Court Opinion

ID: 9912446
Source: CourtListenerOpinion
Date Created: 2023-12-22 15:05:16.258278+00
Date Added: 2024-06-11T12:59:23.129234
License: Public Domain

RENDERED: DECEMBER 15, 2023; 10:00 A.M.
                       NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                          Court of Appeals

                             NO. 2022-CA-1366-MR

STINLER, INC.                                                       APPELLANT

                APPEAL FROM BOONE CIRCUIT COURT
v.          HONORABLE RICHARD A. BRUEGGEMANN, JUDGE
                      ACTION NO. 20-CI-00515

MALL ROAD INVESTORS, LTD. CO.                                         APPELLEE

                                    OPINION
                                   AFFIRMING

                                  ** ** ** ** **

BEFORE: CETRULO, KAREM, AND MCNEILL, JUDGES.

KAREM, JUDGE: Stinler, Inc. (“Stinler”) appeals from orders of the Boone

Circuit Court granting summary judgment and awarding damages and attorney’s

fees to Mall Road Investors, Ltd. Co. (“Mall Road”). Stinler leased property from

Mall Road to operate a sandwich shop. The trial court held that Stinler violated the

lease when it removed the HVAC unit and several fixtures upon vacating the
premises. On appeal, Stinler argues (1) that summary judgment was improper

because the lease was ambiguous, and (2) that the amount of attorney’s fees was

excessive. Upon careful review, we affirm.

             Mall Road owns a shopping center containing several commercial

tenants. In 2009, Mall Road leased space in the center to Harper on a Roll, LLC

(“Harper”), a Jimmy John’s Gourmet Sandwiches franchisee, for a five-year term.

On August 11, 2014, Harper on a Roll and Mall Road entered into a first

amendment to the lease agreement, which extended the tenancy through September

30, 2019.

             In 2017, Harper, with Mall Road’s consent, assigned its lease to

Stinler, which continued operating the Jimmy John’s franchise. Stinler has been a

Jimmy John’s franchisee for over twenty-five years and owns approximately

thirteen such restaurants in Illinois, Indiana, Ohio, and Kentucky. Mall Road and

Stinler agree that the terms of the 2009 lease and the first amendment were

incorporated into Stinler’s assignment and govern their business relationship.

             The lease contained the following provisions relating to the HVAC

and fixtures in the shop:

             Paragraph 2 provides in relevant part:

             At or prior to expiration of the Lease Term, Tenant will
             return possession of the Shop to Landlord in broom clean
             condition with all of Tenant’s furniture, fixtures, signage
             (with façade repaired) and inventory removed.

                                         -2-
           Paragraph 7 provides in part:

           Landlord must assign any and all warranties associated
           with the equipment at the shop to the tenant, including
           heating, ventilating and air conditioning system which is
           to be a new non reconditioned unit. Tenant will maintain
           the Shop in good condition and repair (including any
           necessary replacements), including, interior and exterior
           doors, plate glass, windows, store front, all plumbing and
           sewage facilities serving only the Shop, all fixtures,
           heating, ventilating and air conditioning and electrical
           systems serving only the Shop, walls, floors and ceilings,
           meters serving the Shop and all installations made by
           Tenant, including repairs caused by illegal acts. . . .
           Tenant will enter into a maintenance contract for the
           heating, ventilating and air conditioning system
           providing for quarterly service inspections and necessary
           repairs.

           Additionally, Exhibit B of the lease includes the following provisions

relating to the HVAC and washrooms under a section entitled “DESCRIPTION OF

LANDLORD’S WORK AND TENANT’S WORK”:

           6. HEATING, VENTILATING AND COOLING
           The air conditioning will be installed on the basis of a
           minimum of one ton of air conditioning for every two
           hundred (200) square feet of interior Premises or as
           deemed sufficient HVAC.

           Distribution consisting of double wall, insulated spiral
           duct will be provided. Exhaust and ventilation will be
           provided in accordance with local building codes.
           Combination heating and cooling unit will be installed on
           the roof.

