Bannum, Inc. v. 2210 Adams Place, N.E., LLC
Bannum, Inc. v. 2210 Adams Place, N.E., LLC
Opinion of the Court
This case concerns a dispute between Bannum, Inc. (“Bannum” or “Tenant”), a Kentucky corporation that operates correctional facilities under contract with the Bureau of Prisons (“BOP”), and 2210 Adams Place, N.E., LLC (“Landlord”), a Maryland company that owns the commer
I. Factual Background
In July 2002, Bannum entered into a lease agreement in order to operate a correctional facility at 2210 Adams Place, a commercial property configured as a warehouse at the time. The agreement explicitly stated that the tenancy would run concurrently with Bannum’s BOP contract, and that the lease would “become null and void immediately” when the BOP contract terminated. The agreement allowed Ban-num to make alterations to the property to meet the BOP’s requirements, except that it required the removal of the improvements “if requested to do so by Landlord in -writing before the expiration of the [lease] term.” After making necessary changes, such as the installation of dormitories, bathrooms and the like, Bannum operated a correctional facility on the premises from 2003 to early April 2006.
The landlord-tenant relationship seems to have come under strain almost immediately. In October 2003, the landlord filed suit to eject Bannum, which was stayed when Bannum countersued, alleging a breach of the covenant of quiet enjoyment.
On September 20, 2006, the landlord sued Bannum. The single count of the complaint, entitled “Breach of Lease,” alleged that the tenant had vacated the premises “on or around April 9, 2006, with rent due and owing” and had failed to restore said premises “to the condition they were in at the commencement of the [ljease.” Though the complaint demanded unpaid rent, it did not mention the lease’s tenancy at sufferance clause.
In light of the fact that the premises were at least as valuable in their current configuration as they would be without Bannum’s alterations, the court held that the landlord had failed to prove damages on its restoration claim. The court also dismissed Bannum’s objection to the belated reference to the lease’s holdover provision, holding that the argument was “no more than an interpretation of the Lease that is in evidence.... [Bannum] cannot claim surprise that [the landlord] asks the court to determine [Bannum’s] obligations by reading the Lease.”
II. Legal Analysis
Both parties have alleged error below. We consider each appeal in turn. In doing so, we apply general contract interpretation principles to parse the lease.
A. Bannum’s Appeal
Bannum contends that it is not ha-ble as a tenant at sufferance. First, it objects to the late introduction of the issue during trial as an unfair surprise. Second, it contends that it has incurred no liability under the clause because of the lease’s post-expiration prohibition on liability, or alternatively, because it surrendered the premises as required and therefore did not become a tenant at sufferance in the first instance.
i. Unfair surprise
Bannum claims that the trial court erred in allowing the landlord to claim the
ii. The validity and application of the tenancy at sufferance clause
Bannum also argues that the tenancy at sufferance clause was inapplicable because (a) it had no liability under the lease after it had expired, or (b) even if the clause did apply, it had surrendered the premises as required.
We first dispose of the threshold argument. Bannum appears to rely on the clause that stated “Bannum will have no further liability under the lease after its expiration” to argue that it had no liability under the tenancy at sufferance clause because the lease had expired when the clause went into effect. This defies the very nature of a tenancy at sufferance, which arises, by definition, after a lease expires. Any interpretation of the “no further liability” clause that would insulate Bannum from all liability once the lease expired would make the tenancy at sufferance clause a nullity since it could never become effective. Rather than read the tenancy at sufferance clause out of the contract, the better approach is to recognize that the liability for a tenant at sufferance does not arise under the lease but is imposed by law on a tenant wrongfully holding over.
