HRC Guam Co. v Bayview II LLC [2017] GUSC 25 (29 December 2017)

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Appeal from the Superior Court of Guam
Argued and submitted on October 3, 2016
Hagåtña, Guam

Appearing for HRC Guam Co.: Theodore K. Cheng, Esq. Fox, Horan & Camerini, L.L.P. 825 Third Ave. New York, NY 10022	Appearing for Bayview II L.L.C.: David A. Mair, Esq. Mair & Mair, Attorneys at Law Thompson Thompson & Alcantara, P.C. 238 Archbishop F.C. Flores St., Ste. 801 Hagåtña, GU 96910
Thomas C. Sterling, Esq. Blair Sterling Johnson & Martinez P.C. 238 Archbishop F.C. Flores St. Hagåtña, GU 96910

BEFORE: ROBERT J. TORRES, Chief Justice; F. PHILIP CARBULLIDO, Associate Justice; KATHERINE A. MARAMAN, Associate Justice.^[1]

MARAMAN, J.:
[1] This heavily-litigated matter comes before the court following extensive motion practice, a two-day bench trial, and a six-week jury trial, which culminated in an entry of an Amended Final Judgment. On appeal, HRC Guam Co. (“HRC”) raises more than ten issues for review. Bayview II L.L.C. (“Bayview”) has filed a cross-appeal in which it seeks appellate review of two orders issued by the trial court. For the reasons discussed below, we address only five of these issues. First, we consider whether the trial court erred in failing to bar HRC’s parking-related claims in their entirety as a result of HRC’s delivery of an estoppel certificate. Second, we address the trial court’s summary judgment order in which it interpreted various portions of the Lease concerning common area maintenance charges. Third, we review for clear error the trial court’s Findings of Fact and Conclusions of Law following the parties’ two-day bench trial. Fourth, we address Bayview’s contention that the trial court erred in granting judgment notwithstanding the verdict on its fraud claim. Finally, we consider whether a new jury trial is appropriate as a consequence of Bayview’s purported misconduct during trial.
[2] In reviewing these issues, we have determined that: (i) the trial court erred in failing to bar HRC’s parking-related claims in their entirety; (ii) the trial court properly interpreted the Lease provisions related to common area maintenance charges; (iii) the trial court did not commit clear error in its Findings of Fact and Conclusions of Law following the bench trial; (iv) the trial court properly vacated the jury’s verdict in favor of Bayview on its fraud claim; and (v) due process requires that HRC be granted a new trial in light of Bayview’s misconduct during trial.
[3] We therefore vacate the Amended Final Judgment and remand this case for further proceedings not inconsistent with this Opinion.

A. The Commercial Lease Between Bayview and HRC
[4] HRC and Bayview entered into a commercial lease agreement on July 22, 1996, pursuant to which HRC leased certain premises at the Bayview Commercial Complex (“BCC”) from Bayview for the purpose of operating a franchised location for Hard Rock Cafe International (hereinafter, the “Lease”). Under section 1 of the Lease, HRC agreed to take exclusive possession, as commercial tenant, of “part of the BCC” that includes “approximately fourteen thousand square feet (14,000 sqft)” (hereinafter, the “Premises”). Record on Appeal (“RA”), tab 31, Ex. A § 1 (Lease, July 22, 1996) (emphasis omitted). In exchange, HRC agreed to pay to Bayview $60,000 in monthly rent, plus five percent of gross sales (as defined). The Lease also called for a $3 million “Tenant Improvement allowance,” which Bayview agreed to pay in order for HRC to build out the Premises so that it would be suitable for operating HRC’s business (hereinafter, the “Tenant Allowance”). Id., Ex. A § 7(f)(1).
[5] In addition to providing HRC exclusive use of the leased Premises, Bayview also granted HRC “the right to use in common with [Bayview] and all others the common entrances, staircases, landings and all other common entrances, staircases, landings, lavatories, and elevators provided by [Bayview] in the BCC.” Id., Ex. A § 1. In section 12 of the Lease, entitled “Tenant’s Right to Use Common Areas; Parking,” id., Ex. A § 12 (emphasis omitted), Bayview agreed that HRC—including its employees, authorized representatives, and business invitees—would have “a non-exclusive right to reasonable use and enjoyment of the common areas . . . .” Id., Ex. A § 12(a). “Common areas, as referred to in this Lease Agreement, shall mean all parts of the BCC commercial complex in which the Premises are a part and related land uses and facilities outside the Premises and available to be used in common by all tenants in the project.” Id., Ex. A § 13(b). These areas include, but are not limited to, the following:

