THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).
RIEDMANN, Judge.
Concord Neighborhood Corporation (Concord) appeals a decision by the district court for Scotts Bluff County, Nebraska, finding the term "Apple Centre" to be ambiguous and considering parol evidence to interpret it to mean the building footprint in a lease between Concord and Soleiman Brothers, LLC (Soleiman). Because we find the term "Apple Centre" is not ambiguous, we reverse the decision of the trial court and remand the cause to the trial court for a determination of damages.
Concord is a Kansas corporation that operates an Applebee's restaurant in a "community strip center" in Scottsbluff, Nebraska. Soleiman is a California corporation that owns and leases the "community strip center" where the Applebee's is located. The property owned by Soleiman is a fee simple lot that is 82,875 square feet. The fee simple lot contains a building footprint that is 21,415 square feet. The property's total leasable area is the 21,415 square feet of the building footprint.
Concord began leasing 6,281 square feet of the property from Arks, Inc., on September 26, 1995. The parties adopted an amendment to the original lease on October 25 (lease and amendment referred to as "Lease"). Arks subsequently conveyed its interest in both the real property and the Lease to Scottsbluff Apple Centre, LLC, on December 28, 1998. Scottsbluff Apple Centre, in turn, conveyed its interest in both the real property and the Lease to Soleiman on October 16, 2007.
In addition to base rent, Concord was to pay a proportionate share of common area maintenance (CAM) charges. The lease defines this proportionate share as the ratio of "the square footage of the [leased premises] as compared to the total square footage in the Apple Centre."
From the inception of the Lease, Concord paid its proportionate share of CAM charges based upon an interpretation that the "total square footage in the Apple Centre" meant the amount of leasable square footage in the building footprint. In early 2010, Concord began questioning the calculation of CAM charges, asserting that its proportionate share should be based upon the amount of square footage of the fee simple lot, not just of the building itself. Soleiman filed a declaratory judgment action seeking a declaration that the phrase "total square footage in the Apple Centre" referred to the leasable square footage of the building footprint. Concord filed a counterclaim, seeking a declaration that the phrase referred to the total square footage of the fee simple lot and seeking overpayments that it allegedly made for CAM charges.
At trial, Soleiman's property manager described the Lease as a type of "net lease." In a "net lease," a lessee pays outside costs, such as CAM costs, in addition to basic rental fees. Concord's basic rental fees are covered in § 3.1 of the Lease. Section 3.1 requires Concord to pay the higher of either a base rent of $8,000 per month or 6 percent of "gross sales." The basic rental fees are not at issue in this appeal.
Three sections of the Lease, §§ 5.3, 5.4, and 9.1, cover Concord's responsibility to pay a proportionate share of a lessor's CAM costs. Section 5.3 requires a lessee to "pay and reimburse Lessor for a proportionate share of the snow removal expense based on the square footage of the Leased Property as compared to the total square footage in the Apple Centre." Similarly, § 5.4 requires a lessee to "pay and reimburse Lessor for a proportionate share of the real estate taxes relating to the Apple Centre." Section 5.4 states that the "proportionate share" of the real estate tax is "the footage of the Leased Property as compared to the total square footage in the Apple Centre." Section 9.1 of the Lease requires a lessee to "pay and reimburse Lessor for a proportionate share of costs for utility services supplied to the Leased Property which are not separately metered." Section 9.1 states that the "proportionate share" of utility costs is "the square footage of the Leased Property as compared to the total square footage in the Apple Centre." The Lease refers to the "Apple Centre" in several sections other than §§ 5.3, 5.4, and 9.1.
Section 1.1 of the Lease identifies the leased property as follows:
Section 5.1 describes the property's common area. It defines the common area as "that part of the Apple Centre, including applicable facilities, that are intended for common use of all tenants." Section 5.1 states that "[f]acilities" are defined to include "the parking area, private streets and alleys, landscaping, curbs, loading area, sidewalks, lighting facilities, drinking fountains, public toilets and the like." This section also states that a lessor may "change the dimensions and locations of the Common Area, as well as the identity of all buildings in the Apple Centre." Section 5.1(c) prohibits a lessor from adding "rentable square footage to the Apple Centre."
