Strip Delaware L.L.C. v. Landry's Restaurants, Inc. , 2011 Ohio 4075 ( 2011 )

[Cite as Strip Delaware L.L.C. v. Landry's Restaurants, Inc., 2011-Ohio-4075.]
COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
THE STRIP DELAWARE, LLC JUDGES:
Hon. Sheila G. Farmer, P .J.
Plaintiff-Appellee Hon. John W. Wise, J.
Hon. Patricia A. Delaney, J.
-vs-
Case No. 2010 CA 00316
LANDRY'S RESTAURANTS, INC., et al.
Defendants-Appellants OPINION
CHARACTER OF PROCEEDING: Civil Appeal from the Court of Common
Pleas, Case No. 2009 CV 02483
JUDGMENT: Affirmed in Part; Reversed in Part and
Remanded
DATE OF JUDGMENT ENTRY: August 15, 2011
APPEARANCES:
For Plaintiff-Appellee For Defendants-Appellants
MICHAEL R. STAVNICKY TERRENCE L. SEEBERGER
SINGERMAN, MILLS, DESBERG NADA G. FADDOUL
& KAUNTZ STARK & KNOLL
3333 Richmond Road, # 370 3475 Ridgewood Road
Beachwood, Ohio 44122 Akron, Ohio 44333
RANDOLPH SNOW
BLACK MCCUSKEY SOUERS
& ARBAUGH
220 Market Avenue South
1000 Unizan Plaza
Canton, Ohio 44702
Stark County, Case No. 2010 CA 00316 2
Wise, J.
{¶1} Appellants/Cross-Appellees Landry's Restaurants, Inc. and Landry’s
Seafood House-Ohio, Inc., appeal the August 3, 2010 and October 15, 2010 decisions
of the Court of Common Pleas, Stark County, awarding monetary judgments in favor of
Appellee/Cross-Appellant The Strip Delaware, L.L.C. in a protracted dispute concerning
a restaurant property lease in Jackson Township, Stark County.
{¶2} As an initial matter, we note this is the fifth appeal to this Court involving
this lease dispute. See Stark Commons, Ltd. v. Landry's Seafood House Ohio, Inc.,
Stark App.No. 2007CA00240, 2008 WL 2102353; The Strip Delaware, LLC v. Landry's
Restaurants, Inc., Stark App.Nos. 2008CA000146 and 2008CA00160, 2009-Ohio-1869;
Stark Commons Ltd. v. Landry's Seafood House–Ohio, Inc., Stark App.No. 2008 CA
00206, 2009-Ohio-3847, 2009 WL 2372143; Strip Delaware, L.L.C. v. Landry's
Restaurants, Inc., 191 Ohio App.3d 822, 947 N.E.2d 1233. As a full history of this
matter can be gleaned from our opinions in those appeals, we will briefly state the
relevant facts leading to the present appeal as follows.
{¶3} Appellee The Strip Delaware, L.L.C. owns a parcel of commercial real
estate known as “The Strip” in Stark County. In September 1997, Landry's Seafood
House-Ohio, Inc., entered into a twenty-year lease agreement with appellee’s
predecessor, Stark Commons, Ltd., to operate a “Joe's Crab Shack” restaurant. Among
other things, the lease provides that in the event of a breach, the landlord may recover
from the tenant “any deficiency that may arise by reason of reletting for the remainder of
the Lease Term.”
Stark County, Case No. 2010 CA 00316 3
{¶4} In addition, Appellant Landry’s Seafood Restaurants, Inc. executed a
guaranty agreement, guaranteeing the full performance of the lease by Landry's
Seafood House-Ohio, Inc. (tenant).
{¶5} Appellants closed Joe's Crab Shack restaurant at The Strip on November
17, 2006. Appellee then notified Landry’s Ohio that it was in default on the lease
agreement, which required it to continuously operate at the leased premises. On
December 22, 2006, appellee repossessed the leased premises. On February 1, 2007,
appellee filed a complaint for declaratory judgment. The common pleas court granted
summary judgment, finding that appellee was entitled to self-help repossession of the
leased premises. On appeal, we affirmed the summary judgment decision. See Stark
Commons, Ltd. v. Landry's Seafood House Ohio, Inc., Stark App.No. 2007CA00240,
2008 WL 2102353 (filed April 14, 2008).
{¶6} Further litigation would ensue. In the meantime, appellee pursued a new
lease with a restaurant named Vieng’s Bistro. However, no agreement was reached
with Vieng’s.
