Double Park, LLC v. Kaine Parking 125, LLC

In this action arising out of a landlord-tenant dispute, Double Park, LLC, the

plaintiff/counter-defendant below, appeals from a non-final order directing it to

place disputed excess rent money in escrow pursuant to section 83.232 of the

Florida Statutes (2014). Finding we have jurisdiction to review the matter, see Fla.

Discount Props., Inc. v. Windermere Condo., Inc., 763 So. 2d 1084, 1084 (Fla. 4th

DCA 1999) (holding that an order directing rent money be paid into the registry of

the court is appealable under Florida Appellate Rule 9.130(a)(3)(C)(ii) “because it

determines the right to immediate possession of property, i.e., the rent payments”),

we reverse the order under review because the trial court erred in determining

without an evidentiary hearing the amount of excess rent that must be placed in

escrow under this lease. See Cascella v. Canaveral Port Auth., 827 So. 2d 308,

309 (Fla. 5th DCA 2002) (applying de novo review to non-final order determining

rent obligation under parties’ lease for purposes of section 832.232 of the Florida

Statutes “[b]ecause the appeal involves issues of contract and statutory

interpretation”).

1. The facts

In March 2008, Double Park entered into an agreement to lease a parking lot

from Kaine Parking 125, LLC. The subject lease is titled and provides that it is a

“TRIPLE NET LEASE AGREEMENT.” See Hochhauser v. Jacobson, 795 So. 2d

232, 234 n.1 (Fla. 4th DCA 2001) (explaining that “[u]nder a triple net lease, the

tenant is obligated to pay all taxes, insurance and cost of maintenance on the leased

premises”). To this end, the subject lease expressly provides that Double Park “at

2

its expense and as additional rent” is to secure certain “all risk” property insurance

and liability insurance policies, and that, as an “Increase in Rent,” Double Park is

responsible for paying one half of the real estate taxes, up to $35,000 per year1, on

the leased premises. The lease further provides that, as a triple net lease, Double

Park is responsible for the cost of all maintenance on the premises, utilities, and

certain capital improvements.2

Paragraph 17(d) of the lease agreement further provides that if Double Park

sublets the property and collects rental income greater than the payments it

currently makes to Kaine Parking, then Double Park’s rent obligation under the

lease increases to the amount being paid by its sublessee:

(d) Any monetary consideration obtained (net of selling costs

and expenses) in connection with the transfer or assignment of this

Lease or received by the sublessor in connection with a sublease of

the premises shall belong to the Landlord. In the event of the

subletting or assignment of this Lease, if Tenant derives funds or

rental income greater than what it is paying to Landlord under this

Lease, the Annual Rent provided for herein shall be increased to that

amount received by Tenant from sublessee or assignee of this Lease.

(Emphasis added).

1 The subject lease originally made the landlord, Kaine Parking, responsible for the

payment of real estate taxes. However, pursuant to a November 14, 2012,

amendment to the lease, Double Park is responsible for paying one-half of the real

estate taxes on the subject property up to a total of $35,000 in any given year.

2 In addition to being responsible for “alterations, changes, substitutions,

improvements and construction in connection with the Premises,” Double Park

agreed to provide $100,000 to refurbish the parking lot, payable in installments of

$2,500 per month.

3

After Double Park sublet the property to 120 Ocean Drive, Kaine Parking

complained that Double Park had not received permission to sublet any portion of

the leased property. It also claimed that, pursuant to paragraph 17(d), Double

Park’s annual rent under the lease had increased because Double Park allegedly

was collecting more from its sublessee than Double Park was paying to Kaine

Parking under the lease. Double Park then sued Kaine Parking for breach of

contract with Kaine Parking countersuing to demand payment of the excess rental

income that Double Park had not paid since the inception of the sublease.3

Kaine Parking thereafter moved to require Double Park to deposit unpaid

excess rental income into the court registry claiming that the amount the sublessee

was paying to Double Park each month ($26,000 or $31,000, depending on the

date) was greater than the rent Double Park allegedly was paying to Kaine Parking

each month ($22,000, $23,100, or $24,255 per month, depending on the date).

