Court Opinion

ID: 171172
Source: CourtListenerOpinion
Date Created: 2010-08-14 18:28:40+00
Date Added: 2024-06-11T17:25:11.947636
License: Public Domain

FILED
                                                               United States Court of Appeals
                                                                       Tenth Circuit

                                                                     August 29, 2008
                    UNITED STATES COURT OF APPEALS
                                                                   Elisabeth A. Shumaker
                                 TENTH CIRCUIT                         Clerk of Court

 CARR OFFICE PARK, LLC, a Delaware
 limited liability company,

               Plaintiff - Appellant,
                                                           No. 07-1277
          v.                                              (D. Colorado)
 CHARLES SCHWAB & CO., INC., a                 (D.C. No. 05-CV-2572-EWN-BNB)
 California corporation,

               Defendant - Appellee.

                            ORDER AND JUDGMENT *

Before MURPHY, HARTZ, and GORSUCH, Circuit Judges.

      Plaintiff Carr Office Park, LLC (Carr) and defendant Charles Schwab &

Co., Inc. (Schwab) are, respectively, landlord and tenant in a corporate center

located in Colorado. Numerous leases and agreements regulate the relationship

between the parties. This dispute arose out of an agreement that obligated Carr to

build an office complex and associated parking garage, which Schwab was then

      *
        This order and judgment is not binding precedent except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
obligated to lease. Changed circumstances led the parties to alter the agreement

so that it covered a multiple-tenant parking garage, rather than an single-tenant

office complex. After completion of the parking garage, Carr and Schwab were

unable to agree on the terms governing the lease of the garage. Carr filed this suit

in Colorado state court, claiming Schwab was in breach of contract for its failure

to pay rent for the garage. Schwab removed the action to the Federal District

Court for the District of Colorado. The district court, with diversity jurisdiction

pursuant to 28 U.S.C. §§ 1332 and 1441, determined that essential elements of the

parking garage lease were ambiguous and the agreements between the parties

constituted only an unenforceable agreement to agree. The district court

accordingly granted Schwab’s motion for summary judgment. This court has

jurisdiction under 28 U.S.C. § 1291 and AFFIRMS the judgment of the district

court.

I. Background

         Carr owns and operates an office park in Arapahoe County, Colorado

known as Panorama Corporate Center. In 1997, Carr and Schwab entered into a

lease (Building III Lease) for a building known as Panorama III in the Corporate

Center. At the same time, Carr and Schwab entered into an Option Agreement.

Under the Option Agreement, Schwab was entitled to exercise five Expansion

Notices, which would trigger Carr’s obligation to construct a new building and

Schwab’s obligation to lease the newly constructed premises. The Option

                                         -2-
Agreement specified that after the exercise of an expansion option, Carr would

deliver a lease for the new building (New Building Lease). The Option Agreement

also specified that the failure of the parties to agree to a New Building Lease

would not affect the validity of the Expansion Notice. Rather, absent an

agreement to alternate terms, the New Building Lease would contain, as a default,

the same terms and conditions expressed in the Building III Lease. In December

of 2000, the parties entered into the Second Amendment to the Option Agreement.

That Amendment replaced the default lease terms from the Building III Lease

with the terms negotiated for a different, prior lease between the parties for the

Panorama VIII development. This new default lease was termed the Lease Form

for New Buildings (Lease Form).

      In June of 2000 Schwab exercised its expansion option, requiring Carr to

build a new office site and parking garage known as Panorama IV. After the

exercise of this option, Carr was approached by the Regional Transportation

District (RTD) regarding the proposed construction of a light rail stop and

parking facilities near the Panorama IV building site. Carr and RTD, with

Schwab’s knowledge, entered into an agreement under which the Panorama IV

parking garage (Shared Parking Facility) would be shared by RTD and Schwab.

Carr and Schwab entered into the Third Amendment to the Option Agreement, by

which Schwab formally approved the agreement between Carr and RTD and

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agreed that Carr would not be in breach of the Option Agreement by performing

its contractual obligations to RTD.

