined out” text is removed, Paragraph 18(c) would read as follows:
(c) [NRS] may relet the Premises or any part thereof for any term without
terminating this Lease, at such rent and on such terms as it may, choose. [NRS] may
make alterations and repairs to the Premises. In addition to [Resilent’s] liability to [NRS]
for breach of this Lease, for the rent due for the balance of the Lease term, which sum
shall be immediately due [NRS] from [Resilent]. The amount due [NRS] will be reduced
by the net rent received by [NRS] during the remaining term of this Lease from reletting
the Premises, r [sic] any part thereof. If during the remaining term of this Lease [NRS]
receives more than the amount due [NRS] under this sub-paragraph, [NRS] shall pay
such excess to [Resilent], but only to the extent [Resilent] has actually made payment
pursuant to this sub-paragraph.
This results in a sentence fragment in the middle of the paragraph, providing “In addition to
[Resilent’s] liability to [NRS] for breach of this Lease, for the rent due for the balance of the
Lease term, which sum shall be immediately due [NRS] from [Resilent].”
In this case, the original language of Paragraph 18(c), if the “lined out” text was included
and not stricken, would have provided NRS with the right to relet the premises without
terminating the lease and the right to make alterations and repairs, and it would have provided
that Resilent would be liable for expenses of reletting, for the cost of alterations and repairs, and
for the rent due for the balance of the lease agreement, less rent received by NRS for reletting.
Although there was no testimony presented to provide any explanation for why portions of these
damages were not going to be included, the effect of “lining out” a portion of this paragraph was
to remove entirely references to Resilent’s being liable for expenses of reletting or for the cost of
alterations and repairs.
The version of Paragraph 18(c) that appeared in the lease agreement, if the “lined out”
text is entirely stricken, plainly and unambiguously indicates that NRS had the right to relet the
premises and the right to make alterations or repairs to the premises. NRS did not exercise either
of these rights. What is not clear and unambiguous, however, is what the remainder of the
paragraph, including the sentence fragment, means.
It is not clear whether Paragraph 18(c) is intended to apply only as a means of calculating
damages if NRS actually did relet the premises or make alterations and repairs, or whether
Paragraph 18(c) is intended to provide a right to both relet and make alterations and repairs, and
also to the rent due for the balance of the lease term.
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In its entirety, paragraph 18(a) (Paragraph 18(a)) deals with NRS’ right to reenter the
premises and remove property and personnel. It does not provide the right to do that and also a
separate right to monetary damages unrelated to reentry and removal of property and personnel.
Paragraph 18(b), in its entirety, deals with NRS’ right to terminate the lease and the
means of calculating damages if NRS terminated the lease. It does not provide the right to
terminate the lease and also a separate right to monetary damages unrelated to termination of the
lease.
Paragraph 18(c), then, could similarly be read, in its entirety, to deal with NRS’ right to
relet the premises and the means of calculating damages if NRS had relet the premises. Such a
reading of Paragraph 18(c) would be consistent with the plain and unambiguous construction of
Paragraph 18(a) and Paragraph 18(b). In determining if a portion of the contract is ambiguous,
we are to consider the contract as a whole. See Ruble v. Reich, 259 Neb. 658, 611 N.W.2d 844
(2000).
Nonetheless, because of the portions of Paragraph 18(c) that were “lined out,” the final
text of Paragraph 18(c) could be read to suggest that NRS’ right to relet the premises and make
repairs and alterations is to be “[i]n addition to” Resilent’s liability for breach, or to suggest that
NRS has the right to relet the premises and make repairs and alterations and that in addition to
whatever other liability Resilent might have for breaching the contract, NRS also has the right to
rent due for the balance of the lease term. The sentence fragment that results from removing the
“lined out” text entirely makes it impossible to infer one clear, plain, and unambiguous meaning
of Paragraph 18(c).
NRS concedes in its brief that no extrinsic evidence was adduced at trial to indicate the
intent of the parties when agreeing to Paragraph 18(c) in the lease agreement. Nonetheless, NRS
argues that if Paragraph 18(c) is ambiguous, it should be construed against Campisi because the
contract was drafted by the attorney representing Resilent and Campisi at the time of the lease
agreement. We disagree.
Our review of the record does not indicate that this contract was drafted “by” Resilent,
Campisi, or the attorney who was representing them at the time of the lease. During the court’s
examination of Siahpush, the court asked Siahpush, “[W]ho drafted this lease, if you know?”
Siahpush responded, “I believe it was between the agent and . . . Campisi’s attorney.”
There was no further examination or explanation. This testimony merely indicates that, as
far as Siahpush knew, the lease agreement was drafted “between the agent and” an attorney
representing Resilent and Campisi. There is no indication of who “the agent” was or who “the
agent” represented. This testimony only suggests that Siahpush himself was not involved in the
drafting, but does not indicate that the lease agreement was drafted “by” Resilent, Campisi, or
the attorney who was representing them at the time such that we could construe the provision
somehow against them.
