Jezerinac v. Dioun , 2019 Ohio 726 ( 2019 )

[Cite as Jezerinac v. Dioun, 2019-Ohio-726.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Ronald M. Jezerinac, et al., :
Plaintiffs-Appellees, :
No. 18AP-479
v. : (C.P.C. No. 16CV-7939)
Mo M. Dioun, et al., : (REGULAR CALENDAR)
Defendants-Appellants. :
D E C I S I O N
Rendered on February 28, 2019
On brief: Hahn Loeser & Parks LLP, Marc J. Kessler, and
Jordan D. Rauch, for appellees, Ronald M. Jezerinac and
Tiffany Sexton. Argued: Marc J. Kessler.
On brief: Allen Kuehnle Stovall & Neuman LLP, Todd H.
Neuman, Rick L. Ashton, and Jeffrey R. Corcoran; David A.
Kopech for appellants. Argued: Rick L. Ashton.
On brief: Bailey Cavalieri, LLC, James G. Ryan, Timothy A.
Riedel, and Matthew T. Schaeffer, for intervenor-appellee,
Brewery Real Estate Partnership. Argued: Matthew T.
Schaeffer.
APPEAL from the Franklin County Court of Common Pleas
BRUNNER, J.
{¶ 1} Defendants-appellants, Mo M. Dioun and Mina L. Dioun, appeal several
decisions of the Franklin County Court of Common Pleas culminating in a decision entered
on June 4, 2018 denying a receiver's motion to accept a $4.2 million offer from Taste
Hospitality Group Ltd. to purchase the partnerships and corporations that own Barley's
Brewing Company, and ordering the receiver to instead accept an offer from
LLJBucksBrew, LLC for $1.875 million. Because we find that the lease between Barley's
Brewing Company and its current landlord is assignable without the landlord's agreement
No. 18AP-479 2
to certain parties based on a January 2, 2013 amendment and is assignable with the
landlord's permission (which shall not unreasonably be withheld) to any interested party
pursuant to lease provision 9.01(a), we sustain Dioun's second and third assignments of
error. We decline to address the first assignment of error on the grounds that it is unripe.
We therefore reverse and remand with instructions.
I. INTRODUCTION & PARTIES
{¶ 2} Before addressing the facts and procedural history of this case, it is helpful
for the sake of clarity to review the relevant entities and their relation to one another as
matters undisputedly existed when this litigation began. Barley's Brewing Company and
Brewcadia (collectively, "Barley's") are the names given to a restaurant, pub, and classic
video game arcade operated out of a certain premises located at 467 North High Street,
Columbus, Ohio, 43215. Those businesses are owned by Brewpub Restaurant Limited
Partnership ("BRLP"). BRLP is composed of several limited partner investors and one
general partner, Brewpub Restaurant Corporation ("BRC"), which owns 50 percent of
BRLP. BRLP's general partner, BRC, is owned 50/50 by the Dioun and plaintiff-appellee
Ronald M. Jezerinac families. Dioun and Jezerinac also apparently own some additional
limited partnership stakes in BRLP, but the record is not clear as to the extent or
percentages of the families' ownership further, indirect ownership interests in BLRP. The
final entity relevant to this appeal is intervenor-appellee Brewery Real Estate Partnership
("BREP").1 BREP owns the building at 467 North High Street and leases it to BRLP. BREP
is composed of many of the same partners as the partners who compose BRLP, including
Jezerinac (who apparently owns more than a third of BREP) but not including Dioun. This
appeal concerns the sale of BRC and BRLP and whether the lease between BREP and BRLP
should be interpreted to permit BREP to effectively limit who may buy BRLP and BRC.
II. FACTS AND PROCEDURAL HISTORY
{¶ 3} By a complaint filed on August 23, 2016, plaintiffs, including Ronald
Jezerinac and Tiffany Sexton (collectively, "Jezerinac"), in their individual capacities and
derivatively as interest holders in various businesses, sued Mo Dioun, Mina Dioun, and
1 It is not entirely clear from the record what corporate form BREP takes. It is called a partnership throughout
the record and its constituent entities refer to themselves as partners. See, e.g., Lyon Aff. at ¶ 1, Ex. A attached
to May 1, 2018 BREP Resp. in Opp. to Taste Offer. Yet in the lease to BRLP, BREP refers to itself as an LLC.
(BRLP & BREP Lease at introduction, attached to Aug. 1, 2017 BREP Brief on Termination.)
No. 18AP-479 3
their daughter and son-in-law, Adam and Sheila Trautner (collectively, "Dioun"), as well as
various business entities associated with the individual plaintiffs and defendants. (Aug. 23,
2016 Compl.) Most of the specific allegations in the complaint are not relevant to this
appeal, but essentially, the complaint accused Dioun of various business betrayals and
sought a business divorce between the Jezerinac and Dioun families. Id. In service of that
goal, the complaint repeatedly suggested that the appointment of a receiver might be
appropriate to effectuate the disentangling of the two families' business interests. Id. at
¶ 136, 141, 145, 149, 153. On October 17, 2016, Dioun answered and counterclaimed,
accusing Jezerinac of financial betrayals and an attempt to squeeze him out of some of their
business ventures. (Oct. 17, 2016 Answer & Counterclaim at ¶ 4-9.)2 Among the many
claims in the counterclaim, Dioun also moved the trial court to appoint a receiver to
untangle and, if necessary, dissolve and liquidate the parties' jointly owned businesses and
their assets, including BRC and BRLP. Id. at ¶ 170-72, 180-82.
