Wasatch Valley Pizza v. Wilson Properties , 2021 UT App 45 ( 2021 )

2021 UT App 45THE UTAH COURT OF APPEALS
WASATCH VALLEY PIZZA LLC,
Appellant,
v.
WILSON PROPERTIES & ASSOCIATES LC, SMOOT COMMERCIAL
PROPERTY MANAGEMENT LC, AND SHARMAN W. SMOOT,
Appellees.
Opinion
No. 20190940-CA
Filed April 15, 2021
Second District Court, Farmington Department
The Honorable Michael Edwards
No. 170701211
David W. Tufts, David L. Arrington, J. Tayler Fox,
and Madeline Aller, Attorneys for Appellant
Jonathan O. Hafen, James L. Ahlstrom, and Erin H.
St. John, Attorneys for Appellees
JUDGE MICHELE M. CHRISTIANSEN FORSTER authored this Opinion,
in which JUDGE DAVID N. MORTENSEN and SENIOR JUDGE KATE
APPLEBY concurred. 1
CHRISTIANSEN FORSTER, Judge:
¶1 Wasatch Valley Pizza LLC (Wasatch) appeals the district
court’s grant of summary judgment in favor of Wilson Properties
& Associates LC, Smoot Commercial Property Management LC,
and Sharman W. Smoot (collectively, Wilson). We affirm.
1. Senior Judge Kate Appleby sat by special assignment as
authorized by law. See generally Utah R. Jud. Admin. 11-201(6).
Wasatch Valley Pizza v. Wilson Props.
BACKGROUND
¶2 In 2016, Wasatch began looking into the possibility of
leasing certain property (the Property) Wilson owned in
Centerville, Utah, to develop a Pizza Hut restaurant. The
Property’s previous tenant had operated a custard shop at the
location, selling frozen custard and sandwiches.
¶3 The Property was in a zone known as “commercial high.”
The custard shop was classified as “retail, specialty,” which is a
permitted use within the commercial high zone. Other potential
classifications within the commercial high zone include
“restaurant, general,” which is also permitted, and “restaurant,
fast food,” which is conditionally permitted. For a conditionally
permitted use, the occupant must obtain a conditional use
permit (CUP) by complying with certain mitigation measures as
required by Centerville City (the City).
¶4 Wasatch and Wilson began negotiating a lease, and
Wasatch conducted due diligence on the Property. As part of its
due diligence, Wasatch spoke with a Centerville city planner,
who informed it that the City would not require Wasatch to
obtain a CUP or a new certificate of occupancy for the Property
as long as it did not increase the size of the building by more
than 30% or its value by more than 50%.
¶5 Wilson and Wasatch entered into a lease agreement (the
Lease) on June 29, 2016. The Lease included a Permitted Use
Clause, which gave Wasatch “the right to use and occupy the
[Property] as a Pizza Hut restaurant, similar to other Wasatch
Valley Pizza Hut restaurants for the sale of prepared pizza,
Italian sandwiches, pasta, and other Italian food products, and
take-out chicken wings and chicken wing products for on and
off-premises consumption”; “to sell desserts and drinks
(including wine and beer), for on- and off-premises
consumption, catering and delivery services”; and to use the
Property “for incidental purposes.”
20190940-CA 2 2021 UT App 45Wasatch Valley Pizza v. Wilson Props.
¶6 The Lease also contained a “Landlord Representations
and Warranties” section in which Wilson warranted “that the
[Property is] zoned for restaurant use and there is no legal
impediment to the construction and use of the [Property] as a
restaurant or for restaurant uses” (the Warranty). The Lease does
not define the terms “restaurant use” or “legal impediment.”
¶7 With respect to necessary permits, the Lease included a
Contingencies Clause, which stated,
Tenant may, at Tenant’s expense, apply for, and
use reasonable efforts to obtain, all Permits, if any
are necessary. If the Permits are not obtained,
within forty (40) days after mutual execution and
delivery of this Lease to both parties . . . or if they
are available only with conditions unacceptable to
Tenant, or if Tenant determines that it would not
be feasible or economically satisfactory for Tenant
to build or operate its proposed facility, Tenant
shall have the right to terminate this Lease,
provided it has given Landlord written notice no
later than ten (10) days after expiration of the
Permit Period. As part of the process of seeking
Permits Tenant may also agree to conditions to
issuance of use permits or other Permits for
Tenant’s use.
The Lease defined “permit” as
all authorizations and approvals issued by
government agencies and necessary for Tenant to
install Tenant Improvements and operate its
business on the [Property] such as (but not limited
to) zoning change,[ 2] variance, use permit,
2. The strikethrough formatting appears in the lease.
20190940-CA 3 2021 UT App 45Wasatch Valley Pizza v. Wilson Props.
environmental law compliance, site plan approval,
parking approval, sign approval, curb cut and
other access approval, utility connection permit,
and building permit.
