Appeal from the Superior Court of the District of Columbia (LT-22623-97) (Hon. Ann O'Regan Keary, Trial Judge)
Before Wagner, Chief Judge, and Terry and Washington, Associate
The opinion of the court was delivered by: Terry, Associate Judge
This appeal involves two sections of a commercial lease. We must determine which of the two provisions governs the manner by which the tenant, Big Wash, Inc., should be billed for the consumption of water used in its laundromat business. The landlord, Double H Housing Corporation, argues that the term "water rents," as included in section 4.2 of the lease ("Taxes and Assessments"), is ambiguous and thus must be read in conjunction with section 15.1 ("Services and Utilities"). When these two sections are read together, Double H argues, section 15.1 obligates Big Wash to pay for its actual water consumption in addition to the proportionate share of taxes and assessments specified in section 4.2. Big Wash contends, to the contrary, that billing for water consumption is specifically included in the lease as "water rents" under section 4.2 and thus may be billed only in accordance with that section. Following a non-jury trial, the trial court ruled in favor of Big Wash. Concluding that the term "water rents" as used in section 4.2 is not ambiguous, we affirm.
On June 7, 1995, Double H and Big Wash entered into a ten-year lease for two storefront spaces in a shopping center in the District of Columbia. The basic monthly rent was $2,033.33 for the first year, with gradual increases to follow over the term of the lease. In addition to the basic rent, three sections of the lease outlined additional expenses to be paid by Big Wash. Section 4.1 provided that Big Wash would pay a proportionate share (9.2 percent) of certain taxes and assessments and common area maintenance ("CAM") costs. The lease defined CAM costs to include all costs incurred by the landlord in servicing, operating, repairing, and maintaining the common areas.
Under section 4.2, Big Wash also agreed to pay 9.2 percent of the taxes assessed against the shopping center. The term "taxes" is defined in section 4.2 (a) to include "all real estate taxes, assessments, water and sewer rents and other governmental impositions and charges . . . non-recurring as well as recurring, special or extraordinary as well as ordinary" (emphasis added). The other part of the lease at issue here, section 15.1, provides:
Tenant [Big Wash] shall be responsible for the cost of all utilities of every kind and nature serving the Premises. If any utility is separately metered, Tenant shall have such meter placed in its own name and pay the cost thereof directly to the provider. If any utility is not separately metered, Tenant shall pay Landlord its share of the cost of such utility within five days after receipt of Landlord's bill therefor. Landlord may, at Tenant's cost and expense, separately meter any utility that is not currently separately metered, and Tenant shall thereafter put such meter in its own name and pay the costs of such services directly to the provider. Landlord also may, at Tenant's sole cost and expense, submeter any utility, and Tenant shall thereafter pay the costs of such utility based on submeter readings or Landlord's reasonable determination of Tenant's use of such utility.
Each store in the shopping center was separately metered for gas and electricity, but not water.
For almost two years Big Wash paid its rent without incident, including its proportionate share of CAM expenses and taxes. Double H, however, did not receive a bill from the District of Columbia for water usage during that period, and thus it did not bill Big Wash or any of the other tenants for this expense. When the District finally sent Double H a water bill for $22,000, Double H initially protested the bill but eventually paid it in full. Soon thereafter, according to the testimony of its vice president, Double H "billed every tenant for part of it, and about $12,000 of it was subsidized because we don't think it's right to pass on the water usage for Big Wash to other tenants."
Then, on March 31, 1997, Double H sent Big Wash a letter stating, "As you are aware, you are the major user of water in the center [but] your monthly CAM charges are not truly reflective of your usage. Therefore, it is necessary to charge you a monthly water fee of $1,000 (effective 1/1/97) to cover the cost of your water usage." Big Wash paid its 9.2 percent of the CAM charges for 1997 but refused to pay the additional water fee because it believed it was not required to do so under the lease. As a result, Double H filed an action in the Landlord and Tenant Branch of Superior Court seeking payment of $6,300 alleged to be in arrears, including $300 in late fees.
Big Wash filed a motion for summary judgment in which it argued that, under the express terms of section 4.2 of the lease, it could be charged for only 9.2 percent of the water usage for the entire center and not for its specific water usage. In opposition, Double H pointed out that section 15.1 of the lease provided that Big Wash was responsible for the costs of all "utilities of every kind and nature" that served the premises, and argued that water should be considered a "utility" within the meaning of section 15.1. In addition, Double H noted that the term "water rents" used in section 4.2 was not defined in the lease and maintained that, in light of the other provisions of the lease, it could not be read to include water consumption. After a hearing, a Superior Court judge denied the motion for summary judgment, concluding that "the interpretation of the lease was ambiguous and therefore an issue of fact to be decided at trial."
The case went to trial several months later before another judge. At trial, the testimony focused primarily on the definition of "water rents" and on whether that term denoted charges for actual consumption of water or referred to charges for physical improvements to the water and sewer systems. Silas Young, the vice president of Double H, testified that under section 4.2 each tenant would pay for the usage of utilities within its own space. Mr. Young said that "utilities to me includes water, electric, and gas" and that "it was always my understanding that water was going to be billed as a utility." Moreover, "[i]t was always our intention to submeter the center and put in water meters. To be honest about it, we didn't do it. It was an error on our part. Because we wanted to, instead of estimating water, because each tenant uses a different amount of water." *fn1
Anne Magruder, an attorney with sixteen years of commercial leasing experience, testified that she had reviewed the lease for Double H. She also stated that "by the time I got the lease . . . the utilities had already been determined . . . and the lease negotiations were never conducted about utilities after that point." *fn2 According to Ms. Magruder, the term "water rents" is always found in the real estate tax section of a commercial lease. It is intended to protect the landlord from charges based on the cost to the local government for installing and ...