H&B Realty, LLC v. JJ Cars, LLC , 2021 ME 14 ( 2021 )

MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2021 ME 14Docket: BCD-20-82
Submitted
On Briefs: September 29, 2020
Decided: March 23, 2021
Panel: MEAD, GORMAN, JABAR, HUMPHREY, HORTON, and CONNORS, JJ.
Majority: MEAD, GORMAN, JABAR, and HUMPHREY, JJ.
Dissent: CONNORS and HORTON, JJ.
H&B REALTY, LLC
v.
JJ CARS, LLC, et al.
GORMAN, J.
[¶1] H&B Realty, LLC, appeals from a judgment of the Business and
Consumer Docket (Duddy, J.) in favor of JJ Cars, LLC, and John Mokarzel on
H&B’s complaint for breach of contract. H&B contends that the court erred by
applying the affirmative defenses of breach of contract and failure to mitigate
damages as pleaded by JJ Cars and Mokarzel.1 We affirm the judgment.
1 We have not specifically held that “breach of contract” is an affirmative defense that must be
pleaded as such. Here, JJ Cars and Mokarzel asserted both in a counterclaim and as a “defense” that
H&B’s material breach of the contract excused their obligations under the contract. The trial court
agreed. We have identified failure to mitigate damages as an affirmative defense, see Tang of the Sea,
Inc. v. Bayley’s Quality Seafoods, 1998 ME 264, ¶ 12, 721 A.2d 648, but need not address that issue
here. See infra n.4.
2
I. BACKGROUND
[¶2] In its judgment, the court made the following findings of fact, which
are supported by competent evidence in the record. See Dupuis v. Ellingwood,
2017 ME 132, ¶ 3, 166 A.3d 112. H&B and JJ Cars entered into a five-year
commercial lease agreement commencing on July 1, 2011, and ending on
June 30, 2016, whereby JJ Cars leased a car dealership property in Portland
from H&B. Mokarzel, the sole member of JJ Cars, personally guaranteed the
payment of rent and other charges under the lease. Article XIII of the lease
contained the following provision regarding subleasing:
Lessee will not . . . sub-let . . . the lease premises, without the
prior written consent of Lessor in each instance which consent
shall not be unreasonably withheld or delayed. The consent by
Lessor to any . . . sub-letting shall be subject to Lessor’s reasonable
review and approval of subtenant’s or sublessee’s
creditworthiness, business experience, and capacity to perform the
Lessee’s obligations under this lease. . . .
Any assignment . . . as to which Lessor has consented . . . shall
not be effective or deemed valid unless at the time of such
assignment:
(a) Each . . . sublessee shall agree in a written statement
satisfactory to Lessor to assume and abide by all of the terms and
provisions of this Lease . . . and
(b) Each . . . sublessee has submitted a current financial
statement . . . and
(c) Lessee shall pay Lessor an assignment fee . . . . The
assignment fee will be . . . ($250.00).
3
Lessor shall not be obligated to consent to any proposed . . .
subletting if . . . at the time of the proposal . . . Lessee is in material
default under any term, covenant or condition of this Lease . . . .
Article XX(a)(iv)(B) of the lease also required that “[u]pon any termination of
the Lessee’s right to possession only without termination of the Lease: . . .
Lessor shall use commercially reasonable efforts to relet the leased premises
or any part thereof for such rent and upon such terms as Lessor, in its
reasonable discretion, shall determine.”
[¶3] JJ Cars operated a car dealership at the location from July of 2011
until February of 2013. By February of 2013, JJ Cars was in financial distress,
and Mokarzel, the sole member of JJ Cars, decided to close the business and
sublet the property.
[¶4] From February of 2013 until October of 2015, three separate
businesses sublet the property from JJ Cars. Approval for the first and third of
these sublets by H&B was provided by its sole member, Sterling Boyington. As
to the second sublet, the court found that “Boyington never objected.” JJ Cars
never submitted any of the financial information required by the lease terms
for any of these sublets to H&B.
[¶5] In November of 2015, Wholesale Motors, Inc., owned by Dave
McGovern, began occupying the property. Wholesale Motors wanted to sublet
4
the property and was also interested in extending the lease or purchasing the
property. When JJ Cars sought H&B’s consent to sublease the property to
Wholesale Motors, Boyington refused to give consent on behalf of H&B because
he “did not like McGovern.” Because H&B refused to approve the sublease,
Wholesale Motors vacated the property in November of 2015.
