Port City Limited Partnership and Ziff Properties v. City of Charleston ( 2011 )

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Port City Limited Partnership and Ziff Properties, Inc., Appellants/Respondents,

v.

City of Charleston, Respondent/Appellant.

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Appeal From Charleston County
Kristi L. Harrington, Circuit Court Judge

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Unpublished Opinion No. 2011-UP-427  
Heard March 9, 2011 – Filed September 23, 2011

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AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

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G. Trenholm Walker and Jamie A. Khan, both of Charleston, for Appellants/Respondents.

Lydia B. Applegate, of Charleston, for Respondent/Appellant.

PER CURIAM:  Port City Limited Partnership and Ziff Properties, Inc. (collectively Appellants) appeal the circuit court's judgment in favor of the City of Charleston (the City) as to Appellants' claim for past-due "common expenses" under two leases between the parties.  The City cross-appeals the circuit court's denial of its request for attorney's fees. We affirm in part, reverse in part, and remand.

FACTS

The City entered a ten-year lease for space in the Port City Center to house the South Carolina Automatic Ticketing Office (SCAT) beginning in 1994.  The lease was extended for an additional twenty-six months.  The City also leased space in the Port City Center for a ten-year term beginning in 1996 to house its Archives division. The property was managed by Ziff Properties.  The terms of both leases were substantially similar.  The SCAT lease provided:

3.4   Operating Cost Adjustment and Additional Rents:

(A) Tenant's Pro Rata Share:  The Tenant's share of common expenses which are to be paid as Additional Rents shall be equal to three and one-half (3.5%)[1] percent ("Tenant's Pro Rata Share").

(B) Solid Waste User Fee:  The Tenant shall pay the Tenant's Pro Rata Share of any solid waste user fees assessed against the Building and its common property on a monthly basis as invoiced by the Landlord.  The monthly fee for the first year is fo[]rty dollars ($40.00) per month,[2] and will be adjusted and reconciled each year with the tenant[']s actual pro rata expenses based on tenant occupancy. 

The City paid its monthly base rent plus pro rata share of the solid waste user fee.  The City also paid monthly fees for employee parking, visitor parking, and a mailbox. 

In March 2005, Port City decided to sell the building to Jupiter Realty.  As new owners, Jupiter performed an audit of the current leases and informed Ziff it was entitled to additional payments from the City under the terms of the two leases.  In response, Ziff sent letters to the City stating the City was required to pay its back due pro rata share of "common expenses."  The City refused payment, and Appellants brought this lawsuit in May 2005, seeking the past due amounts. 

At trial, Timothy Walter, Ziff's chief executive officer, testified he did not negotiate the leases at issue, and that the term "common expenses" was not defined therein. However, he testified the City owed, under the leases, its pro rata share of taxes, insurance, electricity, water and sewer, gas and fuel, landscaping, interior plant maintenance, general repairs and maintenance, pest control, waste disposal, elevator maintenance, security, and other building services[3] in addition to the solid waste user fee and parking fees.  Walter admitted those charges were not assessed to the City until 2005 but testified that was simply an accounting oversight.  Upon cross-examination, the City introduced a copy of a fax sent in 1997 from Ziff to Daniel Maloney, the City's representative in the lease negotiations.  The document was a "lease report" containing the notation "TI/CAM – none."  Walter testified this would have indicated to the recipient that no taxes, insurance, or common area maintenance fees were due.  At the close of Appellants' case, the circuit court granted partial summary judgment in the City's favor, ruling that claims for monies due prior to May 2002, were barred by the statute of limitations.   

The trial continued as to the remaining claims, and Colleen Carducci, director of real estate management for the City, testified she was not directly involved with the negotiation of the leases at issue.  However, she indicated it was her expectation based on the lease, billing history, and conversations with Ziff that "the rent included all of the services that were being provided at the building."  The City's expert, Thomas Hartnett, testified it was common in the realty business for landlords to charge operational costs to tenants that could include management fees, taxes, and insurance.  Hartnett further testified it was the custom in commercial realty to explicitly define any expenses outside the base rent that a tenant was obligated to pay.  He indicated the term "common expenses" was not defined in the two leases between the City and Appellants and it was not a term typically found in commercial leases.    

