Case Title: Video Zone, Inc. v. KF&F Properties

Citation: 

Docket Number: 031486

State: virginia

Court: Virginia Supreme Court

Date: 2004-04-23T00:00:00Z

Document:
P
 
RESENT:  All the Justices 
VIDEO ZONE, INC. 
 
v.  Record No. 031486   OPINION BY JUSTICE BARBARA MILANO KEENAN 
 
 
                          April 23, 2004 
KF&F PROPERTIES, L.C. 
 
FROM THE CIRCUIT COURT OF THE CITY OF PORTSMOUTH 
Dean W. Sword, Jr., Judge 
 
 
In this appeal, we consider whether the circuit court erred 
in holding that the terms of a commercial lease required a 
tenant to replace certain heating, ventilation, and air 
conditioning (HVAC) equipment located primarily on the roof of 
the leased premises. 
 
The following facts are relevant to this appeal.  KF&F 
Properties, L.C. (KF&F), owns the Rodman Shopping Center in the 
City of Portsmouth.  In 1996, KF&F leased certain property 
within the shopping center to Video Zone, Inc. (Video Zone), for 
the purpose of operating a "video store" on the premises.  The 
lease had an initial term of five years and was renewed in 2001 
for a second five-year term. 
 
The leased property included HVAC equipment.  Although some 
of the HVAC equipment was installed in the interior of the 
building, the major component of the system was located on the 
roof. 
The lease provision addressing the maintenance of the 
property, including the HVAC equipment, stated in relevant part: 
MAINTENANCE.  Lessor covenants that it will, at its 
own expense, keep and maintain the exterior of the 
said building, roof and parking facilities, in good 
order and repair . . . .  Lessee covenants that at its 
own expense, it will keep and maintain in good order 
and repair the entire interior of the said building, 
including all plumbing, heating, cooling (Lessor will 
maintain cooling and heating during the first year) 
and electrical equipment. 
 
Throughout the term of the lease, Video Zone paid for the 
repair and maintenance of the HVAC equipment installed on the 
leased premises, including the HVAC equipment located on the 
roof.  In 2002, however, the HVAC system totally malfunctioned. 
Dan Korzeniowski, Video Zone's president, obtained several 
price quotations for replacing the HVAC equipment.  After 
concluding that the quoted prices were too high, Korzeniowski 
asked the managing partner of KF&F, J. Ovid Keene, to obtain a 
price estimate for a replacement system.  Korzeniowski thought 
that Keene could obtain a "better price" based on his business 
"contacts." 
Keene received a bid from Professional Heating and Cooling, 
Inc. (Professional), to replace the HVAC equipment at a cost of 
$8,939.  This price was lower than the estimates obtained by 
Korzeniowski. 
Professional replaced the entire HVAC system.  Most of the 
equipment replaced was located on the roof of the building.  The 
only work that Professional conducted in the interior of the 
 
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building was "ductwork and work to bring the HVAC system up to 
building code requirements." 
Professional submitted an invoice to Keene in the amount of 
$8,939, which KF&F paid.  KF&F then requested reimbursement from 
Video Zone for the full amount of the invoice.  At that time, 
Video Zone no longer employed Korzeniowski and, under the 
direction of a new president, refused KF&F's request for 
reimbursement of the invoice amount. 
KF&F filed a warrant in debt in the City of Portsmouth 
General District Court (the district court) seeking to recover 
$8,939 from Video Zone for its failure to reimburse KF&F for the 
cost of replacing the HVAC equipment.  The district court 
awarded KF&F $650 plus costs.  KF&F appealed from the district 
court's judgment to the Circuit Court of the City of Portsmouth. 
 
At a trial de novo in the circuit court, Keene testified 
that when he informed Korzeniowski of Professional's bid, 
Korzeniowski agreed that KF&F would contract for the HVAC 
replacement work and that Video Zone would reimburse KF&F for 
the cost of that work.  Keene also stated that Video Zone 
drafted the lease and that neither he nor anyone employed by 
KF&F participated in the drafting process. 
 
Korzeniowski testified that he never agreed to pay KF&F for 
the cost of the replacement equipment.  Korzeniowski further 
 
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stated that he did not draft the lease and that Keene had 
produced the lease at the time the parties signed it. 
 