{¶7} On August 22, 2008, Appellee The Strip Delaware entered into a new
lease on the property at issue with Wasabi Japanese Steakhouse. On March 13, 2009,
after a period of remodeling and reconstruction of the physical premises, Wasabi took
possession and began paying rent.
{¶8} On June 25, 2009, Appellee The Strip Delaware filed a civil complaint
against Appellants Landry’s Restaurants, Inc. and Landry’s Seafood House-Ohio, Inc. in
the Stark County Court of Common Pleas, seeking recovery of lost rent and other
Stark County, Case No. 2010 CA 00316 4
damages for the period April 15, 2008 to March 13, 2009. The matter proceeded to a
bench trial commencing on July 26, 2010.
{¶9} The court awarded appellee damages against both appellants for breach
of contract in the amount of $164,042.51. This amount included the following:
1. Base rent, including interest, from 4/15/08 through
11/30/08 = $93,199.46
2. Common area maintenance fees, including interest,
4/15/08 through 3/13/09 = $14,770.49
3. Taxes, including interest, 4/15/08 through 3/13/09 = $11,072.56
4. Costs pertaining to Vieng’s lease termination = $5,000.00
5. Brokerage fee = $40,000.00
{¶10} In addition, the court awarded appellee rent damages, against Landry’s
Ohio solely, for the period 11/30/08 through 3/13/09 in the amount of $39,734.32,
including interest. Finally, appellants were ordered to pay costs and attorneys’ fees of
$46,912.47, plus interest.
{¶11} On November 1, 2010, appellants filed a notice of appeal. They herein
raises the following six Assignments of Error:
{¶12} “I. THE TRIAL COURT ERRED BY AWARDING DAMAGES TO
APPELLEE THE STRIP DELAWARE LLC WHERE IT SUFFERED NO ACTUAL
DAMAGES (INCLUDING, BUT NOT LIMITED TO, RENT, COMMON AREA
MAINTENANCE FEES, AND TAXES) INASMUCH AS A REPLACEMENT LEASE FOR
THE PREMISES AT ISSUE PROVIDED FOR SUBSTANTIALLY HIGHER RENT THAN
DID THE LEASE AT ISSUE HEREIN.
Stark County, Case No. 2010 CA 00316 5
{¶13} “II. THE TRIAL COURT ERRED BY IGNORING THE PLAIN LANGUAGE
OF THE LEASE AND AWARDING DAMAGES TO APPELLEE STRIP DELAWARE,
WHERE STRIP DELAWARE SUFFERED NO ACTUAL DAMAGES (INCLUDING, BUT
NOT LIMITED TO, RENT, COMMON AREA MAINTENANCE FEES, AND TAXES)
INASMUCH AS A REPLACEMENT LEASE FOR THE PREMISES AT ISSUE
PROVIDED FOR SUBSTANTIALLY HIGHER RENT THAN THE LEASE AT ISSUE
HEREIN.
{¶14} “III. THE TRIAL COURT ERRED BY HOLDING GUARANTOR
LANDRY’S RESTAURANTS, INC. LIABLE FOR COMMON AREA MAINTENANCE
FEES AND TAXES AFTER NOVEMBER 2008 WHERE ITS LIABILITY FOR SUCH
FEES AND TAXES WAS LIMITED BY THE GUARANTY TO A TWO-YEAR PERIOD
AFTER BREACH.
{¶15} “IV. THE TRIAL COURT ERRED BY HOLDING LANDRY'S
RESTAURANTS LIABLE FOR ATTORNEYS' FEES, THE $5,000 VIENG’S LEASE
TERMINATION EXPENSE, AND THE $40,000 BROKERAGE FEE WHERE IT NEVER
GUARANTEED THOSE FEES AND EXPENSES.
{¶16} “V. THE TRIAL COURT ERRED BY HOLDING LANDRY'S
RESTAURANTS LIABLE FOR ATTORNEYS' FEES AND THE BROKERAGE FEE
WHERE SUCH NECESSARILY WERE INCURRED MORE THAN TWO YEARS
AFTER THE ALLEGED BREACH.
{¶17} “VI. THE TRIAL COURT ERRED BY ASSESSING ATTORNEYS' FEES
AGAINST APPELLANTS WHERE, PURSUANT TO ASSIGNMENT OF ERROR NO. I,
Stark County, Case No. 2010 CA 00316 6
STRIP DELAWARE WAS NOT ENTITLED TO ANY DAMAGES, AND FURTHER
ERRED BY NOT AWARDING ATTORNEYS' FEES TO APPELLANTS.”
