Opinion
No. 301-11305 (JOINTLY ADMINISTERED)
March 7, 2003
MEMORANDUM OPINION
This mater is before the Court upon the debtor's motion for summary judgment and the motions for partial summary judgment filed by Pebble Commercial Center, LLC (hereinafter "Pebble") and Village Square, LLC (hereinafter "Village Square"). The debtor seeks to have the claims of Pebble and Village Square disallowed in their entirety as a matter of law. Pebble and Village Square request that the Court find as a matter of law that they are entitled to their claims and set a hearing to liquidate the claims. For the reasons more fully explained herein, the Court grants in part and denies in part the parties' motions.
I. FACTS
On October 11, 2001, the debtor filed its Chapter 11 petition. On December 7, 2001, this Court confirmed the debtor's Amended Joint Plan of Reorganization, setting an effective date of January 29, 2002. The debtor timely objected to the claims of Pebble and Village Square, arguing that the claims included CAM charges that were not owed by the debtor under the terms of the Lease Agreements and the Grants of Reciprocal Easements and Declarations of Covenants ("CCRs"). Pebble and Village Square responded, arguing all charges were proper, due, and owing.
A. FACTS RELATED TO PEBBLE
The debtor operates a multi-screen movie theater, known as Eastgate Theater, Inc., in Colonnade Square at Pebble Shopping Center in Las Vegas, Nevada, Pebble is the landlord. The parties executed the lease governing their relationship on November 5, 1997. It is this 1997 lease and accompanying CCRs that are the subject of the dispute.
Pebble seeks $18,540.61 to cover maintenance and other pre-petition charges. The debtor's objection states that "Landlord claims CAM charges, which tenant believes are not required by the lease."
B. FACTS RELATED TO VILLAGE SQUARE
The debtor operates a multi-screen movie theater, known as Eastgate Theater, Inc. in the Village Square Peccole Ranch Shopping Center in Las Vegas, Nevada. Triple Five Development Group Central, Ltd., (hereinafter "Triple Five") and the debtor executed the lease governing their relationship on January 16, 1997. Triple Five assigned the lease to Village Square on or about June 30, 1999. It is this 1997 lease and accompanying CCRs that are the subject of the dispute.
Village Square seeks $15,999.27 to cover maintenance and other charges for September 2001 through October 10, 2001. The debtor's objection stated that the "[c]laim of $15,999.27 is for $11,213.97 Sept. 2001 and $4,785.30 Oct 2001 CAM. Tenants paying $6,357.00 monthly in CAM, a 5% increase over CAM paid in 2000 and has asked landlord to substantiate large CAM increase that is double of previous year's CAM. Tenant had previously paid $11,325.18 in 1999 which was $84,744.31 in excess of year-end actual CAM. Landlord also refers to post-petition $136,805.33 CAM payable but that amount is separate from the claim stated."
C. LEASE PROVISIONS
The applicable provisions of each lease are identical. Those provisions at issue include: Section 1, Section 4.3, Section 7.1, Section 19, Section 22.3, and Section 4.04 of the CCRs. These provisions provide in relevant part:
SECTION 1: LEASED PREMISES
Upon the terms and conditions herein contained, Lessor leases to Tenant, and Tenant leases from Lessor, that certain parcel of real property containing approximately eight and one-half (8.5) acres of land situated in the City of Las Vegas, Clark County, Nevada . . .SECTION 4.3: NET LEASE
The Pebble lease was subsequently amended on January 24, 2002, to show that the Leased Premises consists of 8.29 acres.
