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Bannum, Inc. v. 2210 Adams Place

September 2, 2010


Appeal from the Superior Court of the District of Columbia (CAB 7134-06) (Hon. Lynn Leibovitz, Trial Judge).

The opinion of the court was delivered by: Kramer, Associate Judge

Argued January 14, 2010

Before REID and KRAMER, Associate Judges,and SCHWELB, Senior Judge.

Associate Judge KRAMER.

Concurring and dissenting opinion by Senior Judge SCHWELB at p. 11.

This case concerns a dispute between Bannum, Inc. ("Bannum" or "Tenant"), a Kentucky corporation that operates correctional facilities under contract with the Bureau of Prisons ("BOP"), and 2210 Adams Place, N.E., LLC ("Landlord"), a Maryland company that owns the commercial property at the corresponding address. The landlord alleges that the tenant breached its lease agreement by vacating the premises without notice and by subsequently failing to remove the alterations it had made to the property. After a bench trial, the court determined that the tenant breached the lease and owed rent as a tenant at sufferance during the period it held over. The court also awarded the landlord the cost of repairs to the property, but, finding that the alterations the tenant made to the property had actually increased its value, it refused to award any additional damages for the tenant's failure to restore the premises. Both sides appealed. On appeal, Bannum contends that it was prejudiced by the landlord's failure to refer to the lease's holdover clause before closing arguments. Bannum further argues that it incurred no liability under the holdover clause due to a limit on its liability after the lease expired, or, alternatively, because it timely surrendered the premises. The landlord cross-appeals and claims that it was entitled to the costs of the restoration in addition to the unpaid rent and cost of repairs. Both parties additionally contest the trial court's decision to award a portion of the landlord's attorney's fees as the partially prevailing party. We affirm the trial court's decision in its entirety.

I. Factual Background

In July 2002, Bannum entered into a lease agreement in order to operate a correctional facility at 2210 Adams Place, a commercial property configured as a warehouse at the time. The agreement explicitly stated that the tenancy would run concurrently with Bannum's BOP contract, and that the lease would "become null and void immediately" when the BOP contract terminated. The agreement allowed Bannum to make alterations to the property to meet the BOP's requirements, except that it required the removal of the improvements "if requested to do so by Landlord in writing before the expiration of the [lease] term." After making necessary changes, such as the installation of dormitories, bathrooms and the like, Bannum operated a correctional facility on the premises from 2003 to early April 2006.

The landlord-tenant relationship seems to have come under strain almost immediately. In October 2003, the landlord filed suit to eject Bannum, which was stayed when Bannum countersued, alleging a breach of the covenant of quiet enjoyment.*fn1 In addition, the District of Columbia sought to revoke Bannum's zoning permit shortly after it began operating the correctional facility. Some time around March 2006, Bannum lost the zoning dispute and its permit. Though the parties dispute the exact date, the trial court found that the BOP terminated Bannum's contract "at the latest on April 6th, 2006." On April 7, 2009, the landlord's representatives arrived at the premises, ostensibly to carry out an inspection,*fn2 only to find them vacant. The inmates had been moved. Unable to secure entry, the landlord sent a letter to Bannum that same day, stating that the property appeared to be abandoned and inquiring about Bannum's intentions with respect to the lease. On April 14, 2006, the inspection took place, and Bannum turned over the keys to the landlord. The landlord then demanded that Bannum remove the alterations it had made to the property. Bannum's counsel responded in writing on June 6, 2006, arguing that the tenancy had ended in April 2006 when Bannum vacated the premises and refuting that Bannum was obligated to restore the premises or remit rent for the period between April and June.

On September 20, 2006, the landlord sued Bannum. The single count of the complaint, entitled "Breach of Lease," alleged that the tenant had vacated the premises "on or around April 9, 2006, with rent due and owing" and had failed to restore said premises "to the condition they were in at the commencement of the [l]ease." Though the complaint demanded unpaid rent, it did not mention the lease's tenancy at sufferance clause.*fn3 At trial, the court interpreted the expert testimony provided by both parties to find that the value of the premises had not decreased (and may even have increased) as a result of the tenant's modifications. The trial court also found that the landlord had started advertising the property for rent around May 2006 and eventually succeeded in leasing it to the District of Columbia, which in turn started to operate a homeless shelter on the premises. As it became clear that it would not prevail with its "failure to restore" argument, the landlord in closing argument contended that Bannum owed rent as a tenant at sufferance because it had failed to timely surrender the premises.

In light of the fact that the premises were at least as valuable in their current configuration as they would be without Bannum's alterations, the court held that the landlord had failed to prove damages on its restoration claim. The court also dismissed Bannum's objection to the belated reference to the lease's holdover provision, holding that the argument was "no more than an interpretation of the Lease that is in evidence. . . . [Bannum] cannot claim surprise that [the landlord] asks the court to determine [Bannum's] obligations by reading the Lease."

II. Legal Analysis

Both parties have alleged error below. We consider each appeal in turn. In doing so, we apply general contract interpretation ...

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