{¶ 4} Both sides then moved for the appointment of a receiver. (Jan. 24, 2017
Dioun Mot. for Receiver; Feb. 6, 2017 Jezerinac Mot. for Receiver.) The parties agreed that
Barley's was a thriving enterprise and that this was not the typical case in which a receiver
is appointed to liquidate a failing business. Nonetheless, both sought the appointment of a
receiver under R.C. 2735.01(A)(7). (Jan. 24, 2017 Dioun Mot. for Receiver at 6; Feb. 6, 2017
Jezerinac Mot. for Receiver at 15.) Dioun sought for the receiver to, among other tasks, be
appointed to manage BRC and its assets, including BRLP, in order to formulate and
implement a bidding or sale process to monetize and disentangle the two families' interests.
(Dioun Mot. for Receiver at 2.)
{¶ 5} Jezerinac sought a receiver for BRC and BRLP yet simultaneously pointed to
the fact that, under BRLP's partnership agreement, such an action triggers a withdrawal of
BRC as general partner and a dissolution of BRLP. (Jezerinac Mot. for Receiver at 2-4.)
That is, BRLP's "Agreement of Limited Partnership" includes provisions automatically
withdrawing the general partner in the event of three occurrences: first, if the general
partner seeks, consents to, or acquiesces in the appointment of a receiver; second, if a
receiver is appointed for the general partner and not dismissed within 90 days; or third, if
2Paragraph numbering begins anew for the counterclaim portion of the combined counterclaim and answer.
This citation refers to the counterclaim paragraphs.
No. 18AP-479 4
the general partner is the subject of an action seeking reorganization, liquidation, or
dissolution and the action is not dismissed within 120 days. (BRLP Partnership Agreement
at 9.3(f-g), Ex. B attached to Jezerinac Mot. to Appoint Receiver.) In the event the sole
general partner withdraws, the agreement provides that BRLP is dissolved unless, within
90 days, the remaining limited partners agreed to continue the business and to appoint at
least one new general partner. Id. at 10.1(e). Despite these agreed to deadlines and
contingencies, the trial court stayed the running of the business deadlines in the case.
(Nov. 29, 2016 Order at 1; Jan. 4, 2017 Order at 1.)
{¶ 6} After considerable briefing by the two main factions and additional briefs by
other, intervening limited partners, the trial court appointed a receiver (the individual
proposed by Jezerinac) "for the purpose of protecting and preserving, managing and
operating, and collecting the necessary profits of * * * Brewpub Restaurant Corporation
[BRC] [and] Brewpub Restaurant Limited Partnership [BRLP] * * * during the pendency of
this action." (Mar. 10, 2017 Decision & Entry at 7.) It also forbade any "willful[]
interfere[nce] with the authority of the [r]eceiver" as well as the commencement or
continuation of any action or proceedings against the business or against the receiver
without leave of court, and it continued to stay all activity against the businesses. Id. at 11-
12.
{¶ 7} Approximately three months after the trial court appointed a receiver, BREP
sought to intervene and moved for leave to terminate the lease between BREP and BRLP.
(June 15, 2017 BREP Mot. to Intervene; May 26, 2017 BREP Mot. to Terminate.) The lease
was initially for a five-year term with the option to renew two times for five years each at
the discretion of the tenant. (BRLP & BREP Lease at 1.02, Ex. A attached to Aug. 1, 2017
BREP Brief on Termination.) The lease addressed assignment as follows, whether
voluntary or involuntary, and as requiring "prior written approval of [BREP as] landlord":
Tenant shall not: (i) assign or otherwise transfer * * * this Lease
* * * or (iii) permit the assignment or other transfer of this
Lease * * * by operation of law. * * * The sale of * * * the
partnership interests of any Tenant which is a partnership, that
results in the change of ownership control of Tenant shall be
deemed a transfer of this Lease under [this section] and shall
require the prior written approval of Landlord, which shall not
be reasonably[sic] withheld.
No. 18AP-479 5
(BRLP & BREP Lease at 9.01(a).) But an amendment (executed on January 2, 2013) adds
a sentence to the end of subsection 9.01(a) of the lease, basically easing the effect of
assignment if the Jezerinacs and persons known to them for at least three years are
involved:
The foregoing sentence not withstanding, [sic] Landlord's
approval is not required if the change of ownership control
results from a transfer of stock or partnership interests owned
by Lillian Jezerinac or Ronald Jezerinac to a person or persons
personally known to them for a period of not less than three (3)
years prior to such transfer.
(BRLP & BREP Lease at Jan 2, 2013 Amendment at 1.) Another amendment executed at
around the same time amends the term of the lease to provide an option to renew five times
for five years each at the discretion of the tenant. (BRLP & BREP Lease at Dec. 31, 2012
Amendment at 1.03.)
{¶ 8} The lease also provides that it is a default under the lease, "If a receiver * * *
shall be appointed * * * for Tenant [BRLP] * * * and such receivership * * * shall not be set
aside within thirty (30) days after such appointment." (BRLP & BREP Lease at 11.01(c).)
In the event of default, BREP is empowered by the lease to terminate the agreement on ten
days' notice to the tenant. Id. at 11.02(a). An additional ground of termination arises if a
transfer of the lease occurs that requires notice to the landlord, and upon receipt of such
notice the "Landlord shall have the right * * * to terminate this Lease." Id. at 9.01(b).