Section 6.1 outlines covenants between a lessor and a lessee. In § 6.1(a), a lessor covenants it has "good and indefeasible title to the Apple Centre." Section 6.1(d) prohibits a lessor from constructing or permitting "construction of any building or other structure or chang[ing] any landscaping in the Apple Centre that would reduce access to, or visibility of, the restaurant on the Leased Property." In § 6.1(e), a lessor promises to not "permit any other restaurant or bar in the Apple Centre."
Section 7.5 requires a lessor and a lessee to find a mutually agreeable location for the "reader board" on "the South end of the Apple Centre." This sign is located in the parking lot.
Finally, § 29.1 provides a lessee the right of first refusal in the event that a lessor receives an "acceptable bona fide offer to purchase the Leased Property or the Apple Centre" from a third party.
Under the Lease sections outlining Concord's CAM responsibilities, §§ 5.3, 5.4, and 9.1, Concord was billed and paid a proportionate share equal to 29 percent of the specified utilities, tax, and snow removal charges. Soleiman's property manager testified that he determined Concord's proportionate share to be 29 percent by dividing Concord's leased area by the building's total leasable area. Concord's leased area is 6,281 square feet. The building's total leasable area is 21,415 square feet. This calculation utilizes a definition of "Apple Centre" as the building's total leasable area, which is the same area as the building's footprint.
Concord's chief financial officer, John Gabel, testified that he received a concerning invoice from Soleiman dated January 15, 2010. Gabel thought some of the CAM charges on that invoice were too high and reviewed the Lease to determine whether Soleiman was overcharging Concord for CAM costs. After reviewing the Lease, Gabel contacted Soleiman's property manager to inquire about the square footages reflected within the Lease. Upon review of the terms of the Lease and the square footages reflected therein, Gabel determined that Concord should be charged only 7.58 percent of CAM costs. Gabel arrived at this calculation by dividing Concord's leased area (6,281 square feet) by the entire area of the fee simple lot (82,875 square feet). This calculation utilizes a definition of "Apple Centre" as the fee simple lot. These calculations led Gabel to conclude that Concord had overpaid its CAM charges by $32,923.12. In response, Concord unilaterally gave itself a credit for $32,923.12 and used that credit to offset future bills.
Soleiman sought a declaratory judgment that Concord's proportionate share of CAM costs under the Lease was 29 percent. Concord and Soleiman both presented evidence in the district court for Scotts Bluff County on October 26, 2011. The trial court found that the term "Apple Centre" was ambiguous in the Lease. This finding was based solely on a reading of the Lease. The trial court found that there was "no specific percentage stated in the [L]ease" for CAM costs and that "both the 29% and the 7.58% are derivable from the [L]ease, depending on whether Apple Centre is considered the entire lot or only the building."
After determining that the Lease was ambiguous with respect to the definition of "Apple Centre," the trial court evaluated parol evidence to define the term. The trial court considered the parties' conduct, including the parties' use of a 29-percent proportionate ratio for 14 years before a dispute arose. The trial court also considered industry standards and the Lease's commercial practicability. It determined Concord's interpretation of the Lease was "not a reasonable interpretation for a commercial lease where the owner intends to make a profit." Based on parol evidence, the trial court concluded that "the proper interpretation of the meaning of `Apple Centre'... is the leasable square footage of the building." The court determined that Concord owed a proportionate share equal to 29.3 percent of CAM expenses, and therefore, the court granted Soleiman declaratory judgment and dismissed Concord's counterclaim.
On appeal, Concord alleges that the trial court erred in (1) finding the term "Apple Centre" was ambiguous in the Lease; (2) considering parol evidence in construing the term "Apple Centre"; (3) calculating Concord's proportionate share of annual real estate taxes, snow removal charges, and not separately metered utility charges at 29 percent rather than 7.58 percent; and (4) construing the term "Apple Centre" in a way that effectively rewrote controlling terms of the Lease.
