Opinion
No. 105,989.
2012-06-22
BABYLON, L.L.C., Appellant, v. ADVANTAGE SALES & MARKETING, L.L.C., Appellee.
Appeal from Johnson District Court; James F. Vano, Judge. Brennan P. Fagan, of Fagan Emert & Davis, L.L.C., of Lawrence, for appellant. Lindsay Todd Perkins, Barry L. Pickens, and Kelly A. Campbell, of Spencer Fane Britt & Browne LLP, of Overland Park, for appellee.
Appeal from Johnson District Court; James F. Vano, Judge.
Brennan P. Fagan, of Fagan Emert & Davis, L.L.C., of Lawrence, for appellant. Lindsay Todd Perkins, Barry L. Pickens, and Kelly A. Campbell, of Spencer Fane Britt & Browne LLP, of Overland Park, for appellee.
Before LEBEN, P.J., STANDRIDGE and ARNOLD–BURGER, JJ.
MEMORANDUM OPINION
PER CURIAM.
This is a commercial landlord-tenant action involving Babylon, L.L.C. (Babylon), the landlord, and Advantage Sales & Marketing, L.L .C. (ASM), the tenant. Babylon appeals from a jury verdict finding that it did not give notice within the requirements of the lease agreement regarding its claim that ASM failed to perform its duties under the lease. Specifically, Babylon argues the jury's finding that Babylon failed to comply with the notice provision of the lease is contrary to the evidence presented at trial. We disagree and therefore affirm the verdict rendered.
Facts
This appeal arises from a dispute between Babylon and ASM regarding a commercial lease. The dispute revolves around a lease agreement that was assigned to Babylon when it purchased the building in which ASM was a tenant.
In 2004, Babylon purchased a commercial building for $1,850,000 as investment property. At the time, ASM was the building's tenant and had been since July 1, 2003; ASM's lease was assigned to Babylon from the building's previous owner. ASM is a national marketing agency for grocery stores, and the lease stated that the building was to be used as a food brokerage office and storage facility. Throughout its tenancy, ASM properly paid rent to Babylon. The lease was scheduled to expire in June 2008; Babylon and ASM agreed to extend the lease for 60 days while ASM was waiting for its new facility to be completed.
ASM moved out of the building at the end of August 2008. When ASM vacated the building, John Bush, one of Babylon's members, walked through the building with ASM's branch manager. Bush asked ASM to remove a walk-in freezer that was left in the building, but otherwise did not ask ASM to fix or change anything in the building. ASM complied, and Bush returned to the building to verify that the freezer was removed and to accept the keys. ASM considered Bush's actions as confirmation that the property was acceptable to Babylon and that the lease was closed.
On March 13, 2009—more than 6 months after ASM vacated the building—Babylon mailed a demand letter to ASM at its address in Lenexa, Kansas. Salah Ibrahim, a member of Babylon, sent the letter through his assistant. This was the first contact between Babylon and ASM since ASM turned in the keys and vacated the building. The letter listed damages totaling $48,000 for which Babylon stated that ASM was responsible; Babylon demanded that ASM pay the damages within 10 days of the letter.
ASM's deputy general counsel, Dana Miles, responded with a letter that stated ASM was not obligated to pay the damages as Babylon demanded. Miles' letter said that ASM could not know what had occurred in the building during the 6 months since ASM moved out. Miles also noted that no problems were identified at the time ASM turned the building over to Babylon. Babylon's attorney responded to Miles' letter by mailing a letter to ASM's Charlotte, North Carolina, address on April 10, 2009, that restated Babylon's demand for damages and offered ASM an opportunity to inspect the property. ASM did not reply to this letter.
On May 7, 2009, Babylon filed a complaint against ASM, alleging that ASM breached the lease agreement and asking for $48,000 in damages. ASM filed an answer on June 12, 2009, asserting that Babylon did not serve proper notice to ASM of its claims.
A jury trial began on January 10, 2011. The main dispute at trial was whether ASM left the property “in the same condition as received” except for ordinary wear and tear. Ibrahim testified on behalf of Babylon, stating that the building was “functionable, usable, [and] leaseable” when Babylon purchased the building in 2004, but the property was in poor condition in 2008 when ASM moved out. Ibrahim said that Babylon could not sell or re-lease the property immediately after ASM vacated for a price in line with what Babylon owed on the property. Babylon eventually did around $245,000 worth of repair work and sold the building for $2,050,000.
ASM presented evidence that it left the property in suitable condition and the damages Babylon claimed from ASM were related to water damage that occurred after ASM vacated the property. ASM's branch manager, Tom Popek, testified that clients were in the building shortly before ASM moved out and the building was clean aside from some small stains on the carpet and some damage to the wall against which the walk-in freezer rested. Popek said that at the time ASM vacated the property, the property complied with the condition stated in the lease. He said Bush walked through the property with him and did not request any repairs be done.
