Opinion
IP 00 1758-C-T/K.
September 25, 2002
ENTRY ON DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT AND PLAINTIFF'S CROSS-MOTION FOR SUMMARY JUDGMENT
This Entry is a matter of public record and is being made available to the public on the court's web site, but it is not intended for commercial publication either electronically or in paper form. Although the ruling or rulings in this Entry will govern the case presently before this court, this court does not consider the discussion in this Entry to be sufficiently novel or instructive to justify commercial publication or the subsequent citation of it in other proceedings.
Plaintiff Shadeland Hills Development Company ("Shadeland Hills") sued Defendants Westel-Indianapolis Company, d/b/a Cellular One ("Cellular One") and Crown Castle South, Inc. ("Crown Castle") over the alleged breach of a lease agreement. Defendants moved for summary judgment. In a procedural twist, Plaintiff, instead of responding to Defendants' motion, filed its own Cross-Motion for Summary Judgment. In an earlier order, this court determined to treat Plaintiff's filing as both a response to Defendants' Joint Motion for Summary Judgment and a motion for summary judgment in its own right. The parties followed up with a couple more rounds of replies and responses. That process now complete, the court, after having reviewed the briefs, admissions, interrogatories and other submissions of the parties, rules as outlined below.
I. Background
Based on the evidentiary submissions of the parties, the facts contained in this section are not in dispute unless otherwise noted. Some additional facts which are relevant to the decisions reached herein are subsequently addressed in Section III (Discussion). To the extent that any of the additional facts are in dispute, that will be noted in the discussion.
On March 15, 1995, Shadeland Hills and Cellular One entered into an agreement (the "Lease") in which Shadeland Hills leased to Cellular One approximately 3,640 square feet of land located in Marion County, Indiana (the "Leased Premises"). Charles R. Sheeks, a partner in Shadeland Hills, negotiated the agreement on its behalf with one or two representatives of Cellular One. The purpose of the Lease was for the construction of a communications antenna structure and accessory building (the "Communications Facilities"). (Defs.' SMF at 4.)
The parties disagree as to whether James A. L. Buddenbaum took part in the negotiations representing Cellular One (see Pl.'s Statement of Material Facts ("SMF") 3; Defs.' Reply to Pl.'s SMF 3) but resolution of this fact has no importance to the outcome of this case.
The court begins with a brief description of the principal terms of the Lease as relevant to this case. First, the Lease provides for a five year initial term, to begin "on April 1, 1995, or the date Lessee begins construction of the Communications Facilities, whichever occurs first. . . ." (Lease § 4.) Cellular One has the option of renewing the Lease for four additional five-year periods after the end of the initial term by giving timely written notice. (Id.) Additionally, annual rent under the Lease is due "in advance" during both the initial term and any extended terms. (Lease § 5.) Second, the only route of access to the Leased Premises is across a larger tract of land also owned by Shadeland Hills (the "Real Estate"). (Defs.' SMF at 31.) In recognition thereof, the Lease includes a provision granting "Lessee a right-of-way for ingress and egress from Shadeland Avenue on and across the Real Estate to the Leased Premises, as the Lessee reasonably requires to construct the Communications Facilities, and to use, operate and maintain same." (Lease § 3.) Third, the Lease allowed Cellular One as Lessee "to sublease or license the use of the Leased Premises, or space on and in the Lessee's Communications Facilities, to third parties for communications purposes only." (Lease § 6.) Accordingly, in 1999 Cellular One entered into a sublease agreement with Crown Castle, its co-defendant, for such purposes. (Defs.' SMF at 28.) Fourth, the Lease obligates Cellular One, as lessee, to pay all property taxes assessed against the Leased Premises. (Lease § 21.) Fifth, the Lease required Shadeland Hills to give Cellular One thirty days opportunity to cure after written notice of default — other than late payment of rent — before Shadeland Hills may acquire the right of ejectment. (Lease § 13.) Lastly, a choice of law provision in the Lease stipulated that it "shall be construed in accordance with the laws of the State of Indiana. . . ." (Lease § 22.)