{¶ 9} In July 2017, the trial court held a hearing and decided to require briefing on
two questions:
1) May the Receiver assign to a third party or may the landlord
terminate the lease between Brewpub Restaurant Limited
Partnership, as tenant, and Brewery Real Estate Partnership,
as landlord?
2) Does the Court have the power to stay/enjoin any action
regarding said lease termination and/or assignment?
(July 19, 2017 Order at 1; July 12, 2017 Hearing Tr. in passim, filed June 25, 2018.) After
both sides submitted briefs and the trial court also heard from intervening limited partners
and BREP, it rendered a decision on August 24, 2017. (Aug. 24, 2017 Decision & Entry.)
The trial court found that it did not have the power to assign the Lease "outside the terms
of the contract" but that it did have the power to temporarily stay action by the landlord.
No. 18AP-479 6
Id. at 1. The trial court quoted subsection 9.01(a) of the lease but omitted the portion
addressing transfers resulting from ownership changes of the tenant to which the Landlord
must consent which "shall not be [un]reasonably withheld." Compare Aug. 24, 2017
Decision & Entry at 2 with BRLP & BREP Lease at 9.01(a). The trial court also excluded
from its analysis the amendment eliminating the need for Landlord consent in cases where
the assignees have known the Jezerinacs for at least three years. (BRLP & BREP Lease at
Jan. 2, 2013 Amendment at 1.) The only explanation we can find for this omission is the
trial court's stating, "this option is highly tailored, the Court finds its uses limited under the
current situation." (Aug. 24, 2017 Decision & Entry at 3.) Having excluded assignment as
a viable option, the trial court then found that the default provision under the lease in the
event of a receivership was fair to enforce under the circumstances of the case. Id. at 5;
BRLP & BREP Lease at 11.01(c). However, because the trial court was loath to disrupt the
successful business and because the parties agreed that it could stay termination of the
lease, it decided to do so. (Aug. 24, 2017 Decision & Entry at 5-6.)
{¶ 10} Shortly after the trial court's decision, Dioun, through an entity known as The
Stonehenge Company ("Stonehenge"), offered to purchase BRC's interest in BRLP for $3.2
million, in addition to providing each limited partner of BRLP a choice to remain in the
partnership with a $10,000 bonus or to leave and be paid out at a rate of $17,500 per 1
percent interest. (Sept 26, 2017 Notice of Stonehenge Purchase Offer at 5.) Whether
limited partners chose to leave or stay under the offer, they were entitled to share in
previously accrued distributions. Id. The offer proposed to continue BRLP as an entity
thus eliminating the need for an assignment (though, de facto, an assignment would occur
by the change of ownership of the general partner) and to guarantee future lease payments
by placing the entire five-years of rent for each period in escrow at the beginning of each
such period. Id.; see also BRLP & BREP Lease at 9.01(a), as amended by Jan 2, 2013
Amendment at 1.
{¶ 11} Jezerinac and BREP objected to the offer on the grounds that the lease was
not transferable, would be terminated, and would not be available to BRLP under
Stonehenge ownership. (Oct. 6, 2017 Jezerinac Objs.; Oct. 18, 2017 BREP Objections.) The
court held a hearing concerning the offer on December 5, 2017. (Dec. 5, 2017 Hearing Tr.
at 64-86, filed June 25, 2018.) During the hearing, the receiver opined that the offer should
No. 18AP-479 7
be vetted and was, by no means, a ridiculous offer. Id. at 68-69. Nevertheless, because
there was a possibility that BREP would sell 467 North High Street, such that Barley's could
be sold on the open market, evaluation of the Stonehenge offer stalled. Id. at 65-80. During
the hearing, BREP again took the position that the Stonehenge offer was not bona fide
because, in light of the trial court's rulings on the lease's transferability and termination, it
could not be consummated. Id. at 76-77. The trial court orally agreed that the offer could
not go forward until the "lease problem [wa]s solved." Id. at 79.
{¶ 12} On January 25, 2018, the trial court held a status conference. (Jan. 25, 2018
Hearing Tr., filed June 25, 2018.) During the conference, counsel for the landlord, BREP,
represented to the trial court that BREP was engaged in productive discussions with both
Dioun-related parties and Jezerinac-related parties. Id. at 6-8. Counsel for Jezerinac
requested, however, that the stay be lifted to allow BREP to terminate the current lease and
go to a month-to-month arrangement to motivate the parties. Id. at 8-11. The trial court
did not, at this juncture, grant that permission but did note that a free market sale effort for
Barley's would likely be impossible without the participation and cooperation of BREP. Id.
at 24-27.
{¶ 13} Slightly over two months later, the receiver sent notice to the parties that he
had reviewed offers from a Jezerinac company, LLJBucksBrew, LLC ("LLJBucksBrew"),
and a Dioun company, Taste Hospitality Group Ltd. ("Taste"), offering to purchase Barley's
for $1.875 and $4.2 million respectively. (Apr. 3, 2018 Ltr. at 1, Ex. B attached to Apr. 9,
2018 Dioun Resp. to BREP Notice.) The receiver indicated, based on his determination
that the Taste offer was worth substantially more to the receivership estate, he had
determined to accept that offer subject to two conditions: (1) that Taste offer proof of
financial ability to close;3 and (2) that Taste provide evidence of its ability to enter into a
binding lease with BREP for the premises out of which Barley's operates. Id. The receiver
specifically indicated in his letter that he would entertain a new or revised offer from
LLJBucksBrew or any other entity that might offer more value. Id. at 1-2.
