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SJ Enterprises, LLC v. Quander

Court of Appeals of The District of Columbia

May 16, 2019

SJ Enterprises, LLC, Appellant,
Dianne Quander, Appellee.

          Argued March 29, 2018

          Appeal from the Superior Court of the District of Columbia (CAB-3221-16) (Hon. Steven M. Wellner, Trial Judge)

          Stephen O. Hessler for appellant.

          Aaron Sokolow, with whom Morris R. Battino and Vivianette Velázquez were on the brief, for appellee.

          Before Blackburne-Rigsby, Chief Judge, and Glickman, Associate Judge, and Ferren, Senior Judge.


          Blackburne-Rigsby Chief Judge.

         In this appeal, we are asked to determine whether the landlord, Dianne Quander, waived the deadline for the tenant, SJ Enterprises', lease renewal option, by her actions and communications with the tenant after the renewal option deadline had already passed.[1]

         In the present case, after the lease renewal option deadline had passed but before the original contract term expired, Ms. Quander e-mailed SJ Enterprises. The subject line of the e-mail stated: "reminder of lease increase and renewal." In the body of the e-mail, Ms. Quander wrote the following:

I just wanted to remind you that your first five[-]year lease agreement comes to an end on November 30, 2015. Please confirm that you want to continue with the lease. There is an increase of 3% each year starting in December, 2015 [sic] and the rent will be $4326 a month.

         At trial, Ms. Quander claimed that the e-mail was an inquiry as to whether SJ Enterprises would be remaining at the property after the initial lease term ended, in a holdover tenancy, which she could terminate upon thirty-days' notice. SJ Enterprises, however, testified that it believed that the e-mail constituted an offer to renew the lease for an additional five-year term, which it accepted by responding to the e-mail: "Thanks, Dianne, for the reminder. Will start next month."

         The trial judge found in favor of SJ Enterprises on an alternative legal theory, that the parties' e-mail exchange constituted a new five-year lease agreement, but the trial judge limited the new lease to one year because it violated the statute of frauds, D.C. Code § 42-306(b) (2012 Repl.). However, we conclude that Ms. Quander's e-mail constituted a clear and unequivocal waiver of her right to timely notice of SJ Enterprises' option to renew for an additional five-year term, which the tenant accepted and exercised by her e-mail response. We therefore reverse and vacate the trial court's decision and remand for the trial court to enter judgment in favor of SJ Enterprises.

         I. Factual and Procedural Background

         In August 2012, SJ Enterprises opened its business, "North Indian/Pakistani bar/restaurant known as 'Cusbah, South Asian Spice Bar'" at the subject property located 1128 H Street Northeast, Washington, D.C. ("Property"). The lease's initial term was for five years, but SJ Enterprises had a Renewal Option under paragraph five of the agreement to renew the lease for up to two additional five-year terms, so long as SJ Enterprises gave Ms. Quander "not more than twelve (12) and not less than five (5) months' notice of" its intent to exercise the option to extend the lease agreement. The initial lease term was set to expire on November 30, 2015, and SJ Enterprises needed to notify Ms. Quander "of such intention" to exercise the Renewal Option between December 2014 and July 2015. SJ Enterprises did not timely exercise its option.

         However, on September 16, 2015, the landlord, Ms. Quander, of her own accord sent SJ Enterprises' co-owner Julie Hussain[2] an e-mail entitled "reminder of lease increase and renewal." (Emphasis added). On November 2, 2015, Julie Hussain responded to Ms. Quander's e-mail: "Thanks, Dianne, for the reminder. Will start next month."

         Consistent with this e-mail exchange, SJ Enterprises remained in the Property after the initial lease term expired on November 30, 2015, and began paying the increased rent in December 2015. However, on March 16, 2016, Ms. Quander issued SJ Enterprises a Notice to Vacate by April 30, 2016. SJ Enterprises did not vacate the Property on April 30, 2016, and filed a suit for breach of contract in Superior Court. Ms. Quander counter-sued for a non-redeemable judgment of possession.