A copy of the Lease appears as Exhibit 2 to Plaintiff's Cross-Motion for Summary Judgment. Unless otherwise noted, all excerpts from the Lease are taken from that exhibit, with the appropriate section noted in parenthesis.
One of the main points of contention in this case concerns the start date of the initial term, which hinges on whether construction of the Communications Facilities began before or after April 1, 1995. Plaintiff believes it commenced on some date prior to April 1; Defendants allege it began well afterward. This issue is discussed in some detail below. It is, however, undisputed that Cellular One remained as lessor of the Leased Premises for the initial five-year term, having paid rent in advance of April 1 (as well as in advance of March 15, Plaintiff's preferred due date) for each of the next four years, all of which Shadeland Hills concedes were timely payments. (Pl.'s SMF at 8.) In October of 1999, Cellular One sent Shadeland Hills a letter declaring its intent to exercise its option to extend the Lease for an additional five year-term. In that letter it described the current term as expiring on "March 31, 2000" and the new term as extending from "April 1, 2000 through March 31, 2005." (Defs.' SMF at 33.) It did not receive any objection to this description of the extended term from Plaintiff. (Defs.' SMF at 35-36.) On or about March 24, 2000, Cellular One tendered its first annual payment under the extended term. That payment was declined by Shadeland Hills, who subsequently brought this suit claiming breach of the lease agreement and seeking ejectment. (Pl.'s SMF at 10.)
II. Standard of Review
"Summary judgment is warranted only if `there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Outlaw v. Newkirk, 259 F.3d 833, 836 (7th Cir. 2001) (quoting Fed.R.Civ.P. 56(c)) Where it would not bear the burden of proof at trial, the moving party need not negate the non-movant's case, but may prevail on summary judgment by "`showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Summary judgment should be granted only where the evidence would require a directed verdict for the moving party. Anderson v. Liberty Lobby, 477 U.S. 242, 251 (1986). Where, as here, the parties have filed simultaneous motions for summary judgment, the court's review of the record "requires that [it] construe all inferences in favor of the party against whom the motion under consideration is made." Metropolitan Life Ins. Co. v. Johnson, 297 F.3d 558, 561-562 (7th Cir. 2002) (quoting Hendricks-Robinson v. Excel Corp., 237 F.3d 685, 692 (7th Cir. 1998)). The court will consider Defendants Cellular One and Crown Castle's Joint Motion for Summary Judgment first, and thus draw all reasonable inferences in favor of Shadeland Hills in its review of the record.
III. Discussion
Plaintiff claims breach of the Lease on the grounds that Cellular One tendered annual payment of rent after the alleged March 15 deadline; subleased its right-of-way over the Real Estate to its sublessee Crown Castle without either party obtaining Shadeland Hill's consent; and failed to pay property taxes due under the Lease. (Pl.'s Cross-Mot. Summ. J., Ex. 1.)
The court addresses Plaintiff's claims in reverse order, and so starts with the property tax allegation. As mentioned above, the Lease contains a provision requiring Cellular One to pay all property taxes assessed against the Leased Premises. Accordingly, Shadeland Hills sent Cellular One two letters, a copy of the Marion County Notice of Assessment in November 1996, and a semi-annual tax statement and request for payment of $164.95 in April 1997. Shortly thereafter Cellular One paid a total of $329.90 (double the semi-annual amount) to Shadeland Hills. There was no further correspondence between the parties concerning Cellular One's tax liability, nor did Cellular One make any other tax payments under the Lease. (Defs.' Joint Mot. Summ. J. at 25; Defs.' Reply to Pl.'s SMF at 18.)