           7. WASHROOMS
           Landlord will provide two ADA washrooms per current
           code, size and location to be designated by tenant.
           Washroom walls will be framed and drywalled to the
                                       -3-
             roof deck, taped sanded and ready for paint. All fixtures,
             doors, floor and wall finishes will be provided by
             landlord per Tenant’s specifications and design.

             In April 2019, Stinler paid for and installed a new HVAC system in

the shop, at a cost of $10,900.

             As we have noted, under the terms of the first amendment, the lease

agreement was set to terminate on September 30, 2019. Stinler had the right to

renew the lease by giving written notice by May 3, 2019. Stinler did not, however,

renew the lease nor did it vacate the premises. Mall Road negotiated an agreement

with Stinler and the new incoming tenant to give Stinler additional time to move

out. When Stinler failed to do so, Mall Road filed a forcible detainer complaint in

Boone District Court. Stinler and Mall Road reached a settlement of the case and

on February 3, 2020, the district court entered an agreed order which provided in

part that

             Defendant shall vacate the . . . Property . . . by 5 pm on
             Sunday, February 23, 2020. Defendant shall provide
             Plaintiff a walk-through of the Property at that time
             where all keys to the Property shall be returned to the
             Plaintiff. Defendant shall leave the Property in the
             condition as outlined in the lease between the parties.

             Defendant has agreed that all personal property,
             including coolers, ovens, racks, shelves, refrigerators,
             iceboxes, etc., will be removed from the premises, and
             Defendant will remove all signage for the Jimmy John’s
             brand, and will leave the property in broom swept
             condition on the day they move out.

                                         -4-
              If Defendant fails to vacate the Property as outlined
              above, Defendant shall be liable to Plaintiff for
              reasonable damages arising therefrom.

              After the entry of the agreed order, Stinler informed Mall Road that it

wanted to remove the HVAC unit from the property. Mall Road communicated

with Stinler’s counsel that the HVAC unit belonged to Mall Road and was not to

be removed.

              After Stinler vacated the building, Mall Road discovered that Stinler

had removed the HVAC unit, as well as two bathroom doors, two paper towel

holders, two toilet paper holders, and the bathroom sconces. Stinler also refused to

pay outstanding rent, water, or common area maintenance (“CAM”) charges.

              Mall Road filed suit against Stinler, alleging breach of contract and

conversion of its property and seeking compensatory damages, punitive damages,

and attorney’s fees. Following a hearing, the trial court held that Stinler’s removal

of the HVAC and fixtures constituted not only breach of contract but conversion

and granted summary judgment to Mall Road. After a hearing on damages, the

trial court entered a final judgment awarding Mall Road $21,793.70 in damages,

$433.27 in costs, and $35,999.95 in attorney’s fees, plus post-judgment interest.

This appeal by Stinler followed.

                                          -5-
                            STANDARD OF REVIEW

i. Summary judgment

             In reviewing a grant of summary judgment, our inquiry focuses on

“whether the trial court correctly found that there were no genuine issues as to any

material fact and that the moving party was entitled to judgment as a matter of

law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996); Kentucky Rules of

Civil Procedure (“CR”) 56.03. The trial court is required to view the record “in a

light most favorable to the party opposing the motion for summary judgment and

all doubts are to be resolved in his favor.” Steelvest, Inc. v. Scansteel Service

Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). “[A] party opposing a properly

supported summary judgment motion cannot defeat it without presenting at least

some affirmative evidence showing that there is a genuine issue of material fact for

trial.” Id. at 482. “Not every issue of fact or conflicting inference presents a

genuine issue of material fact that requires denial of a summary judgment motion.”

Grass v. Akins, 368 S.W.3d 150, 153 (Ky. App. 2012). “An appellate court need

not defer to the trial court’s decision on summary judgment and will review the

issue de novo because only legal questions and no factual findings are involved.”

Hallahan v. The Courier-Journal, 138 S.W.3d 699, 705 (Ky. App. 2004).

ii. Interpretation of a contract

             This case involves the interpretation of the lease and the terms of the

agreed order memorializing the settlement in the forcible detainer proceedings. “A
                                          -6-
lease is a contract for the possession and profits of lands and tenements on the one

side, and the recompense of rent or property on the other[.]” Neighborhood

Investments, LLC v. Kentucky Farm Bureau Mut. Ins. Co., 430 S.W.3d 248, 251

(Ky. App. 2014) (citation omitted). “[S]ettlement agreements are a type of

contract and therefore are governed by contract law[.]” Frear v. P.T.A. Industries,

Inc., 103 S.W.3d 99, 105 (Ky. 2003).