Double Park balked, claiming that its rent obligation under the lease should not be

increased because the amount it paid to Kaine Parking pursuant to its triple net

lease each month, when considering insurance, maintenance, taxes, utilities and

capital improvements, far exceeded the rent Double Park collected from the

sublessee, and requested an evidentiary hearing to determine the proper amount of

excess rent to be paid into the court registry. See § 83.232(2)(b), Fla. Stat. (2014)

3 Kaine Parking also sought to evict Double Park and the sublessee from the

parking lot premises.

4

(providing that “[i]f the tenant contests the amount of money to be placed into the

court registry, any hearing regarding such dispute shall be limited to only the

factual or legal issues concerning . . . [w]hat properly constitutes rent under the

provisions of the lease”); Muvico Entm’t, L.L.C. v. Pointe Orlando Dev. Co., 755

So. 2d 194, 194 (Fla. 5th DCA 2000) (“[S]ubsection 83.232(2), Florida Statutes

(1999), specifically provides that if the tenant contests the amount of money to be

paid into the court registry, the court is limited to factual and legal issues

concerning what constitutes rent under the lease agreement and whether the tenant

is due any credits for rent that has been paid.”).

At a non-evidentiary hearing which followed, the court below determined

that Double Park was obligated to deposit an amount equal to the difference

between the gross rent collected each month by Double Park from 120 Ocean

Drive (either $31,000 or $26,000 per month, depending on the date) and the base

or annual rent paid by Double Park to Kaine Parking each month (either $22,000,

$23,100 or $24,255 per month, depending on the date).4 Double Park appeals

claiming that this method for determining whether additional or excess rent was

due was error. We agree.

4 Pursuant to agreement of the parties, the court ordered that this sum be placed in

escrow in the trust account of counsel for Kaine Parking instead of the court

registry.

5

As an initial point, we reject Kaine Parking’s argument that Double Park

waived its right to appeal the trial court’s excess rent determination when it failed

to take advantage of the trial court’s offer to consider the matter at a subsequent

evidentiary hearing. We do so because that offer amounted to no offer at all,

where the court had already issued its legal ruling, making it clear that it would

consider only the base monthly rental fee Double Park was obligated to pay Kaine

Parking when calculating the excess rental income under paragraph 17(d) and that

nothing introduced at the evidentiary hearing was going to change the court’s mind

as to this point. The court even went so far as to state that if Double Park elected

to proceed with an evidentiary hearing it would impose sanctions against Double

Park if it did not secure a more favorable ruling. Such a Hobson’s choice

amounted to no choice at all. Thus, no voluntary waiver that would preclude

consideration by this court occurred. See Marcos v. Haecker, 915 So. 2d 703, 705

n.1 (Fla. 3d DCA 2005) (citing Anderson v. Highlands Beach Dev. Corp., 447 So.

2d 1045, 1046 (Fla. 4th DCA 1984) (defining Hobson's choice as “an apparent

freedom of choice with no real alternative”)).

As to the merits, we agree that a triple net lease such as the instant lease

between Kaine Parking and Double Park generally “assures that the landlord will

actually receive the lease’s stated profits,” that is, an amount—here the base or

annual rent—“net” of the cost of “taxes, operating expenses, and the like.” In re

6

McSheridan, 184 B.R. 91, 94 n.2 (B.A.P. 9th Cir. 1995), overruled on other

grounds by In re El Toro Materials Co., 504 F. 3d 978, 981-982 (9th Cir. 2007).

However, the instant appeal does not turn on what constitutes “rent” under a triple

net lease. Rather, this appeal hinges on whether Double Park must pay anything to

Kaine Parking as a consequence of its sublease to 120 Ocean Drive. This

determination is governed by paragraph 17(d) of the parties’ lease, whereby

Double Park’s rent obligation under the lease increases if Double Park collects

more in rental income from its sublessee than “it is paying” to Kaine Parking. See

Stemmler v. Moon Jewelry Co., 139 So. 2d 150, 153 (Fla. 1st DCA 1962) (“The

rules of construction relating to contracts generally apply in the construction of a

lease.”); see also In re Phillip Watts Enters., Inc., 186 B.R. 735, 738 (Bkrtcy. N.D.

Fla. 1995) (“In Florida, the general rules of contract construction apply to the

construction of a commercial lease contract. ‘It is a cardinal rule of contract

construction that the intention of the parties governs.’ Dune I, Inc. v. Palms North

Owners Ass’n, Inc., 605 So. 2d 903, 905 (Fla. App. 1 Dist. 1992). The intention of

parties to a contract is to be obtained from the unambiguous terms of the

contract.”) (citation omitted). Because Double Park has always paid the base rent

under the lease (either $22,000, $23,100, or $24,255 per months depending on the

date), we are concerned only with any additional or excess rental income Double

7

Park may owe to Kaine Parking as a consequence of the Double Park/120 Ocean

Drive sublease.