[¶6] After the sublease opportunity with Wholesale Motors ended, the
property was unoccupied and JJ Cars stopped paying rent. H&B obtained a
forcible entry and detainer judgment against JJ Cars on March 24, 2016, and
then sold the property on or about April 7, 2016.
[¶7] Two months after the sale, H&B filed a one-count complaint against
JJ Cars and Mokarzel individually, alleging breach of contract and seeking
damages for unpaid rent from November of 2015 through April 6, 2016. In
their amended answer, JJ Cars and Mokarzel asserted five counterclaims
against H&B—alleging breach of contract, fraud, discrimination, failure to
mitigate damages, and punitive damages—and eight affirmative defenses,
including breach of contract and failure to mitigate damages.2
2Later in the action, JJ Cars and Mokarzel filed a separate action against Boyington. The trial court
explained that the separate claims and counterclaims other than that alleging breach of contract were
based on assertions that Boyington “harbors racial animus against persons of color[,] harassed and
discriminated against JJ Cars’ subtenants[,] and caused those subtenants to vacate the premises.”
Although the trial court found that Boyington had made “bigoted, repulsive, and discriminatory
statements,” it concluded that JJ Cars failed to establish that Boyington’s statements had any effect
on its ability to find or keep tenants. The court entered a judgment in favor of H&B on the
5
[¶8] The court conducted a jury-waived trial during which Boyington
and Mokarzel testified.3 In its judgment, the court found that JJ Cars and
Mokarzel had breached the lease agreement by failing to pay rent beginning in
November of 2015. The court also found that H&B breached Article XIII of the
lease by unreasonably withholding its consent to JJ Cars to sublease to
Wholesale Motors. The court further found that H&B breached its duty to
mitigate damages—pursuant to Article XX(a)(iv)(B) of the lease—because it
did not take steps to relet the property after JJ Cars began missing rent
payments in November of 2015. Based on these findings, and citing Cellar
Dwellers, Inc. v. D’Alessio, 2010 ME 32, ¶ 16, 993 A.2d 1, the court issued a
judgment in favor of JJ Cars and Mokarzel on the ground that their breach—
failure to pay rent—was excused by H&B’s material breaches—unreasonably
withholding consent to sublet to Wholesale Motors and failing to mitigate
damages.
counterclaims of JJ Cars and Mokarzel. The court also entered a judgment in favor of Boyington on
the third-party complaint of JJ Cars and Mokarzel.
3 In this appeal, H&B has not provided a transcript of the testimony of the other trial witnesses.
The court’s findings are supported by the testimony of Boyington and Mokarzel alone. See M.R.
App. P. 5(b)(2)(A) (requiring a party claiming insufficiency of the evidence to provide a transcript of
all relevant evidence).
6
[¶9] The court denied H&B’s subsequent motion for additional and
amended findings and to alter or amend the judgment. See M.R. Civ. P. 52(b),
59(e). H&B timely appeals from the judgment on its complaint. See 14 M.R.S.
§ 1851 (2020); M.R. App. P. 2B(c)(2)(D).
II. DISCUSSION
[¶10] H&B raises a variety of challenges to the court’s finding that it
breached the lease by unreasonably withholding consent to Wholesale Motors’
proposed sublease.4 “Whether a breach of contract has occurred is a finding of
fact reviewed for clear error.” Coastal Ventures v. Alsham Plaza, LLC, 2010 ME
63, ¶ 20, 1 A.3d 416. Where, as here, a party’s motion for further findings has
been denied, we do not infer findings from the evidence in the record.
See M.R. Civ. P. 52(b); Douglas v. Douglas, 2012 ME 67, ¶ 27, 43 A.3d 965.
Rather, we confine our review to the trial court’s explicit findings and
determine whether those findings are supported by the record. See Ehret v.