         At a bench trial on the issue of possession of the Property, the trial judge heard testimony from three witnesses: Landlord, Dianne Quander, and SJ Enterprises co-owners Julie and Soophia Hussain. Ms. Quander testified that the intent behind her September 16, 2015, e-mail was to inquire from SJ Enterprises whether it would be vacating the Property at the end of the initial lease term or if SJ Enterprises intended to remain at the Property on a month-to-month basis as a holdover tenant. However, Ms. Quander's e-mail never used the phrase "month-to-month" or any terminology to suggest that by remaining, SJ Enterprises would be treated as a holdover tenant.

         Julie Hussain testified that her understanding of the September 16, 2015, e-mail from Ms. Quander was that Ms. Quander "wanted [Julie Hussain] to respond . . . [with whether SJ Enterprises] wanted to continue with the lease . . . [f]or the next five years;" and if SJ Enterprises was to continue the lease, that the rent would increase. Julie Hussain believed that because she paid the increased rent in December, she was complying with Ms. Quander's e-mail, agreeing to extend the lease for a second five-year lease term. Soophia Hussain[3] testified consistent with Julie Hussain's testimony, that it was her understanding that they were renewing the lease based on the e-mail exchange and that the rent increase would begin in December 2015.

         The trial judge credited Julie and Soophia Hussain's testimony and did not credit Ms. Quander's testimony because he found that her testimony contradicted the plain language of her e-mail. The trial judge held, as a matter of law, that SJ Enterprises did not timely exercise the Renewal Option, that Ms. Quander's e-mail was an offer to enter into a new lease agreement, and SJ Enterprises' response was "a meeting of the minds," which created a new five-year lease agreement.

         In coming to his conclusion, the trial judge discussed his belief "that the landlord, by that e-mail of September 16, 2015, either extended the period to exercise the option or else made a new offer with the same terms that the option would have included." (Emphasis added). In favoring the latter over the former, he noted that although the parties were "equally sophisticated" and "probably understood [the renewal option] at the time they entered into the agreement," after a few years had passed, they no longer understood how the option worked. Therefore, because Ms. Quander "did not know how the option worked" "she was [not] in a position to be extending the deadline."

         On subsequent motion by the parties, the trial court amended its judgment, holding that the new agreement did not satisfy the statute of frauds, D.C. Code § 42-306(b), [4] and limited the lease term to one year. This appeal followed.[5]

         II. Analysis

         We are not persuaded by the trial court's conclusion that the parties intended to enter a new contract. We conclude that the trial judge erred as a matter of law, in concluding that the parties entered a new lease. See Strauss v. NewMarket Glob. Consulting Grp., LLC, 5 A.3d 1027, 1032 (D.C. 2010) (The determination of whether an enforceable contract exists is a question of law, which we review de novo.) (citation omitted).

         Traditional notions of contract formation tell us that "for an enforceable contract to exist, there must be both (1) agreement as to all the material terms, and (2) intention of the parties to be bound." Kramer Assocs., Inc. v. Ikam, Ltd., 888 A.2d 247, 251 (D.C. 2005) (internal citations, quotation marks, and brackets omitted). While we may assume the parties agreed to the same terms in their original written lease, we are unable to find evidence of the parties' "meeting of the minds" or "mutual assent" to be bound to a new contract. Id. at 252 (citations omitted). The landlord sent an e-mail that resembled an offer to extend or otherwise to continue with the lease. The trial court viewed the tenant's response as "I accept your offer to renew the lease term." While we accept the trial judge's factual findings as to what the parties did and said prior to extending the lease agreement, we do not agree with the ultimate conclusion that an enforceable contract was formed by the parties' e-mail exchange and instead conclude that the landlord waived the option deadline.[6]

         As the trial judge noted, the tone of the e-mail exchange between the parties was forward-looking and included the phrases, "reminder of lease increase and renewal," "first five-year" term, and "continue with the lease." This tone leads us to conclude that the parties intended to extend the current lease agreement as opposed to beginning a new lease. Further, the parties originally executed a written and signed lease agreement, which contradicts the conclusion that the parties abandoned that lease ...

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