Triple J Parking Inc. v. SCSB LLC ( 2018 )

2018 UT App 162THE UTAH COURT OF APPEALS
TRIPLE J PARKING INC.,
Appellant,
v.
SCSB LLC,
Appellee.
Opinion
No. 20170048-CA
Filed August 23, 2018
Third District Court, Salt Lake Department
The Honorable Todd M. Shaughnessy
No. 160906725
Donald L. Dalton, Attorney for Appellant
Matthew N. Evans and Matthew M. Cannon,
Attorneys for Appellee
JUDGE DAVID N. MORTENSEN authored this Opinion, in which
JUDGES MICHELE M. CHRISTIANSEN FORSTER and JILL M. POHLMAN
concurred.
MORTENSEN, Judge:
¶1 In this case, Triple J Parking Inc. paved the property and
put up a parking lot—and now it wants to recoup the
improvement costs. 1 For nearly nine years, Triple J leased
ground property from SCSB LLC, pursuant to a lease agreement,
1. Joni Mitchell, Bob Dylan, and the Counting Crows can all
attest: “you don’t know what you’ve got ‘til it’s gone.” Joni
Mitchell, Big Yellow Taxi, on Ladies of the Canyon (Reprise
Records 1970); Bob Dylan, Big Yellow Taxi, on Dylan (Columbia
Records 1973); Counting Crows, Big Yellow Taxi, on Hard Candy
(Geffen Records 2002).
Triple J Parking v. SCSB
in order to run its park-and-ride business. During that time,
Triple J made millions of dollars’ worth of improvements to the
property—but did not negotiate an agreement with SCSB
regarding repayment or compensation for those improvements.
In September 2016, the parties could not come to an agreement
regarding renewal of the lease, and SCSB terminated the
agreement, with the effective end date in October 2016. While
the lease agreement with Triple J was still operative, SCSB
negotiated a separate, future lease on the property with a new
tenant, whose lease agreement would commence after Triple J’s
agreement had expired and after Triple J had vacated the
premises. Upon questioning whether the negotiations with the
new tenant violated the non-competition clause in its own lease,
Triple J brought suit against SCSB, alleging that SCSB breached
(1) the non-competition provision of the ground lease agreement
and (2) the implied covenant of good faith and fair dealing. SCSB
moved to dismiss the complaint, and the district court granted
its motion. Triple J now appeals the district court’s ruling. We
affirm.
BACKGROUND
¶2 In November 2007, Triple J entered into a ground lease
agreement (the Lease Agreement) with SCSB. The leased lot (the
Property) was located near the airport and provided
approximately six acres to Triple J for use as a parking lot, with
an optional 2.87 acres also to be used as a parking facility.
¶3 The initial term of the Lease Agreement was three and a
half years, but the Lease Agreement further specified that upon
expiration, it would continue and renew on a month-to-month
basis. Additionally, the Lease Agreement contained a
non-competition provision. The Lease Agreement was silent,
however, on the issue of any improvements made to the
Property.
¶4 After the Lease Agreement became effective, Triple J
spent millions of dollars improving the Property and
20170048-CA 2 2018 UT App 162Triple J Parking v. SCSB
subsequently began operating a parking facility. Pursuant to the
Lease Agreement, after the original term had expired in April
2011, the Lease Agreement continued on a month-to-month basis
until September 2016. At that time, SCSB proposed the
elimination of the non-competition provision in the lease,
sparking negotiations between the two parties. During these
discussions, SCSB acknowledged that it was in dialogue with a
third party with respect to the sale of the Property.
¶5 Triple J and SCSB could not reach a satisfactory resolution
regarding the non-competition provision or a further renewal.
Accordingly, in September 2016, SCSB served Triple J with a
Notice of Termination of Ground Lease, and Triple J vacated the
Property by the end of October 2016. Triple J asserts that in
September 2016, SCSB sold, or agreed to sell, the Property to a
competing parking business, but it was later discussed that the
new agreement may have been a three-year lease with an option
to purchase.
¶6 Upon discovering that SCSB had leased the Property to a
competitor, Triple J filed suit, asserting two claims for relief—
breach of the Lease Agreement and breach of the implied
covenant of good faith and fair dealing—and seeking damages
in the amount it had spent on improving the Property over
many years. SCSB moved to dismiss the complaint, and the
district court granted its motion. Triple J now appeals.
ISSUES AND STANDARD OF REVIEW
¶7 Triple J asserts that the district court incorrectly
concluded that Triple J failed to allege facts demonstrating that
SCSB breached the non-competition provision of the Lease
Agreement by negotiating a future lease on the Property with a
competing parking entity, to commence after Triple J’s Lease
Agreement had expired. Similarly, Triple J asserts that the
district court erred in concluding that Triple J failed to allege
facts upon which a claim for breach of the implied covenant of
good faith and fair dealing could be maintained.
20170048-CA 3 2018 UT App 162Triple J Parking v. SCSB
¶8 The grant of a motion to dismiss pursuant to rule 12(b)(6)
of the Utah Rules of Civil Procedure presents a question of law
that this court reviews for correctness. See Lilley v. JP Morgan
Chase, 2013 UT App 285, ¶ 4, 317 P.3d 470; see also Utah R. Civ. P.
