DANYELLE D. KIMP v. FIRE LAKE PLAZA II, LLC
Supreme Court No. S-17298
THE SUPREME COURT OF THE STATE OF ALASKA
March 5, 2021
7507
STOWERS, Justice.
Superior Court No. 3AN-17-04469 CI. Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Gregory Miller, Judge.
Appearances: Danyelle D. Kimp, pro se, Eagle River, Appellant. Gregory R. Henrikson, Walker & Eakes, Anchorage, for Appellee.
Before: Bolger, Chief Justice, Winfree, Stowers, Maassen, and Carney, Justices.
OPINION
STOWERS, Justice.
I. INTRODUCTION
A business owner formed a brewing company with plans to open a brewpub in Eagle River. He signed a lease that provided rent-free access to a commercial unit for a period of time to allow him to prepare the rental space prior to opening for business. But the brewing company encountered numerous delays during construction and did not open for business as planned. It also did not pay rent once the rent-free period ended.
The business owner filed suit, claiming the property owner breached the lease, tortiously interfered with a business relationship, and breached the implied covenant of good faith and fair dealing. The property owner counterclaimed that the brewing company breached the lease.
On cross-motions for summary judgment, the superior court dismissed all claims against the property owner and ruled in the property owner‘s favor on its counterclaim. The court also denied the business owner‘s request to compel discovery and awarded the property owner over $200,000 in damages. The business owner appeals the superior court‘s grants of summary judgment, its denial of his motion to compel discovery, and its award of damages. We affirm.
II. FACTS AND PROCEEDINGS
A. The Lease
In January 2016 Danyelle Kimp entered into a 66-month lease with Fire Lake Plaza II, LLC (Fire Lake) on behalf of Kimp‘s company, QUAKE! Brewing Company, LLC (Quake). Quake and Fire Lake were the parties to the lease agreement, but the lease included a guaranty agreement between Kimp and Fire Lake that made him personally liable for Quake‘s failure to pay rent and any other violations of the lease. The lease granted Quake rent-free limited possession of a commercial unit in Eagle River for an initial six-and-a-half-month period — the “fixturing period” — allowing Quake to build out the space prior to opening a brewpub there.
The lease required Quake to pay rent monthly upon expiration of the fixturing period. It also required Quake to conform its use of the space to specific rules and regulations outlined in the lease. Among these rules was a prohibition on uses that would constitute a nuisance or unreasonable annoyance to other tenants in the plaza,
The lease also outlined the conditions and remedies available to Fire Lake in the event of default. Failure to pay rent when due was considered immediate grounds for default. For other violations, the lease required Fire Lake to give notice of the applicable lease provision that had been violated. Quake would then have ten days to cure the violation before a default occurred. A default under the lease triggered a set of remedies available to Fire Lake “cumulatively or in the alternative.” Among these was the right to enter and relet the unit.
B. Events Leading To Litigation
Quake‘s leasehold interest began in February 2016. In April and May Kimp encountered delays in getting water shut off to the unit so he could perform necessary plumbing work. Kimp and Fire Lake‘s property management company initially agreed on a date in mid-to-late April to shut the water off, but one of the other tenants in the plaza indicated this would be disruptive. Further coordination around an early May date also proved unsuccessful, as the parties could not agree on a time that would work for Quake‘s plumber and the other tenants in the plaza. Eventually, the water was shut off in mid-June.
The parties also coordinated around Quake‘s efforts to obtain a special land use permit from the Municipality of Anchorage. In February 2016 Laura Cantrell, a broker at the property management company, signed off on Kimp‘s permit application. The application stated that only recorded music, and no live music, would be played at the brewpub. In April Cantrell expressed some concern with building plans Kimp submitted for approval that called for a stage and did not explain how Quake would handle soundproofing. Kimp responded that the stage was for a “possible ‘future’ development.” Cantrell reiterated that the permit application stated there would be no
The Anchorage Assembly passed a resolution approving an amended version of Quake‘s permit application. One of the amendments was that “[l]ive music and amplified sound systems [should] cease operations” at specified hours. The resolution also stated that Quake could not begin operations until it submitted relevant portions of the rental agreement demonstrating Fire Lake‘s consent to the amended permit and Quake‘s proposed operations under it.
