Filat v. Rand , 463 S.W.3d 301 ( 2015 )

Cite as 2015 Ark. App. 316
ARKANSAS COURT OF APPEALS
DIVISION II
No. CV-14-593
NASSER KHAIRI FILAT Opinion Delivered MAY 13, 2015
APPELLANT
APPEAL FROM THE WHITE
V. COUNTY CIRCUIT COURT
[NO. CV-2011-805]
JIM RAND; RAND PROPERTIES I, HONORABLE CRAIG HANNAH,
LLC; SUBWAY REAL ESTATE JUDGE
CORPORATION; DOCTORS
ASSOCIATES, INC.; AND FRANK REVERSED AND REMANDED
AND LISA GARDNER
APPELLEES
DAVID M. GLOVER, Judge
This case involves the installation of an air conditioner by a heat-and-air company
hired by the sublessee, appellant Nasser Filat, in breach of the terms of his lease, on the
seamless metal roof of property owned by appellees Jim Rand and Rand Properties I, LLC
(“Rand”). Rand leased the property to Subway Real Estate Corporation & Doctors
Associates, Inc. (“Subway”) pursuant to a master lease, and those parties then subleased the
property to Filat in October 2002.
Rand notified Subway in July 2009 that installation of the unit represented a breach
of the master lease. Subway withheld $37,0001 from Filat when Filat terminated his
relationship with Subway in November 2009. The amount withheld was roughly based on
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Subway was released from the case after interpleading the $37,000.
Cite as 2015 Ark. App. 316
an estimate Rand received as the cost to replace the roof because repair was not considered
possible.
In December 2011, Filat brought a replevin, interpleader, and declaratory-judgment
action against Rand and Subway, claiming that the funds withheld by Subway belonged to
him. Rand counterclaimed against Filat, alleging negligence in the damage to the roof, and
cross-claimed against Subway, alleging breach of contract. The heat-and-air company was
not named as a party by anyone. Frank Gardner and Lisa Gardner were joined as necessary
parties by order entered May 23, 2013, because they had subsequently subleased the premises
where the air conditioner was located. Art Rand, Jim Rand’s brother, was initially involved
in the leased premises but was never named as a party because Jim acquired Art’s ownership
interest in the premises.
Filat asserted that any action against him by Rand was barred because the statute of
limitations had begun to run when the unit was installed in March 2003 and had expired
long before suit was filed. Rand, on the other hand, contended that the statute of limitations
on the tort action against Filat did not begin to accrue until Rand knew or by the exercise
of reasonable diligence should have discovered the cause of injury, and he did not know, nor
could he have reasonably known, about the roof damage until 2009. Filat moved for
summary judgment, which was denied, and the case went to a bench trial, where Rand was
awarded $36,000 of the amount held in escrow, and Filat was awarded the remaining $1,000.
Filat appeals, contending that the trial court erred in holding that the case was not
barred by the statute of limitations because it sounded in tort, rather than in contract. He
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further contends that, even if Rand’s claim sounded in tort, the trial court erred in applying
the “discovery rule” to toll the running of the statute. We hold that this action sounded in
contract and that it was barred by the applicable five-year statute of limitations. We therefore
reverse and remand for further proceedings consistent with this opinion.
Background
The master lease between Subway and Rand provides in pertinent part: “No
alterations or improvements affecting the structural portion of the premises shall be made by
Tenant without the written consent of the Landlord.” (Emphasis added.) The Master Lease
also provided:
Tenant shall pay and settle all expenses and liabilities arising out of or in any
way connected with any and all construction, repairs, alterations or maintenance of
the Premises, and all liens of mechanic’s and materialmen and all liens of a similar
character arising out of or growing out of the construction, repair, alteration or
maintenance of the Premises, provided said work was performed by Tenant.
The sublease between Subway and Filat provides in pertinent part: “The Sublessee (Filat)
agrees to perform and observe all of the obligations of the Sublessor (Subway) under the
Master Lease . . . .” A copy of the Master Lease was “annexed” to the Sublease.
Filat employed a local heat-and-air company to address a cooling problem in the
leased premises. The owner of the heat-and-air company, Mr. Wilburn Addington, testified
that the leased premises had never had adequate air conditioning; that it was hot in the
customer area; that “there was no way of getting the air-conditioning where they wanted it,”
and that he was the one who “suggested a rooftop unit.” He testified he sealed the unit once
he installed it on the roof; he did a “good job”; he did not conceal the unit or try to hide it;
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he was never instructed to obscure it from the view of onlookers; he completed the job by
March 5, 2003; he billed Filat because he thought Filat owned the property; Filat was the
one who paid him for the work; and he (Addington) never talked to or heard from Jim or
Art Rand.
Addington explained that he had to cut two holes in the roof to install the unit; that
he was not aware the roof was one seamless piece of metal with a lifetime guarantee when
he cut through it; and that he did not know cutting through a one-piece roof would destroy
the roof’s integrity. He said it was common for him to install units on the roof of a business
and he took steps to make sure the unit was sealed tightly with no leaks. He also stated he
was not aware that exterior repairs were prohibited under the terms of the lease without the
written consent of the owner.
