Court Opinion

ID: 2789000
Source: CourtListenerOpinion
Date Created: 2015-03-25 15:03:45.830219+00
Date Added: 2024-06-11T11:08:28.394264
License: Public Domain

Mar 25 2015, 9:17 am

      ATTORNEYS FOR APPELLANT                                    ATTORNEYS FOR APPELLEE
      Sean M. Clapp                                              David B. Honig
      Ian T. Keeler                                              Andrew B. Howk
      Clapp Ferrucci                                             Hall Render Killian Heath & Lyman, PC
      Fishers, Indiana                                           Indianapolis, Indiana

                                                  IN THE
          COURT OF APPEALS OF INDIANA

      Norris Avenue Professional                                March 25, 2015
      Building Partnership,                                     Court of Appeals Case No.
      Appellant-Plaintiff,                                      40A01-1408-PL-349

              v.                                                Appeal from the Jennings Circuit
                                                                Court

      Coordinated Health, LLC,                                  The Honorable Jon W. Webster,
                                                                Judge
      Appellee-Defendant.
                                                                Cause No. 40C01-1106-PL-127

      Najam, Judge.

                                        Statement of the Case
[1]   Norris Avenue Professional Building Partnership (“Norris”) appeals the trial

      court’s judgment for Coordinated Health, LLC (“Coordinated Health”) on

      Norris’ complaint for breach of a lease agreement. Norris raises a single issue

      for our review, namely, whether the trial court erred when it concluded that

      Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015                    Page 1 of 16
      Coordinated Health did not breach the lease agreement. We reverse and

      remand with instructions.

                                    Facts and Procedural History
[2]   On April 29, 2002, Norris and Coordinated Health entered into a lease

      agreement whereby Coordinated Health agreed to lease certain real property

      from Norris.1 The parties’ lease provided for an “initial term” of two years to

      be followed by two “option terms” of five years each. Appellant’s App. at 13.

      In particular, the lease stated in relevant part as follows:

               Section 2.1 Initial Term. The initial term of this Lease shall be
               for a period of two (2) years . . . commencing on May 1, 2002,
               and terminating on April 30, 2004. In the event that
               [Coordinated Health] wishes to exercise either of the option
               terms set forth in Section 4.1, at least sixty (60) days prior to the
               end of the initial term or the first option term, as the case may be,
               [Coordinated Health] shall give written notice to [Norris] of
               intent to exercise the option. In the event [Coordinated Health]
               does not provide such notice, then this Lease will terminate at the
               end of the then[-]current term unless [Norris] and [Coordinated
               Health] agree otherwise.

                                                           ***

               Section 4.1 Minimum Annual Rent. [Coordinated Health]
               covenants and agrees to pay . . . as rent for said Premises . . . the
               sums as set for[th] below: $2250.00 per month beginning May 1,

      1
        Unhelpfully, in its brief on appeal Norris cites sixty-six pages of its appendix in support of this basic fact. A
      simple citation to page 13 of the appendix would have sufficed.

      Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015                              Page 2 of 16
        2002[,] in advance on the first day of each calendar month of the
        term . . . .

        Rent for the 1st five (5) year option term will be $2,300/month
        for the 1st year, $2,350/month for the 2nd year, $2,400/month
        for the 3rd year, $2450/month for the 4th year, and
        $2,500/month for the 5th year. In the event [Coordinated
        Health] exercises its option for the 2nd five (5) year option term,
        rent per month for the 1st year of the second option term shall be
        calculated by taking the monthly rent for the 6th year of the 1st
        option term and increasing said monthly rental by the change in
        the CPI-Urban [the Consumer Price Index for Urban
        Consumers] for the twelve month period ending three (3) months
        prior to the beginning of the 1st year of the 2nd option term. For
        each year of the 2nd option term thereafter, the monthly rental
        amount shall be increased by the change in the CPI-Urban for the
        twelve (12) month period ending three (3) months prior to the
        beginning of said year.