Id.
[6] While the definition of “[c]ommon areas” under section 13(b) of the Lease included “public parking,” the parties separately negotiated the extent of access HRC, its employees, and customers would have to the parking available at the BCC. The parties agreed that:

[HRC’s] employees and customers, shall park only in areas designated by [Bayview] from time to time; provided, however, [Bayview] shall provide and assign Eighty-three (83) parking spaces within BCC for the exclusive use by [HRC] for [HRC’s] customers, and invitees. [Bayview] shall allocate an additional forty (40) non-exclusive employee parking stalls in the proximity of BCC, in an area to be designated by [Bayview]. [HRC] for itself and its employees, hereby agrees to comply with all parking rules and regulations established by [Bayview].
Id., Ex. A § 12(b).
[7] Under the terms of the Lease, it was Bayview’s obligation to maintain the common areas. The costs of maintaining the common areas, however, would be passed on to the tenants of the BCC at cost (hereinafter, “Common Area Maintenance Charges” or “CAMCs”). Accordingly, under section 4(c) of the Lease, the parties agreed that,

[i]n addition to the Minimum Monthly Rent and the percentage rent, [HRC] shall pay monthly as CAMC its pro rata share . . . of all real or personal property taxes, and any general, special, infrastructure development or maintenance, or other assessment, and any insurance premiums assessed against the BCC in which the Premises are located, common area charges, seasonal decoration, general BCC, utility charges, and property management fees incurred by [Bayview].
Id., Ex. A § 4(c); see also id., Ex. A § 4(c)(2)(d)-(k), 4(c)(4)(n). The pro rata share of the CAMCs paid by HRC, to the extent such charges “cannot be sub-metered,” is calculated by determining “the ratio of the total number of square feet comprising the area of the Premises . . . to the total number of leasable square feet in the BCC commercial complex.” Id., Ex. A § 4(c).
[8] The original term of the Lease was for a period of ten years. See id., Ex. A § 2. The Lease, however, could be terminated earlier. Pursuant to section 27(b), upon “any default” by HRC, Bayview, “without further notice or demand, shall have the immediate right and option to terminate this Lease Agreement and all rights of Tenant under this Lease Agreement.” Id., Ex. A § 27(b). A “material default” under the Lease includes, among other things,

