Timothy Tucker Coleman, et al. and Marvin D. Thaxton, Trustee Under the Last Will and Testament of Cora A. Moore, Deceased v. Regions Bank and KARK-TV, Inc.

Annotate this Case
ca04-401

ARKANSAS COURT OF APPEALS
NOT DESIGNATED FOR PUBLICATION

DIVISION II

CA04-401

March 2, 2005

TIMOTHY TUCKER COLEMAN,

et al., and MARVIN D. THAXTON, AN APPEAL FROM THE PULASKI COUNTY

Trustee Under the Last Will and CIRCUIT COURT

Testament of CORA A. MOORE, [CV02-8687]

Deceased

APPELLANTS HONORABLE WILLARD PROCTOR, JR.

v. CIRCUIT JUDGE

REGIONS BANK and KARK-TV, INC.

APPELLEES AFFIRMED

Josephine Linker Hart, Judge

This appeal arises from the trial court's determining the rights and obligations of the parties to certain commercial leases. Appellants raise four points on appeal. However, we find that three points are procedurally barred and do not address these points. We affirm on the properly preserved and argued point.

There are two sets of appellants, each set representing one of the lessors. The first set, referred to as Tucker, are the heirs of Mildred Tucker Porter and Irma Tucker Engle, and the distributees of the Tucker Company.1 The second set, referred to as Moore, includes Marvin Thaxton, trustee under the will of Cora Moore, who died in October 1965.

The facts are essentially undisputed. In August 1952, Peoples National Bank of Little Rock (the Bank), predecessor in interest of appellee Regions Bank, executed two leases -one with the Tucker predecessors and the other with Moore - for the lease of the two parcels. Each lease permitted the Bank to construct its banking facilities on the parcels. Further, each lease allowed the Bank to make such alterations in and to the building as the Bank deemed necessary, provided that such alterations were not injurious to the leased premises. Finally, each lease required the Bank, upon termination, to deliver the building, except for bank fixtures, equipment, and bank vaults, in good condition, reasonable wear and tear excepted. Each lease, as extended, expired on July 31, 2002.

In 1953-54, in accordance with the leases, the Bank constructed its then-new banking headquarters consisting of a two-story structure on the Moore property that housed the Bank's lobby and offices and a two-story structure on the Tucker property that housed a drive-through banking facility on part of the ground floor and additional office space on the second floor. The Bank's architects prepared the design for the building, and Tucker and Moore approved the plans. The structural frame of the building is separated at the property boundary, with a double set of structural columns (one on each side of the common boundary) and structural separation throughout the frame. Additionally, the structural columns along the Louisiana Street side were built on twenty-five-foot centers, to address a requirement in the Moore lease that the building be designed so that the portion of the building fronting Louisiana Street could be easily and economically converted into twenty-five-foot shops at the termination of the lease. As a result of the 1953-54 construction, the structures were integrated, having common electrical, HVAC, and plumbing systems and sharing common elevators, restrooms, and stairwells.

In 1966-67, the Bank desired to expand its banking headquarters and acquired additional leasehold interests to the west of the Tucker and Moore properties. The property to the west was leased to the Bank by owners collectively referred to as Terry/Drennan. In 1967, the Bank expanded its banking facilities to cover all of the Tucker and Moore parcels (the East Building). The drive-in banking facility was relocated to the ground floor under the western (Terry/Drennan) side. There is no evidence regarding whether the Bank sought approval of its plans.

The Bank also constructed a three-story structure on the Terry/Drennan property (the West Annex) and connected it to the East Building through a two-story structure (the Overpass) that traversed the alleyway between the East Building and the West Annex. As a result of the 1967 construction, the separation of the structural frame along the property line was maintained, the structural columns along Louisiana Street remained on twenty-five-foot centers, and the banking facility continued to have integrated building services, having common electrical, HVAC, and plumbing systems and sharing common elevators, restrooms, and stairwells. This project is referred to as the 1967 expansion/modification. The Terry/Drennan lease required the Bank, at termination of the lease, to deliver the building free of any connections to other structures, specifically including the Overpass. The Terry/Drennan lease expired on June 30, 2002, and the Bank purchased the lots previously covered under the Terry/Drennan lease, succeeding to all of the rights and obligations under that lease.

Appellee KARK's2 involvement began in 1975, when the Bank moved into its current headquarters at Capitol and Broadway and entered into a transaction with KARK whereby the Bank conveyed ownership of the banking facilities to KARK (subject to the interests of the landowners) and subleased the Tucker, Moore and Terry/Drennan ground leases to KARK, who remained on the premises until the sublease expired on June 30, 2002. The Tucker and Moore ground leases expired on July 31, 2002, and on that date, Tucker and Moore became owners of the East building. Prior to the expiration of the leases, Moore and Tucker made demands on the Bank to remove the Overpass and to restore the buildings to good condition, including removing any environmental contamination.