In light of the trial court’s failure to hold an evidentiary hearing, the trial

court could not resolve the disputed factual issue of whether Double Park “is

paying to the Landlord” more than just annual rent. The parties’ lease agreement

provides, for example, that Double Park is required to pay $2,500 each month for

its share of the cost of refurbishing the parking lot. Double Park is also required

under the lease to pay for its share of the real estate taxes assessed on this property.

Under paragraph 17(d), if Double Park makes these payments directly to Kaine

Parking it would appear that these amounts should have been added to the monthly

rent being paid to Kaine Parking when calculating whether Double Park was

receiving more from 120 Ocean Drive than it was paying to Kaine Parking, and if

so, the amount of excess rent due. Because the trial court failed to hold an

evidentiary hearing to resolve these and any other factual disputes prior to

determining the amount of excess rent, if any, to be escrowed, we reverse the order

on appeal.5

5 Double Park’s counsel represented at the non-evidentiary hearing held below that

Double Park’s monthly payments for the refurbishment cost and for taxes have

been made to Kaine Parking. Such representations are not testimony; therefore, on

remand, Double Park will have the opportunity to validate these claims by

introducing evidence at an evidentiary hearing.

Double Park also claims that the $450 per month it was paying for maintenance,

the $568.67 per month it was paying for utilities, and the $592.33 per month it was

paying for insurance also should have been added to “what it was paying” to Kaine

8

In reaching this decision, we reject Double Park’s argument that the trial

court also erred in failing to reduce the $26,000 or $31,000 per month in rent that it

was collecting from 120 Ocean Drive by an amount equal to the sales taxes that

120 Ocean Drive was paying under the sublease ($2,170 per month). We do so

because the sublease expressly requires 120 Ocean Drive to pay these taxes over

and above the amount it was paying to Double Park in rent to use the lot. The

amount Double Park was collecting or receiving in rent from 120 Ocean Drive was

not, therefore, being reduced by the amount needed to pay sales taxes and therefore

correctly was not considered by the trial court in determining the amount of rent,

either $26,000 or $31,000 depending on the date, being received by Double Park

under its sublease with 120 Ocean Drive.

We therefore reverse the order on appeal and remand this cause with

instructions that the court below hold an evidentiary hearing to: (1) determine

whether any other payments pursuant to the lease were being made by Double Park

to Kaine Parking for the use of this property, and if so, the amount of those

payments; and (2) after making these determinations to deduct from the amount of

rent received by Double Park from 120 Ocean Drive (either $26,000 or $31,000)

Parking. However, the record does not demonstrate whether any of these sums

were being paid to Kaine Parking so as to justify their inclusion. On remand,

Double Park may well be able to adduce evidence to demonstrate whether these

payments are being made to Kaine Parking. If so, they should be included in

determining whether Double Park was receiving more from 120 Ocean Drive than

it was paying to Kaine Parking.

9

the total amount of all payments being made by Double Park to Kaine Parking

(including monthly rent in the amount of either $22,000, $23,100, or $24,255 plus

any other amounts) to determine whether the amount being received by Double

Park exceeded the amount being paid to Kaine Parking, and if so, the amount of

excess rent due, and thus to be deposited into escrow.

Reversed and remanded with instructions.

EMAS, J., concurs.

10

Double Park, LLC v. Kaine Parking 125, LLC.

Case No. 3D14-3135

LOGUE, J. (concurring)

I concur in the holding to reverse because the trial court set the amount to be

escrowed without conducting an evidentiary hearing. As the majority properly

determined, an evidentiary hearing was required here because the facts are in

dispute. I do not join the remainder of the opinion, however, because it addresses

issues that were not decided by the trial court. Those issues are best resolved in the

first instance by the trial court in the context of a full factual record developed at

the evidentiary hearing which we are ordering. This approach respects the

prerogative of the seasoned trial judge, honors our role as an error-correcting court,

and avoids the unintended consequences that might result from the doctrine of the

law of the case.

11

Reversed and remanded with instructions.