The circuit court held the lease was ambiguous for indefiniteness of expression because the term "common expenses" was undefined.  The circuit court concluded the parties' course of conduct in the years between the signing of the leases and the filing of the lawsuit "was conclusive" of their intent pursuant to Kitchens v. Lee, 221 S.C. 59, 69 S.E.2d 67 (1952)[4]. Because the City paid its rent plus the additional solid-waste user fee, and that was accepted by Appellants, those actions established what "common expenses" meant under the leases, and the City did not owe any additional funds to Appellants.  The circuit court denied the City's request for attorney's fees under the contract. 

Appellants filed a motion for reconsideration regarding the past-due amounts.  Likewise, the City filed a motion for reconsideration with respect to the denial of attorney's fees.  Both motions were denied, and this appeal and cross-appeal followed. 

LAW/ANALYSIS

I.  Statute of Limitations

Appellants contend the circuit court erred in finding the statute of limitations barred their claims prior to May 2002, because the breach of contract did not occur until Ziff requested payment for the past-due common expenses and the City refused to pay in 2005.  We disagree.

  "Statutes of limitations embody important public policy considerations in that they stimulate activity, punish negligence, and promote repose by giving security and stability to human affairs."  Moates v. Babb, 322 S.C. 172, 176, 470 S.E.2d 402, 404 (Ct. App. 1996).  The statute of limitations for actions pursuant to contract or statute is three years.  S.C. Code Ann. § 15-3-530(1)-(2) (2005) (stating the statute of limitations for actions based upon contract or upon liability created by statute is three years).  "The limitations period begins to run when a party knows or should know, through the exercise of due diligence, that a cause of action might exist."  Anonymous Taxpayer v. S.C. Dep't of Revenue, 377 S.C. 425, 439, 661 S.E.2d 73, 80 (2008);  see also Epstein v. Brown, 363 S.C. 372, 376, 610 S.E.2d 816, 818 (2005) ("Under the discovery rule, the statute of limitations begins to run from the date the injured party either knows or should know, by the exercise of reasonable diligence, that a cause of action exists for the wrongful conduct.").

Appellants contend the "common expenses" did not have a due date under the leases so they were arguably not due to be paid until Ziff demanded payment from the City in 2005.  Under Appellants' theory, a landlord could assess past-due common expenses at any point in the future without fear the statute of limitations would bar a claim.  Such an interpretation would severely undermine the purpose of statutes of limitation.  Walter testified common expenses under the lease should have been billed annually.   Appellants could have discovered through their own records and the exercise of due diligence the City was not being billed for additional fees such as taxes and insurance.  Therefore, the circuit court did not err in granting summary judgment in the City's favor with respect to claims for "common expenses" prior to May 2002.

II.  Common Expenses Under the Lease

Appellants argue the circuit court erred in finding the term "common expenses" was ambiguous. They further contend that if the leases were ambiguous, the circuit court erred in not requiring the City to pay anything as past-due common expenses. 

The circuit court determined that the phrase "common expenses" is ambiguous. While we do not agree that the term itself is ambiguous, we do agree that the provision in the lease for the sharing of common expenses as "Additional Rents" is not capable of legal construction by the court.  Therefore, the circuit court was correct to consider the prior performance of the parties under the contract in order to determine their intent.  See Jordan v. Sec. Grp., Inc., 311 S.C. 227, 230, 428 S.E.2d 705, 707 (1993) ("Where the language of a contract is plain and capable of legal construction, that language alone determines the instrument's force and effect. . . . Resort to construction by a party is only done when the contract is ambiguous or there is doubt as to its intended meaning.") (emphasis added). 

