The Icehouse, Inc. vs. Geissler et al
Annotate this CaseThe Icehouse, Inc.
Plaintiff and Appellant
v.
Paul Geissler and PTG Enterprises, LLC.,
Defendants and Appellees
[2001 SD 134]
South Dakota Supreme Court
Appeal from the Circuit Court of
The Seventh Judicial Circuit
Pennington County, South Dakota
Hon. Jeff Davis, Judge
John K. Nooney
Penny Tibke Platnick
Ryan J. Taylor of
Morrill, Thomas, Nooney & Braun, LLP
Rapid City, South Dakota
Attorneys for plaintiff and appellant.
Mark J. Connot of
Gunderson, Palmer, Goodsell & Nelson
Rapid City, South Dakota
Attorneys for defendants and appellees.
Considered on Briefs August 28, 2001
Opinion Filed 11/7/2001
#21768
GILBERTSON, Chief Justice
[¶1.] The Icehouse, Inc. (“Icehouse”) leased portions of a building owned by Paul Geissler and PTG Enterprises, LLC (collectively referred to as “Geissler”). The applicable leases extended through March 5, 2001, with an option to renew for another five-year term held by Icehouse. After a dispute arose as to the parties’ rights under the leases, Icehouse filed a declaratory judgment action. Geissler filed a counterclaim, alleging numerous material breaches of the leases, and requesting immediate eviction. The circuit court concluded one lease was ambiguous and ordered Icehouse to vacate the premises at the expiration of the lease. We reverse and remand as to the issues raised by Icehouse and affirm as to the issues raised by Geissler upon a notice of review.
FACTS AND PROCEDURESTANDARD OF REVIEW
[¶7.] A trial court’s findings of fact are reviewed by this Court under the clearly erroneous standard. Arnold Murray Constr., LLC v. Hicks, 2001 SD 7, ¶6, 621 NW2d 171, 174. Pursuant to this standard, we will reverse a finding of fact only “if we are left with a definite and firm conviction that a mistake has been made.” Id. “On appeal, this Court can read a contract itself without any presumption in favor of the trial court's determination.” Thunderstik Lodge, Inc. v. Reuer, 1998 SD 110, ¶12, 585 NW2d 819, 822 (additional citations omitted). For that reason, the interpretation of contractual provisions is a question of law, which we review de novo. Mahan v. Avera St. Luke’s, 2001 SD 9, ¶15, 621 NW2d 150, 154. Whether a contractual provision is ambiguous is likewise a question of law, reviewed de novo. St. Paul Fire and Marine Ins. Co. v. Schilling, 520 NW2d 884, 886 (SD 1994) (citations omitted).
ANALYSIS AND DECISION[¶8.] 1. Whether the Warehouse lease is ambiguous.
[¶9.] In this action, Icehouse requested a declaration of the parties’ rights under the leases, specifically as to Icehouse’s right to use the common area. The trial court concluded that the Warehouse lease was ambiguous as to the parties’ rights because the lease did not mention the common area. The relevant portion of the lease is section XXVIII, which provides in part:
Vehicle parking will be regulated by a policy that will apply to all tenants and will be developed at a later date. Under such policy, [Icehouse] will be granted exclusive access to the west most door of the south wall to which it is entitled to exclusive possession and reasonable access to docks that it is granted non-exclusive possession of. (emphasis added).
The “west most door” mentioned above lies within the warehouse bay specifically leased by Icehouse under the Warehouse lease. All other docks located in Manor House lie within the “common area.” It is clear from the language quoted above that Icehouse is entitled to “reasonable access” to those areas. While the word “reasonable” is not defined in the lease, that term alone does not render the provision ambiguous.
[¶10.] The trial court also noted section X when making its decision that the lease was ambiguous. That provision provides:
Lessor shall pay for all utilities for the non cooler-freezer warehouse and office areas. Lessor shall install at its expense and [Icehouse] shall pay for all water usage metered through said separate water line to its leased premises.
[Icehouse] shall pay for all of the utility expense for utilities, including electricity and water for the cooler-freezer areas. Separate meters for the electrical usage in the cooler-freezer area shall be utilized to calculate [Icehouse’s] monthly electrical usage for said cooler-freezer area, which meters shall be read by Lessor and Lessor shall bill [Icehouse] monthly for such electrical usage for that area and [Icehouse] shall pay said bill within ten (10) days after being billed by Lessor.
[Icehouse] shall also be responsible for the cost of installation of a new electrical service to [Icehouse’s] leased premises and shall pay all electrical billings for this service directly which new electrical services shall be metered separately. (emphasis added).
At the time of the hearing, no separate metered water line had been installed. Hence, Icehouse was under no obligation to pay for the water used to produce its ice.
[¶11.] Pursuant to this provision, Icehouse was responsible for only the electricity used in the cooler-freezer areas. Geissler is responsible “for all utilities for the non cooler-freezer warehouse and office areas.” Despite these explicit statements, the trial court concluded that provision was ambiguous.