Wilson agreed to “cooperate with Tenant to enable Tenant to . . .
maintain, renew or obtain permits, licenses or other approvals.”
¶8 Several months after entering the Lease, Wasatch
submitted its building plans to the City. At that time, the City’s
zoning administrator informed Wasatch that despite the city
planner’s suggestions to the contrary, the zoning classification
for its business was different from the custard shop and that
Wasatch would therefore need to obtain a CUP. Wasatch
attempted to convince the City, with Wilson’s cooperation, that
it should be classified as “retail, specialty” just as the custard
shop was, reasoning that the custard shop sold items, such as
sandwiches, that were similar to what Pizza Hut would sell.
However, the City rejected Wasatch’s arguments and classified
the Pizza Hut as “restaurant, fast-food.”
¶9 Wasatch began taking steps to obtain the required CUP,
as well as necessary approvals from the Utah Department of
Transportation (UDOT). The City approved the CUP,
conditioned upon Wasatch meeting certain conditions, including
several imposed by UDOT. But Wasatch calculated the costs of
complying with these conditions to be somewhere between
$100,000 and $200,000. Wasatch demanded that Wilson pay these
costs based on the Warranty. Wilson refused and served
Wasatch with a notice to pay rent or vacate the Property, so
Wasatch withdrew its application for the CUP and informed
Wilson that it was terminating the Lease. 3
3. These events occurred more than fifty days after the Lease was
signed, so Wasatch’s option to terminate the Lease under the
Contingencies Clause had passed.
20190940-CA 4 2021 UT App 45Wasatch Valley Pizza v. Wilson Props.
¶10 Wasatch filed a complaint against Wilson, asserting
claims for breach of the Lease. It alleged that Wilson had
breached the Warranty and sought $147,431.88 in damages.
Wilson filed an answer and counterclaim, asserting that Wasatch
breached the Lease by failing to pay rent and other expenses.
¶11 The parties filed cross-motions for summary judgment.
The district court granted Wilson’s motion and denied
Wasatch’s, concluding that Wilson did not breach its obligations
under the Warranty but that Wasatch did breach its obligations
by failing to pay rent. The court entered final judgment against
Wasatch in the amount of $255,316.33 plus $118,877.86 in
attorney fees under the Lease. Wasatch now appeals.
ISSUE AND STANDARD OF REVIEW
¶12 Wasatch asserts that the district court erred in denying its
motion for summary judgment and granting Wilson’s. “Because
a district court’s ruling on summary judgment is a question of
law, we review it for correctness.” Rupp v. Moffo, 2015 UT 71, ¶ 5,
358 P.3d 1060.
ANALYSIS
I. The Warranty
¶13 This case turns on the interpretation of two phrases in the
Warranty, neither of which is defined in the Lease: “restaurant
use” and “legal impediment.” “We determine what the parties
have agreed upon by looking first to the plain language within
the four corners of the document.” Thatcher v. Lang, 2020 UT App
38, ¶ 31, 462 P.3d 397 (quotation simplified). In doing so, “we
look for a reading that harmonizes the provisions and avoids
rendering any provision meaningless” by “examin[ing] the
entire contract and all of its parts in relation to each other and
giv[ing] a reasonable construction of the contract as a whole.” Id.(quotation simplified).
20190940-CA 5 2021 UT App 45Wasatch Valley Pizza v. Wilson Props.
¶14 Wasatch maintains that “restaurant use,” read in
conjunction with the Permitted Use Clause, “could only mean a
Pizza Hut fast food restaurant.” While we do not necessarily
agree with this interpretation, we accept it for purposes of our
analysis because we ultimately agree with Wilson that the
challenges Wasatch faced in obtaining the CUP do not constitute
legal impediments under the Lease.
¶15 Wasatch relies on the Black’s Law Dictionary definition of
“impediment” as a “hindrance or obstruction.” See Impediment,
Black’s Law Dictionary (11th ed. 2019). Wasatch asserts that a
hindrance broadly includes anything that “interferes with or
slows the progress of someone or something.” Hindrance,
Merriam-Webster, https://www.merriam-webster.com/dictionar
y/hindrance [https://perma.cc/D4BV-BFQJ]. And thus, Wasatch
concludes that “any city ordinance or regulation can be a legal
‘impediment’ regardless of whether means exist to overcome it”
if it “interfered with, held back, [or] slowed down . . . the
construction and operation of [Wasatch’s] restaurant.”