      Subsequently, Schwab determined that, due to current economic conditions,

it no longer wished to go forward with the Panorama IV expansion. The parties

agreed in the Fourth Amendment to the Option Agreement (Fourth Amendment)

that Schwab could revoke its exercise of the expansion option with respect to the

office building in exchange for payments in excess of seven million dollars. 1 The

Fourth Amendment specified that the revocation did not apply to Schwab’s lease

of the Shared Parking Facility. It stated, “[u]pon completion of the Shared

Parking Facility, [Schwab] shall be required to lease from [Carr] the parking

spaces which are contained in two lowest levels of the Shared Parking Facility

(the ‘Parking Spaces’).” The Fourth Amendment further provided that,

      within [sixty] days after [Schwab’s] receipt of [Carr’s] notice of
      commencement of construction of the Shared Parking Facility, [Carr]
      and [Schwab] shall, in good faith, negotiate and finalize a lease
      document (the “Garage Structure Lease”) based on the Lease Form
      for New Buildings . . . concerning [Schwab’s] lease of the Parking
      Spaces which requires [Schwab] to pay to [Carr] an annual triple net
      rent for use of the Parking Spaces calculated as a product of the Total
      Project Costs (as such term is defined in the Lease Form) for [Carr’s]
      cost of the construction of [Schwab’s] portion of the Shared Parking
      Facility and the Return Rate for Panorama IV . . . . [Carr] estimates
      that such rent will equal $502,200.00 per annum (triple net) assuming
      a Total Project Cost of $5,400,000.00 for [Schwab’s] portion of the
      Shared Parking Facility.”

      1
          Schwab ultimately made a termination payment of $7,142,777 to Carr.

                                         -4-
In addition, the Fourth Amendment dictated that “[i]n the event of any conflict

between the terms and provisions of the Option Agreement, as it has previously

been amended, and the terms and provisions of this Fourth Amendment, the terms

and provisions of this Fourth Amendment shall control.”

      In January of 2004 Carr notified Schwab that it would commence

construction of the Shared Parking Facility in February. As agreed to in the

Fourth Amendment, this notification triggered negotiations between the parties

for a Shared Parking Facility lease. On March 5, 2004, Carr representative Lisa

Foyston sent Schwab a proposed lease (March 5 Draft). The March 5 Draft was

redlined against a previously proposed draft lease for the entire Panorama IV

complex, with changes intended to convert the lease into one for only the parking

garage. Included in those changes were deletions of terms that would allow

Schwab to purchase the premises (Article 33) and giving Schwab a right of first

offer on the parking garage (Article 34). Schwab rejected the March 5 Draft and

the parties continued their negotiations. The negotiations between the parties

included discussions on issues such as the premises covered by the lease, which

party bore the maintenance obligations for the structure, rental of excess space by

Schwab, and whether an extension option would exist.

      The parties failed to resolve these issues. The Shared Parking Facility was

completed and delivered on December 3, 2004, but Schwab has never occupied

the Facility nor paid rent. Carr brought suit on November 29, 2005, alleging

                                         -5-
Schwab was in breach of contract. In the district court, the parties filed cross

motions for summary judgment. Carr argued the existing agreements obligated

Schwab to pay rent on the Shared Parking Facility and its failure to do so

constituted breach. Schwab claimed no such agreement existed because material

elements, such as rent, remained unresolved. It further argued that the Fourth

Amendment constituted an unenforceable “agreement to agree.” The district

court agreed that unresolved material terms to the lease rendered any agreement

unenforceable and granted summary judgment to Schwab on Carr’s breach of

contract claim.

II. Discussion

      This court reviews a district court’s grant of summary judgment de novo,

applying the same legal standards as the district court. Jones v. Denver Post

Corp., 203 F.3d 748, 751 (10th Cir. 2000). We examine the factual record and

reasonable inferences therefrom in the light most favorable to the nonmoving

party, in this case, Carr. Concrete Works of Colo., Inc. v. City & County of

Denver, 36 F.3d 1513, 1517 (10th Cir. 1994). Summary judgment is appropriate

only “if the pleadings, the discovery and disclosure materials on file, and any

affidavits show that there is no genuine issue as to any material fact and that the

movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). The

moving party must show the absence of evidence supporting the nonmoving

party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If this burden

                                         -6-
is met, the nonmoving party must then show a genuine issue of material fact

exists. Fed. R. Civ. P. 56(e)(2). In so doing, it may not rely solely on the

allegations made in its pleadings, but must set out specific facts demonstrating a

genuine issue for trial. Id. When sitting in diversity, this court applies the law of

the forum state, here Colorado. Woolard v. JLG Indus., Inc., 210 F.3d 1158, 1168

(10th Cir. 2000).

      To create an enforceable and binding contract, all essential elements must

be settled or a method of settlement must be agreed upon. Greater Serv.