Filat testified he was receiving numerous complaints from customers about heating
and cooling; he thought it was hurting his business; he called Art Rand prior to calling the
heat-and-air company and asked if he would help put air in the dining room; Art told him
he would not take care of the problem but Filat could do it himself; Art had no problem
with it at all and did not give him any restrictions on where it could be located; he (Filat)
then called Addington to address the problem; it was Addington who suggested putting the
unit on the roof; Filat did not ask him to hide it in any fashion; anyone entering the front
door of the business would be able to see the air-conditioning vent inside; the vent was
never obscured; that on one occasion, about a year after the installation, there was a leak
regarding the air-conditioner vent; and he called Addington, who came out and fixed it.
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Filat testified he sold the business in 2009; from the first leak in 2004 until 2009, there
were no other leaks and he was not aware of any leaks after that time either; he did not bill
Art Rand for anything connected with the air-conditioner installation or the leak repairs; and
he became aware of a problem with the installation when he was approached by Jim Rand
when he sold the business in 2009. Filat stated Art visited the property after the installation
and was “ecstatic,” saying that “it looked nice.” Art denied any such knowledge when he
testified. It is undisputed that, regardless of whether oral consent was given, no written
consent was obtained, which breached the terms of the lease.
Discussion
In its findings of fact and conclusions of law, the trial court explained:
17. Filat had a duty to properly follow the terms of the contract and not make
exterior repairs without the written consent of Rand. Furthermore, Filat is
responsible for any expenses and liabilities arising out of or in any way connected with
any and all construction, repairs, alterations or maintenance caused by Filat. Filat
breached this obligation and attempts to avoid this responsibility which arises under
the contracts (Master Lease and Sublease). His breach of this duty is a tortious act that
resulted in Filat damaging the roof at the Premises. The integrity of the roof is
destroyed. Rand did not know nor should he reasonably have known of the damage
to the roof until 2009. His counterclaim was filed in December of 2011.
Filat contends the trial court erred in concluding that his breach of the contract constituted
a tortious act. We agree.
In Westark Specialties, Inc. v. Stouffer Family Ltd., P’ship, 310 Ark. 225, 232--33, 836
S.W.2d 354, 357--58 (1992), our supreme court explained:
Westark also argues that our decision in Quinn Companies, Inc., v. Herring-
Marathon Group, Inc., 299 Ark. 431, 773 S.W.2d 94 (1989), requires that a plaintiff not
transform a breach of contract action into a tort action. That only partially states the
holding of the case. We stated, “if the facts warrant, a party to a contract may sue on
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an independent tort claim. But a plaintiff may not transform a breach of contract
action into a tort claim by alleging the breach was motivated by malice. The breach
itself simply is not a tort.”
The distinguishing characteristic which transforms a breach into a tort was
defined in L.L. Cole & Sons, Inc. v. Hickman, 282 Ark. 6, 665 S.W.2d 278 (1984)
where we said:
Generally, a breach of contract is not treated as a tort if it consists
merely of a failure to act (nonfeasance) as distinguishable from an affirmatively
wrongful act (misfeasance). [citations omitted] The courts, however, have
tended to extend the tort liability for misfeasance whenever the misconduct
involves a foreseeable, unreasonable risk of harm to the plaintiff’s interests.
Westark argues in a parenthetical fashion that there were no allegations of
foreseeability or unreasonable risk of harm and that Automotive did not prove
foreseeability. There is no requirement that a party plead foreseeability in a complaint,
and water damage from a poorly maintained sprinkler system is obviously foreseeable.
The jury clearly found the evidence sufficient to support the showing of breach of the
duty to maintain the system. There is no error in the case proceeding on a tort theory.
See also Farm Bureau Ins. Co. v. Running M Farms, Inc., 366 Ark. 480, 237 S.W.3d 32 (2006);
CEI Eng. Assoc., Inc. v. Elder Constr. Co., 2009 Ark. App. 259, 306 S.W.3d 447.
Filat did not get written permission to have the new air-conditioning unit installed
on the roof, and in failing to do so he breached the terms of his lease. However, the
“tortious conduct” Filat was supposed to have engaged in was never well defined by Rand
or by the court, and we are not convinced that it should have been foreseeable to Filat that
a roof-top installation was improper or that it would create an unreasonable risk of harm to
Rand’s property. He did not undertake the task of installation himself. He hired Addington,
a heat-and-air specialist. Moreover, Filat did not even suggest positioning the unit on the
roof; rather, he took Addington’s advice to do so. We conclude that the distinguishing
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characteristic that transforms a breach into a tort is missing under the facts of this case, and
the trial court erred in concluding otherwise.
The statute of limitations for a breach of contract is five years. Ark. Code Ann. § 16-
56-111 (Repl. 2005). The air-conditioner installation, undertaken without written consent
in violation of the terms of the lease, was completed by March 5, 2003. The limitations
period ended on March 5, 2008, which expired before this case began. The trial court erred
in concluding that the action was not barred by the applicable statute of limitations for
contract breaches.
Because we have concluded the trial court erred in treating this action as a tort rather
than a contract breach, it is not necessary to address Filat’s remaining point of appeal. The
“discovery rule” does not apply to breach of contract actions.
Reversed and remanded.
KINARD and HIXSON, JJ., agree.
The Henry Firm, P.A., by: Matthew Henry, for appellant.
Simpson, Simpson & Mercer, by: James A. Simpson, Jr., for appellee.
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