Ehret, 2016 ME 43, ¶ 12, 135 A.3d 101. Although the trial court’s judgment
must be “supported by express factual findings that are based on record
evidence, are sufficient to support the result, and are sufficient to inform the
4H&B also challenges the court’s finding that it breached the contract by failing to mitigate its
damages. Because the court did not err in applying the affirmative defense of breach of contract
concerning the subletting issue, we decline to reach the mitigation argument.
7
parties and any reviewing court of the basis for the decision,” Mooar v.
Greenleaf, 2018 ME 23, ¶ 7, 179 A.3d 307 (quotation marks omitted), “there is
no requirement that a court identify the reasoning it uses to reach each finding
of fact.” Theberge v. Theberge, 2010 ME 132, ¶ 18, 9 A.3d 809.
[¶11] H&B first contends that it reasonably withheld its consent to
Wholesale Motors’ sublease because JJ Cars did not provide H&B with records
or give H&B the opportunity to inquire into Wholesale Motors’
creditworthiness, experience, or capacity to perform. H&B also contends that
its refusal to consent to the sublease was a result of Wholesale Motors’ request
to extend the sublease beyond the four months remaining on the lease and, as
such, its refusal was motivated by legitimate commercial business concerns.
[¶12] Although Boyington testified that those were the reasons he
refused to agree to the sublease, the court did not credit those explanations.
Instead, the court relied on Mokarzel’s testimony that H&B’s reason for
withholding consent was Boyington’s dislike for McGovern. Mokarzel testified
as to Boyington’s distaste for McGovern during direct-examination:
A: Eventually, I found another person . . . McGovern. And when I
asked . . . [Boyington] to meet with [McGovern], he said I don’t like
him, I’m not going to meet him. I’m like, [Boyington], you got to
work with me. [Boyington said] I don’t like him. . . . I don’t like that
guy, I don’t like him. And I’m the one who’s do[ing] business with
him, and I’m not going to.
8
Mokarzel’s testimony continued on cross-examination:
Q: And you didn’t ask [Boyington] for his consent before you
subleased to McGovern?
A: I did. He said no, I don’t like him. Wouldn’t meet.
Q: So, you did not get his written consent, correct?
A: He wouldn’t give it. He wouldn’t meet with him despite my
asking because he “didn’t like him.”
Q: So . . . he never met with him but he didn’t like him, is that your
testimony?
A: We met in the parking lot as discussed earlier, and [McGovern]
said to [Boyington], I want to extend a longer-term lease. He said
no. He wouldn’t even talk about a longer-term lease. [McGovern]
said, I want to invest money in the property. . . but . . . I can’t have a
four-month lease. [Boyington] said, I’m not giving you a long lease.
Take it up with [Mokarzel]. I’m not doing it.
The court did not—and was not required to—believe Boyington’s version of
events, nor was it required to credit Boyington as a witness over Mokarzel.5 See
Guardianship of Gionest, 2015 ME 154, ¶ 7, 128 A.3d 1062; see also Roalsvik v.
Comack, 2019 ME 71, ¶ 7, 208 A.3d 367 (explaining that great deference is paid
to the fact-finder because it has the first-hand opportunity to see and hear the
5 H&B also argues that the court posited that Boyington acted unreasonably based on the
erroneous finding that he refused to ever meet with McGovern. H&B points out that although
Mokarzel did claim that Boyington refused to meet him, Mokarzel promptly contradicted himself by
agreeing that a meeting took place in November of 2015. Even if the court erred in finding that
Boyington never met with McGovern, the error is harmless because the court found—and competent
record evidence supports—that H&B refused to lease to Wholesale Motors simply because Boyington
did not like McGovern. See M.R. Civ. P. 52(c).
9
witnesses testify). There was competent, substantial evidence to support the
trial court’s finding that “Boyington did not withhold his consent based on a
‘reasonable review’ of [Wholesale Motors’] creditworthiness, business
experience or capacity to perform JJ Cars’ obligation under the lease,” but rather
that he withheld his consent “simply because [he] did not like McGovern.” See
Chapman v. Katz, 862 N.E.2d 735, 745 (Mass. 2007) (stating that, in a
commercial context, when determining whether a refusal to give consent to a
tenant’s sublease is reasonable, only factors relating “to a landlord’s interest in
preserving the property or in having the terms of the . . . lease performed should
be considered”) (quoting Restatement (Second) of Prop.: Landlord and Tenant
§ 15.2(2) (Am. L. Inst. 1977)). We decline H&B’s invitation to re-weigh the
evidence on this issue. See Roalsvik, 2019 ME 71, ¶ 7, 208 A.3d 367.