Shadeland Hills argues that it provided Cellular One with all the information necessary for it to meet its property tax obligations independently, and that the Lease contains no requirement that Shadeland Hills present Cellular One with a tax bill — as it did in 1997 — before triggering Cellular One's duty to pay. (Pl.'s Cross-Mot. Summ. J. at 12.) This may be true, but disregards the express provision in the Lease calling for written notice of default and thirty days opportunity to cure. Plaintiff concedes it has not provided notice of default outside of this litigation.
That difficulty leads Shadeland Hills to propose its novel "lawsuit" theory of notice: Shadeland Hills notified Cellular One of its delinquency in the payment of taxes by filing the complaint in this case alleging the same. And despite knowledge of the complaint, Cellular One has still not remedied the situation. See Id. The notion that a notice-of-default clause in a contract may be satisfied by a lawsuit subverts the entire purpose of these clauses of avoiding unnecessary litigation; nor has opportunity to cure been given where notice of default and the lawsuit arrive in one fell swoop. Moreover, the idea is contrary to an analogous line of Indiana cases holding that where notice and an opportunity to remedy defects in sold goods form part of a warranty agreement, they operate as conditions precedent to instituting suit. See Aamco Transmission v. Air Sys., Inc., 459 N.E.2d 1215, 1217 (Ind.Ct.App. 1984) (collecting cases). Because Shadeland Hills failed to give Cellular One proper written notice as to its default in tax payments, as well as a chance to cure, there has been no actionable breach of the Lease provision relating to this obligation.
Not for lack of trying, however. Upon receipt of the complaint, Cellular One attempted to contact Shadeland Hills to arrange payment of the taxes. In response it received a letter from counsel for Shadeland Hills with the admonishment that communications between litigating parties should be conducted solely through their attorneys. The record does not indicate any further correspondence between the parties in regards to this matter. (See Pl.'s Reply to Defs.' Statement of Additional Material Facts ("SAMF") at 53.)
Nothing in this opinion should be construed to relieve Cellular One of its duty to pay current and back property taxes under the Lease; it only concerns the question of whether a breach of the lease agreement has occurred.
The second of Shadeland Hill's arguments for breach relates to the sublease agreement between it and Crown Castle. Plaintiff admits that the Lease contains an express provision authorizing sublease of the Leased Premises. Plaintiff also admits that the Lease grants to lessee a right-of-way over the Real Estate. (Pl.'s SMF at 13-15; Pl.'s Cross-Mot. Summ. J. at 9.) The Lease is, however, silent as to whether the right-of-way — necessary to reach the Leased Premises — may itself be transferred to Crown Castle as part of the sublease. Shadeland Hills maintains that the absence of an express term allowing for sublease of the right-of-way placed the burden on Crown Castle to secure Plaintiff's consent to cross over its property. (Id. at 10.)
This contention contravenes both the clear intent of the Lease and Indiana law on the assignment of real property. "A lease is to be construed as any other contract." Whiteco Indus., Inc. v. Nickolick, 571 N.E.2d 1337, 1339 (Ind.Ct.App. 1991). The meaning of a contract is derived not only from "individual words, phrases, or paragraphs" but from the document as a whole. Burkett v. Am. Family Ins. Group, 737 N.E.2d 447, 452 (Ind.Ct.App. 2000) (citation omitted). Thus, an interpretation of the contract must be sought which "harmonizes the provisions rather than one which supports a conflicting version of the provisions." Id. (citation omitted). The application of this rule of construction to the present case is clear. The Lease permits use by the lessee of the right-of-way over the Real Estate in recognition of the land-locked nature of the Leased Premises. It also allows for sublease of the Leased Premises without consent of the lessor, Shadeland Hills. This latter provision would be completely nullified by a requirement that either lessee or sublessee seek the permission of Shadeland Hills to sublease the right-of-way, since, as both parties note, the Leased Premises would have no value to a sublessee without the attached right-of-way. On Plaintiff's reading of the Lease, Cellular One and Crown Castle would, in effect, be obliged to obtain Shadeland Hills' consent to sublease the Leased Premises, although indirectly via the requirement to seek consent to sublease the right-of-way. Because this reading negates an express term of the Lease, it must be rejected as failing to "harmonize the provisions," see id., contained therein.