[f]ailure by [HRC] to observe or to perform any of the covenants, conditions, or provisions of this Lease Agreement, other than the making of any payment, where such failure shall continue for a period of thirty (30) days after notice of such failure from [Bayview] or such [sic] for such additional period of time as is reasonable necessary to cure such failure, provided [HRC] diligently prosecutes such cure.
Id., Ex. A § 27(a)(3).
B. The 2002 Amendment to the Lease
[9] The parties entered into an amendment to the Lease on July 1, 2002 (the “2002 Amendment”) whereby the minimum monthly rent paid by HRC was lowered to $42,000/month (from a previous monthly payment of $60,000), but the amount of rent paid on gross sales (as defined) was increased from 5% of gross sales to 7% of gross sales. See HRC Guam, Co. v. Bayview II, LLC, CV0504-08 (Def. Trial Ex. 23 ¶ 2(a)-(b) (July 1, 2002)) (First Amendment to the Bayview Phase IV Commercial Center Standard Lease Agreement); see also RA, tab 31, Ex. A § 4(b) (Lease). The 2002 Amendment further provided that, “[e]xcept as expressly modified by this Amendment, the Existing Lease Agreement is, and shall remain, in full force and effect in accordance with its terms.” Def. Trial Ex. 23 ¶ 3.1 (First Amendment to the Bayview Phase IV Commercial Center Standard Lease Agreement).
C. The 2006 Estoppel Certificate
[10] On December 20, 2006, HRC provided, “at the request of Bayview II, L.L.C., as landlord under the lease,” an estoppel certificate to UBS Real Estate Securities, Inc. (the “Estoppel Certificate”). RA, tab 51, Ex. B (Estoppel Certificate, Dec. 20, 2006). The Estoppel Certificate was delivered pursuant to section 58 of the Lease, which provides that “[e]ach party shall, within fifteen (15) days after written request from the other party, execute and deliver to the other party, in recordable form if requested, a certificate . . . stating whether, to the knowledge of the party giving the certificate, any event has occurred under this Lease which constitute[s] an event of default hereunder.” RA, tab 31, Ex. A § 58 (Lease). In the Estoppel Certificate, HRC certified that “neither the undersigned nor [Bayview] is in default under any of the terms, covenants or provisions of the Lease,” except with regard to CAMC overcharges and alterations to the exterior signage referenced in Exhibit B to the Estoppel Certificate. RA, tab 51, Ex. B (Estoppel Certificate).
D. The Default Letter
[11] On or about June 12, 2009, Bayview sent HRC a letter enumerating nine alleged defaults under the Lease (the “Default Letter”). See HRC Guam, Co. v. Bayview II, LLC, CV0504-08 (Def. Trial Ex. 36 (June 12, 2009)) (Default Letter). In addition to six other purported defaults, Bayview claimed that HRC was in violation of sections 8(o), 14, and 50 of the Lease.
[12] First, section 8(o) of the Lease requires HRC to “maintain and operate the Premises at all times in accordance with the international standard of operations maintained by Hard Rock Cafe throughout the world and in a manner consistent with the international image and reputation of Hard Rock Cafe.” RA, tab 31, Ex. A § 8(o) (Lease). Bayview claimed that HRC breached this provision “by failing to meet the international standards of Hard Rock Cafe as evidenced by the Licensing Corporation’s inspection reports . . . .” Def. Trial Ex. 36 at 2 (Default Letter).
[13] Second, under section 14 of the Lease, HRC is required to “keep, maintain, and preserve the Premises and appurtenances . . . in good condition and repair, and shall, when and if needed, at [HRC]’s sole cost and expense, make all repairs to the Premises and every part of the Premises.” RA, tab 31, Ex. A § 14(a) (Lease). According to the Default Letter, “HRC has breached this covenant by failing to repair pipes on its premises thereby causing damage to the Coach premises, a neighboring tenant.” Def. Trial Ex. 36 at 2 (Default Letter).
[14] Third, HRC is required under section 50 of the Lease to “comply with all applicable laws, regulations and requirements of any governmental or other competent authority of Guam in relation to the Project, the Premises and operations thereon.” RA, tab 31, Ex. A § 50 (Lease). Bayview alleged in the Default Letter that “HRC has breached this covenant by participating in a scheme to pay a management fee in order to avoid the payment of applicable government taxes that are lawfully owed by both HRC and Astro,” HRC’s parent company. Def. Trial Ex. 36 at 1 (Default Letter).
[15] Bayview concluded the Default Letter by providing “notice of its intent to terminate the Lease in the event that the defaults identified herein are not corrected within thirty (30) days after the date of this notice.” Id. at 3.

[16] We summarize below only those proceedings relevant to our disposition of this appeal.
A. The Parties’ Affirmative Claims for Relief
[17]

Supreme Court of Guam

HRC Guam Co. v Bayview II LLC [2017] GUSC 25 (29 December 2017)