{¶18} Appellee has submitted the following sole Assignment of Error in its cross-
appeal:
{¶19} “I. THE TRIAL COURT ERRED IN FINDING ANY LIMIT UNDER THE
GUARANTY APPLICABLE TO THIS DEFAULT.”
Appellants’ Direct Appeal
I., II.
{¶20} In their First and Second Assignments of Error, Appellants Landry’s
Restaurants and Landry’s Ohio contend the trial court erred in awarding “deficiency”
damages for breach of the lease to Appellee Strip Delaware. We disagree.
{¶21} The purpose of contract construction is to effectuate the intent of the
parties. See Skivolocki v. East Ohio Gas Co. (1974), 38 Ohio St.2d 244, 313 N.E.2d
374, paragraph one of the syllabus. In assessing contractual damages, the goal is to
place the aggrieved party in the position he or she would have been had the breach not
occurred. Baxter v. Kendrick, 160 Ohio App.3d 204, 826 N.E.2d 860, 2005-Ohio-1477, ¶
24, citing Peterman v. Dimoski, Hamilton App. No. C-020116, 2002-Ohio-7337, 2002
WL 31894859; Heckman v. Porter, Stark App.Nos. 2002CA00380, 2002CA00381,
2003-Ohio-3135, 2003 WL 21384859. In regard to the case sub judice, although the
lengthy dispute over the former Joe’s Crab Shack restaurant property has frequently
been one of complexity for this Court and the trial court, the issue in the two present
assigned errors is straightforward: Should the commercial landlord’s (appellee’s) claim
for unpaid rent or “deficiency” damages for the eleven months the property sat empty
Stark County, Case No. 2010 CA 00316 7
(until re-letting) be adjusted or eliminated based upon potentially higher rents
anticipated to be received by the landlord from a new tenant (Wasabi’s Restaurant)
under a replacement lease?
{¶22} Appellants’ essential claim is that appellee, as landlord, has not suffered
any “deficiency” under the terms of the Joe’s Crab Shack lease, and that the recovery
allowed by the trial court constitutes an improper windfall to appellee, even though
appellants do not dispute that appellee’s efforts to relet were proper and reasonable.
Appellants rely in large measure on The Way International v. Ohio Center (1982), 3
Ohio App.3d 451, 445 N.E.2d 1158, wherein the Tenth District Court of Appeals held as
follows:
{¶23} “1. The measure of damages for a breach of an agreement prior to the
time the injured party has performed is that amount which places the injured party in as
good a position as he would have been had the contract been fully performed (i.e., the
benefit of the bargain)
{¶24} “2. In considering the damage award, the proper test for compensation is
the difference between the total rent agreed upon and the total rent received for the
unoccupied term of the lease from subsequent tenants, not a pro rata share of rent due
for the unoccupied term of the lease.” Id., syllabus.
{¶25} In mathematical terms, appellants maintain that Wasabi, the new tenant,
will pay rent totaling over $1,600,000.00 through what would have been the end of the
Landry’s lease (March 2018), while less than $1,200,000.00 would have been paid
under the Landry’s lease had it been fulfilled. Thus, appellants argue, in the end
appellee will most likely be financially better off under the Wasabi lease and should not
Stark County, Case No. 2010 CA 00316 8
have been awarded monetary damages for breach of the Landry’s Joe’s Crab Shack
lease.
{¶26} Nonetheless, we find appellants’ argument unpersuasive in several
respects. First, the standard rule in Ohio is simply that rent under a lease agreement is
due until the end of the stated lease term or until the premises are relet with reasonable
efforts, whichever occurs first. See Dennis v. Morgan (2000), 89 Ohio St.3d 417,
syllabus. We are aware of no clear law in Ohio that increased rents to be paid by a new
tenant should benefit the prior tenant following a breach. See Schooley v. Wilker (1929),
33 Ohio App. 462, 467, 169 N.E. 829: “The only thing that [the former tenant] can be
thankful for is that the property was rented at all, and for enough to hold him harmless
for the period of time that it was occupied after [the date of re-letting].”