[¶12.] During the peak ice-producing season, Icehouse typically employed portable icemakers and freezers in addition to those in the freezer-cooler area. These icemakers and freezers are positioned in, and use electricity from, the warehouse area. Under the clear terms of the lease, Icehouse is not responsible for electricity used in the warehouse area. Geissler argued, and the trial court concluded, that the lease was ambiguous because Icehouse was not responsible for the electricity used in the production of that ice. We fail to see how that argument creates ambiguity. Geissler is responsible “for all utilities for the non cooler-freezer warehouse and office areas.” When viewed objectively, this phrase can have only one meaning and therefore, no ambiguity exists. See Pesicka v. Pesicka, 2000 SD 137, ¶10, 618 NW2d 725, 727. The trial court erred in deciding otherwise.
[¶13.] When a contract is unambiguous and clear, we determine the parties’ intent from the four corners of the document and extrinsic evidence is not needed.[2] In re Estate of Klauzer, 2000 SD 7, ¶14, 604 NW2d 474, 478. After declaring the lease provisions ambiguous, the trial court then apportioned the parties’ responsibility for electricity and water. In its conclusions of law, the trial court stated “that certain electricity utilized for purposes of production equipment, although located outside the cooler-freezer warehouse area is the responsibility of the Icehouse, while other electricity which is merely incidental to the use and occupancy of the premises by the Icehouse is the responsibility of the Lessor.” While this disposition may seem equitable and fair, it directly contradicts the terms of the lease, which provide that Geissler “shall pay for all utilities for the non cooler-freezer warehouse and office areas.” There is no distinction made in the Warehouse lease between electricity used for production and electricity “incidentally” used. If the parties had intended to make that distinction, they could have done so. In fact, they did just that in the Office lease. Under that lease, the parties agreed that “Lessor shall be responsible for all general utility expenses consumed upon the premises . . . . Utility consumption which provides 'value added’ to the tenant’s products shall be considered manufacturing utility costs and such costs shall be the sole responsibility of the tenant.” The parties clearly knew how to differentiate between manufacturing and general costs. However, that difference was not incorporated into the Warehouse lease and a court cannot import language into a contract which the parties did not intend. Id. The lease language clearly specifies that Geissler is responsible for all electricity used on the lease premises except the cooler-freezer area. The trial court erred in directing otherwise.
[¶14.] The trial court also concluded “that the water utilized by the Icehouse is for purposes of production and is the responsibility of the Icehouse.” This conclusion also clearly contradicts the language of the lease. At the time the Warehouse lease was signed, Icehouse agreed to pay for the water used in the cooler-freezer area, on the condition that the Lessor installed a separate metered water line. That has not been done. If Geissler installs a separate metered water line, Icehouse will then be responsible for the water it uses. Until that time, however, water expense remains Geissler’s responsibility.
[¶15.] Again, it may seem equitable and fair to apportion the parties’ responsibilities as the trial court did. However, Icehouse entered into a valid lease agreement with North Central. Pursuant to its obligations under that lease, Icehouse purchased and installed the coolers and freezers. At the expiration of the lease, those coolers and freezers become the property of whoever owns Manor House. The terms of the lease, including the water usage term, were bargained for trade-offs. Geissler assumed North Central’s responsibilities when he purchased the Manor House with full knowledge of the accompanying rights and responsibilities. He has failed to fulfill the obligation which would entitle him to receive payment for water usage. We will not relieve Geissler of his obligations simply because it now appears Icehouse received the better bargain. See Roth v. Roth, 1997 SD 75, ¶18, 565 NW2d 782, 787 (citations omitted). In sum, we reverse the trial court’s conclusion that the lease was ambiguous and reverse its allocation of responsibility under the leases to reflect the clear language of the lease as stated herein.
[¶21.] Rescission of a lease “is an equitable remedy, which should only be granted in extraordinary circumstances.” Sejnoha v. City of Yankton, 2001 SD 22, ¶11, 622 NW2d 735, 739 (citing Mattson v. Rachetto, 1999 SD 51, ¶17, 591 NW2d 814, 818). In Thunderstik Lodge, we noted that:
As a lease is a contract we will follow the law of contract in regard to breach. “[R]escission of a contract is not generally permitted for a casual, technical, or unimportant breach . . ., but only for a breach so substantial as to tend to defeat the very object of the contract.” This Court has held that a breach must be “substantial” and relate to a “material” aspect of the contract to warrant rescission. A “material breach” would defeat “the very object of the contract.”
[¶32.] MILLER, Retired Chief Justice, was a member of the Court at the time this action was submitted, but was disqualified and did not participate.
[1]. The trial court’s order was stayed pending the outcome of this appeal.
[2]. Therefore, the evidence heard by the trial court as to custom and course of performance under the contract is not relevant to our determination.
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