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
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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.
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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. . . .
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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
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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
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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).
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[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,
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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).
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[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
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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
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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
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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.”).
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[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
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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
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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.
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Mathias, J., and Bradford, J. concur.
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