Except as provided to the contrary in this Lease, this Lease is a net lease and, as between Lessor and Tenant, it is intended that Tenant shall pay all costs and expenses of every character, whether foreseen or unforseen, ordinary or extraordinary, in connection with the Leased Premises, whether maintenance, repair (structural or nonstructural) or reconstruction of the Leased Premises or any improvements thereon.SECTION 7.1: TAXES AND ASSESSMENTS
Tenant shall pay its proportionate share of maintenance assessments due under the CCRs with respect to maintenance and repair of common driveways and walkways in the Shopping Center (based on the ratio that the land area in the Leased Premises bears to the total land area including the Shopping Center). Tenant acknowledges that Lessor, as the fee owner of the Leased Premises, is obligated to pay a proportionate share of maintenance assessments pursuant to the CCRs with respect to maintenance and repair of common driveways, walkways, and other common areas within the Shopping Center. Tenant shall reimburse Lessor for the costs applicable to the Leased Premises within ten (10) days of Tenant's receipt of an invoice for such costs. Such invoice may be sent directly to Tenant by Lessor or the Managing Party (as that term is defined in the CCRs).SECTION 19: PERFORMANCE ON BEHALF OF TENANT
If Tenant shall fail to make any payment or perform any act required hereunder to be made or performed by Tenant, then Lessor (after such notice to Tenant, if any, as may be reasonable under the circumstances) may, but shall be under no obligation to, make such payment or perform such act with the same effect as if made or performed by Tenant. Entry by the Lessor upon the Leased Premises for such purpose shall not waive or release Tenant from any obligation or default hereunder. Tenant shall reimburse Lessor for all sums so paid by Lessor and for all cost and expenses incurred by Lessor in connection with the performance of any such act.SECTION 22.3: ENTIRE AGREEMENT
Except as may be specifically referred to herein, there are no coverants, promises, agreements, conditions or understandings, either oral or written, between the parties hereto, other than as herein set forth. No subsequent alteration, amendment, change or addition to this Lease shall be binding upon Lessor or Tenant unless reduced to writing and signed by them.
CCR SECTION 4.04: COST OF OPERATION AND MAINTENANCE OF COMMON AREA
(a) Payment by Managing Party. All costs incurred in the operation and maintenance of the Common Area shall be promptly paid directly by the Managing Party when incurred.
(b) Proportionate Share. Commencing with the first day of each calendar month during the term of this Declaration, and on the first day of each month thereafter, each Owner shall pay to the Managing Party an amount estimated by the Managing Party to be such Owner's Proportionate Share of the Common Area Costs.
Such estimated charge may be adjusted by the Managing Party from time to time on the basis of its experience and anticipated costs of maintainig the Common Area hereunder. After the end of each quarter of the calendar year, or at the option of the Managing Party, the end of each calendar year, the Managing Party shall submit a statement to each Owner for its respective Proportionate Share of the actual costs and expenses paid or incurred by the Managing Party for the previous quarter or year. Such statement shall set forth the total Common Area Costs for the previous quarter or year, the amount of such Owner's Proportionate Share of Common Area Costs for such calendar quarter or year, and the total estimated payments made by such Owner with respect to such period under this subsection (b). If an Owner's Proportionate Share of Common Area Costs exceeds that Owner's estimiated payments, that Owner shall pay to the Managing Party the deficiency within fifteen (15) days after receipt of such statement. If such estimated payments exceed that Owner's Proportionate Share of Common Area Costs, that Owner shall be entitled to offset the excess against payments next thereafter due the Managing Party under this subsection (b).
II. ARGUMENTS
The debtor asserts that the Lease Agreements only require it to reimburse Pebble's and Village Square's Shopping Center costs that relate to charges for common driveway and walkway maintenance and repair, and therefore, since no such costs underlie Pebble's and Village Square's claims, their claims should be disallowed. In addition, the debtor asserts that since the Lease Agreements only require the debtor to reimburse driveway and walkway maintenance and repair costs within 10 days after the receipt of invoices, it is not required to make payments based on estimates of future costs provided by Pebble and Village Square.