In subsequent communications Kimp outlined for Cantrell lease modifications required by the Assembly. Among these were changes related to “noise being heard beyond [the] rented space” and “the allowable hours/terms for entertainment and amplified events.” Cantrell responded she would work on the modifications and get back to Kimp. But she never made any modifications.
Quake did not pay any rent due under the lease other than prepayment of the first month‘s rent when it signed the lease. Quake also experienced delays in construction, and in a November 2016 meeting with Cantrell, Kimp requested additional time to complete the build-out and an extension of the rent-free fixturing period. It is disputed whether Cantrell orally agreed in that meeting to abate Kimp‘s rent payments until construction was complete. Kimp alleges that Cantrell refused to put her promise to abate rent in writing.
In mid-December a veteran-owned non-profit allegedly agreed to help Kimp finish construction. The following day, however, Cantrell entered the property,
The notice prohibited access to the unit until January 2017. Fire Lake allowed representatives of the non-profit to enter the unit and assess requirements for completing construction. But the next day the non-profit declined to do business with Kimp.
Fire Lake later sent Kimp a notice of default, outlining numerous lease violations that Quake had committed; the notice gave Quake ten days to cure all non-access defaults. It also stated:
To prevent further liability, damages and liens, I have changed the locks, and I am exercising Landlords [sic] Rights to utilize Alternative means to protect Landlord‘s rights and protect the property from further Tenant negligence.
You are currently insisting on access and engaging a NEW contractor to install another $300,000 in improvements per your text message to me yesterday . . . . [U]ntil tenant remedies all existing non-access defaults listed above in the required time allotment, the premises will remain locked and unavailable for access by Tenant and any persons under Tenant‘s direction.
C. Proceedings
A few weeks after Fire Lake locked Kimp out of the unit, Kimp filed a complaint in superior court alleging that Fire Lake breached the lease, tortiously interfered with a prospective business relationship, and breached the implied covenant of good faith and fair dealing. Fire Lake counterclaimed for breach of contract and breach of the implied covenant of good faith and fair dealing.
The parties filed three motions for summary judgment: (1) Fire Lake‘s motion on all of Kimp‘s claims; (2) Kimp‘s cross-motion on his claims; and (3) Fire Lake‘s motion for partial summary judgment on its counterclaim that Quake breached
Kimp filed a motion to set aside summary judgment based on newly discovered text messages between himself and Cantrell purporting to show that the parties intended a ten-day cure period for failure to pay rent. The superior court denied the motion.
Fire Lake sought entry of final judgment and damages limited to its breach of contract claim, effectively waiving any other damage claims that might require trial. Kimp opposed, claiming that Fire Lake was unjustly enriched by “over $200,000” due to improvements he made to the unit. Before the superior court issued its order for final judgment, Kimp also requested a hearing on an earlier motion he filed to compel discovery. The court denied the motion for a hearing, and entered final judgment for $221,980.24 in damages the same day. Kimp appeals.
III. STANDARDS OF REVIEW
“We review grants of summary judgment de novo.”1 “It is well-settled that leases are contracts and should be interpreted according to contract principles.”2 “Contract interpretation is a question of law subject to de novo review. When applying the de novo standard of review, we apply our ‘independent judgment to questions of law, adopting the rule of law most persuasive in light of precedent, reason, and policy.’ ”3
IV. DISCUSSION
Kimp makes four challenges to the superior court‘s rulings: first, that the superior court‘s grant of summary judgment against Kimp for breach of contract was improper; second, that it was error for the superior court to rule in Fire Lake‘s favor on Kimp‘s claims; third, that the superior court abused its discretion when it denied Kimp‘s motion for a hearing to compel discovery; and fourth, that the superior court erred in its award of damages. We discuss each of these issues below.
A. The Superior Court Properly Granted Summary Judgment In Favor Of Fire Lake On Its Breach Of Contract Claim Against Kimp.