{¶ 14} LLJBucksBrew in its offer proposed to pay $1.875 million for BRLP and BRC,
$937,500 of which would go to BRC (which owned 50 percent of BRLP as a general partner
and was itself owned 50/50 by Dioun and Jezerinac) and the other $937,500 would go to
3 No party seems to consider the first condition to have been an obstacle to closing.
No. 18AP-479 8
BRLP's limited partners based on their respective ownership interests. (February 1, 2018
Notice of LLJBucksBrew Purchase Offer at 2, Ex. A attached to Apr. 9, 2018 Receiver Mot.
for Taste Purchase.) This worked out to $18,750 per 1 percent interest for each limited
partner of BRLP and $937,500 split evenly between Dioun and Jezerinac for their interests
in BRC. The LLJBucksBrew offer required that the buyer would "provide an option to
certain limited partners of BRLP * * * to become a limited partner of LLJ Brewery with
[LLJBucksBrew] as the General Partner," and contained the promise that "[t]hese certain
limited partners w[ould] retain their same (or higher) percentage of the limited partnership
interest." Id. at 2-3. However, in the event the "certain" limited partners elected to become
partners of LLJ Brewery Ltd., the offer required such partners to "contribute" their payouts
as well as all unpaid past distributions to LLJ Brewery Ltd. in exchange for partnership
interest in LLJ Brewery Ltd. Id. at 3. The offer also contained the promise that the
purchasing entity would enter a new lease with BREP. Id. at 2.
{¶ 15} On the other hand, the Taste offer provided for the purchase of BRC's interest
in BRLP for $3.2 million, in addition to providing each limited partner of BRLP a choice to
stay in the partnership with a $10,000 bonus or leave and be paid out at a rate of $20,000
per 1 percent interest. (March 2, 2018 Notice of Taste Purchase Offer at 2-3, Ex. C attached
to Apr. 9, 2018 Receiver Mot. for Taste Purchase.) Under the Taste offer, whether limited
partners chose to leave or stay, they were entitled to all past unpaid distributions. Id. at 2-
3. The Taste offer proposed to either buy 467 North High Street from BREP for $3.55
million or to pay yearly rent of $285,000 (base rent under the original lease was $200,090)
and to guarantee future lease payments by placing 5 years of advance rent in escrow. Id. at
3; BRLP & BREP Lease at 2.01(a). The Taste offer indicated skepticism about its chances
of consummating its offer without court intervention, given that BREP had refused to
negotiate with them. (Mar. 2, 2018 Notice of Taste Purchase Offer at 3-5.)
{¶ 16} Two days after the receiver sent notice that he intended to accept the Taste
offer, contingent on Taste's ability to purchase or lease 467 North High Street, BREP filed
notice with the court to the effect that it had entered into a lease agreement with LLJ
Brewery Ltd. for the 467 North High Street premises to take effect whenever the court
might lift the stay and allow it to terminate the existing lease. (Apr. 5, 2018 BREP Notice
of Lease at 1.) The new lease indicated that LLJ Brewery Ltd. would pay yearly rent of
No. 18AP-479 9
$290,000. (BREP & LLJ Brewery Ltd. Lease at 3.01, Ex. B to Apr. 9, 2018 Receiver Mot.
for Taste Purchase.) In an attachment to its notice, BREP stated that it had rejected a lease
offer from Taste. See Apr. 5, 2018 BREP Notice of Lease. Four days after that, the receiver
filed a motion with the trial court asking the court to approve the purchase of Barley's by
Taste. (Apr. 9, 2018 Receiver Mot. for Taste Purchase.)
{¶ 17} At a hearing on April 10, 2018, BREP argued that it had entered into a new
lease with Jezerinac's group, LLJBucksBrew, after good faith negotiations with both
interested parties. (Apr. 10, 2018 Hearing Tr. at 52-53, 61-62, filed June 25, 2018.) Taste
disagreed and alleged that BREP refused even to negotiate. Id. at 66-67. BREP rejoined
that both Taste and the parties holding interest in LLJBrewBucks had made insufficient
purchase offers and that LLJ Brewery Ltd. had made a satisfactory lease offer while Taste
had not. Id. at 72-74. In written responses to the receiver's motion to accept the Taste offer,
BREP attached the affidavit of one of its investors, David J. Lyon, manager of Krager
Investments, LLC. (Lyon Aff., Ex. A to May 1, 2018 BREP Resp. in Opp. to Receiver Mot.
on Taste Offer.) Lyon's affidavit indicated that BREP would not consider entering into a
lease with Dioun or Dioun-related entities because the relationship between Dioun and the
partners of BREP had soured. (Lyon Aff. at ¶ 8.) According to Lyon, BREP had entered a
lease with LLJ Brewery Ltd. because it had a good relationship with the principles of LLJ
Brewery Ltd. and was not interested in considering any other lease offers. Id. at ¶ 10, 13.
{¶ 18} Dioun filed a response in support of the receiver's motion and attached the
affidavit of Mo Dioun. The affidavit indicated that Dioun negotiated the January 2013 lease
amendment (allowing transfer without landlord approval to a party known to Jezerinac for
more than three years) in order to ensure that if he or members of his family were to acquire
control of BRC or BRLP the lease would be unaffected by the change in ownership. (Dioun
Aff. at ¶ 3-4, Ex. C. attached to May 1, 2018 Dioun Memo in Support of Receiver Mot. on
Taste Offer.) Dioun further swore that Taste was owned by his daughter, Sheila Trautner,
who had been personally known to the Jezerinacs for more than three years. Id. at ¶ 5-6.