Furthermore, according to Indiana law, in the absence of limiting language to the contrary, tenants may freely assign or sublet. First Fed. Sav. Bank of Ind. v. Key Markets, Inc. 559 N.E.2d 600, 603 (Ind. 1990) (citing The Indianapolis Mfg. and Carptenters Union v. Cleveland, C., C., I. Ry., 45 Ind. 281 (1873)). Indiana law also follows general principles of real property in holding that an easement appurtenant, such as the right-of-way in this case, is generally transferrable along with the dominant estate it benefits. See, e.g., Jeffers v. Toschlog, 383 N.E.2d 457, 607 (Ind.App. 1978) ("The conveyance of the dominant estate carries the easement along with the dominant estate.") (citation omitted). In this case, the Lease specifically permits conveyance of a leasehold interest in the dominant estate, i.e., it gives Cellular One the power to sublet the Leased Premises. The silence of the Lease as to the right to sublease the right-of-way simply implies that the parties have not altered the background rule allowing for subleasing in general and, a fortiori, for subleasing of an attached easement where a lease gives express permission to sublease the dominant estate. Plaintiff's claim that Defendants breached the Lease by failing to secure its consent in this matter is therefore without merit. Under a fair interpretation of the Lease and Indiana law, no such consent was required.
Shadeland Hill's last argument for breach alleges that Cellular One's March 24, 2000, payment of annual rent for the 2000-2001 term of the Lease was not timely. The court finds insufficient factual support for this charge as well.
The parties agree that the extended term option which Cellular One chose to exercise, and under which its rental payment is claimed to be late, renewed the original agreement such that the extended term is governed by the same start date as the initial term. (Defs.' Reply at 7.) The Lease gives the initial term as beginning on April 1, 1995, or the start of construction on the Communications Facilities, whichever is earlier. In this respect the Lease is unambiguous. The only question lies in whether the event referenced in the Lease — the commencement of construction — occurred prior to April 1, thereby triggering an antecedent due date, or not. The sole task before the court is thus to determine whether Defendants have demonstrated the absence of a genuine issue of material fact regarding this question.
Plaintiff continually cites Appendix B to the Lease as providing for a start date of March 15, 1995. (See, e.g., Pl.'s Cross-Mot. Summ. J. at 8.) Appendix B plainly says no such thing. It merely states what is not in contention, that the Lease was executed on March 15, 1995, and gives a rental sum for each five-year term. (See Id., Ex. 2 at App. B (". . . pursuant to a certain Lease and Right-of-Way Agreement entered into as of March 15, 1995 and to which this rent payment schedule is appended and made a part. . . .") (emphasis added.))
In support of Defendants' position that construction was initiated subsequent to April 1, they adduce an affidavit by Jeffrey W. Kellerman, Project Manager for Cellular One responsible for the site that is the subject of the Lease. (Kellerman Aff. ¶ 7.) Mr. Kellerman attests that Cellular One first received notice from the Indianapolis Metropolitan Development Commission that the site had been rezoned for construction of the cellular tower on April 24, 1995, (see Commission Letter attached as Ex. B to Stoner Aff.) and that he did not "release," the site, that is, notify the construction company that construction may begin, until May 31, 1995. (Kellerman Aff. ¶ 11.) Defendants have also submitted an affidavit by Jason D. Stoner, Project Manager with Valcom, Inc., the construction company hired to build the Communications Facilities. Mr. Stoner corroborates Mr. Kellerman's account with reference to a "Work Performed" record giving May 31 as the date the site was released. Mr. Stoner additionally states that an attached invoice from a subcontrator referring to a shipment dated June 2, 1995, describes the first of any construction activity to occur on the site. (Stoner Aff. ¶ 6.; Ex. A to Stoner Aff.) Finally, Defendants point to two permits they received from the Neighborhood and Development Services Division dated April 25, 1995, with the work status noted as "not yet started." (Exs. C, D to Kellerman Aff.)