James Hensley, a vice president of Professional, testified 
that he inspected the malfunctioning HVAC equipment at Keene's 
request.  Hensley stated that while the HVAC equipment could 
have been repaired, such repairs would not have been cost 
effective "given the age and condition of the equipment."  
Hensley further stated that the "most cost effective approach 
was to replace the HVAC equipment." 
The circuit court held in favor of KF&F and entered 
judgment against Video Zone in the amount of $8,939, plus costs 
and interest.  The court held that the language of the lease was 
"potentially ambiguous" and concluded that the parties' actions 
"indicated that they understood the [lease] to mean that Video 
Zone was responsible for all HVAC equipment wherever it was 
located."  In support of its finding concerning the parties' 
intent, the court cited Korzeniowski's actions in obtaining 
estimates for replacing the equipment and in paying for past 
repairs as evidence that Video Zone understood that it was 
responsible for replacing the HVAC equipment.  The court also 
concluded that the phrase "keep and maintain in good order and 
repair" required Video Zone not only to repair the HVAC 
equipment, but also to "maintain the equipment in good working 
 
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order, including replacing the equipment, if necessary."  Video 
Zone appeals. 
 
Video Zone argues that the circuit court's holding is 
contrary to the lease terms, which are unambiguous and do not 
make Video Zone responsible for replacement of the HVAC 
equipment.  Video Zone contends that because KF&F was obligated 
under the lease to maintain and repair the exterior of the 
building, that obligation included replacement of the HVAC 
equipment located on the building's roof. 
 
In response, KF&F also argues that the lease terms are 
unambiguous, but claims that these terms required Video Zone to 
replace the HVAC equipment in order to meet its duty to maintain 
that equipment in a state of good order and repair.  
Alternatively, KF&F contends that even if the lease terms are 
ambiguous, the circuit court made a factual finding that the 
parties intended that Video Zone replace the HVAC equipment 
irrespective whether the equipment was located in the interior 
or on the exterior of the building.  KF&F asserts that the 
evidence supported the circuit court's finding that Video Zone 
agreed to pay for the cost of replacing the HVAC equipment. 
 
In resolving this issue, we first consider the circuit 
court's holding that the lease terms are ambiguous.  The issue 
whether a contract provision is ambiguous presents a question of 
law, not of fact.  Utsch v. Utsch, 266 Va. 124, 129, 581 S.E.2d 
 
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507, 509 (2003); Pyramid Dev., L.L.C. v. D&J Assocs., 262 Va. 
750, 754, 553 S.E.2d 725, 727 (2001); Pollard & Bagby, Inc. v. 
Pierce Arrow, L.L.C., III, 258 Va. 524, 528, 521 S.E.2d 761, 763 
(1999).  Therefore, on appeal, we do not accord the circuit 
court's resolution of this question any deference and we are 
afforded the same opportunity as the circuit court to consider 
the terms of the contract.  Pyramid Dev., L.L.C., 262 Va. at 
754, 553 S.E.2d at 727; Musselman v. The Glass Works, L.L.C., 
260 Va. 342, 346, 533 S.E.2d 919, 921 (2000); Donnelly v. 
Donatelli & Klein, Inc., 258 Va. 171, 180, 519 S.E.2d 133, 138 
(1999). 
The language of a contract is ambiguous if "it may be 
understood in more than one way or when it refers to two or more 
things at the same time."  Eure v. Norfolk Shipbuilding & 
Drydock Corp., 263 Va. 624, 632, 561 S.E.2d 663, 668 (2002) 
(quoting Granite State Ins. Co. v. Bottoms, 243 Va. 228, 234, 
415 S.E.2d 131, 134 (1992)); accord Westmoreland-LG&E Partners 
v. Virginia Elec. & Power Co., 254 Va. 1, 11, 486 S.E.2d 289, 
294 (1997).  Such an ambiguity, if it exists, must appear on the 
face of the instrument.  Salzi v. Virginia Farm Bureau Mut. Ins. 
Co., 263 Va. 52, 55, 556 S.E.2d 758, 760 (2002); S.F. (Jane Doe) 
v. West Am. Ins. Co., 250 Va. 461, 464, 463 S.E.2d 450, 452 
(1995).  In determining whether the disputed terms are 
ambiguous, we consider the words employed in the contract in 
 
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accordance with their usual, ordinary, and popular meaning.  See 
Haisfield v. Lape, 264 Va. 632, 637, 570 S.E.2d 794, 796 (2002); 
Pocahontas Mining Ltd. Liab. Co. v. Jewell Ridge Coal Corp., 263 
Va. 169, 173, 556 S.E.2d 769, 772 (2002). 
We conclude that the contested lease language is ambiguous 
because it can be understood in more than one way.  During the 
first year of the lease, KF&F was responsible, without any 
exception concerning equipment location, for the condition of 
all heating and cooling equipment.  After that first year, 
however, the lease language requires Video Zone to "keep and 
maintain in good order and repair the entire interior of the 
said building, including all . . . heating, [and] cooling . . . 
equipment." 
On the other hand, the lease language also states that KF&F 
is responsible during the entire lease term for "the exterior of 
the said building, roof and parking facilities."  Thus, the 
lease assigns KF&F responsibility for the exterior of the 
premises, without stating whether that responsibility extends to 
the HVAC equipment located outside the building.  Conversely, 
the lease charges Video Zone with responsibility for the 
condition of the interior of the building, including all heating 
and cooling equipment, without specifying whether that 
responsibility extends to the HVAC equipment located on the 
exterior portion of the premises.  Accordingly, we hold that 
 
