Court Opinion

ID: 6328418
Source: CourtListenerOpinion
Date Created: 2022-03-30 20:01:00.796907+00
Date Added: 2024-06-11T09:22:40.134379
License: Public Domain

USCA11 Case: 21-11989     Date Filed: 03/30/2022   Page: 1 of 13

                                           [DO NOT PUBLISH]
                            In the
         United States Court of Appeals
                 For the Eleventh Circuit

                   ____________________

                         No. 21-11989
                   Non-Argument Calendar
                   ____________________

CYPRESS PROPERTY, LLC,
a Florida Limited Liability Company,
                                              Plaintiff-Appellee,
versus
JP MORGAN CHASE BANK NA.,
                                      Defendant-Appellant.
                   ____________________

          Appeal from the United States District Court
              for the Southern District of Florida
             D.C. Docket No. 1:19-cv-23903-DPG
                   ____________________
USCA11 Case: 21-11989       Date Filed: 03/30/2022   Page: 2 of 13

2                     Opinion of the Court                21-11989

Before LUCK, LAGOA, and EDMONDSON, Circuit Judges.

PER CURIAM:
       In this Florida breach-of-contract case, Defendant JPMorgan
Chase Bank, N.A. (“JPMorgan”) appeals the district court’s grant of
summary judgment in favor of Cypress Property, LLC (“Cypress”).
Reversible error has been shown; we vacate the final judgment, re-
verse the grant of summary judgment, and remand for further pro-
ceedings.
                                    I.
      In 2012, the parties entered into a 20-year Ground Lease
(“Lease”) pursuant to which JPMorgan agreed to lease property
owned by Cypress. This appeal involves a dispute about the fre-
quency with which the Base Rent increases under the Lease: once
every year or once every five years. In pertinent part, the Lease
includes this language about rent:
             3.2 Base Rent. Tenant shall pay rent (“Base
      Rent”) to Landlord in the amounts set forth below for
      the periods set forth below:

             ...

              (b) Commencing on the Rent Commence-
      ment Date and continuing through the last day of the
      sixtieth (60th) Lease Month of the Term, annual Base
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21-11989              Opinion of the Court                      3

      Rent shall equal Two Hundred Eighty Five Thousand
      and NO/100 DOLLARS ($285,000.00) and shall be
      payable in equal monthly installments of Twenty
      Three Thousand Seven Hundred Fifty and 00/100
      DOLLARS ($23,750.00), exclusive of sales/use tax.

              (c)     Commencing on the first day of the
      sixty-first (61st) Lease Month following the Rent Com-
      mencement Date and on the first day of every fifth
      (5th) calendar year thereafter (“Effective Change
      Date”), Base Rent shall be increased annually by the
      percentage of increase in the “CPI Index” (hereinafter
      defined) which has occurred between the first calen-
      dar month immediately preceding the first full calen-
      dar month of the sixty (60) Lease Month period of any
      subsequent five (5) calendar year period then expir-
      ing, as the case may be (the “Base Month”), and the
      calendar month immediately preceding the month of
      the Effective Change Date in which the Base Rent is
      to be increased (the “Comparison Month”) (e.g., if the
      Rent Commencement Date is July, 2011, then the
      first Base Month is June, 2011 and the first Compari-
      son Month will be June, 2016). Notwithstanding the
      percentage of increase established by the CPI Index
      on any Effective Change Date, Base Rent shall in-
      crease by a minimum of eight percent (8%) and a
      maximum of twelve percent (12%) on each Effective
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4                    Opinion of the Court                21-11989

     Change Date. Landlord shall notify Tenant of each
     increase in the Base Rent by a written statement set-
     ting forth the CPI Index for the Base Month, the CPI
     Index for the Comparison Month, the percentage in-
     crease between those two indices, and the amount of
     the adjusted Base Rent. Tenant’s obligation to pay
     the adjusted Base Rent shall accrue as of the Effective
     Change Date, notwithstanding any delay in Land-
     lord’s notice to Tenant . . .. The term “CPI Index”
     shall mean the Consumer Price Index . . . prepared by
     the Bureau of Labor Statistics of the U.S. Department
     of Labor. . . . During the pendency of any dispute,
     Tenant shall continue to pay to Landlord annual Base
     Rent in the amount due and payable by Tenant prior
     to the Effective Change Date increased by 8% in equal
     monthly installments, subject to readjustment upon a
     final determination hereunder.

            (d) If Tenant exercises its right to renew the
     Lease as set forth in Section 2.7, annual Base Rent for
     the first Renewal Term and each exercised subse-
     quent Renewal Term shall be determined in accord-
     ance with Exhibit B attached hereto.