We disagree, however, with the circuit court's conclusion that prior performance was conclusive as to the parties' intent.  Rather, the parties' prior conduct is merely one of the factors the fact finder considers in determining their intent entering the contract.  See Langston v. Niles, 265 S.C. 445, 458, 219 S.E.2d 829, 834 (1975) ("The conduct of the parties is entitled to great weight in interpreting an ambiguous contract.").  The court should also consider the testimony and evidence adduced by the parties to the contract as well as the common usage of terms in the industry.  See 32A C.J.S. Evidence § 1507 (2008) ("Evidence of the practical construction given to an instrument of writing by the parties thereto may be admissible to explain its meaning, when explanation is necessary."); Time Warner Cable v. Condo Servs., Inc., 381 S.C. 275, 285, 672 S.E.2d 816, 820-21 (Ct. App. 2009) (stating an unexpressed term may be inferred from the language of the contract or by examining the facts and circumstances surrounding the bargain, or by proving a general custom and usage of including certain terms as part of similar contracts).

Because the circuit court relied exclusively on the prior performance of the parties and did not consider other indicia of intent, such as the common usage of the terms in the industry, testimony of witnesses, and documentary evidence, the circuit court committed an error of law.  Therefore, we reverse the decision of the circuit court and remand for a new trial.  On remand, the circuit court should consider all evidence submitted by the parties relating to their intent in entering the lease agreement. 

III.   Attorney's Fees

The City claims the circuit court erred in denying its request for attorney's fees pursuant to the leases, which indicated the prevailing party shall be paid attorney's fees.  We reverse and remand.

"The general rule is that attorney's fees are not recoverable unless authorized by contract or statute."  Blumberg v. Nealco, Inc.,  310 S.C. 492, 493, 427 S.E.2d 659, 660 (1993).  "When there is a contract, the award of attorney's fees is left to the discretion of the trial judge and will not be disturbed unless an abuse of discretion is shown."  Id.  When attorney's fees are requested and authorized by contract or statute, the court should make specific findings of fact regarding certain factors including (1) the nature, extent, and difficulty of the legal services rendered; (2) the time and labor devoted to the case; (3) the professional standing of counsel; (4) the contingency of compensation; (5) the fee customarily charged in the locality for similar services; and (6) the beneficial results obtained.  Id., 310 at 494, 427 S.E.2d at 660-61.

In this case, both leases provided:

10.6   Attorney's Fees:  In case suit shall be brought for an unlawful detainer of the Leased Premises, for the recovery of any rent due under the provision of the Lease, or because of the breach of any other covenant herein contained on the part of Tenant to be kept and performed, Tenant shall pay to Landlord all reasonable attorney's fees, in the event Landlord prevails in said litigation.  In the event Tenant shall bring suit for breach of Landlord's covenant herein contained or shall prevail in a suit brought by Landlord as herein provided, Landlord shall pay Tenant all reasonable attorney's fees.

(emphasis added).

The circuit court "decline[d] to award attorney's fees" in a Form 4 order and failed to address the issue of attorney's fees at all in the formal order that followed. Likewise, the circuit court summarily denied the City's motion to alter or amend the judgment regarding the denial of attorney's fees to it under the leases as the prevailing party. 

The leases clearly call for the payment of reasonable attorney's fees to the prevailing party.  While the court is given discretion to determine the amount of reasonable attorney's fees, it is not given discretion to summarily deny the request without reason or explanation.  To do so was an abuse of discretion, and the circuit court's ruling on the point is reversed.  Therefore, we remand the attorney's fee issue for (1) a determination of who is the prevailing party in light of our remanding the common expenses issue for consideration and (2) findings of fact with regard to a reasonable amount of attorney's fees.

Accordingly, the order of the circuit court is

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

FEW, C.J., and THOMAS and KONDUROS, JJ., concur.

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[1] The pro rata share of the Archives lease was 3.2%.

[2] The monthly fee under the Archives lease was $50.00 per month.

[3] Both leases contained the following provision:

Section 7.1  Building Services:  Landlord agrees to furnish to the Leased Premises during hours of generally recognized business days, water, electricity for standard office use; heat and air conditioning required in the Landlord's reasonable judgment for the comfortable use and occupancy of the Leased Premises; building common area standard cleaning and janitorial services; normal maintenance and repair of the Property.  Landlord shall also maintain and keep lighted the common stairs, entries, and toilet rooms in the Building.

[4] Kitchens involved an oral agreement between a night watchman and his employer regarding overtime wages.