Homebuilders’ Inv. Ass’n v. Albright, 293 P. 345, 348 (Colo. 1930). “If the

writing leaves the agreement of the parties vague and indefinite as to an essential

element thereof, it is no contract and cannot be made one by parol.” Id. at 348-

49. “To have an enforceable contract it must appear that further negotiations are

not required to work out important and essential terms.” New York Life Ins. Co.

v. K N Energy, Inc., 80 F.3d 405, 409 (10th Cir. 1996) (applying American

Mining Co. v. Himrod-Kimball Mines, Co., 235 P.2d 804, 807-08 (Colo. 1951) (en

banc)). When parties have entered into an “agreement to agree,” the purported

contract is unenforceable because the court cannot force parties to reach an

agreement and therefore no remedy is available. Griffin v. Griffin, 699 P.2d 407,

409 (Colo. 1985) (holding that an agreement by two parents to “negotiate and

reach agreement at some future time concerning their child’s education” was

unenforceable). “[C]ontract interpretation is a question of law that is reviewed de

                                          -7-
novo.” Ad Two, Inc. v. City & County of Denver, 9 P.3d 373, 376 (Colo. 2000)

(en banc). Evidence beyond the language of the instrument itself is admissible

only where there is an ambiguity in the terms of the contract. Id.

      Carr argues the Option Agreement specified all essential terms of the lease

and therefore was unambiguous and enforceable. Carr contends that Colorado

law specifies only four essential elements of a valid lease: (1) the boundaries of

the property to be leased, (2) the term of the lease, (3) the amount of rent to be

paid, and (4) the rent commencement date. 2 Carlson v. Bain, 182 P.2d 909, 911

(Colo. 1947). Because the agreements between the parties contained these

essential term, Carr argues, an enforceable lease exists. Schwab maintains that

the district court correctly determined that neither the Lease Form nor the Option

Agreement contained a final accord concerning rent for the Shared Parking

Facility and, as a result, no binding contract existed.

      We agree. The agreements between the parties constitute only an

unenforceable “agreement to agree.” The Fourth Amendment unambiguously

states that Schwab and Carr “shall, in good faith, negotiate and finalize a lease

document . . . concerning [Schwab’s] lease of the Parking Spaces which requires

      2
       Schwab contests Carr’s assertion that any lease with these four elements is
enforceable under Colorado law. Schwab argues that these elements are
necessary, but not always sufficient. We find it unnecessary to resolve this
dispute because Carr cannot show that all of the elements it acknowledges are
necessary existed in its agreements with Schwab.

                                          -8-
[Schwab] to pay [Carr] . . . rent” (emphasis added). The Fourth Amendment also

provides “[t]he Garage Structure Lease will require [Schwab] to agree to an initial

lease term of 15 years” (emphasis added). These provisions demonstrate that the

Garage Structure Lease was a document to be negotiated and agreed to at a future

date.

        Furthermore, unlike the previous agreement between the parties, the Fourth

Amendment did not designate lease terms to be used in the event of a failure to

reach an accord on a new lease. The Option Agreement explicitly states that, in

the event a New Building Lease cannot be negotiated, “[t]he lease of the New

Building shall be on (and the New Lease shall contain) the same terms and

conditions of the [Lease Form].” In contrast, the Fourth Amendment requires

only that the parties negotiate a Shared Parking Facility lease “based on the Lease

Form for New Buildings.” Unlike the unamended Option Agreement, the Fourth

Amendment does not provide a fully negotiated fallback lease. The Fourth

Amendment specified that in the event of a conflict between the Option

Agreement and the terms of the Fourth Amendment, the Fourth Amendment

would control. As a result, the Fourth Amendment constitutes only an agreement

to agree, which is “unenforceable because the court has no power to force the

parties to reach agreement and cannot grant a remedy.” Griffin, 699 P.2d at 409.

        The ambiguities concerning the amount of rent to be paid on the Shared

Parking Structure further supports this conclusion. Carr argues the Fourth

                                         -9-
Amendment itself was a fully negotiated agreement specifying all essential

elements of the lease for the Shared Parking Facility. In particular, it claims the

Fourth Amendment provided a method for calculating the Shared Parking Facility

rent. It points to the parties’ agreement that “an annual triple net rent for use of

the Parking Spaces calculated as a product of the Total Project Costs (as such

term is defined in the Lease Form) for [Carr’s] cost of the construction of

[Schwab’s] portion of the Shared Parking Facility and the Return Rate for

Panorama IV . . . .” Carr argues that this provision constitutes an enforceable

agreement on rent. It acknowledges that “Total Project Costs” is defined by

reference to the Lease Form, but maintains the Fourth Amendment’s definition is

nevertheless unambiguous.

      The calculation of rent agreed to in the Fourth Amendment, however,

leaves two ambiguities which render the formula for rent meaningless absent

further negotiations. First, as defined in the Fourth Amendment, one element of

the formula is “[Carr’s] cost of the construction of [Schwab’s] portion of the

Shared Parking Facility.” Yet the Fourth Amendment provides no definition for

Schwab’s portion of the Shared Parking Facility. It could arguably be defined as

only the Parking Spaces themselves or include areas used for ingress and egress,

land surrounding the garage, structural elements of the garage, and the land

underneath the garage. Without an agreement between the parties as to how to

determine Schwab’s portion of the Shared Parking Facility, rent cannot be

                                         -10-
calculated. An agreement that is “vague and indefinite as to an essential element”

cannot be enforced. Albright, 293 P. at 348-49.