¶16 Wilson, on the other hand, asserts that “legal
impediment,” as used in the Warranty, should be interpreted as
something that bars or blocks the construction of the restaurant
altogether. It points out that “bar” and “block” are synonyms of
“hindrance,” id., and that the word “hinder” is also defined as
“to hold back: prevent, check,” Hinder, Merriam-Webster,
https://www.merriam-webster.com/dictionary/hinder [https://pe
rma.cc/ER6V-J796]. Wilson asserts that Wasatch’s interpretation
would lead to an absurd result by making Wilson liable for
“literally any and every required interaction with [the] City.”
Wilson “in essence would be warranting that [the] City would
do nothing and ask nothing of Wasatch . . . , who instead alone
would get to dictate the size, structure, and manner of
operations of its Pizza Hut.”
¶17 Recognizing the potential implications of its original
argument, Wasatch qualified its position at oral argument,
conceding that not every ordinance that slows down the
20190940-CA 6 2021 UT App 45Wasatch Valley Pizza v. Wilson Props.
progress of construction constitutes a “legal impediment” and
suggesting instead that something that cannot be overcome
through “reasonable efforts” should be construed as a “legal
impediment.” Wasatch asserts that the efforts necessary to
comply with the CUP and UDOT conditions—i.e., paying the
associated $100,000 to $200,000 costs—would be unreasonable.
¶18 We agree with Wilson, however, that even this narrower
interpretation is inconsistent with the terms of the Lease. The
Contingencies Clause anticipated that there might be permitting
requirements that could not be overcome by “reasonable
efforts,” including conditions that might be “unacceptable to
[Wasatch]” or that might make it “not . . . feasible or
economically satisfactory for [Wasatch] to build or operate its
proposed facility.” Further, the Contingencies Clause provided
Wasatch with a remedy for such a circumstance—it could
terminate the Lease so long as it did so within fifty days of the
Lease’s execution. It would be unreasonable to read the
Warranty as guaranteeing Wasatch’s ability to overcome
permitting requirements with reasonable efforts while at the
same time planning for such a contingency and providing a
specific remedy.
¶19 Moreover, the Lease specifically includes “use permit,”
“site plan approval,” and “curb cut and other access approval”
within its definition of “permit,” while explicitly excluding
“zoning change” with a strikeout. This suggests that although
the parties believed the restaurant use would not require a
zoning change, they anticipated the possibility that a CUP and
various road- and traffic-related approvals would need to be
obtained. It is not logical that while anticipating the potential
need for such permits and addressing them in the Lease, Wilson
nevertheless would warrant that no CUP or UDOT approvals
would be necessary. 4 As the district court observed, “the CUP
4. Deposition testimony from the City’s zoning administrator
suggested that conditions such as a traffic study and UDOT
(continued…)
20190940-CA 7 2021 UT App 45Wasatch Valley Pizza v. Wilson Props.
imposed by [the City] amounted to a financial impediment, not a
legal impediment.” “After [the City] imposed the CUP
requirement, [Wasatch] was still able to continue with
construction” but “chose to end construction after determining
the expense of obtaining the CUP was too high.”
¶20 Because the requirements to obtain a CUP and UDOT
approvals were anticipated in the Lease, Wasatch’s broad
interpretation of the term “legal impediment,” as used in the
Warranty, is not a reasonable construction of that provision.
Thus, Wilson did not breach the Warranty by refusing to pay the
cost of satisfying the CUP and UDOT requirements.
II. Fees on Appeal
¶21 The district court awarded Wilson its fees in accordance
with the attorney fees provision in the Lease. As the prevailing
party on appeal, Wilson is also entitled to an award of fees and
costs incurred in defending this appeal. See Telegraph Tower LLC
v. Century Mortgage LLC, 2016 UT App 102, ¶ 52, 376 P.3d 333(“When a party who received attorney fees below prevails on
appeal, the party is also entitled to fees reasonably incurred on
appeal.” (quotation simplified)).
CONCLUSION
¶22 We agree with the district court that the requirements
imposed on Wasatch by the City and UDOT did not constitute
(…continued)
requirements could have been imposed as part of the site plan
approval regardless of whether the use was permitted or
conditional. Thus, it is by no means clear that Wasatch could
have avoided these expenses even if the City had permitted the
Pizza Hut to operate under the “retail, specialty” designation as
it originally anticipated.
20190940-CA 8 2021 UT App 45Wasatch Valley Pizza v. Wilson Props.
legal impediments under the Lease. Thus, Wilson did not breach
the Warranty, and the district court did not err in granting
Wilson’s summary judgment motion and denying Wasatch’s.
Accordingly, we affirm the district court’s ruling but remand for
the court to calculate Wilson’s costs and attorney fees incurred
on appeal.
20190940-CA 9 2021 UT App 45