12(b)(6). When reviewing a dismissal under rule 12(b)(6), “we
accept the plaintiff’s description of facts alleged in the complaint
to be true . . . . The district court’s ruling should be affirmed only
if it clearly appears that the plaintiff can prove no set of facts in
support of [the] claim.” America West Bank Members, L.C. v. State,
2014 UT 49, ¶ 7, 342 P.3d 224 (cleaned up).
¶9 The Lease Agreement was referenced several times in the
Complaint and, therefore, the language of the Lease Agreement
was properly considered by the district court on SCSB’s motion
to dismiss. See Oakwood Village LLC v. Albertsons, Inc., 2004 UT
101, ¶ 13, 104 P.3d 1226 (“If a plaintiff does not incorporate by
reference or attach a document to its complaint, but the
document is referred to in the complaint and is central to the
plaintiff’s claim, a defendant may submit an indisputably
authentic copy to the court to be considered on a motion to
dismiss. The classic example is a contract where the complaint
alleges a breach of contract.” (cleaned up)). Here, we need not
look beyond the complaint and the language of the lease to
determine whether a breach was sufficiently alleged.
ANALYSIS
¶10 SCSB maintains, and Triple J does not dispute, that absent
an agreement otherwise, a tenant is not entitled to compensation
for improvements made to a leasehold. Commercial Fixtures
& Furnishings, Inc. v. Adams, 564 P.2d 773, 774 (Utah 1977) (“The
right of plaintiff to recover for the goods incorporated into
defendant’s real property must be based upon an agreement,
either express or implied, and the stipulated facts are clear that
none existed.”). Triple J acknowledges that the Lease Agreement
is silent on the issue of compensation for improvements.
Therefore, Triple J is not entitled to compensation by way of
express agreement regarding those improvements. Instead,
20170048-CA 4 2018 UT App 162Triple J Parking v. SCSB
Triple J claims that it is entitled to those sums as damages
because SCSB negotiated with a competitor to lease the Property
for a future period beginning after the termination of the Lease
Agreement, thereby allegedly breaching the non-competition
provision and the implied covenant of good faith and fair
dealing. For the reasons that follow, we reject these contentions. 2
I. Non-Competition Provision
¶11 Triple J first contends that the district court incorrectly
concluded that Triple J failed to allege facts demonstrating that
SCSB breached the Lease Agreement between the parties by
agreeing to lease the Property to a competing parking entity
after the Lease Agreement had expired. Simply stated, Triple J
alleges that SCSB violated the non-competition provision by
virtue of negotiating and entering into a lease with a future
tenant while Triple J’s Lease Agreement was still operative. This
argument fails.
¶12 SCSB’s actions are not prohibited under the plain
language of the Lease Agreement. The Lease Agreement
contains the following non-competition provision:
Non-competition. To secure the interests of Lessee
hereunder, and as a material inducement to Lessee
to enter into this Lease, Lessor, its manager,
members and affiliates will not, directly or
indirectly compete with Lessee, its successors or
assigns within a two (2) mile radius from the
Leased Land. For the purposes of this paragraph,
the term “compete” means owning, managing,
operating, controlling, or participating in the
2. We note that the request for damages in the amount of the
Property’s improvements has no tether whatsoever that we can
perceive to Triple J’s alleged injury for breach of contract. But
this was not the basis of the district court’s conclusion.
20170048-CA 5 2018 UT App 162Triple J Parking v. SCSB
ownership, management, operation or control of,
any business, whether in corporate, proprietorship,
or partnership form or otherwise, where such
business involves the operation of a parking
facility and related amenities; and the term
“affiliate” means any legal entity or individual
who directly or indirectly through one or more
intermediaries controls, is controlled by, or is
under common control with, Lessor or Lessee, as
applicable.
¶13 On appeal, SCSB contends that the purpose of this
provision was to prevent SCSB from “leas[ing] any surrounding
property to a competing parking concern during the term of the
Lease Agreement.” In contrast, Triple J maintains that a plain
reading of the provision includes the Property itself. This
difference of interpretation is immaterial. Even if Triple J is
correct, the actual terms of the Lease Agreement do not provide
a basis for claiming breach here. “Competing,” as specified in
the provision, requires SCSB to be involved in the “operation of
a parking facility and related amenities.” Here, Triple J has failed
to assert that SCSB was involved in the operation of any parking
facility or related amenities during the lease term. No
“ownership, management, operation or control of” a
competitor’s business occurred during Triple J’s lease period—
not even for one minute—and therefore, no breach was
sufficiently alleged. Accordingly, Triple J has failed to state a
claim that SCSB breached the non-competition provision.