The Bank filed a petition for declaratory judgment against Tucker, Moore, and KARK, seeking a declaration that it had complied with the terms of the leases and that the Bank, Tucker, and Moore be determined to have mutual use of the equipment, utilities, and services located in all of the buildings. The Bank asserted that the parties were entitled to mutual use based on theories of irrevocable license, implied easement, easement by estoppel, and prescriptive easement. Moore and Tucker answered and counterclaimed, asserting the right to separate, independent buildings and denying the Bank's easement claims.3 The counterclaim alleged, inter alia, that the Bank and its subtenant, KARK, breached the "good condition" and the "injurious to the leased premises" clauses of the leases, were negligent, and committed waste by constructing a building that effectively merged the Moore and Tucker properties and then failing to restore separate buildings at the expiration of the leases. The Bank's third amended petition sought judgment over against KARK on the independence claims. The trial court bifurcated the claims concerning the separation of the buildings from the claims that the Bank failed to return the buildings in "good condition" or pay for certain necessary repairs. Both sets of claims involve the "good condition" clauses.

Tucker and Moore moved for partial summary judgment on their claims for separate, independent buildings. The Bank responded by filing a motion for summary judgment, alleging that any breach of contract or "waste" claims that Moore and Tucker may assert for separate, independent buildings are barred by the statute of limitations. KARK filed a motion for summary judgment, asserting that it did not agree to assume any of the Bank's obligations on the independence claims and is not otherwise liable to the Bank on those claims.

In an order addressing the Bank's motion for summary judgment on Tucker's and Moore's counterclaim for separate, independent buildings, the trial court found that the initial construction of the buildings did not violate the leases or require separate buildings because the leases do not expressly so provide and because Tucker and Moore approved the original designs. The trial court next examined whether the 1967 expansion/modification violated the leases. The court noted that the leases gave the Bank the right to make any alterations or modifications to the buildings so long as the alterations did not injure the leased premises - the underlying real estate - and that Moore and Tucker did not reserve any rights to review or approve any changes in use or building modification. The court refused to construe the lease as imposing the requirement not to injure the leased premises on the building itself. The court further found that the 1967 expansion/modification was not "waste" because the Bank was expressly given permission in the leases to make such alterations.

Addressing the statute-of-limitations issues, the trial court found that, as to the claims that either the original construction or the 1967 expansion/modification violated the lease, the five-year statute of limitations on contracts applied and began to run upon the completion of the construction and expired well before suit was filed. On the waste claims, the trial court found that the three-year statute for property damage was applicable and that Moore and Tucker could have maintained the action without waiting for the expiration of the leases. The trial court further construed the "good condition" clause as requiring the Bank to repair or replace only items that are worn out or are not in working order at the expiration of the leases and not to make substantial structural changes to the buildings. As the court noted, the "good condition" clause was the only claim involving KARK. Because the court found that the "good condition" clause did not obligate the Bank to restore separate buildings, there was no basis for the Bank's claim for judgment over against KARK. Therefore, the Bank's claim against KARK was dismissed as moot.

In a supplemental order, the trial court addressed Tucker's and Moore's motion for summary judgment on the Bank's claims concerning a license or easement for use of the common utilities and facilities by all parties over all of the buildings. The court found that, upon expiration of the leases and the Bank's purchase of the Terry/Drennan property, there was an implied easement to allow all three owners (Tucker, Moore, and the Bank) to continue to use the common facilities in the same manner as when the buildings were all owned by the Bank. The court further found that it would constitute economic waste not to impose such an easement and that it would be inequitable to allow Tucker and Moore to object at this late date. The court noted that the East Building, the West Annex, and the Overpass all had been operated as a single structure since their construction and that the imposition of an easement requires that this joint use continue. The court made Rule 54(b) certificates to both orders, and Moore and Tucker filed timely notices of appeal from both orders.

In this appeal, Tucker and Moore argue that the trial court erred in (1) not finding that the leases required the Bank to provide separate buildings to Tucker and Moore at the termination of the leases; (2) not finding that the Bank violated the "alterations" provisions by expanding and merging what were originally separate buildings into each other; (3) not finding that the Bank breached the "good condition" provision of the leases due to the configuration of the buildings; (4) finding that the parties have an irrevocable license, easement by estoppel, and a prescriptive easement upon each other's properties.

We do not reach Tucker's and Moore's first or second points because they do not challenge the trial court's alternate rulings on the statute of limitations until their reply brief. Where the trial court based its decision on two independent grounds and appellant challenged only one on appeal, the appellate court will affirm without addressing either. Pugh v. State, 351 Ark. 5, 89 S.W.3d 909 (2002). Further, it is well settled that we do not consider arguments raised for the first time in a reply brief because the appellee is not given a chance to rebut the argument. See, e.g., Maddox v. City of Fort Smith, 346 Ark. 209, 56 S.W.3d 375 (2001); Schueck Steel, Inc. v. McCarthy Bros., 289 Ark. 436, 711 S.W.2d 820 (1986). Although Tucker's and Moore's main brief contains arguments that licenses, easements by prescription, and easements by estoppel are not applicable in this case, none of which were addressed by the trial court, they do not address the trial court's specific ruling granting an easement by necessity until their reply brief.4 Thus, Tucker and Moore did not challenge the basis for the court's ruling in their opening brief and challenged only the court's ruling in their reply brief. Therefore, this claim is similarly barred, and we do not address their fourth point. We affirm on those points.5

For their third point, Tucker and Moore argue that the trial court erred in finding that the "good condition" clauses of the leases did not require the Bank to return separate buildings, including separate heating and air conditioning systems, at the end of the leases.

