Facts

Plaintiff James Cotter entered into a written lease with defendant Golden Valley Bank (GVB) for bare shell office space. Cotter offered a rate of $1.45 per square foot with a $30.00 per square foot tenant-improvement allowance. GVB, Chico Investors, Douglas Guillon, Howard Isom, Donald Wallrich, and Gary Katz (collectively, defendants) proposed a zero in fill allowance and a five year lease with two five-year renewal options, at a fixed rate of $.98 per square foot (plus cams) and bi-annual 4 percent rent increases over the initial and renewal terms. Following six months of negotiations, the parties signed a ten-year lease with two five-year renewal options and a first amendment to the lease, specifying the rental rate offered by defendants. $1.45 per square foot was never mention in the lease documents.

After defendants improved the premises, including construction of second floor storage, Cotter requested that defendants begin paying rent on the second floor storage space. Defendants declined to pay rent for the second floor, asserting that it was not within the premises area defined in the lease.

Another dispute arose between Cotter and defendants when Cotter agreed to reimburse defendants for improvements to the building shell. According to Cotter, the final amount of the credit was not determined. According to the defense, Cotter simply did not reimburse them.

Ultimately, Cotter sued defendants due to these various disputes. Defendants cross-claimed for rent allegedly overpaid and pre-judgment interest, and declaratory relief.

PLAINTIFF'S CONTENTIONS:
According to plaintiffs counsel, when the rent schedule was created for the 10-year term, the five-year amortized rent credit remained, due to the inadvertence of the parties. Thus, Cotter claimed, defendants would obtain more than twice the tenant-improvement allowance that was agreed upon. Cotter contended that, when he asked the defendants to change the mistake, they declined to do so. Cotter asserted that the defendants should not be permitted to obtain a million dollar discount due to an innocent mistake. He claimed that the five-year amortization credit should end on the twelfth month of the fifth year of the lease and thus, at the first month of the sixth year of the lease, the base monthly rent was required to escalate to $1.63 per square foot. Further, he contended that the defendants were responsible under the lease to pay rent in relation to the second floor as a tenant improvement. In addition, Cotter claimed, the defendants damaged the premises.

DEFENDANTS' CONTENTIONS:
Defendants contended that, only after GVB had spent more then $750,000 in tenant improvements (including construction of second floor storage), did Cotter demanded that the base rent increase to $1.45 after the fifth year of the lease, claiming he mistakenly entered into the lease without the escalation provision. Defendants argued that the plain language of the lease provided for rent at $.98 per square foot over the term and term extension, and that rent was not due on the second floor in-fill space paid for by defendants. Further, they claimed that the square footage term, which was drafted by their attorney, was not the result of fraud or mistake.

Damages

Cotter requested reformation of the lease and a decision requiring the defendants to pay rent for the second floor. GVB requested declaratory relief, confirming and clarifying rents due under the lease, and damages.

Result

The court determined that Cotter did not prove that a mistake occurred and that base rent under the lease and extension terms as $.98 per square foot. The court also found that GVB was not required to pay rent for the second floor because it was only used as storage space. The court found that the second floor was part of the premises area; but, that it would not be considered part of the premises area for the purpose of paying rent unless the storage space was improved by GVB. The court stated that, if the use is changed in the future from storage, the rent on the second floor would be the same as the first. The court also found that the actual square footage of the footprint of the premises was smaller than indicated in the lease documents. The court awarded GVB a rent credit of $23,345 and credited GVB with a $5,000 deposit paid by GVB toward rent due. Also, GVB was awarded $26,131 with $8,710 in pre-judgment interest due to Cotter's failure to make improvements to the building. GVB was also awarded all attorney fees and costs incurred during the proceedings.

Other Information

FILING DATE: Sept. 15, 2006

Length

nine days