KB Squared LLC v. Mem'l Bldg. LLC

442 P.3d 1168

KB SQUARED LLC, Appellant,

v.MEMORIAL BUILDING LLC, Appellee.

No. 20170807-CA

Court of Appeals of Utah.

Filed April 18, 2019

James L. Barnett, Darren G. Reid, and Steven M. Lau, Salt Lake City, Attorneys for Appellant

James K. Tracy, Joshua L. Lee, and James C. Dunkelberger, Salt Lake City, Attorneys for Appellee

Judge Kate Appleby authored this Opinion, in which Judges Gregory K. Orme and Diana Hagen concurred.

Opinion

APPLEBY, Judge:

¶1 KB Squared LLC dba Park City Live (PCL), entered into a lease agreement (the Lease) with Memorial Building LLC (Memorial) to operate a nightclub (the Club) including presenting concerts in a building owned by Memorial in Park City, Utah. PCL used an upper-level "bridge" (the Bridge) for high capacity premium concert seating. Out of occupancy and safety concerns Park City ordered PCL to stop using the Bridge in that way. PCL sued Memorial for a breach of the Lease, arguing that its inability to use the Bridge was caused by Memorial’s failure to repair it. After a bench trial, the district court ruled Memorial did not breach the Lease. We affirm.

BACKGROUND

¶2 In December 2011, Memorial entered into the Lease with PCL to occupy the Club "for the purpose of [operating a] nightclub, entertainment, and other event use." Before PCL occupied the Club, a prior tenant (Prior Tenant) operated in the space. In 2005, Prior Tenant had the Bridge built inside the Club. The Bridge was intended to connect "the right and left side mezzanine levels of [the Club]." Engineers prepared construction drawings that "reflect[ed] that the Bridge was approximately 42 feet wide and would accommodate a seating area" that could hold "21 people total." The plans showed a standing area behind the seating area, which, the experts at trial calculated, could "accommodate an additional 38 people, for a total occupancy of 59 on the Bridge." "The plans also contained an express occupancy limit of 50 for the Bridge addition for egress purposes." Based on the testimony presented at trial the district court ruled that "it was reasonable, based upon the intended use of the Bridge, that it was designed to hold between 50 and 60 people for the stated and intended use—i.e., fixed seating and standing for a restaurant or nightclub."

¶3 The district court found the testimony regarding Prior Tenant’s use of the Bridge after it was constructed "somewhat unspecific about the precise number of people that [Prior Tenant] housed on the Bridge." But the court concluded "[Prior Tenant] used the Bridge in a manner that appears to have exceeded the stated limit set forth in the plans." At one point, Prior Tenant also used the Bridge "to accommodate [concert] equipment."

¶4 The Lease did not contain "any representation or guaranty concerning the occupancy of the [Club], or any part thereof" nor "any representation or guaranty concerning the manner of use of any particular part of the [Club]." But the Lease generally provided that the Club as a whole was to be used as a nightclub. Prior to entering into the Lease, PCL did not investigate the purpose for which the Bridge was designed. PCL intended to use the Bridge for "premium event seating" in the same way it believed Prior Tenant used it.

¶5 In January 2013, Park City officials "observed 85 to 100 people ... dancing and jumping" on the Bridge and observed "excessive deflection of the floor." Because of this, the officials requested that PCL "limit[ ] the occupancy of the Bridge to 35." "They came back the following night and again observed 80–85 people on the Bridge." After PCL failed to follow the officials’ directives, the officials "believed PCL could not control the occupancy load, [and] issued [a] ‘Stop Work’¹ order prohibiting any occupancy on the Bridge until otherwise approved."

¶6 PCL contacted the engineers involved in the construction of the Bridge and had them inspect it. The engineers concluded the Bridge was structurally sound. Their report stated that "[t]he original intent of [the Bridge] was to serve as an access platform to mount lighting and sound equipment. In the construction documents, the drawings indicate a value of 50 persons (attributed to [the Bridge] area) used to calculate the means of egress width." The report also noted, "Recently, it has become apparent that the usage of [the Bridge] (under new ownership) has been changed to an assembly area without fixed seats." The engineers recommended that to "prevent excessive deflection/vibration of [the Bridge] under the new usage, ... the maximum occupant load of [the Bridge should be reduced] to 25 persons." But the engineers also believed "the structural integrity of [the Bridge] system [was] not compromised" and was still fit for its intended purpose.

