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