Bannum also argues that it “surrendered” the premises the day after the cancellation of the BOP contract, as required by the tenancy at sufferance clause.
iii. The award of damages for the damaged HVAC unit on the premises
After the landlord re-entered the premises, it found that the HVAC unit was damaged and required repairs. The lease required Bannum to turn over the HVAC in good working order. Bannum argues that the landlord failed to prove that the damage occurred during Bannum’s tenancy because the landlord’s witnesses could not inspect the premises until April 14, 2006, notwithstanding the apparent irony of its contention that it had surrendered the premises to the landlord by April 7, 2006. Therefore, argues Bannum, the landlord could not prove that the HVAC was damaged during Bannum’s tenancy. There was conflicting testimony on this issue at trial. Nevertheless, the trial court found that it was more likely than not that the damage had occurred during Bannum’s tenancy. Since there was some factual basis for that conclusion, we cannot say
B. The landlord’s appeal
It is undisputed that Bannum breached the lease by failing to restore the premises after the lease expired. Specifically, Bannum was required to remove all water heaters and fixtures, as well as the plumbing and interior walls, and restore the loading dock, leaving behind an unimproved warehouse instead of a warehouse “upgraded” to house a correctional facility. Bannum did not do so. But it introduced expert testimony to prove that the alterations had increased the value of the premises. The landlord’s real estate manager contested the valuation of B annum’s expert, but conceded that the alterations did not decrease the value of the premises. After considering both sides’ contentions, the trial court found that the rental value of the premises had increased due to Ban-num’s alterations. The trial court found it significant that the landlord has not carried out any restoration on its own and that B annum’s alterations have made it possible to lease the premises to the District of Columbia, which operates them as a homeless shelter.
The landlord nevertheless maintains that it was entitled to the benefit of its bargain. It urges us to follow American Standard, Inc. v. Schectman,
We are not convinced. American Standard involved a contractor who had bargained for and received consideration specifically to perform the alterations to the plaintiffs property. Here, the main purpose of the lease agreement was not to restore the landlord’s property, but to convey a limited estate from the landlord to the tenant to the mutual benefit of both parties. In an effort to bridge this conceptual gap, the landlord hypothetically claims that “[h]ad Bannum been given $100,000 to restore the premises and then failed to do so, under the trial court’s ruling, Bannum would have been entitled to keep the $100,000.” With this hypothetical, the landlord exposes the fatal flaw in its con
The undisputed facts, and the disputed facts taken as Lessors see them, plainly show that Lessors have suffered no damage as a result of [tenant’s] failure to restore the premises. Consequently, cost of repair damages would be wholly unrelated to the loss, which does not exist. The diminution of value rule yields Lessors nothing because [tenant’s] conduct did not cause a diminution.
Lessors cannot claim as damages the out-of-pocket expenditures required to perform the restoration. No such expenditures have occurred. Furthermore, no such expenses will occur.23
Similarly, the landlord has suffered no damage here. It has not performed any restorations on its own, nor will it, since the current configuration of the premises as a homeless shelter depends entirely on keeping Bannum’s alterations intact. Finally, the law of this jurisdiction also counsels that we apply the “economic waste” theory.
C. Attorney fee award
We review an award of attorney fees for an abuse of discretion, which is “firmly committed to the informed discretion of the trial court.”
III. Conclusion
Neither party’s arguments succeed in convincing us of an error in the order below. The trial judge is in the best position as the adjudicator of facts, and we see no abuse of discretion in her factual conclusions. Furthermore, we can detect no legal error in her conclusions of law. Therefore we find no basis for reversal.
Affirmed.
. It appears that both suits were still pending at the time Bannum's BOP contract expired.
. The trial court did not credit appellee's witnesses' testimony that they arrived at 2210 Adams Place on April 7, 2009 by coincidence, unaware that something may have gone awry with Bannum’s BOP contract.
. That clause stated:
If tenant shall not immediately surrender the premises on the day after the expiration or termination of the term, then tenant shall, by virtue of this lease, become a tenant at sufferance at a monthly rent equal to one hundred fifty percent of the monthly installment of the Base Annual Rent due under the terms of the lease. Tenant as a tenant at sufferance shall be subject to all the conditions and covenants of this lease.... During any holdover period each party shall give to the other at least thirty days prior written notice to quit the premises....
. Saul Subsidiary II Ltd. P’ship v. Venator Group Specialty, Inc., 830 A.2d 854, 861 (D.C. 2003).
. 753 A.2d 1001 (D.C. 2000).
. Clarke v. District of Columbia, 311 A.2d 508, 511 (D.C. 1973).