Dioun averred that BREP indicated it was not interested in a lease relationship with any
Dioun company and refused to discuss terms. Id. at ¶ 13-14. He also attested that BREP
refused the purchase offer as below expectations but made no effort to convey its
expectations. Id. at ¶ 13, 15.
No. 18AP-479 10
{¶ 19} At about the same time as the briefing and filing of these affidavits, the trial
court issued an order acknowledging that all discovery had been stayed during the life of
the case except for certain documents provided to a forensic accountant. (May 9, 2018 Am.
Order Modifying Stay at 1; Dec. 21, 2017 Order Modifying Stay at 1.) The trial court
otherwise kept the stay intact for all purposes during the entire life of the case.
{¶ 20} After entertaining briefing on the offers by Dioun, BREP, Jezerinac, and
several limited partners of BRLP, and based on documents and affidavits already discussed,
the trial court issued a decision and entry on June 4, 2018 ordering the receiver to accept
the LLJBucksBrew offer as the highest and best offer. (June 4, 2018 Decision & Entry.)
The trial court reasoned that Barley's had not been offered for general sale and thus the
only offers under consideration were the Taste offer and the LLJBucksBrew offer. Id. at 1.
The court acknowledged that the Taste offer "maximize[d] the financial return from the
property," yet found that the "key to th[e] case [wa]s the lease," because without premises,
Barley's value was only the sum of its parts (which, all parties agreed, was worth far less
than the business as a going concern). Id. at 2. The trial court acknowledged that another
lawsuit was underway (seeking a declaration that the lease could be transferred) and that
consolidation between the two cases was pending. Id. at 4; see also May 25, 2018 BREP
Mot. to Consolidate (seeking to consolidate Taste v. BREP, Franklin C.P. No. 18CV-3879
with the case now being appealed, Jezerinac v. Dioun, Franklin C.P. No. 16CV-7939). Yet
the trial court observed that it had already ruled on the lease transfer issue, declined to
reconsider, and thereby found it had no obligation to resolve the consolidation issue before
ruling. (June 4, 2018 Decision & Entry at 4.) It then found that it had no authority to force
BREP to negotiate with Taste and that BREP had made it very clear that it had no wish to
do business with any Dioun-related entity. Id.
{¶ 21} The trial court indicated that it had considered denying both offers and
asking the receiver to advertise the business to the general market. Id. at 5. But it rejected
this consideration because it believed any other party would end up in the same position as
Taste—unable to enter a lease with BREP because BREP had already determined it wanted
to do business with LLJBucksBrew and executed a binding lease. Id. It opined that in
order to even negotiate with a third party, BREP would have to "get out of their agreement
with LLJBucksBrew first." Id. at 5-6. It concluded that even if the lease problem were
No. 18AP-479 11
solved, the "Court does not believe the new offer would generate enough cash to offset the
additional costs the receiver and his attorney would accrue on their work advertising the
sale and reviewing the additional bids." Id. at 6.
{¶ 22} The trial court's decision indicated that it was a final appealable order and
that there was no just cause for delay. Id. Dioun now appeals. (June 14, 2018 Notice of
Appeal.) The case, and execution of the trial court's decision, is stayed while this appeal is
pending. (July 13, 2018 Entry, 18AP-479.)
III. ASSIGNMENTS OF ERROR
{¶ 23} Dioun presents three assignments of error for review:
1. The Trial Court erred in denying the Defendants-Appellants
Mo and Mina Dioun's * * * requests to conduct discovery and
in entering the July 19, 2017 Order.
2. The Trial Court erred in entering the August 24, 2017
Decision and Entry Regarding Non-Party Brewery Real
Estate Partnership's Motion for Leave and Associated
Briefing.
3. The Trial Court erred in entering the June 4, 2018 Decision
and Entry Denying the Motion of the Receiver to Accept Offer
of Taste Hospitality * * * .
(Emphasis sic.) (Footnote and citations omitted.) Because we see the pivotal issues in this
appeal centering on the lease and how the trial court interpreted the lease in its August 24,
2017 decision and entry, we first review the second assignment of error.
IV. DISCUSSION
A. Second Assignment of Error – Whether the Trial Court Erred in
Interpreting the Lease Contract
{¶ 24} "We review the interpretation of a contract, a question of law, de novo."
Boone Coleman Constr., Inc. v. Piketon, 145 Ohio St.3d 450, 2016-Ohio-628, ¶ 10, citing
Arnott v. Arnott, 132 Ohio St.3d 401, 2012-Ohio-3208, ¶ 14. Neither discovery nor
consideration of facts extraneous to the written document are generally necessary for this
inquiry because, absent fraud, mistake or other invalidating cause, the parties' final written
integration of their agreement may not be varied, contradicted, or supplemented by
evidence of prior or contemporaneous oral agreements, or prior written agreements.
Galmish v. Cicchini, 90 Ohio St.3d 22, 27 (2000), quoting 11 Williston on Contracts, Section
33:4, at 569-70, (4th Ed.1999); see also Bellman v. Am. Interntl. Group, 113 Ohio St.3d
No. 18AP-479 12
323, 2007-Ohio-2071, ¶ 7. Not only is a contract that appears to be a complete and
unambiguous statement of the parties' contractual intent legally presumed to be integrated,
but in this case, the lease contains an integration clause that the lease is the entire
agreement between the parties. (BRLP & BREP Lease at Art. XV(a).) See also Bellman at
¶ 11. Clearly, our de novo analysis of the lease must be confined to what the written contract
and its amendments say and mean and how our interpretation of them applies to what has
happened between the parties and their constituent participants in this appeal.