     Exhibit B reads this way:

            Base Rent during any Renewal Term shall be
     adjusted in accordance with the CPI Index
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21-11989               Opinion of the Court                         5

      adjustment described in Section 3.2(c) of the Lease
      upon the first (1st) Lease Year of each Renewal Term.
      Base Rent during any Renewal Term shall likewise be
      adjusted every fifth (5th) Lease Year.

       For the first five years of the Lease, JPMorgan paid the an-
nual Base Rent amount ($285,000) specified in section 3.2(b) of the
Lease. On 1 June 2018 (the first day of the sixty-first Lease Month
and the first Effective Change Date) Cypress increased the Base
Rent by 8.195% in accordance with the formula described in sec-
tion 3.2(c). JPMorgan paid the adjusted Base Rent ($308,355) with-
out dispute. One year later, on 1 June 2019, Cypress sought to in-
crease the Base Rent again by 8.195%, for a new Base Rent amount
of $333,660. JPMorgan disputed Cypress’s ability to increase the
Base Rent a second time and continued to pay Base Rent at the
same amount JPMorgan paid during the prior year.
       Cypress declared JPMorgan in default. Cypress later filed in
state court this civil action against JPMorgan for breach of contract.
JPMorgan removed the action to federal district court. Following
discovery, the parties filed cross-motions for summary judgment.
       Cypress and JPMorgan each asserted that the unambiguous
language in section 3.2(c) supported its own interpretation about
the frequency of Base Rent increases provided under the Lease. Ac-
cording to Cypress, the Lease provided for increases in Base Rent
every year after the first five years of the Lease. JPMorgan, on the
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6                        Opinion of the Court                    21-11989

other hand, asserted that Base Rent increases occurred only every
five years on the “Effective Change Date.”
        Following a hearing on the cross-motions, the district court
granted summary judgment in favor of Cypress. The district court
determined that the Lease provided clearly and unambiguously for
annual increases in the Base Rent after the first five-year Lease pe-
riod. Having concluded that the Lease was unambiguous, the dis-
trict court declined to consider extrinsic evidence of the parties’ in-
tent offered by JPMorgan.1 The district court then concluded that
JPMorgan breached the Lease by failing to pay the newly adjusted
Base Rent amount. The district court entered final judgment in
favor of Cypress in the amount of $156,066.64. This appeal fol-
lowed.
                                        II.
       We review de novo the district court’s grant of summary
judgment; we “view all evidence and make all reasonable infer-
ences in favor of the party opposing summary judgment.” Chap-
man v. AI Transp., 229 F.3d 1012, 1023 (11th Cir. 2000) (en banc).
Summary judgment is appropriate when the record shows no

1 In support of its motion for summary judgment, JPMorgan submitted a Let-
ter of Intent between the parties, an internal Cypress email, and deposition
testimony from JPMorgan’s real estate lawyer: documents purporting to show
the parties’ intent to increase rent every five years.
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21-11989                  Opinion of the Court                          7

genuine dispute of material fact and the movant is entitled to judg-
ment as a matter of law. Fed. R. Civ. P. 56(a).
       Whether a contract provision is ambiguous is a question of
law that we review de novo. See Arriaga v. Fla. Pac. Farms, LLC,
305 F.3d 1228, 1246 (11th Cir. 2002).

        In construing a contract under Florida law, 2 “the intention
of the parties is to govern.” Royal Am. Realty, Inc. v. Bank of Palm
Beach & Trust Co., 215 So. 2d 336, 338 (Fla. Dist. Ct. App. 1968);
see Ace Elec. Supply Co. v. Terra Nova Elec., Inc., 288 So. 2d 544,
547 (Fla. Dist. Ct. App. 1973) (“It is well established that in constru-
ing a contract the leading object is to ascertain and effectuate the
intent of the parties.”). To “ascertain the true intention of the par-
ties,” the court must consider the entire agreement. Peoples Gas
Sys., Inc. v. City Gas Co., 147 So. 2d 334, 336 (Fla. Dist. Ct. App.
1962) (citing Ross v. Savage, 63 So. 148, 155 (Fla. 1913)).
       When the contract language is clear and unambiguous, the
court determines the parties’ intent based solely upon the language
used in the contract. See Royal Am. Realty, Inc., 215 So. 2d at 338.
When the contract language is ambiguous, however, “then parol
evidence is properly admissible, not for the purpose of changing or
varying the terms of the written instrument, but to elucidate, ex-
plain or clarify the intention of the parties.” Id.; see Waveblast Wa-
tersports II, Inc. v. UH-Pompano, LLC, 291 So. 3d 657, 661 (Fla.

