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The Academy, Inc. v. Paradigm Building, LLC

Court of Appeals of Arkansas, Division IV

February 8, 2017

THE ACADEMY, INC., d/b/a HAAS HALL ACADEMY, and MARTIN SCHOPPMEYER, JR. APPELLANTS
v.
PARADIGM BUILDING, LLC APPELLEE

         APPEAL FROM THE WASHINGTON COUNTY CIRCUIT COURT [NO. 72CV-15-554] HONORABLE BETH STOREY BRYAN, JUDGE

         AFFIRMED ON DIRECT APPEAL; AFFIRMED ON CROSS-APPEAL

          Cullen & Co., PLLC, by: Tim J. Cullen; Henry Law Firm, by: Mark Murphey Henry and Adam L. Hopkins, for appellants.

          Kutak Rock, LLP, by: Jeff Fletcher, for appellee.

          DAVID M. GLOVER, Judge.

         Appellant, The Academy, Inc. d/b/a/ Haas Hall Academy ("Haas Hall"), appeals from the circuit court's ruling that it renewed two commercial leases and owed its landlord, appellee, Paradigm Building, LLC ("Paradigm"), $41, 540 in rent, plus $50, 000 in attorney's fees. Paradigm cross-appeals the court's calculation of the rent and the denial of late fees. We affirm on direct appeal and on cross-appeal.

         I. Background

         Haas Hall is a public charter school in Fayetteville, Arkansas. During the times relevant to this case, the school was located in the Paradigm Building pursuant to two multi-year leases executed in January 2009 and September 2010. The leases covered a total of 13, 400 square feet and ran concurrently, containing essentially the same terms. Importantly for our purposes, they shared an expiration date of June 30, 2014, and contained a one-time renewal option for three additional years.

The renewal clause in the January 2009 lease provided, in pertinent part, as follows:
2.2 Renewals. Tenant shall have the option to renew this Lease Agreement for one renewal term(s) of thirty-six (36) months. The renewal term shall be subject to all of the same terms and conditions as are set forth herein, except as otherwise provided in Section 3.2. Each option shall be exercised by written notice to Landlord, received no later than sixty (60) days prior to the expiration of the term then in effect.

         The September 2010 lease contained a similar renewal provision. Both leases also required that all notices be in writing and sent by certified or registered mail. Hereafter, we will refer to the leases as a single lease, unless the context requires otherwise.

         During the lease term, Haas Hall experiencing growth and frequently expressed an interest in acquiring more space for its students. In 2012, for example, the school began utilizing an adjacent, 800-square-foot space known as the "dance room" pursuant to an oral agreement with Paradigm. Additionally, Martin Schoppmeyer, on behalf of Haas Hall, and Tracy Hoskins, on behalf of Paradigm, occasionally discussed the possibility of Haas Hall's either leasing more space or purchasing the Paradigm Building.

         In mid-2013-approximately one year before the lease expired-Schoppmeyer asked Hoskins if they could discuss "extending" the lease. Thereafter, Hoskins provided Schoppmeyer with a form letter, which stated that Haas Hall "would like to exercise our Renewal Option on both Leases per paragraph 2.2 Renewals of the Agreements." This letter was never used, and no further steps were taken toward renewal at that time.

         In the ensuing months, Hoskins continued to propose solutions to Haas Hall's need for additional space, including the possibility of Haas Hall's entering into a longer-term lease, such as five or ten years, and occupying more square footage. No agreements were reached as to these matters.

         In April 2014, Schoppmeyer and Hoskins began discussions in earnest about the upcoming end of the lease term. In doing so, they exchanged a series of emails and other written communications that are pertinent to this appeal. On April 14, 2014, Schoppmeyer sent an email to Hoskins that stated,

I want to renew our lease. Do you want me to send you a letter stating as much? Can you send me a renewal lease so that I can sign it?

         Hoskins responded, "As for renewing the lease, are you going to want to expand into the remaining space next door?" Schoppmeyer replied that he was not sure about additional space and needed to think about it.

         Two days later, on April 16, 2014, Schoppmeyer sent another email to Hoskins. This email contained the subject line "Renewal" and asked Hoskins,

Do you want me to send you a formal letter for the renewal as stated in the lease or will this suffice? Can you send me a contract? I need to build my budget for 2014.2015.

         Hoskins responded, "Do you want me to do a new lease? Or do you want to extend the lease you have?" Schoppmeyer did not respond by email but instead sent a certified letter to Hoskins on April 22, 2014, in which he stated,

Please allow this communication to be my official request to extend Haas Hall Academy's lease at [address]. We have communicated via email and I await ...

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