When the moving party seeks summary judgment on an issue where it bears the burden of proof at trial, it must set forth undisputed material facts establishing that it “is entitled to judgment as a matter of law.”6 When the moving party seeks summary judgment on an issue where the non-moving party bears the burden of proof at trial, the moving party must “show[] that there is an absence of a factual dispute on a material fact
Fire Lake moved for summary judgment on its counterclaim for breach of contract against Kimp. To prevail on summary judgment, Fire Lake was required to show undisputed facts establishing that Kimp breached the contract.8 On appeal, Kimp disputes the parties’ intent regarding the remedies available to Fire Lake for failure to pay rent and thus claims the issue is inappropriate for resolution on summary judgment. He also claims that Fire Lake‘s alleged promise to abate his rent until he opened for business should prevent enforcement of the contract under a promissory estoppel theory. To succeed on summary judgment Fire Lake, as the moving party, must also show undisputed facts that establish a failure of proof of an essential element of Kimp‘s promissory estoppel claim.9
1. The parties did not intend a cure period for failure to pay rent.
Kimp asserts that language in Fire Lake‘s notice of default combined with the text messages he presented in his motion to set aside summary judgment show that the parties intended a ten-day cure period for failure to pay rent. He argues that the parties’ disagreement over this issue constitutes a genuine issue of material fact sufficient to overcome Fire Lake‘s motion for summary judgment.
Kimp‘s contention that Quake and Fire Lake never intended failure to pay rent as grounds for immediate default does not withstand scrutiny. The text messages he offers as proof are from November 2016, almost nine months after the lease period began. But that evidence cannot speak to the parties’ intent when they signed the lease. Likewise, language in Fire Lake‘s notice of default references section 17.B, which concerns non-monetary violations of the lease. That language does not speak to the parties’ intent with respect to section 17.A, which covers failure to pay rent.
2. Kimp‘s defense of promissory estoppel is without merit.
“The doctrine of promissory estoppel allows the enforcement of contract-like promises despite a technical defect or defense that would otherwise make the promise unenforceable.”19 We have held that to enforce a promise under this doctrine a claimant must establish that an actual promise induced a reasonably foreseeable, substantial change in position and that enforcement must be necessary in the interest of justice.20
Kimp argues that Fire Lake‘s alleged promise to abate his rent induced him to substantially change his position, apparently in that he was free to skip rent payments until he completed construction.21 He asserts that Fire Lake actually foresaw this change since, after consenting to Kimp‘s non-payment of rent, it actively helped Quake to secure
We agree that Kimp‘s non-payment of rent did not constitute a substantial change in position. In Zeman v. Lufthansa German Airlines22 we considered a dispute over an alleged oral agreement between the builder of an apartment complex and the airline.23 The parties had preliminary discussions about housing the airline‘s personnel in Anchorage at an apartment complex the builder was constructing.24 The airline sent the builder a letter of intent, stating that it planned to house its crews at the builder‘s apartment complex but could not commit to signing an agreement until it had more confidence that the building would be completed on time.25 The discussions later fell through, and the airline declined to sign a lease with the builder.26 The builder sued, claiming the parties had entered into an oral agreement for the airline to lease units from the builder.27 The builder alternatively argued under a promissory estoppel theory that the airline had promised to enter into a lease agreement with the builder and that the builder detrimentally relied on this promise.28 We considered the first prong of the promissory estoppel test: whether the action induced by the airline‘s alleged promise
In Zeman we remanded for the superior court to make findings as to whether actual and substantial economic loss occurred.30 Here, remand is not necessary. The action allegedly induced by the promise to abate rent was for Kimp to forgo financial outlays he otherwise would have been required to make. Kimp claims this is a substantial change in position. But this is not actual and substantial economic loss. On the contrary, it is a financial windfall for Kimp. While it is a change in position, it is a change in the wrong direction, and it therefore cannot serve as a basis for Kimp‘s promissory estoppel claim.
Kimp asserts that Fire Lake‘s alleged promise induced him to refrain from paying rent. But Kimp‘s non-payment of rent does not constitute a substantial change. Thus, there is “an absence of a factual dispute on a material fact.”31 Summary judgment against Kimp on his promissory estoppel defense was proper.