                                                 ***

        Section 14.1 Surrender of Premises. At the end of the term or
        any renewal thereof or other sooner termination of this Lease,
        [Coordinated Health] will peaceably deliver to [Norris]possession
        of this Premises . . . .

                                                 ***

        Section 15.1 Waiver. The waiver (or failure to insist upon strict
        performance) by [Norris] or by [Coordinated Health] of any
        term, covenant, or condition herein contained shall not be
        deemed to be waiver of such term, covenant, or condition or any
        subsequent breach of the same or other term, covenant, or
        condition contained herein. . . .

Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015   Page 3 of 16
      Id. at 13-15, 21-22.

[3]   Coordinated Health did not provide Norris with notice that it intended to

      exercise the first option term within sixty days of the expiration of the initial

      term. Nonetheless, Coordinated Health did not surrender the premises upon

      the end of the initial term, and it paid rent to Norris for the entirety of the first

      option term in amounts equivalent to those delineated in the lease for the first

      option term.

[4]   As the end of the first option term approached, Coordinated Health did not

      provide Norris with notice that it intended to exercise the second option term

      within sixty days of the expiration of the first option term. Nonetheless,

      Coordinated Health did not surrender the premises upon the end of the first

      option term, and, for a time, it paid rent to Norris in amounts equivalent to

      those delineated in the lease for the second option term. The second option

      term was scheduled to end on April 30, 2014.

[5]   In October of 2010, Coordinated Health informed Norris that it would

      terminate its tenancy as of April 30, 2011. The parties were unable to

      successfully negotiate a termination agreement, and, by April 30, 2011,

      Coordinated Health had surrendered the premises and paid all rents due up to

      that time.

[6]   On June 7, 2011, Norris filed suit against Coordinated Health. Norris alleged

      that Coordinated Health had breached the parties’ lease agreement and that

      Coordinated Health owed Norris a sum equivalent to the balance of rent from

      Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015     Page 4 of 16
      May 1, 2011, through April 30, 2014, or the remainder of the second option

      term. After the trial court denied the parties’ respective motions for summary

      judgment, the parties entered a joint stipulation of facts and moved for

      judgment without an evidentiary hearing. On June 2, 2014, the trial court

      entered a general judgment for Coordinated Health. Thereafter, the court

      denied Norris’ motion to correct error. This appeal ensued.

                                      Discussion and Decision
                                              Standard of Review

[7]   Norris appeals the trial court’s judgment for Coordinated Health. But the

      parties initially dispute our standard of review. Norris asserts that our standard

      of review is de novo, while Coordinated Health asserts that we must review the

      trial court’s judgment under the clearly erroneous standard. Norris is correct.

[8]   This appeal involves only a written contract and a written, joint stipulation of

      facts. It is well established that, where “only a paper record has been presented

      to the trial court, we are in as good a position as the trial court . . . and will

      employ de novo review . . . .” Munster v. Groce, 829 N.E.2d 52, 57 (Ind. Ct.

      App. 2005); see also Houser v. State, 678 N.E.2d 95, 98 (Ind. 1997) (holding that,

      where “both the appellate and trial courts are reviewing the paper record . . . ,

      there is no reason for the appellate courts to defer to the trial court’s

      finding . . . .”). The clearly erroneous standard, on the other hand, is “our

      usual review . . . when the trial court is in the unique position of determining

      Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015      Page 5 of 16
      the . . . facts.” Anderson v. Wayne Post 64, Am. Legion Corp., 4 N.E.3d 1200, 1206

      n.6 (Ind. Ct. App. 2014), trans. denied.

[9]   Those basic principles aside, Coordinated Health asserts that the clearly

      erroneous standard applies “when facts are stipulated to by the parties and

      entered into evidence by the trial court.” Appellee’s Br. at 8. In support,

      Coordinated Health cites England v. Alicea, 827 N.E.2d 555, 558 (Ind. Ct. App.