Pebble and Village Square contend that the disputed charges are either (1) CAM charges for services provided by the landlords within the Leased Premises, or (2) proper CAM charges under the lease for common areas of the Shopping Centers and properly charged against the debtor under the specific terms of the Lease Agreements. Pebble and Village Square argue that the fact that the Lease Agreements do not specifically set forth the mechanism for collecting the charges does not relieve the debtor from the obligations attributable to it under the Lease Agreements. Finally, according to Pebble and Village Square, the debtor, by its own course of conduct since the inception of the Lease Agreements, has agreed to the manner in which the charges are billed and collected, under theories of waiver, estoppel, ratification, or contract modification by conduct. Pebble and Village Square seek partial summary judgment as to the debtor's responsibility for the types of charges, but request a hearing to liquidate the claims.
All parties agree that the issue to be decided is devoid of any materially disputed facts and ask the Court to interpret the Lease Agreements as a matter of law. If the Court finds that the claims are allowable, Pebble and Village Square request that the matter be set for trial to determine the amount of the claims.
III. SUMMARY JUDGMENT STANDARDS
Federal Rule of Civil Procedure 56(c), as incorporated by Federal Rule of Bankruptcy Procedure 7056, provides that summary judgment is proper if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." On a motion for summary judgment, the evidence, all facts, and any reasonable inferences that may be drawn from the facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986). To prevail, the nonmoving party must show sufficient evidence to create a genuine issue of material fact Klepper v. First Am. Bank, 916 F.2d 337, 342 (6th Cir. 1990). The Court finds that, according to these standards, no material facts remain in dispute, and the Court will, therefore, determine whether any party is entitled to judgment as a mailer of law.
IV. DISCUSSION
The parties agree that the terms of the Lease Agreements are to be governed and construed in accordance with applicable Nevada law. Under Nevada law, the construction of contractual terms is a question of law. NGA #2 Ltd. Liab. Co. v. Rains, 113 Nev. 1151, 1158, 946 P.2d 163, 167 (1997). Nevada generally follows conventional rule of contract interpretation, and therefore, construes an unambiguous contract according o the plain meaning of its terms. Chwialkowski v. Sachs, 108 Nev. 404, 406, 834 P.24 405, 406 (1992). If, however, the contract is not clear on its face, the court must effectuate the intention of the parties which may be determined in light of the surrounding circumstances. Davis v. Nevada Nat'l Bank, 103 Nev. 220, 223, 737 P.2d 503, 505 (1987). Moreover, if two interpretations of the contract are possible, the interpretation that gives meaning to all contract provisions will be preferred, rather than an interpretation that renders one provision meaningless. Quirrion v. Sherman, 109 Nev. 62, 65, 846 P.2d 1051, 1053 (1993).
In this case, the Court finds that the contract provisions are unambiguous.
A. CAM CHARGES FOR THE SHOPPING CENTERS
Pursuant to the clear terms of Section 7.1 of the Lease Agreements, the debtor is required to pay "its proportionate share of maintenance assessments due under the CCRs with respect to maintenance and repair of common driveways and walkways in the Shopping Center. . . ." Although Section 7.1 acknowledges that Pebble and Village Square are obligated to pay their "proportionate share of maintenance assessments pursuant to the CCRs with respect to maintenance and repair of common driveways, walkways, and other common areas within the Shopping Center," there is no language in Section 7.1 that expands the debtor's responsibility for CAM charges in the Shopping Centers beyond driveways and walkways. The terms of the Lease Agreements are clear and unambiguous and require no further interpretation beyond their own, plain meaning. The Court finds that, to the extent that Pebble's and Village Square's claims contains CAM charges attributable to common Shopping Center areas other than walkways and driveways, such are not permissible under the Lease Agreements.
In the alternative, Pebble and Village Square contend that because the debtor paid similar charges in the past and consented to the billing practices used by the parties, the debtor's established course of conduct requires payment of these items. Because the debtor has consented to estimated monthly CAM payments reconciled with actual payments at the end of the fiscal year, Pebble and Village Square insist that the debtor has waived any objection to the billings, is estopped from denying accountability, or has ratified the procedure or modified the contract trough its course of conduct.