{¶27} In addition, while The Way International, supra, initially appears to support
appellants’ position, we note that the rental agreements in that case involved the use of
a convention hall for a few days, not multi-year leases stretching well into the future. We
find appellants’ proposition that the future rents from Wasabi must be counted against
appellee’s present damages would invite far too much consideration of speculative
evidence, which is generally not favored in Ohio courts. See, e.g., Middletown v. McGee
(1988), 39 Ohio St.3d 284, 286. Because there is never a complete assurance that a
landlord in appellee’s position will collect all future rents from a replacement tenant, the
application of appellants’ present theory would likely leave such landlord without a legal
remedy if he or she is forced to wait past the statute of limitations for a breach of lease
action.
Stark County, Case No. 2010 CA 00316 9
{¶28} Finally, because the Landry’s lease and guaranty contained a non-
acceleration clause, we would find it wholly inequitable to allow appellants to effectively
accelerate alleged offsets to the unpaid rent obligations using speculative future rents
from the new tenant, Wasabi.
{¶29} Accordingly, we hold the trial court did not err in awarding damages for
breach of the Landry’s lease to Appellee Strip Delaware.
{¶30} Appellants’ First and Second Assignments of Error are overruled.
III.
{¶31} In their Third Assignment of Error, appellants contend the trial court erred
in holding Landry’s Restaurants liable for common area maintenance fees and taxes
after November 2008, in light of the language of the Guaranty in the record. We
disagree.
{¶32} The Guaranty at issue herein provides: “Notwithstanding anything in this
Guaranty to the contrary, the liability of Guarantor shall not exceed the rent payable
under the Lease at the time of such default for two (2) consecutive years and in no
event shall Guarantor be liable for any Rents payable under the Lease after the fifteenth
(15th) anniversary from the date that Rent is first payable under the Lease. For
purposes of the foregoing sentence, 'Rent’ shall mean the Maximum Rent, additional
rent, and all other sums and charges payable by Tenant to Landlord under the Lease."
{¶33} As appellee has correctly articulated in its response brief, the aforesaid
language creates a “rolling guaranty,” which, in the absence of an acceleration clause,
each new default by appellant creates a new cause of action. See, e.g., Campbell v.
SSR, Inc., Knox App.No. 00CA17, 2001 WL 61082. Appellee clearly set forth
Stark County, Case No. 2010 CA 00316 10
throughout the trial court proceedings that it sought contract damages for the period
from April 15, 2008 (the first day after the period of default addressed in prior case
2007CV3288) through March 13, 2009 (the day Wasabi took over as the new tenant).
As the record supports that these “other sums and charges” were incurred by appellee
during such time frame, we find no error by the trial court in this regard.1
{¶34} Appellants’ Third Assignment of Error is therefore overruled.
IV.
{¶35} In their Fourth Assignment of Error, appellants contend the trial court erred
in holding Landry’s Restaurants liable for attorney’s fees, a $5,000.00 lease termination
expense, and a $40,000.00 brokerage fee. We disagree.
{¶36} Section 14.5 of the lease addresses costs of reletting as follows: “In case
of any event of default, Tenant shall also be liable for all damages Landlord may be
entitled to under the Lease, in law or in equity, and shall pay to Landlord, in addition to
any sum provided to be paid above, costs and expenses relating to Tenant's default and
the reletting of the Premises, including, without limitation, to broker's fees incurred by
landlord in connection with reletting the whole or any part or the Leased Premises; the
costs of removing and storing Tenant's or other occupant's property and the cost of
repairing, to put the Leased premises into good condition.”
{¶37} Appellants essentially argue that the “rent” for which Landry’s Restaurants
would be liable in the event of breach does not include anything other than base rent,
common area maintenance fees, and real estate taxes. However, we agree with
1
In a related vein, we note the trial court limited the time frame of the “base rent”
guarantor damages to a termination date of November 2008. We will further address
this issue in Appellee’s Cross-Appeal assignment, infra.
Stark County, Case No. 2010 CA 00316 11
appellee that the Guaranty binds Landry’s Restaurants (as guarantor) to honor all lease
obligations and to pay all sums and charges payable by the tenant under the lease,
including attorney fees. See Section 14.10. The payment of costs and expenses of
reletting are likewise an obligation of the guarantor under the lease. Evidence was
presented to the trial court that appellee, as landlord, incurred $46,912.47 in attorney’s
fees and costs in seeking to recover for this new default. Tr., September 28, 2010, at 4-
47. Evidence was further adduced that appellee incurred $45,000.00 of costs and
expenses in reletting the premises. Tr. at 109, 110, 123.