      2005). In England, this court reviewed whether the trial court erred in its

      partition of certain real property, and we stated:

              Where, as here, the trial court enters specific findings of fact and
              conclusions of law, we employ a two-tiered standard of review.
              First, we determine whether the evidence supports the findings;
              then we determine whether the findings support the judgment.
              Butler Univ. v. Unsupervised Estate of Verdak, 815 N.E.2d 185, 190
              (Ind. Ct. App. 2004). However, inasmuch as stipulated facts are
              conclusive upon both the parties and the tribunal, the findings of fact may
              not be challenged upon appeal. Wayne Township v. Lutheran Hosp. of
              Fort Wayne, Inc., 590 N.E.2d 1130, 1133 (Ind. Ct. App. 1992).
              Thus, we will only look to the conclusions of law and whether
              the findings and conclusions support the judgment. We will
              consider only the evidence and reasonable inferences flowing
              therefrom that support the trial court’s judgment, and we will not
              reweigh the evidence. Id. We will only disturb the judgment if
              we determine that it is clearly erroneous, meaning that there are
              no facts or inferences supporting it. Id. A judgment is clearly
              erroneous when a review of the record leaves us with a firm
              conviction that a mistake has been made. Id.

      Id. (emphasis added).

      Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015         Page 6 of 16
[10]   England does not control here for two significant reasons. First, England does

       not hold that the clearly erroneous standard of review applies when only a

       paper record is at issue on appeal. Rather, as relevant here England merely

       noted that factual stipulations may not later be challenged on appeal. Id.; see

       also Wayne Township, 590 N.E.2d at 1133 (“stipulated facts are conclusive upon

       both the parties and the tribunal, and . . . a party cannot properly challenge facts

       on appeal which it has stipulated to below”). Thus, we do not agree with

       Coordinated Health’s reading of England. Neither England nor Wayne Township,

       the case England relied on, state that we are obliged to apply the clearly

       erroneous standard of review to a paper record.

[11]   Second, no party to the instant appeal challenges the stipulated facts, and,

       unlike in England, the trial court here did not enter findings of fact and

       conclusions thereon following a bench trial. Indeed, nothing about the court’s

       judgment in the instant matter indicates that the court acted as a fact finder or

       in any way applied its unique position to determine any facts. See Anderson, 4

       N.E.3d at 1206 n.6. In other words, nothing about this appeal suggests that the

       trial court was in a better position than this court to address the facts and the

       law. As such, we owe the trial court no deference in our review. See, e.g.,

       Houser, 678 N.E.2d at 98; Munster, 829 N.E.2d at 57.

                                             Arguments on Appeal

[12]   Turning to the arguments on appeal, we first briefly reject Coordinated Health’s

       argument that we must affirm the trial court’s judgment because Norris did not

       file a brief in the trial court in support of the parties’ request for judgment and,
       Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015     Page 7 of 16
therefore, Norris “fail[ed] to carry its burden of proof.” Appellee’s Br. at 9.

According to the CCS, on April 21, 2014, “both counsel agreed to file

memorand[a] by 5/12/2014 and responsive memorand[a] by 5/27/2014” with

respect to the request for judgment. Appellant’s App. at 7. While the record is

clear that Norris did not file a brief after that date, the record is also clear that

Norris had already filed a brief in support of its motion for summary judgment,

and neither Norris’ arguments nor the underlying facts had changed since

Norris had filed that brief. Indeed, Norris did file a responsive memorandum

on May 30, which the trial court accepted, and in which Norris explicitly

asserted that the matter had been fully briefed on summary judgment, that all

pertinent facts had been stipulated, and that there had been “no change in the

facts, the law that pertains to these facts[,] or any other matter since the

respective Motions for Summary Judgment were filed.” Id. at 138. Thus, we

reject Coordinated Health’s theory that Norris failed to carry its burden of proof

simply because Norris did not file a redundant brief. 2 The issues raised by

Norris on appeal were fairly before the trial court when it entered its judgment,

and we will consider those issues accordingly on appeal. See, e.g., Showalter v.

Town of Thorntown, 902 N.E.2d 338, 342 (Ind. Ct. App. 2009), trans. denied.