¶7 PCL asked Memorial to "restore the seating area to its former and promised use as premium event seating as required by the Lease." Memorial refused, noting that the city officials’ directives resulted from PCL’s misuse of the Bridge, not from its condition, and that the Bridge was structurally sound and undamaged.

¶8 PCL sued Memorial, alleging that it breached the Lease. The claims arose "out of [an] alleged representation that Memorial made in the Lease" that the Bridge was intended to be used as premium event seating. PCL asserted Memorial breached the Lease by failing "to make the structural repairs necessary to enable PCL to use [the Bridge] accordingly."

¶9 After a bench trial, the district court dismissed PCL’s claim. It first noted that "PCL [did] not argue that the representation included a specific number of seats, or a specific occupancy number. Instead, it [asked] the Court to conclude that 50 would be a ‘reasonable’ occupancy number." "[I]t is undisputed that the Lease did not contain any express promise concerning the number of permissible occupants on the Bridge, or any specific use of the Bridge."

¶10 At trial, the principal of PCL (PCL Principal) testified that Memorial made no oral representations or guarantees to PCL regarding how the Bridge was to be used. PCL Principal "believed there was an implicit promise that [PCL] would be able to use the Bridge for nightclub [premium event] seating, which, according to [PCL’s] understanding of nightclub industry usage, connotes dancing and jumping." PCL argued Prior Tenant’s use of the Bridge should allow PCL to similarly use it because Memorial’s Principal (Memorial Principal) was involved in the business when Prior Tenant was using the Bridge and was aware of PCL’s intent to use the Bridge in the same manner.

¶11 In PCL’s view, the notation "seating area" on the diagram of the Bridge attached to the Lease constituted an implicit representation. PCL "argue[d] that because the purpose of the Lease was for [it] to operate a ‘nightclub,’ that ‘seating area’ actually meant ‘premium event seating’ which, in the context of a nightclub, essentially means jumping and dancing."

¶12 The court found that PCL’s "claim [was] at least ‘tenable’ ... [so it] could not interpret the Lease on its face, and had to resort to extrinsic evidence." Accordingly, the court considered the diagram and its reference to "seating area" on the Bridge. The court heard testimony about the diagram and ultimately found that it depicted square footage and was not "intend[ed] to represent or guarantee" an occupancy limit on the Bridge. The court also considered the parties’ testimony and found that it was "a stretch—to say the least—that the use of the word ‘seating’ (taken from a construction document) was understood by everyone to mean a guarantee that the area could be used for dancing and jumping." The court ruled "the facts simply do not preponderate in PCL’s favor on ... its assertions regarding the language of the Lease."

¶13 Specifically, the court noted it was unreasonable for PCL Principal to believe PCL was guaranteed a specific use for the Bridge because, (1) PCL’s belief was "based on a strained interpretation of the Lease, and an improper attribution to the attached square footage diagram"; (2) PCL Principal’s "understanding of [Prior Tenant’s] prior use of the Bridge is not legally relevant"; (3) PCL Principal’s "subjective understanding is belied by the lack of any representation from [Memorial Principal]"; (4) "there are provisions in the Lease noting that any prior representations or any representation—if they had been made—could not form the basis of an enforceable promise"; and (5) "nothing in the Lease, or the extrinsic evidence relating thereto, defines ‘seating’ in the manner [PCL Principal] apparently understood it."

¶14 The district court ruled that "because PCL is able to use [the Bridge] for the furtherance of its nightclub operation, and because there [was] no representation or guarantee of a specific use or occupancy, there is no breach of the terms of the Lease." The court also noted that by misusing the Bridge, PCL caused its own loss. The evidence showed the Bridge was in the same condition as when the Lease was signed and it appeared PCL was requesting that Memorial "upgrade [the Bridge], not repair it." Further, "the reason [the Bridge] cannot be used" in the way PCL requested was "based on the fact that Park City" closed it. The closure "was not based on anything Memorial did in violation of its obligations under the Lease."

¶15 The court also awarded Memorial attorney fees under the terms of the Lease, which stated that for any "dispute regarding the terms of the Lease" the "non-prevailing party agrees to reimburse the prevailing party for all expenses and costs, including reasonable attorney fees incurred." The court noted that the fee award "[would] not include the fees and costs incurred by Memorial that did not materially advance its case." It invited Memorial to file a motion and supporting memorandum detailing its request for attorney fees and costs and gave PCL an opportunity to respond. Ultimately the court awarded Memorial approximately half of its total requested fees.

¶16 PCL appeals,...