1. Whether the Receiver Can Assign the Lease
{¶ 25} "A receiver is an officer of the court and 'succeeds to the title and rights of
action of the corporation itself, and takes all such rights as the corporation itself originally
had, and may enforce them by the same legal remedies.' " State ex rel. Petro v. Gold, 166
Ohio App.3d 371, 2006-Ohio-943, ¶ 53 (10th Dist.), quoting Smith v. Johnson, 57 Ohio St.
486, 488-89 (1898). Dioun argues for an expansion of these rights based on cases sounding
in bankruptcy law and argues that receiverships are essentially state law bankruptcies.
(Dioun's Brief at 30-34.) However, Ohio law permits receivers to be appointed for many
reasons and this case, which concerns disentangling partners at severe odds with one
another concerning each of their stakes in what appears to be a thriving business, is not
best served by a bankruptcy analogy. R.C. 2735.01(A)(7). We hold that the receiver in this
case generally had the same rights and limitations as the tenant, BRLP, under the contract.
{¶ 26} The lease in question generally forbids transfers by the tenant (BRLP) and
provides that transfers attempted "in violation" of that prohibition are "null and void."
(BRLP & BREP Lease at 9.01.) Yet, there is in the lease an exception to that general
prohibition providing:
The sale of * * * the partnership interests of [BRLP] * * * that
results in the change of ownership control of [BRLP] shall be
deemed a transfer of this Lease under this Subsection * * * and
shall require the prior written approval of Landlord, which
shall not be [un]reasonably withheld.
***
The foregoing sentence not withstanding, [sic] Landlord's
approval is not required if the change of ownership control
results from a transfer of stock or partnership interests owned
by Lillian Jezerinac or Ronald Jezerinac to a person or persons
No. 18AP-479 13
personally known to them for a period of not less than three (3)
years prior to such transfer.
(BRLP & BREP Lease at 9.01(a) & Jan 2, 2013 Amendment at 1.)
{¶ 27} Dioun's affidavit stated that Taste was owned by his daughter, Sheila
Trautner, who had been personally known to the Jezerinacs for more than three years.
(Dioun Aff. at ¶ 5-6.) None of the parties seems to dispute that the two families have known
each other, regardless of circumstance, for many years. Jezerinac pled in the complaint, for
example, "[i]n or about 2008, Ron Jezerinac and his late wife [Lillian Jezerinac] became
personal friends with Mo and Mina Dioun." (Compl. at ¶ 33.) It also alleged that the
Jezerinacs and the Diouns (which included Sheila and Adam Trautner) began a
professional business relationship in 2011. Id. at ¶ 30, 37. The undisputed facts of this case
and the plain language of the contract permit an assignment of the lease without the
approval of the landlord if ownership control of BRLP is transferred to the Dioun family.
(BRLP & BREP Lease at 9.01(a) & Jan 2, 2013 Amendment at 1.)
{¶ 28} The trial court erred when it found the lease could not be transferred in
connection with a sale of Barley's, not having given effect to that portion of 9.01(a) of the
lease as amended that provides for transfers in the event tenant (BRC) ownership changes.
The trial court did not give effect to the language of the 2013 lease amendment permitting
transfers without landlord approval if the transferee person was known to the Jezerinacs
for more than three years. (Aug. 24, 2017 Decision & Entry at 2-3.) Under the plain
language of the lease, the lease transfers incident to a sale of BRC and BRLP to any buyer
who has been known to the Jezerinacs for more than three years or, with the approval BREP
(which shall not be unreasonably withheld), to any buyer of BRC and BRLP regardless of
whether that buyer has history with the Jezerinacs. We also disagree with the trial court's
finding that BREP would have to "get out of their agreement with LLJBucksBrew first" in
order to even negotiate with a third party. (June 4, 2018 Decision & Entry at 5-6.) BREP
represented in its April 5, 2018 notice to the court that the purported lease with
LLJBucksBrew would not become effective until after the lifting of the receivership stay and
the only copy of the lease in evidence reflects that it is not fully executed. (BREP & LLJ
Brewery Ltd. Lease at 15-16, Ex. B to Apr. 9, 2018 Receiver Mot. for Taste Purchase.)
No. 18AP-479 14
2. Whether BRLP is in Default Triggering a Right to Termination
{¶ 29} The lease provided, that it is a default under the lease, "[i]f a receiver * * *
shall be appointed * * * for Tenant[,] * * * and such receivership * * * shall not be set aside
within thirty (30) days after such appointment." (BRLP & BREP Lease at 11.01(c).) In the
event of such default, BREP is empowered to terminate the lease on ten days' notice to the
tenant. Id. at 11.02(a). The trial court found this provision to be valid and we have found
no precedent, even persuasively, to suggest that it is not. Yet when we read the provision
in pari materia with the other default provisions of the lease and its amendments, we cannot
so rigidly apply it as BREP does.