We conclude that the district court did not err in concluding that Paragraph 18(c) was
ambiguous. The paragraph is not susceptible to only one reasonable interpretation. This assigned
error is without merit.
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(b) Application of Paragraph 18(b)
NRS next asserts that the district court erred in concluding that Paragraph 18(b) was
applicable and was the appropriate provision for determining NRS’ damages. We agree.
The district court, after concluding that Paragraph 18(c) was ambiguous, concluded that
“abandonment of the leased premises by Resilent, coupled with NRS’ reentry of the premises,
and attempting to relet the premises on the open market, makes it clear that termination of the
lease agreement was intended by NRS and Resilent.” The court then concluded that “as such, the
provisions of Paragraph 18(b) of the lease agreement must be applied to determine the damages
NRS would be entitled to against Resilent for Resilent’s default.” We disagree with this
reasoning, based on the plain and unambiguous language of Paragraph 18(b) and based on the
plain and unrefuted testimony presented at trial.
First, the plain and unambiguous language of Paragraph 18(b) clearly indicates that
although NRS had the right to terminate the lease and have damages calculated according to
Paragraph 18(b), exercising that right would have required NRS to give “written notice of
termination to [Resilent].” Paragraph 18(b) specifically provides that “[w]ithout such notice,
[NRS’] retaking will not terminate the Lease.” The plain and unambiguous language of
Paragraph 18(b) specifically requires written notice for NRS to terminate the lease agreement
and specifically indicates that retaking possession of the premises without such notice “will not
terminate” the lease agreement.
Second, the plain and unrefuted testimony presented at trial indicated that NRS did not
intend to terminate the lease agreement. As the court recognized, on the record prior to the
commencement of the trial, NRS was asserting at trial that it had not terminated the lease.
Indeed, the court explicitly recognized this and granted a motion in limine to prevent NRS from
presenting expert testimony about fair market rental value under Paragraph 18(b) because NRS
was proceeding with trial under Paragraph 18(c). During the trial, Siahpush agreed that after he
discovered that the premises had been vacated, he reviewed the lease to decide what NRS’
options were. He was asked if he “ever [sent] a notice of termination of the lease” to Resilent,
and he responded, “No.” He agreed that he had, instead, opted to enforce rights under Paragraph
18(c).
The only testimony adduced at trial indicated that NRS never took action to terminate the
lease agreement under Paragraph 18(b). The evidence adduced at trial unequivocally
demonstrates that NRS never gave written notice of termination to Resilent, and the plain and
unambiguous language of Paragraph 18(b) specifically indicates that NRS’ actions of retaking
possession of the leased premises, without such written notice of termination, would not operate
as a termination of the lease.
If the lease was not terminated under Paragraph 18(b), then the remaining method of
calculating damages under Paragraph 18(b) is not applicable. The plain and unambiguous
language of Paragraph 18(b) specifically indicates that the method of calculating damages set
forth therein is applicable only “[o]n termination.” Thus, we conclude that the district court erred
in calculating NRS’ damages pursuant to Paragraph 18(b).
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(c) Resolution
As a result of our above findings, we affirm the district court’s conclusion that Paragraph
18(c) is ambiguous. If a contract is ambiguous, the meaning of the contract is a question of fact,
and a court may consider extrinsic evidence to determine the meaning of the contract. Ruble v.
Reich, 259 Neb. 658, 611 N.W.2d 844 (2000). In this case, the district court was not presented
with any extrinsic evidence and the court made no factual findings about the meaning of
Paragraph 18(c). Without any findings by the district court about the meaning of Paragraph
18(c), we have no interpretation of Paragraph 18(c) to review.
We conclude that the district court erred in determining that NRS had terminated the
lease agreement and in proceeding to calculate damages pursuant to Paragraph 18(b). The plain
and unambiguous language of Paragraph 18(b) and the unrefuted testimony adduced at trial
indicate that NRS did not take the required steps to terminate the lease, and the calculation of
damages pursuant to Paragraph 18(b) is only appropriate if NRS had terminated the lease.
Paragraph 18 of the lease agreement specifically indicates that NRS’ rights pursuant to
Paragraph 18(a), Paragraph 18(b), and Paragraph 18(c) were “in addition to any other right or
remedy available to [NRS], either at law or in equity.” In its complaint, NRS made allegations,
inter alia, about Resilent’s failure to pay rent, operating expenses, and late penalties. The district
court made no findings as to whether NRS had sufficiently proven that it was entitled to
damages, either at law or in equity, outside of the specific provisions of Paragraph 18(b) and
Paragraph 18(c).
This case presents an unusual situation. As noted above, we have concluded that
Paragraph 18(c) is ambiguous and have noted that no evidence was adduced to explain that
ambiguity or to provide the trial court with a basis for making factual findings about the parties’
intent. Although we would normally conclude that the trial court be restricted on remand to
making findings on the basis of the record created at trial, where the parties had the opportunity
to litigate the issues, and would conclude that neither party should have a second opportunity to
present evidence and prove its case, the unusual procedural circumstances here require a
different result.