. Id. at 1005.
. This is not to say that we would condone a case where the decision was reached “on the basis of a record in which the parties did not focus upon [the central] issues." See Bahura v. S.E.W. Investors, 754 A.2d 928, 947 n. 18 (D.C. 2000).
. A.H. Fetting Mfg. Jewelry Co. v. Waltz, 160 Md. 50, 54, 152 A. 434 (1930) ("It seems the better view [is] to regard the liability of the tenant wrongfully holding over as one imposed by law on the tenant, without his express or implied consent, and enforceable in an action at law as a quasi contractual obligation in order that justice may be done between the parties.”).
. See supra note 3.
. Saul Subsidiary II, supra note 4, 830 A.2d at 861.
. Id. (citing Black's Law Dictionary 1794 (3d Ed. 1933)).
. Id.
. Black's Law Dictionary 1484 (8th Ed. 2004).
. See supra note 3.
. 80 A.D.2d 318, 439 N.Y.S.2d 529 (4th Dep’t. 1981).
. Id. at 319-20, 439 N.Y.S.2d at 530.
. Id. (citations omitted).
. Id. at 322-23, 439 N.Y.S.2d at 532-33 (citations omitted).
. Id.
. 397 F.2d 113 (7th Cir. 1968).
. Id. at 117.
. See Fortune v. Evans, 58 A.2d 919, 920 (D.C. 1948) ("[Where] remedy of the defect will usually require more than a reasonable expenditure, resulting in an unreasonable economic waste[,] ... the measure of damages is not the cost of replacing the defective work, but is the difference between the value that the work would have had if performed according to the contract and the value of the work as actually performed.”).
. Steadman v. Steadman, 514 A.2d 1196, 1200 (D.C. 1986).
. Allen v. District of Columbia, 503 A.2d 1233, 1236 (D.C. 1986) (quoting Hensley v. Eckerhart, 461 U.S. 424, 436, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983)) ("A typical formulation is that plaintiffs may be considered prevailing parties for attorney’s fees purposes if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.”) (emphasis in original) (internal quotation marks omitted).
Concurring Opinion
concurring in part and dissenting in part:
I agree with, and I am pleased to join, all of Judge Kramer’s persuasive opinion except Part III C, in which the court affirms the trial judge’s award of counsel fees to the landlord. As to that issue, I agree that the landlord was entitled to recover some of its counsel fees,
I recognize that “a request for attorney’s fees should not result in a second major litigation.” Fleming v. Carroll Pub. Co., 581 A.2d 1219, 1229 (D.C. 1990) (Fleming I) (quoting Pierce v. Underwood, 487 U.S. 552, 563, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988)). I also agree that the amount to be awarded is “firmly committed to the informed discretion of the trial court.” Maj. op. at p. 439; Steadman v. Steadman, 514 A.2d 1196, 1200 (D.C. 1986). Nevertheless, appellate courts have a role to play in the process, and our review is not toothless.
As the trial judge appropriately recognized in awarding the landlord counsel fees in the amount of $18,240.60 (a sum which represented two-thirds of the landlord’s documented fees, after subtracting certain relatively minor deductions),
[t]he degree of success in litigation is a relevant factor in the award of attorney’s fees. Statutes awarding attorney’s fees normally limit such a right to the ‘successful’ or ‘prevailing’ party.... The same general concept seems to be applied ordinarily in the interpretation of contractual provisions for attorney’s fees. [Fleming I], 581 A.2d at 1228, “[I]n such cases where a party is only partially successful, the trial court must exercise its discretion to determine what amount of fees, if any, should be awarded.” Id. at 1229 (citing Hensley v. Eckerhart, 461 U.S. 424, 436-37 [103 S.Ct. 1933, 76 L.Ed.2d 40] (1983)).
Order of July 3, 2008, at p. 4.
Relying on our decision in Fleming v. Carroll Pub. Co., 621 A.2d 829 (D.C. 1993) (Fleming II),
“[T]he degree of the plaintiffs success in relation to the other goals of the lawsuit is a factor critical to the determination of the size of a reasonable fee.” Texas State Teachers Ass’n v. Garland Indep. School Dist. 489 U.S. 782, 790-91, 109 S.Ct. 1486, 103 L.Ed.2d 866 (1989) (emphasis added).