             “The interpretation of a contract is a question of law. In the absence

of ambiguity a written instrument will be enforced strictly according to its terms.

Courts will interpret the contract terms by assigning language to its ordinary

meaning without resort to extrinsic evidence.” Stowe v. Realco Limited Liability

Company, 551 S.W.3d 462, 465-66 (Ky. App. 2018) (internal quotation marks and

citations omitted). On the other hand, “[w]here a contract is ambiguous or silent

on a vital matter, a court may consider parol and extrinsic evidence involving the

circumstances surrounding execution of the contract, the subject matter of the

contract, the objects to be accomplished, and the conduct of the parties.” Cantrell

Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 385 (Ky. App. 2002) (internal

quotation marks omitted). If a contract is determined to be ambiguous, the

ambiguity is construed against the drafter. Phoenix American Administrators, LLC

v. Lee, 670 S.W.3d 832, 840 (Ky. 2023) (citation omitted). Because the

construction and interpretation of a lease are questions of law, our standard of

review is de novo. Community Trust Bancorp, Inc. v. Mussetter, 242 S.W.3d 690,
                                         -7-
692 (Ky. App. 2007) (citation omitted). “However, once a court determines that a

contract is ambiguous, areas of dispute concerning the extrinsic evidence are

factual issues and construction of the contract become subject to resolution by the

fact-finder.” Cantrell, 94 S.W.3d at 385.

                                     ANALYSIS

i. The lease and settlement agreement were not ambiguous

             Stinler argues that the trial court erred in ruling that the lease and

agreed order were unambiguous and in construing them against Stinler. Stinler

contends that the HVAC was an especially powerful unit required by Jimmy

John’s and the bathroom fixtures were trade fixtures also mandated by Jimmy

John’s. Because the lease is silent about these types of items, Stinler argues that it

is ambiguous and therefore the trial court erred in ruling as a matter of law that the

HVAC and fixtures belong to Mall Road. “A contract is ambiguous if a reasonable

person would find it susceptible to different or inconsistent interpretations.”

Kentucky Shakespeare Festival, Inc. v. Dunaway, 490 S.W.3d 691, 694-95 (Ky.

2016) (citation omitted).

ii. The HVAC

             The lease specifies under Section 6 of Exhibit B, as set forth above,

that the landlord is required to install the HVAC. Paragraph 7 requires the landlord

to assign the warranty on the unit, which must be new, to the tenant. The tenant is

required to maintain the HVAC in good condition and repair, including necessary
                                          -8-
replacements. When Stinler assumed the lease from Harper, a unit was in place

which presumably met Jimmy John’s standards as Stinler continued to do business

without complaint for two years before replacing it.

             There is no ambiguity in the lease regarding the HVAC. The lease

does not convey ownership of the HVAC to the tenant, nor does it permit the

tenant to remove the HVAC upon expiration of the lease. As the trial court aptly

observed in construing Paragraph 7 of the lease,

             According to [Stinler’s] argument, the fact that it was
             required to maintain – even replace – the HVAC unit
             constitutes ownership. If that were so, then [Stinler]
             would also own the plate glass, windows, store front, all
             plumbing and sewage facilities, and electrical systems
             that served only the shop. Clearly, that is not the case.
             The lease imposes an obligation on tenant to maintain
             these fixtures because they belong to the landlord. It
             does not convey ownership of these fixtures to tenant.

ii. The fixtures

             Stinler argues that the paper towel and toilet paper holders, bathroom

doors, and sconces it removed were trade fixtures mandated by Jimmy John’s and

the lease was unclear regarding the ownership of these fixtures. As evidence for

this alleged ambiguity, Stinler points to the reference of fixtures in Paragraph 2,

which requires the tenant to remove fixtures upon the expiration of the lease but

does not explain which fixtures are included in this category.