2
  We also reject Coordinated Health’s assertion that holding it to the lease would violate the statute of
frauds, an assertion that has long been rejected by this court. E.g., Thurston v. F.W. Woolworth Co., 66 Ind.
App. 26, 117 N.E. 686, 688 (1917). Moreover, Coordinated Health’s assertion that the waiver provision of
the parties’ lease agreement somehow precludes Norris’ arguments is not supported by cogent reasoning, and
we do not consider it. Ind. Appellate Rule 46(A)(8)(a).

Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015                         Page 8 of 16
[13]   We thus turn to the merits of Norris’ claim, namely, whether at the time

       Coordinated Health surrendered the premises it was responsible to pay rent for

       the entirety of the second option term. In support of its position, Norris asserts

       that Coordinated Health had taken affirmative steps to demonstrate its exercise

       of both options notwithstanding Coordinated Health’s failure to provide notice

       to Norris sixty days before the exercise of each option. Coordinated Health, on

       the other hand, asserts that the sixty-day notice was a material condition

       precedent to the exercise of each option, and Coordinated Health’s failure to

       give written notice made it a holdover tenant following the end of the initial

       term.

[14]   Norris first discusses whether the options provided for in the parties’ lease were

       options to extend or options to renew the lease. But we have previously

       rejected this distinction on similar facts, namely, where a lease required sixty-

       days notice from the lessee to the lessor to exercise an optional term for the

       lease. As we explained:

               Under Indiana law, if a lessee has a privilege or option to extend
               under the lease, a mere holding over and payment of rent will be
               sufficient to exercise the privilege. However, if the lessee has an
               option to renew, a mere holding over and payment of rent will
               not be sufficient to exercise the option to renew. Fragomeni v.
               Otto Gratzol Signs (1951), 121 Ind. App. 167, 96 N.E.2d 275; G.S.
               Suppiger Co. v. Summit Gas & Water Co. (1949), 119 Ind. App. 102,
               84 N.E.2d 207. The Indiana cases give little guidance as to the
               reason for this distinction. The rule seems to have developed in
               Indiana as an aid to the courts in determining the intention of the
               parties regarding the effect of holding over when there was some
               right in the lessee to a further term but no express contract

       Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015   Page 9 of 16
        provision regarding the effect of holding over. See C. Callahan Co.
        v. Michael (1910), 45 Ind. App. 215, 218-19, 90 N.E. 642, 643
        (stating that [“]an option of a renewal would seem to imply that
        the parties contemplated some affirmative act by way of the
        creation of an additional term.[”]). However, the lease at issue,
        whether construed as an option to extend or an option to renew,
        clearly required notice to the lessor of an intention to exercise the
        option before expiration of the current term. This notice
        requirement evidences an intent of the parties that there was to be
        no ‘extension’ or ‘renewal’ of the lease without the required
        notice. Regardless of whether the trial court construed the instant lease
        to contain an option to renew or an option to extend, the need for making
        the distinction has been eliminated by the notice requirement. We
        conclude that the giving of the required notice is a condition
        precedent to the right of renewal. In the absence of any right to
        equitable relief, the right of ‘renewal’ or ‘extension’ is lost if the
        notice is not given. Thus, if notice is stipulated in the lease, it must be
        given regardless of whether the lease provides for an option to extend or
        an option to renew. Since the lease at issue required notice ‘in
        person or by certified mail’ and no such notice was given, the
        mere holding over and payment of rent was not sufficient notice under the
        contract. The reasoning behind demanding exact compliance with the
        terms of the option including the notice provision is that the lessor is
        bound to grant the additional term while the lessee is free to accept or
        reject it. Thus, the courts will not hold the lessor to his promise any
        longer than he has agreed to be held. Sosanie v. Pernetti Holding Corp.
        (1971), 115 N.J. Super. 409, 279 A.2d 904, 908; University Realty
        & Development Co. v. Omid-Gaf, Inc. (1973), 19 Ariz. App. 488, 508
        P.2d 747, 749.

