HORIZON PROPERTIES LLC V DOWNRIVER COMMUNITY CONFERENCE
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STATE OF MICHIGAN
COURT OF APPEALS
HORIZON PROPERTIES, L.L.C., d/b/a
HORIZON PROPERTIES VENTURE, L.L.C.,
UNPUBLISHED
September 18, 2008
Plaintiff/Counter-DefendantAppellant,
v
DOWNRIVER COMMUNITY CONFERENCE,
No. 278260
Wayne Circuit Court
LC No. 05-531702-CK
Defendant/Counter-PlaintiffAppellee.
Before: Wilder, P.J., and Markey and Talbot, JJ.
PER CURIAM.
Plaintiff appeals as of right the trial court’s grant of summary disposition in favor of
defendant. We affirm.
This appeal arises from a dispute pertaining to the rental rate to be charged on renewal of
a lease agreement. Defendant, Downriver Community Center, owns real property comprised of a
160,000 square foot office complex in Southgate, Michigan. On December 15, 2000, defendant
entered into a lease agreement with Plaintiff, Horizon Properties, L.L.C., as a tenant leasing
approximately 34,900 square feet of interior space along with exterior space comprised of a
football field and playground.1 In the original lease agreement, the leased space consisted of
21,711 square feet of office space used for classrooms, at a rental rate of $9.50 a square foot and
approximately 13,189 square feet of space used as a gymnasium, at a rental rate of $6.00 a
square foot.
Relevant to the issues in this appeal, the parties in the lower court sought summary
disposition disputing the rental rate to be charged to plaintiff following renewal of the lease
agreement. Specifically, plaintiff argued that the maximum rental increase, pursuant to the lease
1
Plaintiff subleased the space to a Montessori School serving children from kindergarten
through eighth grade. Rental fees for the exterior space are set at $500 a month and are separate
from, and in addition to, fees for the interior space.
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agreement, was ten percent over the original rental rates for the leased space and contended that
the differential rental rates for the classroom and gymnasium space should be maintained on
lease renewal. After taking the matter under advisement, the trial court issued an opinion and
order on May 3, 2007, which stated in relevant part:
The Court finds that the language of the lease concerning the renewal rent
increase is not ambiguous but when read indicates the amount charged is the
greater amount of the average rental amount on charged tenants or a maximum of
10% increase. The alternatives clearly indicate an intent to provide landlord the
opportunity to charge a renewal rent increase in the greater amount of the two
options available while providing some certainty to tenant that if the market
conditions didn’t increase the rent then the amount of increase would be capped at
10%.
Although the original lease provides for different amounts for rent for
office space and gymnasium in the five year term of the lease, the renewal
language makes no such distinction. Therefore, this Court finds that the greater
amount of the rent renewal is to be applied to both office space and gymnasium
space. Plaintiff’s Motion for Summary Disposition on the issue of rental rate
increase is DENIED and Defendant’s Motion for Summary Disposition as to the
amount of renewal rent is GRANTED.
This Court reviews de novo a trial court’s ruling on a motion for summary disposition.
Zsigo v Hurley Medical Ctr, 475 Mich 215, 220; 716 NW2d 220 (2006). The interpretation of a
contract also comprises a question of law, which we review de novo, Burkhardt v Bailey, 260
Mich App 636, 646; 680 NW2d 453 (2004), “including whether the language of a contract is
ambiguous and requires resolution by the trier of fact.” DaimlerChrysler Corp v Tech
Professional Staffing, Inc, 260 Mich App 183, 184-185; 678 NW2d 647 (2003).
Relevant portions of the original lease agreement, executed by the parties, are as follows:
2. Term. The term of this Lease for the Demised Premises shall be for
one five (5) year term with three (3) five (5) year renewal terms (subject to earlier
termination as provided herein) from and after the date of commencement of the
term of this Lease, as hereinafter provided. If, however, the commencement date
falls on a day other than the first day of a month, then the term of this Lease shall
extend for five (5) full years, commencing with the first full month following the
commencement date. The renewal rate for each renewal term shall be the greater
of the average rate of existing tenant lease rates for the Office Complex at the
time of renewal or a maximum increase per renewal term of ten percent. In no
event shall the renewal rate be less than the original Base Rental Rate. [Emphasis
added.]
***
4. Base Rental Rate.
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A. Interior Premises. Tenant agrees to pay Landlord during the five (5)
year term of this Lease the aggregate Base Rental Rate, as may be adjusted at
each renewal date, of $1,331.813.20 Dollars ($9.50 per square foot for office
space identified on Exhibit B totaling 21,711 square feet and $6.00 per square
foot for gym space identified on Exhibit B totaling 13,189 square feet), payable in
successive Base Monthly Rent installments, in the aggregate amount of
$23,782.38 per month, payable in advance on or before the first day of each
month (the “Rent Date”), without prior demand and without any deduction or set
off whatsoever, such covenant by Tenant to pay rent being independent of the
covenants of Landlord under this Lease.
Initially, plaintiff contends the lease terms pertaining to the rental renewal rate are ambiguous.
Citing ¶ 2 of the lease agreement, supra, plaintiff argues that use of the word “maximum” with
the phrase “the greater of” creates an ambiguity. Specifically, plaintiff asserts that reading the
language of this provision, in accordance with the trial court’s ruling, as permitting defendant to
charge the greater of (a) the average existing tenant rates at the time of renewal and (b) ten
percent, renders the word “maximum” superfluous. In contrast, plaintiff contends the language
of the provision should be read, allegedly in conformity with the intent of the parties, to provide
for renewal rental rates to be capped at a maximum of ten percent, regardless of the average
tenant rates, even though plaintiff concedes that this interpretation renders the phrase “the greater
of” superfluous. As such, plaintiff argues the lease language is “patently ambiguous” and must
be construed in its favor as the tenant.