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these lease terms do not unambiguously indicate which party is 
responsible for the condition of the HVAC equipment located on 
the roof, and that the lease could be read to charge either 
party with that responsibility. 
When the terms of an agreement are ambiguous, a court will 
consider parol evidence to ascertain the intent of the parties.  
Eure, 263 Va. at 632, 561 S.E.2d at 667-68; Tuomala v. Regent 
Univ., 252 Va. 368, 374, 477 S.E.2d 501, 505 (1996).  Parol 
evidence "is admissible, not to contradict or vary contract 
terms, but to establish the real contract between the parties."  
Id.; accord Prospect Dev. Co. v. Bershader, 258 Va. 75, 84, 515 
S.E.2d 291, 296 (1999).  Such construction of an ambiguous 
contract is a matter submitted to the fact finder, who must 
consider the extrinsic evidence in determining the parties' 
intent.  Tuomala, 252 Va. at 374, 477 S.E.2d at 505; Cascades N. 
Venture Ltd. P'ship v. PRC Inc., 249 Va. 574, 579, 457 S.E.2d 
370, 373 (1995). 
Generally, the parties' interpretation and dealings with 
regard to contract terms are entitled to great weight and will 
be followed unless doing so would violate other legal 
principles.  Donnelly, 258 Va. at 186, 519 S.E.2d at 142; 
Federal Ins. Co. v. Starr Elec. Co., 242 Va. 459, 467, 410 
S.E.2d 684, 688 (1991); Dart Drug Corp. v. Nicholakos, 221 Va. 
989, 995, 277 S.E.2d 155, 158 (1981); First Nat'l Exch. Bank of 
 
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Roanoke v. Roanoke Oil Co., 169 Va. 99, 115, 192 S.E. 764, 771 
(1937).  Thus, uncertain rights of parties may be determined and 
fixed by their practical dealings with each other.  John H. 
Maclin Peanut Co. v. Pretlow & Co., 176 Va. 400, 410, 11 S.E.2d 
607, 611 (1940); First Nat'l Exch. Bank of Roanoke, 169 Va. at 
115-16, 192 S.E. at 771. 
Here, the circuit court determined the rights of the 
parties in accordance with their practical dealings.  The court 
concluded that the parties' actions demonstrated their 
understanding that Video Zone was responsible for the condition 
of the HVAC equipment, including the equipment located on the 
roof, and was obligated to replace the HVAC equipment if 
necessary.  The court's holding was supported by Keene's 
testimony that Video Zone agreed to reimburse KF&F for the cost 
of replacing the HVAC equipment.  The holding further was 
supported by Korzeniowski's testimony that Video Zone paid for 
prior maintenance of the equipment located on the roof, and that 
when the equipment totally malfunctioned, he obtained several 
price estimates for replacing the system. 
Because there is evidence to support the circuit court's 
factual finding concerning the parties' intent, we are required 
to affirm the court's judgment.*  See Code § 8.01-680; Shooting 
                     
 
* Our conclusion is not altered by Video Zone's contention 
that such a result would be "illogical" because the lease 
 
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Point, L.L.C. v. Wescoat, 265 Va. 256, 264, 576 S.E.2d 497, 501 
(2003); Tauber v. Commonwealth, 263 Va. 520, 526, 562 S.E.2d 
118, 120 (2002); Tuomala, 252 Va. at 375, 477 S.E.2d at 506.  
This determination renders it unnecessary for us to consider the 
circuit court's interpretation of the phrase "keep and maintain 
in good order and repair," or the court's interpretation of that 
phrase in relation to our decision in Seoane v. Drug Emporium, 
Inc., 249 Va. 469, 457 S.E.2d 93 (1995). 
 
For these reasons, we will affirm the circuit court's 
judgment. 
Affirmed.
                                                                  
provides that all fixtures owned by Video Zone remain its 
property and may be removed from the premises after the original 
lease term.  The ownership of the HVAC equipment is not a 
subject of this appeal, and we will not engage in a speculative 
discussion of that issue. 
 
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