¶14 While Triple J alleges that the mere act of selling or
leasing land to a tenant for a future term is the same as
“ownership, management, operation or control of” 3 a competing
3. See, e.g., Neff v. American Dairy Queen Corp., 58 F.3d 1063, 1066
(5th Cir. 1995) (stating that the plain and ordinary meaning of
operate is “to control or direct the functioning of,” or “to
conduct the affairs of; manage” (cleaned up)); see also Nathanson
(continued…)
20170048-CA 6 2018 UT App 162Triple J Parking v. SCSB
parking concern, we are not persuaded. 4 The plain language
of the Lease Agreement does not restrict SCSB from
negotiating with any third party while the Lease Agreement was
in effect. In fact, Triple J concedes, “Certainly, the parties did
not use the word ‘lease’ in the definition of prohibited acts of
competition.” Simply put, Triple J has failed to allege facts
that would trigger the application of the non-competition
provision and, therefore, Triple J fails to state a claim as a matter
of law.
II. Implied Covenant of Good Faith and Fair Dealing
¶15 Triple J also argues that the district court
incorrectly concluded that Triple J failed to allege facts
demonstrating that SCSB breached the implied covenant of
good faith and fair dealing associated with the Lease
Agreement when SCSB signed a new lease with a
different tenant during the term of the Lease Agreement. Triple
J seeks to recover the cost of the improvements made to
the property—millions of dollars—based on this alleged breach.
(…continued)
v. Spring Lake Park Panther Youth Football Ass’n, 129 F. Supp. 3d
743, 749 (D. Minn. 2015) (“Operates has been accorded its plain
and ordinary meaning of put or keep in operation, to control or
direct the function of, or to conduct the affairs of; manage.”
(cleaned up)).
4. When interpreting a contract, we look “first to the plain
language within the four corners of the document. . . . If we find
the language unambiguous, we interpret the contract as a matter
of law. We find ambiguity only where the language of the
contract is reasonably capable of being understood in more than
one sense.” Peterson & Simpson v. IHC Health Services, Inc., 2009
UT 54, ¶ 13, 217 P.3d 716 (cleaned up). Here, the language of the
contract is unambiguous, and we interpret the non-competition
provision as a matter of law.
20170048-CA 7 2018 UT App 162Triple J Parking v. SCSB
¶16 Under the implied covenant of good faith and fair
dealing, each party to a contract “impliedly promises that he will
not intentionally or purposely do anything which will destroy or
injure the other party’s right to receive the fruits of the contract.”
St. Benedict’s Dev. Co. v. St. Benedict’s Hosp., 811 P.2d 194, 199
(Utah 1991). However, the “reach of the implied covenant of
good faith and fair dealing extends no further than the purposes
and express terms of the contract.” Smith v. Grand Canyon
Expeditions Co., 2003 UT 57, ¶ 22, 84 P.3d 1154.
¶17 To allow Triple J to recover under the facts alleged here
would run afoul of established law. This court has previously
rejected the notion that the implied covenant of good faith and
fair dealing can be used to rewrite a contract, holding,
It is fundamental that every contract imposes a
duty on the parties to exercise their contractual
rights and perform their contractual obligations
reasonably and in good faith. Nonetheless, a court
may not make a better contract for the parties than
they have made for themselves; furthermore, a
court may not enforce asserted rights not
supported by the contract itself. It cannot be
adopted as a general precept of contract law that,
whenever one party to a contract can show injury
flowing from the exercise of a contract right by the
other, a basis for relief will be somehow devised by
the courts.
Ted R. Brown & Assocs., Inc. v. Carnes Corp., 753 P.2d 964, 970–71
(Utah Ct. App. 1988) (cleaned up).
¶18 Here, Triple J received the benefits—the fruits—it was
contractually entitled to, namely: the use of the Property and
subsequent improvements, along with a non-competition
agreement preventing SCSB from operating any rival business,
for the entirety of the nearly nine-year Lease Agreement. Despite
receiving the fruits of the contract, Triple J asks us to interpret
20170048-CA 8 2018 UT App 162Triple J Parking v. SCSB
the Lease Agreement to mean that it was entitled to receive
compensation for the improvements even though the Lease
Agreement was silent on this point. Silence in the lease on the
issue of improvements has consequences as a matter of law. See
supra ¶ 10. In this case, silence means that Triple J was not
entitled to recover costs relating to improvements that it made to
the Property.
¶19 Triple J could have insisted on addressing this issue in the
Lease Agreement, but apparently did not. It is not the place of
this court to “make a better contract” for Triple J than it made for
itself. See Ted R. Brown & Assocs., 753 P.2d at 970. Because
effectively adding a term about the improvements remains
outside the scope of the implied covenant of good faith and fair
dealing, and because nothing in Triple J’s complaint alleges that
SCSB interfered in any way with Triple J receiving the complete
fruits of its contract, the district court properly dismissed the
claim under rule 12(b)(6).
CONCLUSION
¶20 The district court correctly held that Triple J failed to state
a claim when it alleged that SCSB breached the Lease Agreement
by negotiating a separate lease with a future tenant—effective
after Triple J had vacated the property. Additionally, the district
court correctly dismissed Triple J’s claim for breach of the
implied covenant of good faith and fair dealing.
¶21 Affirmed.
20170048-CA 9 2018 UT App 162