3. Fire Lake met its summary judgment burden to show that Kimp breached the lease.
Fire Lake provided undisputed evidence showing that Kimp materially breached the lease when he did not pay Fire Lake rent when due. This was grounds for immediate default and material breach of the lease under section 17.A. We therefore
B. The Superior Court Properly Granted Summary Judgment In Favor Of Fire Lake On All Of Kimp‘s Claims.
Fire Lake may succeed on summary judgment on Kimp‘s claims against it if undisputed facts establish that it is entitled to dismissal of Kimp‘s claims as a matter of law.32 We conclude as a matter of law that Fire Lake did not breach the lease as Kimp claims. Fire Lake also did not act with the intent required for intentional interference with a prospective business relationship. And it did not injure the rights Kimp bargained for under the lease as required for breach of the implied covenant of good faith and fair dealing. The superior court therefore properly granted summary judgment dismissing all of Kimp‘s claims against Fire Lake.
1. Fire Lake did not breach the lease.
Kimp argues that Fire Lake violated lease sections 13, 17.B, 18.C, and 18.D.33 Section 13 provides Fire Lake with a general release from liability for damage to Quake or Quake‘s property except from activity arising out of gross negligence or willful misconduct. Kimp argued that Fire Lake acted in a grossly negligent manner
We struggle to understand, however, how Fire Lake could breach this section of the lease at all. Section 13 states: “[Fire Lake] shall not be liable to [Quake] for any damage to [Quake] or [Quake]‘s property from any cause, and [Quake] further waives all claims against [Fire Lake] for . . . damage to any property . . . for any reason.” It further requires Quake to indemnify Fire Lake and hold it harmless for any injury that arises out of Quake‘s business. Section 13 provides an exception to this liability waiver and indemnification requirement in the event Fire Lake engages in grossly negligent or willful misconduct, but it fundamentally does not require Fire Lake to do anything. Section 13 rather limits Fire Lake‘s obligations under the lease and imposes an additional obligation on Quake to indemnify Fire Lake under certain circumstances.
“[A] breach of contract is a failure, without legal excuse, to perform any promise that forms the whole or part of a contract.”34 There is nothing Fire Lake can do to breach this section of the lease because it does not contain a promise Fire Lake made to Quake. Even assuming that Fire Lake acted in a grossly negligent or willful manner and that this action caused Quake injury, section 13 would only allow Quake to bring an action for negligence against Fire Lake, not one for breach of contract. But Kimp does not include negligence as a cause of action in his complaint. Fire Lake did not breach section 13 because it could not commit breach of this section in the manner that Kimp describes.
Section 17 contains provisions related to default. This section outlines five conditions under which Quake could default under the lease. Each of these conditions
Kimp claims that our decision in Sengul v. CMS Franklin, Inc.35 requires us to conclude that Fire Lake breached sections 18.C and 18.D when it locked him out of the unit and constructively evicted him without first terminating the lease. In Sengul we considered whether a landlord violated the lease when he placed a cable lock on the door preventing the tenant from accessing the rental unit for a couple of hours.36 But our conclusion in that case rested on express language in the lease: the lease allowed landlord self-help only upon notice, and because the landlord did not give notice prior to locking the tenant out, he violated the lease.37 Sengul illustrates the case-by-case nature of the inquiry we must perform in these cases. We must examine the terms of the lease in these situations to determine the legality of the landlord‘s action.
The lease provisions in this case are clear: a default by Quake as outlined in section 17 triggers the remedies detailed in section 18. Unlike the lease we considered in Sengul, section 17.A did not require notice before Fire Lake could exercise remedies for failure to pay rent. Once Kimp defaulted, Fire Lake had an immediate right to enter and relet the unit under section 18.A.
Fire Lake could not have accomplished the tasks required to relet the unit without also putting in place some mechanism to prevent Kimp from interfering with that effort and causing more damage. Fire Lake‘s actions here, unlike those in Sengul, were expressly allowed under the lease.38
2. Undisputed facts establish that Fire Lake did not intend to interfere with Quake‘s business relationship.
Kimp claims that the superior court erred by omitting his claim of intentional interference with a prospective business relationship altogether. But the superior court did not omit this claim from its analysis. The superior court first identified the six elements a plaintiff must show for the tort of intentional interference with a
Nowhere in his motion papers did Kimp provide evidence that in retaking possession of the unit, Fire Lake did so with intent to interfere with a prospective relationship. Kimp submitted an affidavit stating that Cantrell had knowledge of his relationship with the company that agreed to help him finish construction, but he never alleged that Fire Lake evicted him with intent to interfere with that relationship.
