HBR Properties Norfolk, L.L.C. v. JANAF HQ, L.L.C.

79 Va. Cir. 479, 2009 Va. Cir. LEXIS 244
CourtNorfolk County Circuit Court
DecidedNovember 10, 2009
DocketCase No. CL06-6721
StatusPublished

This text of 79 Va. Cir. 479 (HBR Properties Norfolk, L.L.C. v. JANAF HQ, L.L.C.) is published on Counsel Stack Legal Research, covering Norfolk County Circuit Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
HBR Properties Norfolk, L.L.C. v. JANAF HQ, L.L.C., 79 Va. Cir. 479, 2009 Va. Cir. LEXIS 244 (Va. Super. Ct. 2009).

Opinion

By Judge Karen J. Burrell

This case concerns a lease entered into between Plaintiff, HBR Properties Norfolk, L.L.C. (“HBR”), and Defendant, JANAF HQ, L.L.C. (“JANAF”), for property located at the JANAF Shopping Complex in Norfolk, Virginia. HBR’s lease began on August 1,2000, (the “Lease”) and is scheduled to terminate on March 23, 2020.

A previous dispute over this lease, concerning HBR’s obligation to provide JANAF with financing, resulted in JANAF filing suit in the U.S. District Court for the Eastern District of Virginia. Concurrently, HBR challenged the Common Area Expenses (“CAM”) charged as a component of their rent. The litigation was settled in May 2003 by a settlement agreement (the “Agreement”) that included an estoppel provision.

The present litigation commenced on December 22,2006, when HBR filed suit in Norfolk Circuit Court challenging CAM fees from 2001 to 2005. The matter was tried before this Court from March 17 to March 20, 2008. Plaintiff seeks atotal of $1,084,610 in damages; Defendant concedes it over-billed Plaintiff in the amount of $230,807.84.

[480]*480I. HBR Is Estopped from Asserting Any Claims of Lease Breach or Default Arising Prior to the Date of the Agreement

A. The 2003 Litigation

When the Lease was negotiated in 2000, HBR had no tenant to occupy its premises. JANAF was concerned it would not be able to secure sufficient financing for the premises because of this vacancy and so required HBR venturers Vornado and Starwood Ceruzzi to execute a guaranty obligating them to make a loan to JANAF to cover any resulting deficiency in financing. When JANAF was not able to obtain sufficient financing and could not agree with HBR on the amount of financing HBR was required to provide, JANAF filed suit in the United States District Court for the Eastern District of Virginia (“EDVA”).

The EDVA suit was settled in May 2003 by the terms of the Agreement, which required HBR to pay $250,000 to JANAF, dismissed the suit, and voided HBR’s loan obligation. Additionally, the Agreement included an estoppel provision that reads:

By their execution below, HBR and Starwood Ceruzzi hereby certify to JANAF HQ as of the date hereof that (i) the Lease is in full force and effect, (ii) to the best of EIBR’s and Starwood Ceruzzi’s knowledge and belief, no uncured default, event of default, or breach by JANAF HQ or BOBR currently exists under the Lease, and (iii) neither HBR nor Starwood Ceruzzi has made any claim against JANAF HQ alleging JANAF HQ’s default under the Lease that remains uncured as of the date hereof.

(Def. Ex. 2.) JANAF argues this provision estops HBR from making any claims on the Lease arising prior to the Agreement. HBR retorts that it lacked sufficient knowledge to be so estopped. For the reasons that follow, the Court finds that HBR is estopped from asserting any claims of lease breach or default arising prior to the date of the Agreement.

B. The Estoppel Provision

The burden of establishing that an effective estoppel certificate was created within the Agreement rests upon Defendant, who must prove the elements of estoppel by “clear, precise, and unequivocal evidence. The evidence must not leave the matter to mere inference or conjecture but must be [481]*481certain in every particular.” Utica Mut. Ins. Co. v. National Indent. Co., 210 Va. 769, 773 (1970) (citing Trayer v. Bristol Parking, Inc., 198 Va. 595, 606, 95 S.E.2d 224 (1956)).

An estoppel claim must establish six elements:

1. There must have been a representation or concealment of material facts. 2. The representation or concealment must have been with knowledge of the true state of facts, unless the party making it was bound to know the facts, or his ignorance of them was due to gross negligence. 3. The party to whom it was made must have been ignorant of the truth of the matter as to which representation was made. 4. It must have been made with the intention that the other party should act on it; but the place of intent will be supplied by gross and culpable negligence on the party sought to be estopped, if the effect of that negligence is to work a fraud on the party setting up the estoppel. 5. The representation or concealment must be proved to have been the inducement to the action of the other party. 6. The party claiming the estoppel must have been misled to his injury.

Chesapeake & O. RR. v. Walker, 100 Va. 69, 91-92 (1902) (quoting 4 Amer. & Eng. Decs, in Equity 268).

As to the first element, representation, there is no dispute that the estoppel provision provided by the Plaintiff was a representation of material facts. In the estoppel provision, HBR represented that no uncured default, event of default, or breach existed under the Lease to the best of its knowledge. The facts underlying this representation were material to JANAF’s assent to the Agreement and are material to the case at bar. (Def. Ex. 2, p. 2; 3/20/08, Tr. 973-75.)

As to the third element, knowledge of the party claiming estoppel, there was no evidence presented that Defendant was itself aware of any breach or default on its part.

As to the fourth element, intent, the context of the estoppel provision, its name and its location within a settlement agreement, makes clear that HBR made its representation with the intention that JANAF should act upon it. HBR consented to the terms of the estoppel clause because the Agreement granted HBR relief from a two to five million-dollar loan obligation and disposed of the pending lawsuit, an arrangement that HBR considered a bargain and “jumped at.” (3/20/08, Tr. 1011.)

[482]*482As to the fifth and sixth elements, inducement and injury, William Tyler, who was primarily responsible for negotiating the Agreement for JANAF, testified that the estoppel provision was a critical, negotiated-for provision of the Agreement, and that JANAF could not have obtained sufficient third-party financing without it. (3/20/08, Tr. 972-75.) JANAF would not have agreed to the monetary settlement of the Agreement without the estoppel provision. (3/20/08, Tr. 975, 991-93.) Additionally, JANAF relied upon the income from the HBR lease to support the loan and pay its debt service. (3/20/08, Tr. 975.)

It is the second element of estoppel, knowledge, that is the least clearly demonstrated. Defendant argues that Plaintiff is estopped from making any claims on the Lease that arose prior to the May 15,2003, settlement date. For Plaintiff to be so estopped, Plaintiff must have possessed knowledge of an “uncured default, event of default, or breach by JANAF HQ” that existed at the time of the Agreement. (Def. Ex. 3 3/19/08.) Alternatively, Plaintiff may be estopped if Plaintiff was bound to know of such a default or breach or if Plaintiffs ignorance of such a default or breach was the result of gross negligence. Chesapeake & O. RR. v. Walker, 100 Va. 69, 91-92 (1902) (quoting 4 Amer. & Eng. Decs, in Equity 268).

Defendant does not argue that Plaintiff was actually aware of a default or breach, but only argues that Plaintiff was aware of the nature of past CAM and was aware of Defendant’s methods for calculating and charging CAM when Plaintiff agreed to the estoppel provision.

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Cite This Page — Counsel Stack

Bluebook (online)
79 Va. Cir. 479, 2009 Va. Cir. LEXIS 244, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hbr-properties-norfolk-llc-v-janaf-hq-llc-vaccnorfolk-2009.