The leases contain identical "repair and good condition" clauses as follows:

The Lessee agrees, during the term of this lease, at its own expense, to keep in good order and repair the inside and outside of the building or buildings on the leased premises and the sidewalks and passageways adjacent thereto. Upon the termination of this lease, the building or buildings and improvements shall be delivered to the Lessors in good condition, reasonable wear and tear during the term of this lease excepted. The buildings and permanent improvements erected and made upon the leased premises by the Lessee, other than bank fixtures, equipment and bank vaults, shall be and remain the property of the Lessors at the termination of this lease; provided, however, upon said termination the Lessee shall have a reasonable time thereafter within which to remove its bank fixtures, equipment, vaults, heating units, air conditioning plants and other personal property from the premises; even though the same may be attached thereto.

(Emphasis added.) The only difference between the two clauses is the italicized part, which is only contained in the Tucker lease. One other difference in the leases is that the Moore lease required the building to be "fully air conditioned and so designed that upon expiration of the lease it can quickly and economically be converted into shop spaces approximately twenty-five (25) feet in width facing Louisiana Street, provided the structural plans shall be approved in advance by the Lessor." (Emphasis added.)

Historically, a requirement that the tenant surrender the premises in good order or condition, without some other provision in the lease so providing, does not require the removal of alterations or improvements. Bifano Bldg. Corp. v. W.T. Grant Co., 325 F.2d 147 (5th Cir. 1963) (per curiam); Savage v. University State Bank, 263 Ill. App. 457 (1931); Leslie Pontiac, Inc. v. Novak, 202 N.W.2d 114 (Iowa 1972); Perry v. J.L. Mott Iron Works Co., 93 N.E. 798 (Mass. 1911); Lamonica v. Bosenberg, 389 P.2d 216 (N.M. 1964); McGregor v. Board of Educ., 14 N.E. 420 (N.Y. 1887); McKenzie v. Western Greenbrier Bank, 124 S.E.2d 234 (W. Va. 1962) (and cases collected); Arkansas Fuel Oil Co. v. Connellee, 39 S.W.2d 99 (Tex. Civ. App. 1931); G. Van Ingen, Annotation, Implied Duty of Lessee to Remove his Property, Debris, Buildings, Improvements, and the Like From Leased Premises at Expiration of Lease, 23 A.L.R.2d 655 (1952); 49 Am. Jur. 2d Landlord and Tenant §§ 845-46, 880 (1995 rev.). A tenant cannot be required to configure the building for the next tenant without an express agreement. Walgreen Co. v. Habitat Dev. Corp., 655 So. 2d 164 (Fla. Ct. App. 1995). Here, Tucker and Moore argue that the present configuration renders the buildings unmarketable and rely on the testimony of two real estate experts. However, that testimony does not shed any light on the intentions of the parties to the 1952 agreements as to whether they meant anything other than the historical construction given to such clauses. Also, Tucker and Moore offer no citation to authority that the "good condition" clauses can be construed in any manner other than consistent with its historic construction. In order to shift to the tenant the burden of what would naturally fall on the landlord, there should be something specific in the lease. Rundell v. Rogers, 144 Ark. 293, 222 S.W. 19 (1920); Kaufman v. Shoe Corp. of Am., 164 N.E.2d 617 (Ill. App. 1960). We affirm on this point.

Affirmed.

Glover and Neal, JJ., agree.

1 The Tucker set of appellants include Timothy Tucker Coleman, Leslie Eagle Coleman, Candice Coleman Heyward, Ren Tucker, Lauren Tucker, Jack R. Tucker, Jr., Victor Halter, Vernon Tucker, Jr., Mary Ann Garner Frizone, Cherron Garner Munson, Gayle Garner Roski, Tucker Garner, and Patricia Tucker Bell.

2 We use the term KARK to collectively refer to KARK-TV, Inc., Combined Communications Corporation (CCC), and Gannett Company, Inc. At the time, CCC was the owner of KARK. The conveyance was actually with CCC. In 1979, CCC was acquired by Gannett. In 1983, Gannnett and CCC sold the KARK assets (including the structures and the sublease) to SouthwestMedia, Inc., which placed those assets in a subsidiary, KARK-TV, Inc.

3 These claims are referred to as the independence claims.

4 In its order, the trial court variously refers to the easement as an implied easement and to facts constituting an easement by necessity.

5 We deny as moot the Bank's motion to strike Tucker's and Moore's reply brief.