      Second, Total Project Costs, an element of the rent calculation, is defined

in the Lease Form. The definition includes land costs, construction hard and soft

costs, construction of infrastructure on the land, and “the cost of operating and

maintaining the Premises.” The definition of construction hard costs included

“Building Cost,” “Parking Structure,” and “Site Costs for the Premises.” The

Lease Form defines “Premises” as “the Land, the Building, the Parking Lot and

the Parking Structure appurtenant thereto, and all other improvements on the

Land.” All provisions, however, contemplate a single-owner office complex and

do not address the allocation of costs for a parking structure with two tenants.

Thus, the Fourth Amendment and the Option Agreement do not specify how much

of the land originally allocated for the Panorama IV complex is properly included

in the cost of constructing only the Shared Parking Facility. Nor do the

documents explain how the construction and maintenance costs of shared portions

of the garage should be allocated between the two tenants. Without these

components, rent cannot be calculated and the agreements are ambiguous as to an

essential element.

      Carr attempts to refute this conclusion by arguing that “both parties

understood that the ‘Tenant’s portion of the Shared Parking Facility’ means all of

the lowest two floors of the parking garage and the associated improvements” and

                                         -11-
that this is also the definition of Premises that should be used to calculate rent.

Carr does not point to anything in the record, however, to show this

understanding existed. Rather, the record shows that Carr took the position in

lease negotiations that the Premises meant “the Land (subject to the ‘RTD

Easement’ as such term is defined in the RTD Agreement), the Parking Structure

and those certain other improvements located on the Land which provide access

(ingress and egress) to the Parking Structure.” Carr argues that it took this

position only as a negotiating tactic and it has no bearing on the Fourth

Amendment’s default definition of Schwab’s portion of the Shared Parking

Facility. This assertion is belied, however, by Carr’s calculations of rent for its

damages exhibit before the district court. Carr admitted before the district court

that its calculation of rent relied on a definition of Premises that included the cost

of the land upon which the Shared Parking Facility was situated, including

“ingress and egress and anything that relates to the garage.” In earlier

negotiations, Schwab had contested this characterization of “Premises.” Carr’s

contention that the parties had a shared understanding of “Tenant’s portion of the

Shared Parking Facility” or “Premises” is not supported by the record.

      Carr also argues that the Option Agreement, as amended, evinces the

parties’ intent to bind themselves to a lease for the garage. It notes the parties’

agreement in the Fourth Amendment that Schwab’s obligation to lease the Shared

Parking Facility “cannot and shall not be revoked.” The district court’s decision,

                                          -12-
Carr maintains, does not give effect to the intent of the parties as evidenced by

the clear language of the agreement. While it is true the parties agreed Schwab

had an obligation to lease a portion of the Shared Parking Facility from Carr

pursuant to a yet to be negotiated Shared Parking Facility Lease, this court cannot

force the parties to come to an accord on essential elements that are left

ambiguous. See Griffin, 699 P.2d at 409.

      In the alternative, Carr argues that the district court erred by granting

summary judgment because a genuine dispute of material fact existed regarding

the parties’ agreement on what “Premises” were leased to Schwab. A dispute of

material fact is genuine “if the evidence is such that a reasonable jury could

return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 248 (1986). Carr maintains that a triable issue of fact exists concerning

whether the parties agreed upon the Premises leased to Schwab. See United

States v. Hess, 194 F.3d 1164, 1174 (10th Cir. 1999) (“[W]here interpretation of a

contract requires examination of extrinsic evidence to determine intent, and where

more than one inference may be drawn therefrom, a question of fact is

presented.”).

      Here, however, Carr has not pointed to any extrinsic evidence that an

agreement between the parties existed as to the bounds of the Premises in the

Fourth Amendment. Rather, Carr relies only on the “plain language of the Fourth

Amendment” as support for its position. Contract interpretation, however, is a

                                         -13-
matter of law. Ad Two, Inc., 9 P.3d at 376. As explained above, this court holds

that as a matter of law the Fourth Amendment is ambiguous with respect to the

extent of the Premises and the only extrinsic evidence in the record indicates that

an agreement on the meaning of the term did not exist. Absent any extrinsic

evidence suggesting there was an agreement as to the Premises to be leased, there

is no genuine issue of fact for trial.

III. Conclusion

      For the foregoing reasons, the judgment of the district court is

AFFIRMED.

                                                ENTERED FOR THE COURT

                                                Michael R. Murphy
                                                Circuit Judge

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