In this case, nobody raised any issue at the trial level about potential ambiguity of the
contract. NRS did not assert any ambiguity in its complaint, and Campisi did not assert any
ambiguity in his answer or amended answer. There is no indication in the record presented to us
or in the briefs of the parties that either party raised any issue about a potential ambiguity in any
pretrial proceeding. Instead, it appears that the first mention of a potential ambiguity came when
the court examined witnesses on its own, and not as a result of any advocacy by either party.
Further complicating the issue in the present case is the trial court’s granting of a motion
in limine prior to trial to prevent NRS from calling a proffered expert witness who might have
provided testimony beneficial to calculating damages. The court’s granting of that motion,
according to the record, was largely based on the court’s acceptance that NRS was not seeking
damages under Paragraph 18(b) and was, instead, seeking damages under Paragraph 18(c) and
not on the basis of the merits of Campisi’s motion or assertions about late notice about the
proffered witness.
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The court’s pretrial ruling, coupled with the fact that nobody raised an issue about
ambiguity until the court raised the issue in the midst of a bench trial, resulted in neither party’s
presenting evidence necessary for the court to make a factual determination about the meaning of
the ambiguous Paragraph 18(c). This also resulted in a lack of evidence to allow calculations of
damages outside the context of Paragraph 18(c), which is the provision the parties were
litigating. As a result, the trial court is unlikely to be able to make additional necessary findings
on the record of the prior trial.
We affirm the district court’s conclusion that Paragraph 18(c), as it appeared in the
contract, is ambiguous. We reverse the district court’s conclusion that the lease was terminated
under Paragraph 18(b) and that damages should be calculated pursuant to Paragraph 18(b). We
remand the matter to the district court for a new trial where the parties can adduce necessary
evidence about the meaning of the ambiguous Paragraph 18(c) and any other calculation of
damages outside of paragraph 18.
2. CAMPISI’S CROSS-APPEAL
In his cross-appeal, Campisi has assigned three errors that all challenge the district
court’s conclusion that NRS had proven a prima facie case and was entitled to some damages.
Campisi asserts that NRS did not prove its prima facie case, that Campisi was entitled to a
directed verdict, and that NRS was not entitled to damages. We find no merit to Campisi’s
assertions.
The “Argument” section of Campisi’s brief on cross-appeal contains no actual argument
or explanation of why his assigned errors have merit. Rather, Campisi presents this court with
three pages of recitations of propositions of law and quotations from authorities establishing that
the plaintiff in a cause of action bears the burden of proving its case, that proof of damages is a
necessary element, and that a directed verdict is appropriate when but one conclusion can be
drawn from the evidence. Campisi presents no argument on what it is that NRS failed to prove,
why but one conclusion can be drawn, or why that conclusion would be favorable to Campisi.
Based on statements presented in the “Facts” and “Conclusion” sections of Campisi’s
brief on cross-appeal, it appears that Campisi’s primary reasoning for asserting that NRS failed
to prove its case and Campisi was entitled to a directed verdict is an assertion that NRS failed to
present sufficient evidence of the fair market rental value of the leased premises. As noted above,
NRS was prevented from adducing expert testimony on that point by the district court’s granting
of a motion in limine prior to trial, which granting appears to have been based on the court’s
conclusion prior to trial that Paragraph 18(b) (including fair market rental value as part of the
calculation of damages) was not the applicable provision. The fact that NRS was contending
throughout the trial that Paragraph 18(b) was not applicable and the fact that the district court
agreed prior to trial--despite reaching the opposite conclusion at the end of the trial--demonstrate
why there is not substantial evidence in the record concerning the fair market rental value.
As our discussion above concerning NRS’ direct appeal demonstrates, we have
concluded that the district court erred in finding that Paragraph 18(b) and its method for
calculating damages is applicable in this case. As a result, Campisi’s apparent assertion on
appeal that insufficient evidence was adduced to support a calculation of damages under
Paragraph 18(b) is similarly without merit.
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We also note that the record does contain evidence that Resilent breached the contract
and that Campisi signed a “personal guarantee” of Resilent’s performance. Siahpush testified
about Resilent’s failure to pay rent under the contract. There was some evidence adduced
concerning Siahpush’s opinion about the fair market rental value of the property, as well as some
evidence concerning NRS’ ability to relet the premises. Consistent with our conclusion above,
the district court will have to determine, on remand, whether NRS adduced sufficient evidence of
damages and, if so, in what amount.
V. CONCLUSION
We affirm the district court’s conclusion that Paragraph 18(c) of the lease agreement is
ambiguous. We reverse the district court’s conclusion that Paragraph 18(b) of the lease
agreement is applicable. We find no merit to Campisi’s cross-appeal. We remand the matter to
the district court for further proceedings consistent with this opinion.
REVERSED AND REMANDED FOR
FURTHER PROCEEDINGS.
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