             “Trade fixture” is defined as “property which a tenant has placed on

rented real estate to advance the business for which it is leased[.]” Scanlon v.
                                         -9-
Scanlon, 545 S.W.3d 311, 316 (Ky. App. 2018) (citation omitted). “While an

ordinary fixture is considered a part of the real property to which it is attached,

trade fixtures are considered personal property and may be removed when vacating

real property.” Id. To determine whether an item is a trade fixture, we inquire

“whether the lessee installed the item with the intent that it be used to aid him in

carrying on his trade or business on the premises.” Id. (internal quotation marks

omitted).

             Under the terms of Exhibit B of the lease, the landlord, Mall Road,

was required to provide two washrooms as well as fixtures, doors, floor, and wall

finishes per the tenant’s specifications and design. Stinler does not dispute that

Mall Road installed the Jimmy John’s branded fixtures in accordance with its

duties under Exhibit B of the lease. Therefore, because the fixtures were not

installed by Stinler, they do not meet the definition of a trade fixture and they are

not Stinler’s personal property.

             Stinler points to the affidavit of its principal, Kenneth Butler, in which

he claims that each of the disputed items was mandated and selected by Jimmy

John’s in accordance with its particular branding or specifications and installed on

the premises in connection with and to advance the Jimmy John’s business

operated there initially by Harper and later by Stinler. Stinler contends that Harper

“knew” at the time it entered the lease that Jimmy John’s would dictate and

ultimately require removal of these branded items. If the removal of the branded
                                         -10-
items was required by Jimmy John’s, Stinler was free to do so but would also have

to replace the items or reimburse Mall Road for these fixtures.

iii. Rent, water, and CAM charges

             Stinler further argues that it understood it would not be responsible for

charges for rent, CAM, and water charges for the period during which it occupied

the shop after the termination of the lease. It claims the parties agreed to this

arrangement in their discussions during the resolution of the forcible detainer

proceedings. As evidence for this, Stinler relies on the statement in Butler’s

affidavit that parties “reached an oral agreement on February 3, 2020, that Stinler

would owe no rent or other monetary amounts for the month of February 2020, as

part of Stinler’s agreement to cease further legal challenge to its eviction.” This

purported agreement was not memorialized in the settlement agreement. Butler’s

claim that there was such an oral agreement, without any other evidence, is simply

not sufficient to read such an alteration of the lease into the settlement agreement.

“A party’s subjective beliefs about the nature of the evidence is not the sort of

affirmative proof required to avoid summary judgment.” Haugh v. City of

Louisville, 242 S.W.3d 683, 686 (Ky. App. 2007).

iv. The attorney’s fees

             The trial court awarded Mall Road $9,609.70 for liquidated damages,

consisting of the rent, CAM, and other charges under the lease; $12,184 for the

property found to be converted; and $35,999.95 in attorney’s fees. The attorney’s
                                         -11-
fees were awarded in accordance with the express terms of the lease, which states:

“The prevailing party in any litigation or other proceedings to enforce such party’s

rights under the Lease will be entitled in such litigation or proceeding to an award

of the costs of such litigation or proceeding, including attorney’s fees and

expenses.”

             Stinler argues that the amount of attorney’s fees, which is more than

one-and-a-half times the total amount of compensatory damages, is not reasonable

in the context of a commercial lease dispute. It argues that it did not damage the

premises or leave them in disrepair; it removed the HVAC professionally and

without damage; and it left the space clean and swept. It further argues that a

portion of the damages sought, but not ultimately recovered by Mall Road,

included costs to repair and replace alleged damage to the premises. Stinler argues

that these speculative damages improperly inflated the amount of attorney’s fees.

             Mall Road argues that Stinler has provided no authority showing that

the ratio of fees to damages was unreasonable or that recovering less than the full

amount of damages sought warrants a reduction in attorney’s fees.