The Court finds all of these arguments unpersuasive. The unrefuted affidavit of Robert Crane stating that debtor paid the disputed charges in the bill by mistake precludes a finding of waiver, estoppel, or ratification, and the contract provisions preventing oral modification precludes contract modified by conduct
Waiver, estoppel, and ratification, the theories asserted by Pebble add Village Square, all have one important concept in common-knowledge and assent. Before the debtor can be precluded from contesting the claims, it must have known the charges were in error and voluntarily paid them (waiver), it must have been "appraised of the true facts" of the billing (estoppel), or it must have assented to the charges (ratification). The unrefuted affidavit of Robert Crane precludes the necessary finding of knowledge and assent. In particular, Mr. Crane's affidavit reflects that the debtor paid these bills mistakenly, and although the payments were voluntary, the payments were voluntarily made based upon mistaken billings. Accordingly, there can be no finding of knowledge and assent
Waiver is "the intentional relinquishment of a known right." Mahban v. MGM Grand Hotels, Inc., 100 Nev. 593, 596, 691 P.2d 421, 423 (1984). "[W]aiver may be implied from conduct which evidences an intention to waive a right, or by conduct which is inconsistent with any other intention tan to waive the right." Id.
"Equitable estoppel operates to prevent a party from asserting legal rights that, in equity and good conscience, they should not be allowed to assert because of their conduct." Nevada State Rank v. Jamison Family P'ship, 106 Nev. 792, 799, 801 P.2d 1377, 1382 (1990). The elements of estoppel are as follows: "(1) the party to be estopped must be apprised of the true facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting estoppel has the right to believe it was so intended; (3) the party asserting estoppel must be ignorant of the true state of facts; (4) he must have relied to his detriment on the conduct of the party to be estopped." Cheqer, Inc. v. Painters Decorators Joint Comm., Inc., 98 Nev. 609, 614, 655 P.2d 996, 998-99 (1982).
Ratification is applicable when a party affirms an otherwise illegal or unenforceable agreement and becomes bound to both its benefits and its burdens. Merrill v. DeMott, 113 Nev. 1390, 1397, 951 P.2d 1040, 1044 (1997). Ratification by conduct is similar in application to the principle of estoppel, but "it operates to make the contract legally valid rather than simply preventing a party from challenging the contract's validity." Id. at 1396-97, 951 P.2d at 1044. Moreover, it is based on a theory of mutual assent. Id. at 1397, 951 P.2d at 1044.
Similarly, the theory of contract modification cannot be applied because the parties agreed that any modification to the contract must be in writing and signed by the parties to the Lease Agreements. See MacKenzie Ins. Agencies, Inc. v. Nat'l Ins. Ass'n, 110 Nev. 503, 508, 874 P.2d 758, 761 (Nev. 1994) (dissenting opinion citing Adair Homes, Inc. v. Jarrell, 59 Or. App. 80, 85, 650 P.2d 180, 183 (1982) (conduct can manifest acquiescence in modification)). Section 22.3 of the Lease Agreements provides that "[n]o subsequent alteration, amendment, change or addition to this Lease shall be binding upon Lessor or Tenant unless reduced to writing and signed by them." In light of this limitation, the Court cannot find that the debtor's payment of previous bills under the assessment and reconciling billing system amounted to contract modification.
Accordingly, the Court finds that the plain language of the Lease Agreements does not support Pebble's and Village Square's claims for CAM charges that occurred outside the Leased Premises unless such were for driveways and walkways. Moreover, the Court finds that Pebble's and Village Square's waiver, estoppel, ratification, and/or modification arguments do not cure the failure of the Lease Agreements to provide for such charges. Therefore, the Court denies Pebble's and Village Square's claims to the extent they contain charges for non-leased premises CAM charges that are not for driveways and walkways.
B. CAM CHARGES FOR THE LEASED PREMISES
Pebble and Village Square also contend that a portion of their claim is for CAM charges for common areas within the Leased Premises. In particular, Pebble and Village Square assert that they provided: (1) electricity to debtor's parking lots, (2) sweeping and/or powerwashing of the debtor's parking lots, and (3) security to patrol debtors parking lots as part of services performed for the overall Shopping Centers.