The meaning of a contract and whether a contract is ambiguous are questions of law. Pavers, Inc. v. Board of Regents, 276 Neb. 559, 755 N.W.2d 400 (2008); Steffen v. Progressive Northern Ins. Co., 276 Neb. 378, 754 N.W.2d 730 (2008); Coral Prod. Corp. v. Central Resources, 273 Neb. 379, 730 N.W.2d 357 (2007); Kluver v. Deaver, 271 Neb. 595, 714 N.W.2d 1 (2006); Gary's Implement v. Bridgeport Tractor Parts, 270 Neb. 286, 702 N.W.2d 286 (2005). In determining the meaning of a contract and whether a contract is ambiguous, an appellate court must decide independently of the decisions made by the trial court. Fitzgerald v. Community Redevelopment Corp., 283 Neb. 428, 811 N.W.2d 178 (2012).
If a contract is ambiguous, the contract's meaning is a question of fact and courts may consider extrinsic evidence in determining the meaning of the contract. Ruble v. Reich, 259 Neb. 658, 611 N.W.2d 844 (2000). A trial court's findings of fact in a declaratory judgment action treated as an action at law will not be overturned on appeal unless they are clearly wrong. E & E Prop. Holdings v. Universal Cos., 18 Neb.App. 532, 788 N.W.2d 571 (2010).
In this appeal, we review the trial court's declaratory judgment involving a contractual dispute. Our review of the trial court's finding that the term "Apple Centre" is ambiguous is a question of law. We therefore review the trial court's ambiguity determination de novo. Our review of the trial court's interpretation of the term "Apple Centre" is a review of the trial court's findings of fact. We therefore review those findings of fact for clear error.
To properly interpret a contract, a court must first determine as a matter of law whether the contract is ambiguous. Davenport Ltd. Partnership v. 75th & Dodge I, L.P., 279 Neb. 615, 780 N.W.2d 416 (2010); State ex rel. Bruning v. R.J. Reynolds Tobacco Co., 275 Neb. 310, 746 N.W.2d 672 (2008); Kluver, supra. A contract is "ambiguous when a word, phrase, or provision in the contract has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings." Kluver, 271 Neb. at 599, 714 N.W.2d at 5. A court must construe a contract as a whole to determine whether a word is susceptible of conflicting interpretation or meaning. Id. The determination of whether an ambiguity exists is to be made on an objective basis, not by the subjective contentions of the parties; therefore, the fact that the parties have suggested opposing meanings does not necessarily mean that the instrument is ambiguous. Big River Constr. Co. v. L & H Properties, 268 Neb. 207, 681 N.W.2d 751 (2004); Eagle Run Square II v. Lamar's Donuts Internat., 15 Neb.App. 972, 740 N.W.2d 43 (2007).
A contract that is not ambiguous must be enforced according to the plain meaning of its terms. See, Kluver, supra; Eagle Run Square II, supra. Extrinsic evidence is not permitted to explain the terms of a contract that is not ambiguous. Spanish Oaks v. Hy-Vee, 265 Neb. 133, 655 N.W.2d 390 (2003). When the terms of the contract are clear, a court may not resort to rules of construction, and the terms are to be accorded their plain and ordinary meaning as the ordinary or reasonable person would understand them. Eagle Run Square II, supra.
Concord argues that the term "Apple Centre" is not ambiguous; that the Lease clearly defines the term in § 1.1; and that references to "Apple Centre" in §§ 5.1, 5.4, 6.1, 7.5, and 29.1 support that definition. Section 1.1 of the Lease states:
The language in § 1.1 defines the "Apple Centre" as the entire fee simple lot, as indicated by the use of the legal description of the entire property which immediately precedes the designation "Apple Centre."
