Kova Bristol Tenn 1894, LLC v. Bristol Pres., LLC

KOVA BRISTOL TENN 1894, LLC, Plaintiff, v. BRISTOL PRESERVATION, LLC, Defendant.

2:19-CV-00084-DCLC-CRW

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TENNESSEE GREENEVILLE DIVISION

June 26, 2020

MEMORANDUM OPINION AND ORDER

This matter is before the Court to address Plaintiff KOVA Bristol TENN 1984, LLC's Motion for Partial Summary Judgment [Doc. 34]. Defendant Bristol Preservation, LLC filed a response [Doc. 41] and Plaintiff replied [Doc. 46]. Defendant then filed a sur-reply with leave of Court [Doc. 50]. This matter is now ripe for resolution. For the reasons that follow, Plaintiff's Motion for Partial Summary Judgment [Doc. 34] is DENIED.

I. BACKGROUND

In April 2018, Plaintiff entered into a Lease Agreement ("Lease") with Defendant to rent the Country Club of Bristol ("the Club"), which consists of, among other things, a golf course and a two-level clubhouse [Doc. 1-1, p. 1]. The main level of the clubhouse contains a ballroom, a bar area, a commercial kitchen, restrooms, a lobby, and the main entrance [Doc. 41-1, p. 46]. The lower level of the clubhouse contains of a golf shop, men's and women's locker rooms, restrooms, offices, and a restaurant [Doc. 41-3, p. 19]. The clubhouse is at the center of the current dispute between the parties. Regarding the clubhouse and the Club as a whole, the parties had various obligations as provided for in the Lease. Therefore, the Court will describe the parties' respective obligations before providing the factual and procedural background underlying the current matter.

A. Defendant's Obligations

Pursuant to the paragraph 1(c) of the Lease, Defendant warranted and represented that as of April 1, 2018, Defendant would "deliver the Leased Premises to [Plaintiff] in an operating condition (not including further work to be completed as provided under the Lease) to be immediately opened for business," and that there was "no existing mold in the Clubhouse" [Doc. 1-1, p. 2]. Paragraphs 7(a) through (e) of the Lease required the following phases of work to be completed by Defendant: (1) Landlord's Initial Work; (2) Second Phase Interior Improvements; (3) Third Phase Interior Improvements; (4) Exterior Improvements; and (5) Main Level Renovations [Id. at p. 4-5]. The Lease required each phase to be completed to Plaintiff's "reasonable satisfaction" [Id.].

Landlord's Initial Work required the following work on the lower level of the clubhouse to be completed by April 1, 2018: (1) repair the HVAC, (2) remediate the air quality, (3) clean the carpets, and (4) cause the golf shop, bathrooms, and offices to be operational [Id. at p. 4]. The Second Phase Interior Improvements, to be completed by April 30, 2018, required Defendant to (1) cause the lower-level kitchen, dining room, and bar to be cleaned and fully operational for immediate use; (2) replace the ceiling above the lower-level kitchen; (3) cause the showers and bathrooms in the lower-level locker rooms to be operational for immediate use; and (4) install a drain under the lower-level ice machine [Id. at p. 4 & 39].

The Third Phase Interior Improvements required the following work on the main level to be completed by June 30, 2018: (1) install a new glass entry door; (2) clean and renovate the lobby and bathroom; (3) erect a temporary wall to separate the lobby from the ballroom; (4) repair or replace the HVAC; and (5) remediate the air quality of the main level to the extent necessary [Id. at p. 5 & 40]. Additionally, this phase of work included the following, which Plaintiff had theexclusive right to select the materials for: (1) replace the lobby ceiling and installing lighting and fixtures; (2) replace the wallpaper in the lobby; (3) paint the clubhouse hallways; and (4) replace the flooring in the lobby [Id. at p. 4 & 40].

The Exterior Improvements required the following work to be completed by July 30, 2018: (1) remove and replace the stone veneer at the front of the clubhouse; (2) wrap the front columns with a wood design; (3) repair or replace the entrance canopy; (4) install new clapboard siding; (5) paint exterior walls, siding, facia, and stairs; and (6) repair or replace the rear steel balcony of the clubhouse [Id. at p. 5 & 41]. Finally, the Lease required Plaintiff to submit architectural, engineering, and design plans and a cost estimate for the Main Level Renovations by December 31, 2018 [Id. at p. 5]. Defendant would then be required to commence the Main Level Renovations by February 1, 2019 [Id.].