In response, the debtor argues that Pebble's and Village Square's argument blurs the distinction between expenses associated with the Leased Premises and expenses related to the common areas in order to recover non-leased premises expenses. Alteratively, the debtor contends that Pebble and Village Square should not be allowed to make this argument because it is a new claim and inconsistent with the proof of claims originally filed. Finally, even if the charges are somehow within the debtor's responsibility, the debtor, exists that it has no obligation to pay for the charges based on the improper billing procedure.
Section 4.3 of the Lease Agreements provides that the debtor shall: pay for "all costs and expenses of every character, whether foreseen or unforseen . . . in connection with the Leased Premises. . . ." The plain meaning of Section 4.3 is crystal clear, immediately understandable, straight forward, and requires no parol evidence to explain its meaning. See Chwialkowski v. Sacks, 108 Nev. 404, 406, 834 P.2d 405, 406. The debtor is required to pay all costs and expenses of every character associated with the Leased Premises. Thus, to the extent that Pebble's and Village Square's claims include CAM charges for services provided on the debtor's Leased Premises, such claims are allowed.
The debtor contends, however, that such claim should not be permitted because Pebble and Village Square did not bill such in accordance with the terms of the Lease Agreements. Pebble and Village Square argue that the Lease Agreements do not specifically provide for a billing method for such expenses, but that Section 19 of the Lease Agreements covers this situation.
Section 19 provides that if the debtor fails to make any payment or perform any act required, then Pebble or Village Square, after notice, if reasonable under the circumstances, can make payments or perform services with the same effect as if made or performed by the debtor.
The Court can find no specific provision in the Lease Agreements that controls or governs the specific billing method for CAM charges that cover both the Shopping Centers and the Leased Premises, and in the absence of a specific provision, it is clear that the debtor utilized the billing method that the Pebble and Village Square were using to bill CAM expenses to the rest of the Shopping Center tenants. Thus, Pebble's and Village Square's "fall back" to Section 19 of the Lease Agreements is both unnecessary and incorrect. The undisputed facts, as established by both Robert G. Crane's affidavit and Matthew Watson's declaration, are that the parties followed the billing mechanism established at the beginning of their relationships for estimated CAM charges paid monthly. These estimates were then reconciled at the end of each fiscal year with actual expenses. Right or wrong, that is the billing mechanism the parties have utilized. Unfortunately, the parties did not foresee this dispute over the interpretation of the Lease Agreements.
Irrespective of what occurred in the past, the parties are asking this Court to decide the discreet issue of the allowability of Pebble's and Village Square's claims based upon the terms of the Lease Agreements. The Court has already ruled that the Lease Agreements were not modified by any course of conduct and that the debtor did not waive any right to object to these certain charges because of past practices. Likewise, Pebble and Village Square are not precluded from recovering the expenses rightly attributable to the Leased Premises because of a particular billing method utilized when it appears no specific billing method was instituted by the Lease Agreements for this unforseen disputed category of expenses.
The Court, therefore, finds that to the extent that Pebble's and Village Square's claims include CAM charges attributable to the Leased Premises including electricity to the debtor's parking lots, cleaning of the debtor's parking lots, and security to the debtor's parking lots, such claims are allowed. However, as stated above, to the extent that peeble's and Village Square's claims include CAM charges for the non-leased premises that do not relate to driveways and walkways, such claims are disallowed.
V. CONCLUSION
For all of the reasons stated above, the Court finds the both parties' motions' for summary judgment should be granted in part and denied in part. Pebble's and Village Square's claims should be allowed to the extent they cover expenses attributable to the Leased Premises whether such expenses relate to CAM charges or otherwise. On the other hand, Pebble's and Village Square's claims should be disallowed to the extent they are for CAM charges attributable to the Shopping Centers, but outside the Leased Premises, unless such relate to the common walkways or driveways.
In the event that the parties are unable to reconcile and agree upon the exact amount of the allowed claim consistent with this Memorandum Opinion, a hearing will be held.
An appropriate order will enter.