{¶ 30} Most of the nine different subsections setting forth potential tenant defaults
involve a situation where the tenant is bankrupt, vacates, or otherwise is in shaky financial
condition to where it may be unable or unwilling to meet its financial obligations. (BRLP
& BREP Lease at 11.01(a-d, f, i).) Of the remaining three default provisions, one concerns
assignments without consent (already addressed), and the other two involve breaches that
remain persistently uncured. Id. at 11.01(e, g-h). Just as bankruptcy law is inapposite to
this particular receivership (see supra at ¶ 24), the creation of this receivership, while
technically a default under the lease because "a receiver [has been] appointed under state
law," is only a technical rather than substantive default because the appointment was not
triggered by and does not impact BRLP's ability to meet its substantive obligations under
the lease. (BREP Lease with BRLP at 11.01(c).) There is no allegation, for example, that
Barley's has ceased to meet its financial and other substantive obligations as tenant in any
other respect. In that regard, we find this case to be analogous to Takis, LLC v. C.D.
Morelock Properties, Inc., where we reversed a trial court's mechanistic application of a
termination clause based on relatively minor technical defaults and remanded for a
weighing of the equities. 180 Ohio App.3d 243, 2008-Ohio-6676, ¶ 18-19 (10th Dist.).
{¶ 31} In this case, like Takis, we find no dispute that BRLP has substantively met
its responsibilities under the lease. Nor do we find dispute that termination of the lease has
the potential to work a hardship on BRLP, which has apparently invested significant
resources in improving the premises. See, e.g., Dec. 5, 2017 Hearing Tr. at 11-29 (discussing
fact that Brewcadia was built shortly before the receivership and dealing with various costs
relating to professional-grade water heaters for the establishment). To further illustrate
the potential for hardship, if the LLJBucksBrew offer were consummated, BRLP would
No. 18AP-479 15
cease to exist, Dioun would receive $468,250 for his interest in BRC, less than the $475,000
Dioun initially invested in BRC in 2013. (Jezerinac's Brief at 4.) And only "certain" limited
partners would be permitted to become limited partners of the new partnership under a
new lease. Even those "certain" limited partners who would be allowed to remain involved
with Barley's would be required to reinvest all unpaid past profit distributions and their
payments of $18,750 per 1 percent of their interest in BRLP. (Feb. 1, 2018 Notice of
LLJBucksBrew Purchase Offer at 1, 3.) In short, the LLJBucksBrew offer would destroy
BRLP, squeeze Dioun (50 percent owner of the general partner, BRC) out of the business
for a sum that is less than Dioun's initial investment, and either squeeze out the other
limited partners or appropriate their past distributions as the price of remaining involved
with Barley's.
{¶ 32} But we need not conclusively determine whether the equities such as in Takis
permit BREP to terminate the lease based on the technical default that the parties (some of
whom are partners of BREP) created when they successfully petitioned the court to appoint
a receiver for BRLP. This is because the trial court stayed the running of business deadlines
by agreement of the parties, and stayed the termination of the contract. (Nov. 29, 2016
Order at 1; Jan. 4, 2017 Order at 1; Aug. 24, 2017 Decision & Entry at 5-6.) While the trial
court will doubtless lift the stay at some point, it need not do so until after the receiver has
accepted and consummated an offer for Barley's. At that juncture, though the 30-day clock
could start to run if the receivership for BRLP were still in existence, it is extremely
conceivable that the receiver will no longer be needed for BRLP and that the receivership
will be terminated.
3. Instructions on Remand
{¶ 33} Because we have determined that the lease is assignable under 9.01(a) and
the January 2, 2013 lease amendment, we remand this matter to the trial court with
instructions. We instruct that, under this section of the amended lease, the receiver should
entertain offers from interested parties to whom the lease may be assigned without BREP's
consent AND from interested parties to whom the lease may be assigned with BREP's
consent (which shall not be unreasonably withheld), over a period not to exceed six months.
The receiver should evaluate all offers and recommend acceptance of the highest and best
offer. See, e.g., Yidi, L.L.C. v. JHB Hotel, L.L.C., 8th Dist. No. 104856, 2017-Ohio-1285,
¶ 19-28. The trial court, in deciding whether to accept the receiver's recommendation,
No. 18AP-479 16
should also endeavor to identify the highest and best offer. Id. In keeping with the analysis
of the lease in this decision, the trial court should not lift the stay on existing business and
contract deadlines unless and until an offer has been accepted, has closed, and the receiver
has relinquished control over the businesses that constitute Barley's (in whatever forms
those take following the sale).
{¶ 34} Thus, in accordance with our decision on Dioun's second assignment of error,
we sustain it.
B. Third Assignment of Error – Whether the Trial Court Erred in Accepting
the LLJBrewBucks Offer and Denying the Receiver's Motion to Accept
the Taste Offer
{¶ 35} The trial court's decision to reject the Taste offer in favor of the
LLJBrewBucks offer was based on its conclusion that the lease was not assignable. (June 4,
2018 Decision & Entry. at 2-6.) Because our de novo review of the contract language has
yielded a different conclusion on this pivotal provision of the amended lease, the trial
court's ruling rejecting the Taste offer is no longer apropos. We therefore also sustain
Dioun's third assignment of error in that we agree that the trial court should not have
ordered the receiver to accept the LLJBucksBrew offer over the Taste offer based on the
perceived lease difficulties. The parties should not interpret the resolution of this
assignment of error as this Court taking any position on whose offer the receiver and trial
court should judge to be highest and best when considering the matter on remand.