             When, as in this case, recovery of attorney’s fees is permitted by

contract, the amount of the award is reviewed for an abuse of discretion. Royal

Consumer Products, LLC v. Saia Motor Freight Line, Inc., 520 S.W.3d 753, 757

(Ky. App. 2016) (citation omitted). “What constitutes a reasonable [attorney’s] fee

is within the discretion of the court. . . . An abuse of discretion occurs if the
                                          -12-
court’s ruling is arbitrary, unreasonable, unfair, or unsupported by sound legal

principles.” Dawahare v. Cabinet for Health and Family Services, 662 S.W.3d

745, 747 (Ky. App. 2023) (internal quotation marks and citations omitted).

             The trial court acknowledged that the amount of damages is a factor in

determining the amount of attorney’s fees, but also noted that

             Plaintiffs had to expend attorney fees wholly separate
             from the damages sought in this case. Agreements were
             reached to extend the date for Defendant to vacate.
             Then, when Defendant failed to do so, Plaintiff had to
             file a forcible detainer action and litigate in District Court
             to retake the premises. Consequently, the amount of
             attorney fees is not unreasonable.

             The trial court appropriately and carefully considered the overall

history of the case, including the increase in the cost of the proceedings attributable

to Stinler’s failure to timely vacate the premises, in determining the amount of

attorney’s fees. The trial court rejected Stinler’s argument that the fees were

inflated because two attorneys worked on the case for Mall Road by pointing out

that because the associate attorney billed at a lower rate, employing two attorneys

ultimately resulted in lower fees. The trial court also pointed out that Stinler had

been unable to identify any duplication of work or charges.

             Stinler further contends that the attorney’s fees were improperly

calculated on damages that were speculative and legally unrecoverable. Mall Road

made claims for the cost of repairing Stinler’s alleged damage to the shop and

replacing the items removed by Stinler. Stinler points to evidence presented at the
                                         -13-
damages hearing that Mall Road had not actually repaired much of the damage or

replaced many of the items. This was due in part to the fact that the new tenant,

EyeMart, was undertaking material renovations to convert the premises to an eye

doctor’s office. Mall Road argued that the risk remained that EyeMart would seek

to recover the cost of the repairs from Mall Road or would remove the fixtures it

had installed when its tenancy ended. In other words, Mall Road still had potential

liability. In its judgment, the trial court rejected this argument, stating:

             Defendant knowingly removed fixtures from the
             premises he leased belonging to the Plaintiff. Inasmuch
             as the Court has found that this constituted conversion,
             Defendant must pay the value of the items converted.
             Based upon testimony at the hearing, it appears that
             Plaintiff did not suffer financial injury from the removal
             of those fixtures because the subsequent tenant provided
             other materials during the build-out. Consequently, the
             damages proposed by Plaintiff for new replacement and
             installation costs would not be appropriate. Rather, the
             Court accepts Defendant’s evidence as to the total value
             of those items being $12,184 ($10,900 for the HVAC
             unit, $800 for two bathroom doors, $102 for two toilet
             paper holders, and $382 for two paper towel holders).
             Further, because the evidence shows Plaintiff’s new
             tenant renovated the space, and had placed a new sign in
             the same place as that removed by Defendant, the Court
             finds no damages for repair would be appropriate.

             Although the trial court did not grant damages for repair and

replacement costs, it did not make a finding that Mall Road’s claims for these

items were frivolous or improper. There is no indication that Mall Road’s

attorneys inflated their fees by knowingly pursuing meritless claims. It is not the

                                          -14-
place of this Court to second-guess the professional judgment of counsel in

deciding which claims to pursue in the course of litigation.

             The trial court’s award of attorney’s fees was not an abuse of

discretion. It was firmly founded on the evidence presented and it was neither

arbitrary, unreasonable, unfair, nor unsupported by sound legal principles.

                                  CONCLUSION

             For the foregoing reasons, the Boone Circuit Court’s order of October

20, 2022, granting summary judgment to Mall Road and its order of June 3, 2022,

awarding damages, attorney’s fees, costs, and post-judgment interest are affirmed.

             ALL CONCUR.

BRIEFS FOR APPELLANT:                     BRIEF FOR APPELLEE:

Daniel A. Hunt                            Jason P. Renzelmann
Covington, Kentucky                       Louisville, Kentucky

                                          Michael E. Nitardy
                                          Florence, Kentucky

                                          Nathaniel L. Truitt
                                          Cincinnati, Ohio

                                        -15-