The other issue discussed at trial—key to Babylon's claim on appeal—is whether Babylon properly notified ASM of its demand for damages. The lease agreement was admitted into evidence and includes three provisions relevant to Babylon's appeal. First is the notice provision, which reads:
“ Notices: Whenever under this Lease provision is made for any demand, notice or declaration of any kind, or where it is deemed desirable or necessary by either party to give or serve any such notice, demand or declaration to the other party, it shall be in writing and served either personally or sent by certified mail, postage prepaid, addressed at the addresses set forth in Section 1. Either party may, by like notice at any time and from time to time, designate a different address to which notices shall be sent. Such notices, if mailed, shall be considered sufficiently served or given, for all purposes herein, at the time they shall be postmarked by the United States Postal Service, or if delivered upon date of actual delivery.”
Section 1 of the lease agreement lists an address in Irvine, California, as the appropriate contact address for ASM.
The second provision at issue is a “time is of the essence” clause included in the lease. It reads: “Time is of the essence of this Lease and each and every provision hereof.” Finally, the lease contained this provision relating to default and breach:
“ Events: The occurrence of any of the following shall, at the option of Lessor, constitute a material default and breach of this Lease by Lessee: ... (iii) A failure by Lessee to observe and perform any other provision of this Lease to be observed or performed by Lessee, where such failure continues for thirty (30) days after written notice thereof by Lessor to Lessee provided however, that if the nature of such default is such that the same cannot reasonably be cured within such thirty (30) day period Lessee shall not be deemed in default hereunder if Lessee commences such cure within said thirty (30) day period and thereafter diligently prosecutes the same to completion....”
Babylon's two demand letters to ASM were admitted into evidence. The first was dated March 13, 2009, and was sent to ASM's address in Lenexa, Kansas. It demanded ASM pay damages to Babylon within 10 days of the letter. The second letter, a response to Miles' letter, was dated April 10, 2009, and sent to ASM's address in Charlotte, North Carolina. It stated Babylon would file a lawsuit if ASM did not respond to the letter within 12 days.
ASM also presented testimony from Miles, who stated that he believed ASM's business with Babylon was closed when Bush walked through the property and did not request that ASM make any repairs, aside from removing the walk-in freezer. Miles' testimony highlighted the lease provision that required notice and demands be sent to ASM's address in California and the fact that Babylon's demand letters went to ASM's offices in Kansas and North Carolina. Miles testified that he did not believe the letters qualified as “notice” under the terms of the lease. Miles also said he believed Babylon's letters violated the provision of the lease that gives ASM a 30–day window to cure a default of the lease. Babylon presented evidence that the letters served as an announcement of Babylon's demand and thus met a dictionary definition of notice.
On January 13, 2011, the jury returned a verdict answering “no” to this special question: “ ‘Did the plaintiff give notice as required by the lease concerning its claims of defendant's failure to perform any duties under the lease contract?’ “ The jury did not decide any of the other issues raised at trial, and the district court held—as a matter of law—that the jury's answer to the special question was a verdict in favor of ASM.
Analysis
In the only issue on appeal, Babylon asserts the jury's finding—that Babylon did not give proper notice to ASM of its claim that ASM breached its duties under the lease—was contrary to the evidence presented at trial. To this end, Babylon makes three arguments: (1) that Babylon's letter, dated March 13, 2009, provided ASM with notice of its claim; (2) that the 6–month delay between ASM's vacancy and Babylon's letter did not cause notice to be ineffective; and (3) that ASM knew of the problems with the building at the time it vacated and thus had notice. In response, ASM maintains that sufficient evidence was presented to show Babylon's letter did not comply with the contracted-for notice requirements in the lease agreement and thus ASM never received proper notice of Babylon's claim for damages.
This court's standard of review is whether the evidence, viewed in the light most favorable to the prevailing party, supports the verdict. If it does, this court does not intervene. Unruh v. Purina Mills, 289 Kan. 1185, 1195, 221 P.3d 1130 (2009) (citing City of Mission Hills v. Sexton, 284 Kan. 414, 422, 160 P.3d 812 [2007] ). In Unruh, our Supreme Court offered this language about claims of insufficient evidence:
“On appellate review, this court accepts as true the evidence and all the inferences to be drawn from it which support or tend to support the findings, verdict, and judgment below, while disregarding any conflicting evidence or other inferences that might be drawn from the evidence. When a jury's findings are attacked as being based on insufficient evidence or being contrary to the evidence, this court's power begins and ends with a determination of whether there is evidence to support those findings. If the evidence supports the jury's findings, this court will not disturb them on appeal. It is of no consequence that contrary evidence might have supported different findings if believed by the jury. Special findings by ajury are to be construed liberally on appeal and interpreted in light of the testimony to ascertain their intended meaning.” 289 Kan. at 1196–97 (citing Calver v. Hinson, 267 Kan. 369, 375, 982 P.2d 970 [1999] ).