{¶38} As an appellate court, our role is to determine whether there is relevant,
competent, and credible evidence upon which the factfinder could base his or her
judgment. Tennant v. Martin–Auer, 188 Ohio App.3d 768, 936 N.E.2d 1013, 2010-Ohio-
3489, ¶ 16, citing Cross Truck v. Jeffries (Feb. 10, 1982), Stark App. No. CA–5758,
1982 WL 2911. Upon review, we find no reversible error in the trial court’s award of
attorney’s fees and the additional aforesaid expenses.
{¶39} Appellant’s Fourth Assignment of Error is therefore overruled.
V.
{¶40} In their Fifth Assignment of Error, appellants contend the trial court erred
in holding Landry’s Restaurants liable for attorney’s fees and the aforecited brokerage
fee based on the two-year limitation language in the Guaranty. (See Assignment of
Error III, supra.) We disagree.
{¶41} The basis of appellants’ argument is its assertion that because the trial
court “cut off” the guarantor liability as of November 30, 2008, no liability has been
established for the attorney’s fees and the brokerage fee, which did not arise until later.
Stark County, Case No. 2010 CA 00316 12
However, because the attorney fees would invariably lag a default in such a scenario,
we find no merit in appellants’ claim. Furthermore, the brokerage fee in this case was
incurred in July 2008 when the broker contract was signed. We additionally note
appellants chose not to raise these arguments before the trial court, except for a brief
reference in their trial brief. As a general rule, a litigant who has the opportunity to raise
an issue in the trial court, but declines to do so, waives the right to raise that issue on
appeal. See Belvedere Condominiums Unit Owners' Ass'n v. R.E. Roark Cos., Inc.
(1993), 67 Ohio St.3d 274, 279, 617 N.E.2d 1075.
{¶42} Appellants’ Fifth Assignment of Error is therefore overruled.
VI.
{¶43} In their Sixth Assignment of Error, appellants again contend the trial court
erred in awarding attorney fees to appellee. We disagree.
{¶44} Section 14.10 of the Lease provides that in case suit is brought, “ *** the
losing party shall pay to the prevailing party all actual expenses incurred therefor,
including reasonable attorney's fees and court costs."
{¶45} Appellants’ argument essentially reasserts the claims in their First
Assignment of Error and maintains accordingly that Appellee The Strip Delaware should
not be the “prevailing party” to be compensated for attorney fees. However, based on
our previous holdings herein, we find appellants’ argument to be without merit.
{¶46} Appellants’ Sixth Assignment of Error is overruled.
Stark County, Case No. 2010 CA 00316 13
The Strip Delaware’s Cross-Appeal
I.
{¶47} In its sole Assignment of Error on Cross-Appeal, Appellee Strip Delaware
contends the trial court erred in utilizing November 2008 as a final limitation date for
appellant’s liability for base rent under the Guaranty. We agree.
{¶48} As noted previously, the default at issue occurred commencing April 15,
2008. The trial court inconsistently concluded that an earlier operational default (i.e., in
November 2006) had legally started the clock as to certain monetary liabilities regarding
the guarantor. The damages sought by appellee in the present lawsuit for breach were
for a sum equal to 10 months and 29 days of damages (April 15, 2008 through March
13, 2009), plus costs and expenses. Having previously concluded that the Guaranty at
issue constitutes a rolling guaranty, we hold there should not have been a November
2006 – November 2008 one-time limit on damages applicable to the Guaranty. The
decision of the trial court in this regard must be reversed as to the time limit for the
payment of rent, thus requiring a reassessment of the base rent damages to be paid by
Appellant Landry’s Restaurants as guarantor.
Stark County, Case No. 2010 CA 00316 14
{¶49} For the reasons stated in the foregoing opinion, the judgment of the Court
of Common Pleas, Stark County, Ohio, is hereby affirmed in part, reversed in part, and
remanded for a revision of base rent damages.
By: Wise, J.
Farmer, P. J., and
Delaney, J., concur.
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___________________________________
JUDGES
JWW/d 0719
Stark County, Case No. 2010 CA 00316 15
IN THE COURT OF APPEALS FOR STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
THE STRIP DELAWARE, LLC :
:
Plaintiff-Appellee :
:
-vs- : JUDGMENT ENTRY
:
LANDRY'S RESTAURANTS, INC., et al. :
:
Defendants-Appellants : Case No. 2010 CA 00316
For the reasons stated in our accompanying Memorandum-Opinion, the
judgment of the Court of Common Pleas of Stark County, Ohio, is affirmed in part,
reversed in part and remanded for further proceedings consistent with this opinion.
Costs to be split evenly among the parties.
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JUDGES