When interpreting a contract, the primary goal is to enforce the intent of the parties.
Burkhardt, supra at 656. Unambiguous terms are to be construed in accordance with their plain
and ordinary meaning. Busch v Holmes, 256 Mich App 4, 7-8; 662 NW2d 64 (2003). “A
contract is ambiguous only if its language is reasonably susceptible to more than one
interpretation.” Cole v Ladbroke Racing Michigan, Inc, 241 Mich App 1, 13; 614 NW2d 169
(2000). “Courts must be careful not to read an ambiguity . . . where none exists.” Auto-Owners
Ins Co v Harvey, 219 Mich App 466, 469; 556 NW2d 517 (1996). When contract language is
clear and unambiguous it cannot “be rewritten under the guise of interpretation.” South Macomb
Disposal Auth v American Ins Co (On Remand), 225 Mich App 635, 653; 572 NW2d 686
(1997).
Plaintiff contends that the following language of the lease agreement is patently
ambiguous:
The renewal rate for each renewal term shall be the greater of the average rate of
existing tenant lease rates for the Office Complex at the time of renewal or a
maximum increase per renewal term of ten percent.
“A patent ambiguity is one ‘that clearly appears on the face of a document, arising from the
language itself.” Grosse Pointe Park v Liability Pool, 473 Mich 188, 198; 702 NW2d 106
(2005), quoting Black’s Law Dictionary (7th ed). More specifically, a patent ambiguity has been
defined as “one apparent upon the face of the instrument, arising by reason of inconsistency,
obscurity or an inherent uncertainty of the language adopted, such that the effect of the words in
the connection used is either to convey no definite meaning or a double one.” Zilwaukee Twp v
Railway Co, 213 Mich 61, 69; 181 NW 37 (1921). Further, “if a contract, even an inartfully
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worded or clumsily arranged contract, fairly admits of but one interpretation, it may not be said
to be ambiguous or fatally unclear.” Michigan Twp Participating Plan v Pavolich, 232 Mich
App 378, 382; 591 NW2d 325 (1998).
Plaintiff’s argument is particularly strained in an effort to create an inconsistency where
none exists. Based on the clear language of the cited lease provision, we fail to discern any
alleged ambiguity. Taking the language as written the provision, “[t]he renewal rate for each
renewal term” is defined as comprising “the greater of the average rate of existing tenant lease
rates for the Office Complex at the time of renewal or a maximum increase per renewal term of
ten percent.” The term “greater” is defined in The American Heritage Dictionary of the English
Language (1985) as, alternatively: “2. Larger than others of the same kind . . . . 3. Large in
quantity or number.” The term “or” is “used to connect words, phrases, or clauses representing
alternatives.” Random House Webster’s College Dictionary (1997). Using these definitions, the
disputed provision provides for the larger of two methods of calculation to comprise the rental
renewal rate – either “the average rate of existing tenant lease rates” or, alternatively, “a
maximum increase . . . of ten percent.” This interpretation is not only clear and unambiguous,
but is consistent with the determination of the trial court, which we affirm.
Finally, plaintiff argues the trial court erred in failing to construe the lease agreement “as
a whole” when it determined that defendant could charge the same rate on renewal for all leased
square footage rather than maintain the differential rates of the original lease for office and
gymnasium space. Plaintiff contends the rates in the original lease demonstrates the intention of
the parties to attribute a different value to each type of space based on its commercial value and
comprises a latent ambiguity.
A latent ambiguity is defined as “one ‘that does not readily appear in the language of a
document, but instead arises from a collateral matter when the document’s terms are applied or
executed.’” Grosse Pointe Park, supra at 198, citing Black’s Law Dictionary (7th ed). Notably,
“where a latent ambiguity exists in a contract, extrinsic evidence is admissible to indicate the
actual intent of the parties as an aid to the construction of the contract.” Grosse Pointe Park,
supra at 198. Plaintiff contends that the existence of differential lease rates within the contract
evidence the intention of the parties to be charged at separate rates based on the commercial use
or value of each type of space (i.e., classroom space versus gymnasium space).
A cardinal rule followed for the interpretation of a contract requires:
[A] contract is to be construed as a whole; that all its parts are to be harmonized
so far as reasonably possible; that every word in it is to be given effect, if
possible; and that no part is to be taken as eliminated or stricken by some other
part unless such a result is fairly inescapable. [Laevin v St Vincent De Paul
Society, 323 Mich 607, 609-610; 36 NW2d 163 (1949) (internal citations
omitted).]
Similar to plaintiff’s assertions of the existence of an ambiguity pertaining to the methodology to
calculate the renewal rate, we determine that no latent ambiguity exists with regard to the “base
rental rate” for the “interior premises.” Pursuant to ¶ 4, subsection A of the lease agreement, the
“five (5) year term of this Lease” defines the amount to be paid for the respective area by the
square foot. However, there is no language within the lease agreement extending such terms to
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future renewals of the contract. Rather, this provision specifically designates that the rate “may
be adjusted at each renewal date.” It is presumed in the law that parties comprehend the import
and meaning of a written contract and had the intention expressed by its terms. Zurich Ins Co v
CCR & Co (On Rehearing), 226 Mich App 599, 604; 576 NW2d 392 (1997). Arguably, had the
parties intended to retain a differential rental rate for the areas, this could have been included
within the renewal language of the lease, as provided for in the original terms.
Affirmed.
/s/ Kurtis T. Wilder
/s/ Jane E. Markey
/s/ Michael J. Talbot
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