Carsten v. Eickhoff, 163 Ind. App. 294, 299-300, 323 N.E.2d 664, 667-68 (1975)

(emphases added; footnotes omitted). But we made it a point in Carsten to note

that that case was “not within the line of cases in which the lease calls for a

higher rent during the second term and the lessee holds over paying the higher

Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015        Page 10 of 16
       rent.” Id. at 669 n.3 (citing Kramer v. Cook, 73 Mass. 550, 550 (1856)); see also

       Pearman v. Jackson, ___ N.E.3d ___, 2015 WL 388389 at *8 (Ind. Ct. App. 2015)

       (holding that, where the rent payments during the original and extended terms

       were the same, the lessees’ “payment of rent and continued occupation of the

       leased premises standing along was insufficient . . . to establish that they had

       exercised their option to renew the lease for an additional term . . . .”), not yet

       certified.

[15]   In another case, we considered whether a lessee had tendered effective notice to

       the lessor when the notice was untimely under the lease but the lessor treated

       the notice as if it were timely. We stated:

               We note Carsten is a case that involved the sufficiency of the
               evidence necessary to establish waiver or a claim of equitable
               estoppel. The court held that, as a matter of law, merely holding
               over and the paying/accepting of rent does not create a
               waiver. . . .

               In the instant case, the trial court’s holding as a matter of law
               that the option to renew had not been exercised is not correct if
               there is substantive evidence of waiver and acceptance by the
               lessor. Here, there was evidence from which the trier of fact
               could conclude waiver of the required notice had been
               established. There was no question that the notice was given
               late, but before the lease expired. It is well settled in Indiana that a
               condition precedent may be waived. In this case, the notice requirement
               (a condition precedent) was for the benefit of the lessor and could have
               been waived by the lessor. Unlike in Carsten, there is no evidence of
               a dispute between lessor and lessees. Here, there was no dispute
               between the lessor and the lessee that the lease had been
               renewed, even though notice was given after the sixty (60) day

       Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015      Page 11 of 16
               notice period. The lessor had the right to waive or modify a condition
               precedent. . . .

       Powers v. City of Lafayette, 622 N.E.2d 1311, 1314-15 (Ind. Ct. App. 1993)

       (emphases added; citations and footnotes omitted), trans. denied. Moreover,

       “[i]t has long been the law in this state that the performance of a condition

       precedent may be waived in many ways. One such way is by the conduct of

       one of the parties to the contract.” Harrison v. Thomas, 761 N.E.2d 816, 820

       (Ind. 2002) (citations, quotations, and alterations omitted).

[16]   Applying that case law here, the notice provision in the instant lease was a

       condition precedent to Coordinated Health’s exercise of either option term.

       Carsten, 323 N.E.2d at 667-68. However, that condition precedent existed for

       the benefit of Norris and, therefore, Norris had the right to waive Coordinated

       Health’s compliance with the condition precedent. Powers, 622 N.E.2d at 1314-

       15. In lieu of the condition precedent, Norris had the right to accept another

       affirmative act by Coordinated Health, beyond Coordinated Health’s merely

       holding over and paying the same rent it had been paying, as evidence of

       Coordinated Health’s intent to exercise the option terms. See, e.g., Fragomeni,

       96 N.E.2d at 278 (“where the lease gives the privilege of renewal[,] the lessee,

       by some affirmative act, must indicate his election to exercise the option prior

       to the expiration of the lease”); see also C. Callahan Co., 90 N.E. at 643 (“an

       option of a renewal would seem to imply that the parties contemplated some

       affirmative act by way of the creation of an additional term.”).

       Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015     Page 12 of 16
[17]   Norris’ right to waive the condition precedent is also supported by the waiver

       provision of the parties’ lease agreement, which contemplates, but also limits,

       the operation and effect of a party’s failure to insist on strict performance of a

       condition by the other party. That provision states that the failure to insist on

       strict performance of any term, covenant, or condition shall not constitute the

       waiver of “any subsequent breach of the same or other term, covenant, or

       condition.” Here, this means that Norris’ failure to insist upon Coordinated

       Health’s performance of the written notice requirement for the first and second

       option terms is limited and does not operate as a waiver of Coordinated

       Health’s obligation to pay rent and otherwise perform under the second option

       term at issue.