C. First Assignment of Error – Whether the Trial Court Erred in Failing to
Permit Discovery
{¶ 36} Insofar as the purpose of this litigation has evolved into a receivership to
disentangle the business partners, Dioun and Jezerinac, and effectuate a sale or transfer of
Barley's that removes one or both of them from the governing structure, we see the case as
one of contract interpretation (which is accomplished only by reference to the integrated
contract) and weighing of competitive offers for purchase (which requires work by the
receiver concerning offers from the interested parties). We do not find that the trial court
has abused its discretion in staying discovery thus far. See State ex rel. Ebbing v. Ricketts,
133 Ohio St.3d 339, 2012-Ohio-4699, ¶ 19-21 (noting that whether to stay discovery
pending resolution of dispositive issues that can be fairly resolved without discovery is
within the discretion of the trial court and is reviewed for abuse of discretion.) (May 9,
2018 Am. Order Modifying Stay at 1; Dec. 21, 2017 Order Modifying Stay at 1.) In the event
No. 18AP-479 17
the litigation evolves further, the trial court may need to revisit that decision. For now,
however, we consider the argument that the trial court has denied all discovery in the case
to be unripe. See State ex rel. Elyria Foundry Co. v. Indus. Commn., 82 Ohio St.3d 88, 89
(1998).
V. CONCLUSION
{¶ 37} Because the lease is assignable based on 9.01(a) and the January 2, 2013
amendment, we reverse the decision of the trial court finding otherwise and remand the
matter to the trial court with instructions that the trial court receiver should entertain offers
from interested parties to whom the lease may be assigned without BREP's consent AND
from interested parties to whom the lease may be assigned with BREP's consent (which
shall not be unreasonably withheld), all over a period not to exceed six months. The
receiver should evaluate all offers and recommend acceptance of the highest and best offer.
{¶ 38} We also instruct that the trial court should not lift the stay on lease deadlines
until an offer has been accepted, has closed, and the receiver has relinquished control over
the businesses that constitute Barley's (in whatever forms those take following the sale).
We sustain Dioun's second and third assignments of error and decline to address the first
assignment of error on the grounds that it is unripe. Therefore, we reverse the judgment of
the Franklin County Court of Common Pleas and remand with instructions.
Judgment reversed and
remanded with instructions.
HORTON, J., concurs.
KLATT, P.J., dissents.
KLATT, P.J., dissenting.
{¶ 39} Because I would affirm the trial court's decision, I respectfully dissent.
{¶ 40} Receivership proceedings are equitable in nature. Heartland Bank v. LNG
Resources, LLC, 10th Dist. No. 08AP-410, 2008-Ohio-6226, ¶ 4. Moreover, the Supreme
Court of Ohio has held that R.C. 2735.04, which sets forth the powers a trial court may grant
to a receiver, is broad enough to enable "the trial court to exercise its sound judicial
discretion to limit or expand a receiver's powers as it deems appropriate," subject to
appellate review for abuse of discretion. State ex rel. Celebrezze v. Gibbs, 60 Ohio St.3d 69,
No. 18AP-479 18
74 (1991). An abuse of discretion occurs where a trial court's decision is "unreasonable,
arbitrary or unconscionable." Blakemore v. Blakemore, 5 Ohio St.3d 217, 219 (1983).
{¶ 41} Here, the trial court reasonably balanced the interests of multiple parties in
exercising its equitable powers. The trial court granted a receivership over a business
tenant, BRLP, to effectuate its dissolution. The validity of the receivership is not contested.
The lease between BRLP and its landlord was key to the trial court's analysis of the
respective rights so as to effectuate an equitable dissolution of BRLP. The trial court
rightfully considered the rights of the landlord, who was not even a party to the receivership
proceeding, in exercising its discretion.
{¶ 42} The trial court recognized that both parties to the lease were sophisticated
business entities. Under the express term of the lease, the appointment of a receiver for the
tenant BRLP (lasting more than 30 days) is a default event that triggers the landlord's right
to terminate the lease. The trial court expressly upheld the enforceability of this default
provision. It is undisputed that the landlord sought to terminate the lease based upon that
default event, and would have done so, except for the trial court's imposition of a stay to
allow the parties time to negotiate an agreed resolution. When no agreement could be
reached, the trial court recognized the landlord's termination of the lease based upon the
undisputed default event, approved the sale of BRLP to LLJBucksBrew, and lifted the stay
effective upon the closing of the sale. Therefore, the majority's reliance on the assignment
provisions in the lease is misplaced. There simply is nothing to assign due to the landlord's
exercise of its termination rights. The trial court did not abuse its discretion when it
recognized these express contractual rights. Although the majority opinion acknowledges
the default provision in the lease, the majority finds the provision unenforceable because it
somehow deems the provision unfair. In essence, the majority simply substitutes its
equitable judgment for that of the trial court without any recognition of the applicable
standard of review.
{¶ 43} Lastly, the majority opinion's reliance on the trial court's stay order as the
basis for avoiding the termination provision is also misplaced. The stay order was part of
the trial court's exercise of its equitable powers. As noted above, the trial court lifted the
stay in the context of its decision to recognize the landlord's termination of the lease and to
No. 18AP-479 19
approve the sale of BRLP to LLJBucksBrew. The majority opinion's reliance on the stay
order as the basis for avoiding the default provision turns equity on its head.
{¶ 44} The trial court did not abuse its discretion in finding that the default
provision was enforceable and that the landlord exercised its right to terminate. Therefore,
I agree with the trial court that Taste's purchase offer was patently not viable because it was
conditioned upon acquiring the existing lease. I also fail to see how the trial court abused
its discretion in directing the receiver to accept the only viable offer to acquire BRLP's assets
and to enter into a new lease with the landlord so that the business could continue
operating. Consequently, I would affirm the trial court's decision in all respects. Because
the majority reaches a different conclusion, I respectfully dissent.