Provost v. Moulton, No. S409-03 CnC (Katz, J., Dec. 29, 2003)



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STATE OF VERMONT                         SUPERIOR COURT
Chittenden County, ss.:                  Docket No. S409-03 CnC

ROBERT L. PROVOST

v.

BRUCE MOULTON and HEART HOMES OF VERMONT



                                 ENTRY

        If we were to agree with Shakespeare’s Dromio of Syracuse that
“Time is a very bankrupt and owes more than he’s worth to season,” we
would be inclined to use this case as exhibit A. The parties, a tenant and
landlord in a commercial lease, dispute the term of a lease that may be as
short as five or as long as twenty years and may include the tricky
mathematical dilemma of making six, five, five, and five add up to twenty.
Tenant Provost contends that the lease was for a twenty-year term, which is
still enforceable. Landlord Moulton counters that the lease was only for
five years with three renewable terms that were not activated by tenant.
Adding to this embroilment is a possible ambiguity within the lease that
suggests an initial six year term. The crux of this controversy is tied up in
tenant’s claim that he wants back on to the property, to which he has no
right if the lease has expired after devolving into a month to month tenancy
at will.

       According to the real estate lease signed by tenant and landlord in
1996, the term of the lease was to begin on January 1, 1997 and end on
December 31, 2002. This adds up to six years. However, under the clause
“Lease Payments” the initial lease term is stated to be only five years
followed by the option of three additional five year terms. In a
“Memorandum of the Lease Agreement” executed significantly later in
April of 1997 to record and acknowledge the original lease within the
Milton land records, the “Terms” clause lists the term of the lease to be
twenty years. This was followed by an “Addendum to Lease Agreement”
executed in August 1997, which stated that the initial lease term was five
years.

       The question of whether the terms of the lease is ambiguous is a
matter of law for us to decide. Morrisseau v. Fayette, 164 Vt. 358, 366
(1995). Establishing ambiguity is not merely a problem of demonstrating
conflicting terms. True ambiguity occurs where the writing and the
circumstances surrounding its formation suggest two reasonable
interpretations. Isbrandtsen v. North Branch Corp., 150 Vt. 575, 579
(1988). In the present case, there is no evidence that either party proposed
or negotiated an initial term of longer than five years. Apart from the
paragraph stating that the lease would run from January 1996 to December
2002, there is no other part of the lease or its addendums or the successive
correspondence that suggests that the initial term was greater than five
years. Still, in light of the fact that the parties signed the lease containing
the six-year lease term, we cannot interpret the term of the lease without
ignoring this term. As such, we find that the term of the lease is ambiguous
and turn to the subordinate rules of construction to interpret the meaning of
this term. Id.

        To interpret the meaning of the ambiguous term of the lease, we
consider extrinsic evidence to determine the intent, situation, motives, and
understanding evinced by the parties surrounding the contract’s formation.
Grievance of John Gorruso, 150 Vt. 139, 143 (1988). We find that the lack
of any evidence in the parties’ dealings concerning an initial six-year term
demonstrates a lack of intent to be bound to anything beyond an initial five-
year term. There is simply no evidence of either party proposing,
negotiating or even mentioning another term. The Memorandum and
Addendum that were executed after the lease confirm this understanding
and support our finding that the parties intended the initial term to only run
for five years. Id. Furthermore, the mathematical isolation of the six-year
term within the contract and the evidence surrounding its formation suggest
that the parties never contemplated such a term and that its presence is a
mere mistake in calculation.

         Even tenant’s larger theory that the lease was for twenty years is
inconsistent with the initial six year theory since the initial six-year term
coupled with the three five-year terms would add up beyond twenty, which
is the longest term mentioned by any document and is the term that tenant
argues should be applied. (Memo. of Law in Support of Mot. for Prel. Inj.,
Apr. 1, 2003, at 5). To interpret the initial term as six years would amend
the total amount time covered by the lease beyond its clearly stated twenty
year limit. If it was “far more likely that the parties always intended the
initial term to end on December 31, 2002 (a date certain),” (Reply to Def.
Opp’n to Pl. Req. for Inj., Aug. 6, 2003, at 2), this would be an oral
modification to the lease not acknowledged by both parties. This is not a
reasonable interpretation since both parties appear to have adhered to the
other terms of the lease and tenant gives no evidence of any agreement
between him and landlord to the contrary. The fact that tenant sublet the
property and that his subtenant did not leave the property until December
31, 2002 does not evince an alteration between tenant and landlord on the
original terms of the lease. To argue that this fact somehow proves
otherwise is to ignore the substantial written and circumstantial evidence
that shows the parties clearly understood the first term of the lease to be
five-years.

        Since the apparent six-year term is best labeled as a drafting mistake,
the ambiguity in the lease is resolved by interpreting the initial term to be
five years as based on extrinsic evidence. In re Verderber, 173 Vt. 612, 616
(2002) (affirming Labor Relation Board’s interpretation based on its
extrinsic evidence findings). The question that follows then is whether
tenant had an automatic and unilateral right to renew the lease for the three
additional terms and if so how would tenant signal his renewal. According
to the payment terms of the lease, there is no express requirement for tenant
to signal his renewal in a particular manner. It does, however, make clear
that each successive term will be at a higher rate of rent. Tenant argues that
the additional terms of the lease were an extension not a renewal of the
lease, and that the subtenant’s continued presence on the property
adequately signaled tenant’s intent to exercise his option to extend the lease
to another term.

       What tenant does not explain is why neither tenant nor subtenant
began paying out the higher level required under the lease for each
consecutive five-year term. Tenant’s argument that merely holding-over is
notice enough to landlord is based on his interpretation of L. Colodny v.
Amer. Clothing Co., 107 Vt. 321, 325 (1935). Ignoring for the moment
that this case is primarily about the irrelevance of parol evidence to affect a
lease made under seal, it involved an actual exchange of notice of tenant’s
intent to renew the option and landlord’s refusal to accept. Id. at 323. The
question in L. Colodny was whether tenant lost his right to renew when the
parties made a subsequent oral modification to the lease to include heat.
That would be closer to landlord here arguing that the addendum parties
executed following the lease excused him from accepting tenant’s options
to renew. In no case that we have found in Vermont has the tenant’s mere
holding-over been enough to give landlord notice of renewal. This is
especially true when tenant has not complied with the sole express term for
the additional lease terms, namely paying increased rent.

        Since tenant failed to pay the increased rent required of subsequent
terms and failed to give notice of renewal at the end of the five-year term,
his subtenant’s continued presence cannot be viewed as anything but a
hold-over tenancy. With an express lease, when specific renewal terms are
not satisfied and when notice is not given, the renewal options are waived.
Cf. L’Esperance v. Town of Charlotte, 167 Vt. 162 (1997) (holding that
town could not waive renewal option in lease where tenant notified it of his
intent to exercise the option). As a hold-over, tenant no longer had a right
of possession under the lease. Any right to possession that tenant obtained
through his subtenant must be determined through equity.

       Therefore, we conclude that there is no ambiguity in the lease
between landlord and tenant and that the term of the lease ran for five years
with three options to renew for five more years. Since tenant gave no
notice and did not comply with the terms of the lease, his attempt to renew
in December 2002 was ineffective.
       Parties will brief further on what parties relationship was as of the
end of the first term on December 31, 2001.

       Dated at Burlington, Vermont________________, 20_______.




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