2 That the Lease is governed by Florida law is undisputed.
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8                      Opinion of the Court                 21-11989

Dist. Ct. App. 2020) (noting that when contract language is ambig-
uous or unclear, extrinsic evidence of the parties’ intent may be
considered “to explain, clarify or elucidate the ambiguous language
with reference to the subject matter of the contract, the circum-
stances surrounding its making, and the relation of the parties.”).
“A contract is ambiguous when it is reasonably or fairly susceptible
to different constructions.” Royal Am. Realty, Inc., 215 So. 2d at
338.
       Section 3.2(c) of the Lease establishes the frequency and
method of calculating increases in Base Rent after the first five
years of the Lease. In determining that the Lease provided for an-
nual increases in Base Rent, the district court focused exclusively
on this phrase within the first sentence of section 3.2(c): “Base Rent
shall be increased annually . . ..” We accept that this language could
be interpreted (at least by itself) to mean that the Base Rent in-
creases each year.
       Other language in section 3.2(c), however, can also be con-
strued reasonably as providing for an increase in Base Rent only on
the “Effective Change Date”: a date that is defined by the Lease as
occurring every five years. For example, section 3.2(c) provides
that the amount of increase in Base Rent shall be calculated based
upon the percentage of increase in the CPI Index over the five-year
period immediately preceding “the month of the Effective Change
Date in which the Base Rent is to be increased.” Notwithstanding
the calculated percentage increase in the CPI Index, section 3.2(c)
states that the “Base Rent shall increase by a minimum of eight
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21-11989                Opinion of the Court                         9

percent (8%) and a maximum of twelve percent (12%) on each Ef-
fective Change Date.” Section 3.2(c) provides further that the
“Tenant’s obligation to pay the adjusted Base Rent shall accrue as
of the Effective Change Date.” Section 3.2(c) also says that, during
the pendency of any dispute about the adjusted Base Rent amount,
“Tenant shall continue to pay to Landlord annual Base Rent in the
amount due and payable by Tenant prior to the Effective Change
Date increased by 8% in equal monthly installments, subject to re-
adjustment upon a final determination hereunder.”
        Considering the language of section 3.2(c) in context with
the other rent provisions in section 3.2 also supports a reasonable
interpretation that the parties intended for the Base Rent to in-
crease every five years throughout the duration of the Lease. The
rent provisions in section 3.2 are separated into three distinct
timeframes: (1) the first 5 years of the 20-year Lease; (2) the remain-
ing 15 years of the 20-year Lease; and (3) possible Renewal Terms
beyond the initial 20-year Lease. About the first timeframe, section
3.2(b) provides a fixed annual Base Rent applicable to the first five
years of the Lease. Section 3.2(d), meanwhile, governs the third
timeframe: the annual Base Rent that applies to each 5-year Re-
newal Term beyond the original 20-year Lease. As described in
Exhibit B, the “Base Rent during any Renewal Term” will be ad-
justed according to the procedure set forth in Section 3.2(c) and
“shall likewise be adjusted every fifth (5th) Lease Year.”
     We read these portions of section 3.2 as providing a fixed
Base Rent during the first five years of the Lease (the first
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10                     Opinion of the Court                 21-11989

timeframe) and also during each five-year Renewal Term (the third
timeframe). Viewing the language in section 3.2 as a whole -- to-
gether with the “likewise” language in Exhibit B -- it is reasonable
to construe section 3.2(c) as also providing for increases in Base
Rent only every fifth year during Lease years six through twenty
(the second timeframe).
      Because the language in section 3.2(c) is susceptible to two
reasonable constructions, we conclude that the language is ambig-
uous. See Royal Am. Realty, Inc., 215 So. 2d at 338.
        Under Florida’s rules of contract construction, “no word or
part of an agreement is to be treated as a redundancy or surplusage
if any meaning, reasonable and consistent with other parts, can be
given to it, and where a contract contains apparent inconsistencies
they must be given such an interpretation as will reconcile them if
possible.” Id. (emphasis added); see Ross, 63 So. at 155 (“In con-
struing any written instrument, . . . the entire instrument must be
considered in order to gather the real intent and to determine the
true design of the makers thereof. To that end, all the different
provisions of such instruments must be looked to and all construed
so as to give effect to each and every of them, if that can reasonably
be done.” (emphasis added)).
       In attempting to reconcile the inconsistent language in sec-
tion 3.2(c) -- and give meaning to the word “annually” -- the district
court determined that the Base Rent was to increase each year by
a rate that would be calculated every five years on the Effective
Change Date. We cannot conclude that this interpretation is
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21-11989                   Opinion of the Court                                11