[18]   Still, to hold Coordinated Health to the option terms absent Coordinated

       Health’s exercise of the conditions precedent, as a matter of law Norris had to

       accept an affirmative act by Coordinated Health beyond Coordinated Health’s

       merely holding over and paying the same rent it had paid during the initial

       term. See, e.g., Fragomeni, 96 N.E.2d at 278; see also C. Callahan Co., 90 N.E. at

       643. With that in mind, the stipulated facts sufficiently demonstrate that Norris

       failed to insist upon Coordinated Health’s strict performance with the notice

       requirements, but, in lieu of those notices, Norris instead accepted Coordinated

       Health’s increased rent payments.

[19]   Thus, we agree with Norris that Coordinated Health took an affirmative act to

       demonstrate its intent to exercise each of the two options. In Carsten, we

       acknowledged that “the mere holding over and payment of rent was not

       Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015   Page 13 of 16
       sufficient notice.” 323 N.E.2d at 668. But in Carsten, and unlike the instant

       case, the rent-payment provisions during the initial term and the option terms

       were identical. Id. at 669 n.3. This distinction is material because nothing

       about the lessee holding over in Carsten would have informed the lessor of the

       lessee’s intent to exercise the option term. Indeed, had Coordinated Health’s

       failure to strictly comply with either of the notice requirements made

       Coordinated Health a holdover tenant, as it asserts on appeal, Coordinated

       Health’s rent obligation during the period after the initial term would have been

       the same as it was during the initial term. As we have explained: “when a

       tenant holds over past the term of his lease, the lease is renewed. The renewed

       lease contains the same terms, and is subject to the same conditions, as the

       original lease.” City of Bloomington v. Kuruzovich, 517 N.E.2d 408, 411 (Ind. Ct.

       App. 1987) (citations omitted), trans. denied.

[20]   But that is not what happened here. Instead of paying rent in accordance with

       “the same terms . . . as the original lease,” id., Coordinated Health instead paid

       rent payments to Norris in accordance with the rent-payment provisions of each

       of the option terms. And the rent-payment provisions for the option terms

       required an annual increase in Coordinated Health’s monthly rent obligation;

       that is, each year of the option terms required an increase in the rent payment

       relative to the prior year. This created a substantial financial difference from

       what a holdover would have paid: at the end of the first option term alone,

       Coordinated Health had paid $9,000 more to Norris than a holdover would

       have paid under the terms of the initial rental period. This affirmative conduct

       Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015   Page 14 of 16
       by Coordinated Health in making increased rent payments demonstrated its

       intent to be held to the option terms.

[21]   Further, Norris had a right to rely on Coordinated Health’s apparent exercise of

       the option terms. Not only did Coordinated Health act in a manner consistent

       with the exercise of each option term, it also acted in a manner inconsistent

       with that of a holdover. Had it acted in a manner consistent with a holdover—

       namely, by paying the rent a holdover would have paid—Norris would have

       been immediately aware of Coordinated Health’s intent and could have

       responded as it deemed appropriate. Coordinated Health may not now, well

       after the fact, claim to be a holdover during the same time in which it deprived

       Norris of the opportunity to treat it like a holdover.

[22]   In sum, we agree with Norris that Coordinated Health demonstrated its intent

       to exercise the lease agreement’s option terms and, as such, Coordinated Health

       is bound by those terms. Although Coordinated Health did not satisfy the

       condition precedent of providing the contractual notice to exercise the option

       terms, it manifested its intent by its affirmative act of paying the option terms’

       rent payments, which were materially different than the initial term’s rent

       payments. And Norris waived the condition precedent when it accepted those

       payments in lieu of the notices. Accordingly, we reverse the trial court’s

       judgment for Coordinated Health and remand with instructions that the court

       enter judgment for Norris and hold any further proceedings as appropriate.

[23]   Reversed and remanded with instructions.

       Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015   Page 15 of 16
Mathias, J., and Bradford, J. concur.

Court of Appeals of Indiana | Opinion 40A01-1408-PL-349 | March 25, 2015   Page 16 of 16