In contrast, Fire Lake submitted evidence showing that it did not intend to interfere with Kimp‘s business relationship. Fire Lake had concerns that Kimp‘s “multiple material breaches, many that involved serious safety issues, . . . could jeopardize the financial viability of Fire Lake Plaza and potentially cause it to file for bankruptcy.” Kimp did not dispute these facts. Undisputed facts therefore show a
3. Fire Lake did not injure Kimp‘s rights under the lease as required for breach of the implied covenant of good faith and fair dealing.
“Under Alaska law, every contract has an implied covenant of good faith and fair dealing requiring ‘that neither party . . . do anything which will injure the right of the other to receive the benefits of the agreement.’ ”41 The covenant arises out of “an effort to further the expectations of the contracting parties that . . . promises will be executed in good faith.”42 We have held that “bad faith may be overt or may consist of inaction, and fair dealing may require more than honesty.”43
Kimp claims that Fire Lake violated the implied covenant of good faith and fair dealing in two ways. First, he contends that Fire Lake prevented Quake from fulfilling its obligations under the lease when Fire Lake delayed making lease modifications as required by Quake‘s special land use permit. Second, he argues that Fire Lake prevented Quake from completing its construction work on time because of its delays in approving the water shutoff.44
We hold that neither of Kimp‘s claims constitutes breach of the implied covenant. Even if we assume that Fire Lake‘s delays in making lease modifications thwarted Quake‘s ability to operate under its special land use permit, Quake did not bargain for an agreement where Fire Lake was required to allow an entertainment venue within the brewpub. The lease clearly states that noise emitted from loud speakers or other devices should not be heard outside of the unit. Quake‘s special land use permit application states that only recorded music, and no live music, would be played within the brewpub. When Kimp first discussed with Cantrell her concerns about his plans for a stage, he implied that he did not need to build the stage at all if she had a problem with it. Despite those assurances, Kimp faults Cantrell for her refusal to allow the “types of live music and live entertainment that would be typical at [his] brewpub.”
Kimp claims that before Quake could open for business under the permit, Fire Lake had to approve lease modifications to allow noise to be heard outside of the premises and to allow entertainment and amplified events. But these modifications were only required because of information Kimp included in his permit application to establish an entertainment venue there. Kimp did not have to submit plans that called for these types of lease changes, and based on the plain language of the lease, he certainly did not bargain for them. Cantrell‘s refusal to permit them therefore could not frustrate the benefit that Quake bargained for when entering into the lease with Fire Lake, and such action cannot be considered a basis for breach of the implied covenant.
C. The Superior Court Did Not Abuse Its Discretion By Denying Kimp‘s Request For A Hearing On His Motion To Compel Discovery.
D. The Superior Court Did Not Clearly Err In Its Award Of Damages.
Kimp argues that the superior court erroneously overlooked his claim that Fire Lake was unjustly enriched and that the court‘s award of damages was excessive. We conclude that the superior court did not clearly err with respect to the damages award.
Kimp asserts that he enriched Fire Lake by over $200,000, including over $20,000 he paid for engineering floor plans that Fire Lake allegedly used without compensation. But even assuming that Kimp paid every bill or invoice he received, Kimp does not explain how Fire Lake was unjustly enriched by those payments. For example, Fire Lake would not have been enriched by Kimp‘s payments to the Municipality of Anchorage for permits. Nor does he present any evidence showing that Fire Lake or any subsequent tenant kept or used any of the items he allegedly paid for
Finally, Kimp argues that Fire Lake improperly appropriated his architectural drawings, but Kimp‘s evidence does not establish what he paid for those drawings. The superior court did not clearly err in finding that Fire Lake was not unjustly enriched.
As for the damages award, Kimp argues that the superior court violated
V. CONCLUSION
Notes
- A prospective business relationship must exist;
- The defendant must know of the prospective relationship and intend to prevent its fruition;
- The prospective business relationship must not culminate in pecuniary benefit to the plaintiff;
- The defendant‘s conduct must interfere with the prospective relationship;
- The interference must cause the plaintiff damages; and
- The defendant‘s conduct must not be privileged or justified.