“reasonable and consistent with other parts” of the Lease. Among
other things, this interpretation conflicts with -- and renders as sur-
plusage -- the other language in section 3.2(c) and in Exhibit B that
seems to indicate that increases to the Base Rent occur only on the
Effective Change Date.
        Because the pertinent Lease language is ambiguous, the dis-
trict court erred in declining to consider extrinsic evidence of the
parties’ intent. See Waveblast Watersports II, Inc., 291 So. 3d at
661 (considering extrinsic evidence of the parties’ intent to resolve
an ambiguous term in a lease agreement); Royal Am. Realty, Inc.,
215 So. 2d at 338 (concluding that -- because the written brokerage
agreement was ambiguous -- the trial court erred in refusing to con-
sider parol evidence to determine the intention of the parties). 3

3 We are unpersuaded by Cypress’s argument that no extrinsic evidence of
the parties’ intent is admissible in this case because the Lease contains only a
“patent” ambiguity. Florida courts historically have distinguished between
patent and latent ambiguities and have permitted extrinsic evidence only to
resolve the latter. See Crown Mgmt. Corp. v. Goodman, 452 So. 2d 49, 51-52
(Fla. Dist. Ct. App. 1984). A patent ambiguity is one that “appears on the face
of the instrument and arises from the use of defective, obscure, or insensible
language,” while a latent ambiguity exists “where a contract fails to specify the
rights or duties of the parties in certain situations.” Id. A third category known
as intermediate ambiguity arises in situations where -- as in this case -- the
words used are sensible and have a settled meaning but where the writing may
be subject to two interpretations. See Ace Elec. Supply Co., 288 So. 2d at 547.
Intermediate ambiguities are treated as latent and may be resolved by consid-
ering extrinsic evidence of the parties’ intent. Id. at 547-48. Some Florida
courts have also indicated that the patent/latent distinction has become less
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12                          Opinion of the Court                        21-11989

        On appeal, JPMorgan urges us to resolve the ambiguity as a
matter of law by considering what JPMorgan says is undisputed ex-
trinsic evidence of the parties’ intent. We decline to do so. Instead,
we remand so that the district court may consider in the first in-
stance the extrinsic evidence of the parties’ intent. See Underwrit-
ers at Lloyds v. Expeditors Korea Ltd., 882 F.3d 1033, 1053 (11th
Cir. 2018) (vacating and remanding to the district court to consider
extrinsic evidence “because the meaning of a contractual provision
in light of extrinsic evidence presents a question of fact, rather than
one of law”); Strama v. Union Fid. Life Ins. Co., 793 So. 2d 1129,
1132 (Fla. Dist. Ct. App. 2001) (noting that “where the terms of the
written instrument are disputed and reasonably susceptible to
more than one construction, an issue of fact is presented as to the
parties’ intent which cannot properly be resolved by summary
judgment.”).
       We also reject Cypress’s argument that we should construe
the ambiguity in the Lease against JPMorgan, as the party that
drafted the lease template. The construction-against-the-drafter
rule is considered a rule of “last resort.” See Underwriters at
Lloyds, 882 F.3d at 1054 n.29 (declining to construe an ambiguous

critical. See Bajrangi v. Magnethel Enters., Inc., 589 So. 2d 416, 419 n.5 (Fla.
Dist. Ct. App. 1991) (“The distinction between latent and patent ambiguities
in relation to parol evidence appears to be disappearing.”); Crown Mgmt.
Corp., 452 So.2d at 51-52 (noting that “the growing and better reasoned trend
of authority indicates that the introduction of parol evidence to probe the true
intent of the parties is proper, irrespective of any technical classification of the
type of ambiguity present.”).
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21-11989                Opinion of the Court                        13

contract against the drafter because the construction-against-the-
drafter rule applies “only after applying other rules of construction
and considering extrinsic evidence”); DSL Internet Corp. v.
TigerDirect, Inc., 907 So. 2d 1203, 1205 (Fla. Dist. Ct. App. 2005)
(under Florida law, “[t]he construction-against-the-drafter princi-
ple is a rule of last resort and is inapplicable when there is evidence
of the parties’ intent at the time they entered into the contract.”).
We have not yet reached the “last resort” stage in this appeal.
        In sum, we vacate the final judgment and reverse the grant
of summary judgment in favor of Cypress. We remand for the dis-
trict court to consider and to make factual findings about the ex-
trinsic evidence of the parties’ intent. We leave to the district
court’s discretion whether additional discovery may be necessary
on remand.
       VACATED, REVERSED, AND REMANDED.