Plaintiff's only evidence to the contrary is an affidavit by Charles R. Sheeks, a partner in Shadeland Hills. According to Mr. Sheeks' affidavit testimony, "in late Febrauary, 1995, affiant observed that Defendant had taken possession of the demised premises and was clearing the land of trees, shrubs, and bushes." (Sheeks Aff. ¶ 6.) Mr. Sheeks does not state the grounds for his belief that Defendants "possessed" the Leased Premises. His statement is nothing more than a bald and self-serving conclusion. More important, there is no basis to conclude with any confidence that what Mr. Sheeks perceived was, in fact, construction on the Communications Facilities. Cellular One offers an alternative and unrebutted explanation for his observation consistent with a post April start date: In early February 1995, Alt Witzig Engineering performed a subsurface investigation on the Leased Premises to determine the suitability of the site for construction, contemplated by section 18 of the Lease, which may have required some clearing of the land to allow for passage of the drilling rig. (Coffey Aff. ¶ 6; Defs.' SAMF at 44-49.) Permitted presence on the property for that type of testing does not constitute possession, nor is it commencement of construction.
Mr. Sheeks also claims that after viewing the activity on the site he placed a call to Mr. Buddenbaum, a representative of Cellular One, and shortly thereafter received the first rental payment. (Sheeks Aff. ¶ 7). Defendants deny that Mr. Buddenbaum either received this call or sent any materials in response. (Defs.' Resp. to Pl.'s SMF at 7.) Neither party has produced the precise date the first rental check was either sent or received. (Pl.'s Answer to Interrog. 6.)
In light of Defendants' strong showing in favor of a post April 1 construction start, Mr. Sheeks statement, even when viewed in the most favorable light, see Metropolitan Life Insurance Co., 297 F.3d at 561-562, cannot by itself withstand Defendants' motion for summary judgment. See Chemsource, Inc. v. Hub Group, Inc., 106 F.3d 1358, 1361 (7th Cir. 1997) ("The nonmovant may not rest upon mere allegations in the pleadings or upon conclusory statements in affidavits.") The Sheeks affidavit does not support the conclusion Plaintiff wishes to draw from it — that construction on the Communications Facilities had begun in late February — which conclusion is squarely contradicted by the affidavits, work records, and government correspondence submitted by Defendants. At best, all that Sheeks observed was the limited activity of Cellular One's agent on the property, doing preparatory testing that was necessarily precedent to the commencement of construction. Plaintiff has produced no facts that would allow a reasonable inference to be drawn that it was anything more than that. In sum, all of the properly founded evidence and the only reasonable inferences that can be drawn from that evidence point to a post April 1, 1995, commencement to construction, and by extension, to an April 1 start to the rental term. Cellular One's March 24, 2000, tender of payment was therefore timely, and Defendants are not in breach of the Lease.
Nor is it even consistent with Plaintiff's own position, in that it would imply a rental term beginning in late February, not the March 15 date for which Plaintiff advocates. (Pl.'s SMF at 8,10,17.)
The court's disposition of this matter precludes the need for separate consideration of Plaintiff's Cross-Motion for Summary Judgment. Plaintiff's arguments in support of its own motion are merely the converse of the reasons it unsuccessfully contends that the Defendants should not prevail on their first-filed dispositive motion. Plaintiff's motion necessarily fails by virtue of the court's grant of summary judgment to Defendants.
IV. Conclusion
In conclusion, Defendants' Joint Motion for Summary Judgment is GRANTED, and Plaintiff's Cross-Motion for Summary Judgment is DENIED.
ALL OF WHICH IS ENTERED this ___ day of October 2002.