Appellate courts generally do not reweigh the evidence or review the credibility of the witnesses. Unruh, 289 Kan. at 1195.
Because the issue before this court focuses on the notice provision in the lease, resolving Babylon's claim necessarily involves contract enforcement principles. Contract interpretation is a matter of law over which appellate courts have unlimited review. National Bank of Andover v. Kansas Bankers Surety Co., 290 Kan. 247, 263, 225 P.3d 707 (2010) (citing City of Arkansas City v. Bruton, 284 Kan. 815, Syl. ¶ 1, 166 P.3d 992 [2007] ). “If the language of a lawful contract is clear and unambiguous, the parties are entitled to have it enforced as written.” Razorback Contractors v. Board of Johnson County Comm'rs, 43 Kan.App.2d 527, Syl. ¶ 5, 227 P.3d 29 (2010), rev. denied 292 Kan. 965 (2011).
In this case, the evidence presented at trial indicated that Babylon, through its assignment of the lease agreement, contracted with ASM that notice of default would be given in a specific way—certified mail to ASM's address in Irvine, California. The evidence was undisputed that Babylon's demand letters went to other addresses—one to Kansas and another to North Carolina. On appeal, Babylon argues that the March 13, 2009, demand letter “clearly provides notice to ASM ... consistent with the notice provision in the Lease.” But Babylon does not address or otherwise explain the discrepancy between the address specified in the notice provision of the lease and the addresses to which Babylon actually mailed its letters. In fact, Babylon cites authority on appeal for the proposition that notice provisions in contracts should be enforced as written.
Indeed, our Supreme Court has previously stated: “[P]arties are free to contract for any type announcement or notice they desire. When the parties have specified the type of announcement or notice to be given, that provision is to be enforced as written, whether it results in actual notice or not.” Fourth Nat'l Bank & Trust Co. v. Mobil Oil Corp., 224 Kan. 347, 354, 582 P.2d 236 (1978); accord Razorback Contractors, 43 Kan App.2d at 539–40. Although Babylon's March 13, 2009, letter made ASM aware of Babylon's claim, the evidence at trial was undisputed that Babylon's method of notice did not follow the notice provision contracted for in the lease. This evidence supports the jury's special verdict that Babylon did not execute proper notice on ASM.
The analysis of Babylon's claim on appeal can probably stop here. However, both Babylon and ASM raise various arguments that we briefly will address. The first is Babylon's contention that the 6–month window between ASM vacating the property and Babylon's demand letter does not make notice defective. Babylon argues that the wait was necessary for it to determine the building could not be reasonably re-leased or sold.
In response, ASM argues the delay caused the notice to be ineffective and the appropriate time for Babylon to raise issues was at the time the lease expired. We find merit to this argument. ASM cites Hochard v. Deiter, 219 Kan. 738, 742, 549 P.2d 970 (1976), for the proposition that performance by a certain point in time may be “ ‘necessarily implied from the character of the obligations assumed.’ “ This principle applies to the present situation. The character of real property is that it changes and is exposed to natural and human elements. Several pieces of evidence—the lease's time-is-of-the-essence clause, the amount of time the building stood vacant, the fact water damage occurred after ASM moved out, and the fact one of Babylon's members walked through the property at the end of ASM's lease and did not state any problems—support a decision that 6 months after ASM moved out was too long under the lease for Babylon to wait to demand damages.
Second, Babylon's argument that ASM had “actual notice” of the damages to the building is similarly flawed. Babylon claims ASM had actual notice because ASM was aware that the property was in poor condition when it moved out and thus did not comply with the terms of the lease. This argument is problematic for two reasons. First, it disregards ASM's contention at trial that the property was acceptable at the time it moved out. Second, it ignores the fact that the parties contracted the terms of proper notice, as discussed above. The evidence presented at trial supports the jury's finding that the lease dictated a proper manner of notice, with which Babylon did not comply.
Finally, we address an argument presented by ASM. Specifically, ASM argues that notice was ineffective because Babylon's demand letters did not comply with the provision of the lease that gave ASM 30 days to cure a default of the lease. But this argument is irrelevant to the issue of whether Babylon complied with the lease's notice provision when it demanded ASM pay damages for the property. Had the trial proceeded past the issue of notice, the opportunity-to-cure clause probably would have become an issue. The evidence at trial suggests that Babylon did not comply with the provision; Babylon demanded payment for the damages within 10 days of its first letter. Again, however, that argument is not relevant to whether the evidence supports the jury's verdict that Babylon did not comply with the notice provision of the lease.
Affirmed.