B. Plaintiff's Obligations

The Lease required Plaintiff to, among other things, pay property taxes and rent [Id.]. The property taxes were to be paid "prior to the date such Tax Bills become past due." [Id. at p. 8]. Rent is separated into three types: (1) Monthly Fixed Rent, (2) Monthly Percentage Rent, and (3) Food and Beverage Percentage Rent ("F&B Rent") [Id. at p. 3]. Monthly Fixed Rent, in the amount of $6,250, commenced on June 1, 2018 [Id.]. Monthly Percentage Rent, five percent of Plaintiff's gross revenue for the prior calendar month, commenced on May 1, 2018 [Id.]. The Lease defines Monthly Fixed Rent and Monthly Percentage Rent collectively as "Rent" and, in aggregate, these two types of rent were not to exceed $10,000 per month until Defendant completed the Main Level Renovations [Id. at p. 3-4]. F&B Rent, five percent of gross revenue from the sale of food and beverages for the prior calendar month, commenced on April 1, 2018[Id. at p. 3]. Notably, F&B Rent is not included in the definition of "Rent" as it is defined in the Lease [Id.].

C. Factual Background

The parties executed the Lease on April 10, 2018 but pre-dated the commencement date to April 1, 2018 [Id.]. Plaintiff asserts that the clubhouse was not move-in ready in April due to roofing issues and the lack of an air quality test clearing the lower level [Doc. 41-3, p. 12]. On April 30, 2018, Plaintiff asserts the lower-level kitchen equipment was neither cleaned nor fully operational and that the kitchen was inspected but licenses and permits could not be obtained until the kitchen equipment was operational [Id. at p. 14].

Plaintiff moved into the clubhouse the first week of May 2018 but asserts it was still unable to immediately open for business due to the lack of functional bathrooms or restaurant capabilities [Id. at p. 13]. Plaintiff asserts there was no Certificate of Occupancy for the clubhouse; thus, when Plaintiff applied for a liquor license, it was denied [Id.]. Defendant asserts that the clubhouse always had a Certificate of Occupancy in place [Doc. 41-1, p. 52].

In late May 2018, the clubhouse sustained significant water damage due to a flood [Doc. 41-3, p. 15-16]. Defendant hired Taff & Frye Co., Inc. ("Taff") to remediate the water damage [Doc. 35, p. 7]. Taff removed the main-level walls, ceilings, flooring, and interior drywall on the exterior walls and the lower-level office flooring, ceiling tiles, and drywall [Id.]. During this remediation work, Taff discovered the presence of mold and asbestos in the main level of the clubhouse [Id.].

On May 31, 2018, Plaintiff sent Defendant a schedule of items that still needed to be completed in order to be fully licensed [Doc. 36, p. 26-27]. Plaintiff informed Defendant that it was concerned with the state of the clubhouse and the ability to obtain necessary licenses andpermits [Id. at p. 28-29]. On June 11, 2018, Defendant requested payment of rent and utilities from Plaintiff [Id. at p. 36]. On July 10, 2018, Plaintiff sent another email to Defendant explaining that the lower level of the clubhouse still had unfinished projects and areas that needed to be completed before Plaintiff could obtain necessary permits and licenses to be fully operational [Id. at p. 39]. Plaintiff ultimately obtained a Certificate of Occupancy on July 13, 2018 [Doc. 41-3, p. 19] and a liquor license on August 18, 2018 [Doc. 36, p. 42].

On September 3, 2018, the kitchen equipment that was not up to code was replaced and Plaintiff informed Defendant that once a satisfactory air quality report was received and business was fully operational, rent would commence [Id. at p. 46]. Additionally, Plaintiff stated that it was still waiting on Defendant to send estimates for the Exterior Improvements [Id.]. On the same day, Defendant contacted J.A. Street and Associates ("JASA"), the contractor for the clubhouse improvements, and instructed them to hold off on any design work, renderings, repairs, or construction [Id. at p. 43]. Defendant asserts the purpose of these instructions were to clarify that any work beyond what Defendant had approved was between JASA and Plaintiff [Doc. 41-1, p. 94-95]. JASA did not complete any further work on the clubhouse after September 3, 2018 [Doc. 41-3, p. 21]. Plaintiff informed Defendant on September 4, 2018, that Plaintiff was complying with the terms of the lease which outline the conditions required for commencement of rent payments [Doc. 36, p. 44]. On September 7, 2018, the lower-level restaurant opened for business [Doc. 41-3, p. 20].

JASA sent a proposal for the Exterior Improvements on September 22, 2018 [Doc. 41-4]. Plaintiff informed JASA that the work was Defendant's decision [Doc. 41-3, p. 40-44]. Defendant contends that it received the proposal but did not complete the work because Plaintiff did not approve the proposal [Doc. 41-1, p. 97]. In November 2018, Plaintiff solicited Burwil Contractors("Burwil") to obtain an estimate for the Third Phase Interior and Exterior Improvements [Doc. 41-3, p. 24]. Plaintiff sent these documents and proposals to Defendant on December 9, 2018 [Doc. 36, p. 48-55]. On December 18, 2018, Plaintiff sent Defendant a Notice of Default explaining that the Initial Work and the Second Phase Interior Improvements were not complete until September 7, 2018, that Defendant was in default as to the Third Phase Interior Improvements and the Exterior Improvements, and advised Defendant that payment of rent would cease until these...