The parties' use of the term "Apple Centre" throughout the rest of the Lease supports a definition of the "Apple Centre" as the entire fee simple lot. Concord argues persuasively that references in the Lease to the "Apple Centre" in §§ 5.1, 5.4, 6.1(a), 7.5, and 29.1 support its interpretation of the term. In § 5.1, the term "Common Area" is defined as "that part of the Apple Centre, including applicable facilities, that are intended for common use." In this section of the Lease, facilities include features that indicate the term references the entire fee simple, i.e., parking area, alleys, landscaping, curbs, sidewalks, et cetera. Concord also argues persuasively that § 5.4 supports a determination that the term "Apple Centre" refers to the entire fee simple because § 5.4 requires Concord to pay its proportionate share of "real estate taxes relating to the Apple Centre" and those taxes are levied on both the land and improvements.
Sections 6.1 and 29.1 must similarly reference both land and a building footprint in order to make sense. Section 6.1(a) states that a lessor has "good and indefeasible title to the Apple Centre," and § 29.1 grants Concord a right of first refusal "to meet the offer of sale on the same terms and conditions" as offered by a third party for the sale of the "Apple Centre." Section 6.1(d) prevents a lessor from allowing the "construction of any building or... chang[ing] the landscaping in the Apple Centre." Finally, § 7.5 details an agreement between a lessor and a lessee to place the "reader board" at a mutually agreeable location on "the South end of the Apple Centre." This sign is located in the parking lot. All of these references lend support to Concord's argument that the term "Apple Centre" refers to entire fee simple.
The trial court found two references in the Lease to "Apple Centre," which lead it to the conclusion that the term was ambiguous: (1) the reference to "Exhibit `A'" in § 1.1 and (2) a combined reading of §§ 5.1(c) and 6.1(e). We will address each in turn.
Exhibit A is a diagram of the fee simple. The diagram contains a depiction of the leased property which is labeled "Applebee's." The diagram also contains a second label, "Apple Centre," that is centered within a drawing of the building footprint. The trial court found that the reference to exhibit A in § 1.1 muddied the definition of "Apple Centre." Reference to exhibit A in § 1.1, however, is to identify the location of the leased premises, not to define the "Apple Centre." Section 1.1 states the "leased property is outlined on Exhibit `A.'" Exhibit A is referenced in § 1.1 after the term "Apple Centre" is defined. Section 1.1 references exhibit A to illustrate the location of the leased property only; it does not define "Apple Centre."
We disagree with the district court's conclusion that a combined reading of §§ 5.1(c) and 6.1(e) supports a finding that the term "Apple Centre" refers only to the building. Section 5.1(c) prohibits a lessor from adding "rentable square footage to the Apple Centre." This means that a lessor will neither build an additional rentable building on the fee simple, nor will it add onto the existing building. Section 6.1(e) states: "Except for the exclusive use by Lessee, Lessor shall not permit any other restaurant or bar in the Apple Centre." The district court found that these two sections, read together, "leads one to a conclusion that Apple Centre refers only to the building, as the Lessor is not permitted by the lease to add rentable square footage." We disagree, because if the term "Apple Centre" is read to reference the entire fee simple lot, that fee simple would also include the building. We do not read these two provisions as weighing in favor of Soleiman's proferred interpretation of the term "Apple Centre." Concord points out that § 5.1(c) actually supports its interpretation because it shows that the parties knew how to use the limiting phrase "rentable square footage" and it did not choose to use that phrase when defining the "Apple Centre."
An analysis of the Lease shows that the term "Apple Centre" is susceptible of only one reasonable meaning, that being the fee simple lot. Because the term "Apple Centre" is not ambiguous, the trial court erred in considering parol evidence and extrinsic evidence in defining the term. Accordingly, we remand this cause to the trial court for a determination of the issues raised in Concord's amended counterclaim.
We determine that the term "Apple Centre" is unambiguous as a matter of law and means the total fee simple lot. We therefore reverse the district court's judgment in favor of Soleiman and remand the cause to the district court with directions to enter declaratory judgment in favor of Concord and to make a determination on the remaining issues raised in Concord's counterclaim, consistent with this opinion.
REVERSED AND REMANDED WITH DIRECTIONS.