The trial judge, however, did not analyze the case in that way. She held that because the landlord was successful with respect to two of the three claims, the award of counsel fees should be reduced by “one third, which represents a reasonable calculation of the measure by which plaintiff prevailed in this action.” Order of July 3, 2008, at p. 5.1 am unable to agree with the notion that, for counsel fee purposes, it makes no difference whether the plaintiff prevailed on a claim for $7,870 or one for $141,500.00. Under the trial judge’s analysis, affirmed by this court, each such award supposedly represents success with respect to one-third of a lawsuit. As I understand the trial judge’s order, affirmed by my colleagues, the exercise was essentially a mechanical one — if a party prevails on two of three claims, whatever those claims are, then under a lease provision authorizing an award of counsel fees, that party recovers two-thirds of its fees.
In my view, this analysis — counting the number of claims won or lost, without explicitly considering the content of each— impermissibly exalts form over substance. As the Supreme Court explained almost a century ago in a different but relevant context, “the courts will not permit themselves to be blinded by mere forms ... but will deal with the substance of the transaction ... as the justice of the case may require.” Chicago, M. & St. P. Ry. Co. v. Minneapolis Civic & Commerce Ass’n, 247 U.S. 490, 501, 38 S.Ct. 553, 62 L.Ed. 1229 (1918). More recently, we have reiterated that “[cjourts deal with the substance rather than the form of a transaction,” and
I do not mean to suggest that the measure of a party’s victory should necessarily be determined by the dollar amounts of the successful claims, as compared to the sums sought but not recovered,
the proportionate share concept is only a rule of thumb to guide the district court’s discretion, ... and that an evaluation by the trial court should be made to determine the effort expended against each defendant and accordingly the pro rata division of attorney fees.
Id at 556. In my view, however, an award reached by simply comparing the number of claims won with those lost, and basing the fee on that comparison, without any consideration of the importance of each claim in the litigation as a whole,
.The lease agreement between the parties contained two provisions, each of which arguably entitled the landlord to an award:
¶ 5.06H: Tenant shall pay to Landlord “all court costs, legal fees, and expenses incurred by Landlord in effecting the collection of the rent from the Tenant, the curing of any default on the part of the tenant in performance of any of its obligations hereunder, and/or obtaining possession of the Premises.”
¶ 8.5: "In the event of any dispute under this Lease, the prevailing party shall be entitled to recover, in addition to any other remedy or relief to which it is entitled, reasonable attorney's fees, expert witness and consultant fees, and the costs of litigation or arbitration.”
. "To be deemed a 'prevailing party,' it is necessary only that the plaintiff succeed on any significant issue in litigation which achieves most of the benefit the parties sought in bringing the suit.” Fleming II, 621 A.2d at 837 n. 14 (emphasis in original).
. See Chang v. Louis & Alexander, Inc., 645 A.2d 1110, 1115-16 (D.C. 1994), holding that, at least where the tenant has filed a counterclaim, the landlord and the tenant may both be prevailing parties for counsel fee purposes with respect to individual claims or issues.
. The court added that this consideration is not a proper factor in the determination whether any award should be made.
. E.g., if a plaintiff sues for $ 1,000,000 in pain and suffering and the jury only awards him $50,000, this does not mean that the amount of attorney time devoted to the issue was only one twentieth of what it would have been if the plaintiff had recovered the full amount prayed for.
. It is conceivable, I suppose, that the landlord's attorneys devoted more time and effort to the damage to the air-conditioning and to the rent owed than they did to restoration costs, because these two issues involved money out of the landlord’s pocket rather than merely an additional hoped for recovery. If that was the basis for the trial judge's approach, however, there is no indication of it in the record before us.
Reference
- Full Case Name
- BANNUM, INC., Appellant/Cross v. 2210 ADAMS PLACE, N.E., LLC, Appellee/Cross
- Status
- Published