[¶13] H&B further argues that it could not consent to the sublease
because Wholesale Motors did not agree in a written statement to abide by the
terms and provisions of the lease and did not submit a financial statement and
a $250 administrative fee. Because leases are contracts in addition to being
conveyances of property, ordinary contract principles apply. See Tondreau v.
Sherwin-Williams Co., 638 A.2d 728, 730 (Me. 1994). “The interpretation of an
unambiguous contract must be determined from the plain meaning of the
10
language used and from the four corners of the instrument without resort to
extrinsic evidence.” See Am. Prot. Ins. Co. v. Acadia Ins. Co., 2003 ME 6, ¶ 11, 814
A.2d 989 (quotation marks omitted). “Where the language of a contract is
unambiguous, we review that contract de novo as a question of law.” Williams
v. Williams, 2017 ME 94, ¶ 9, 161 A.3d 710. Contrary to H&B’s argument, a plain
reading of Article XIII demonstrates that these documents and fees were
required only after H&B had consented to the lease. See Am. Prot. Ins. Co., 2003
ME 6, ¶ 11, 814 A.2d 989. Because H&B had already unreasonably withheld
consent to the sublease, as a matter of law the opportunity for submitting the
necessary documents and fees never arose.
[¶14] H&B next contends that it was not required to consent to the
sublease because JJ Cars was in material default, as defined in the lease, for not
paying rent at the agreed-upon sum.6 Contrary to H&B’s assertion, the court
H&B also makes a glancing reference in a parenthetical to JJ Cars being in material breach of
6
Article XIII for not seeking consent for the three prior subleases. H&B’s argument fails to
acknowledge or accept the court’s finding that Boyington had twice consented to the subleasing of
the property and once acquiesced, facts supported by Boyington’s testimony that he sanctioned the
subleases because “[the sublessees’] money was green.” “A material breach of contract is a
non-performance of a duty that is so material and important as to justify the injured party in
regarding the whole transaction as at an end.” Cellar Dwellers, Inc. v. D’Alessio, 2010 ME 32, ¶ 16, 993
A.2d 1 (quotation marks omitted). Given H&B’s back-to-back acceptance of three subleases—and the
revenue they created—JJ Cars’ failure to abide by the technical aspects of the lease with regard to
subleasing cannot be seen as a “material” breach of the lease. Further, H&B’s argument on this issue
ignores our disfavor for restraints on subleases. See Waterville v. Kelleher, 127 Me. 32, 35, 141 A. 70,
71 (1928) (“Covenants against subletting are restraints which courts do not favor. They are
construed with the utmost jealousy and easy modes have always been countenanced for defeating
them.”); Cowan & Scannell, Maine Real Estate Law and Practice § 15.32 at 684 (2d. ed. 2007).
11
found that Mokarzel had paid rent as required until October of 2015, a fact
supported by Mokarzel’s testimony that Boyington consented to him paying a
lesser amount of rent. Again, although there is certainly contradictory evidence
in the record, there is ample evidence to support the court’s findings that JJ Cars
was not in material default of the lease by failing to pay rent. See Ehret, 2016
ME 43, ¶ 12, 135 A.3d 101.
[¶15] H&B also argues that, even if it had unreasonably refused to
consent to the sublease in November of 2015, it would not have deprived JJ Cars
of any reasonably expected benefit pursuant to the lease because Wholesale
Motors continued to occupy the premises and pay rent to JJ Cars.7 Again,
contrary to H&B’s suggestion, the court found that, after November of 2015, the
property was unoccupied. To the extent that H&B challenges the court’s
findings regarding how long Wholesale Motors occupied the property and paid
rent to Mokarzel, those findings are supported by the evidence presented by
7 The dissent contends that there is no factual finding that connects H&B’s refusal to consent to
the sublease with Wholesale Motors’ departure and JJ Cars’ subsequent inability to perform its duties
under the lease agreement. Dissenting Opinion ¶ 26. We disagree. The trial court found that,
“Boyington refused to approve a sublease for McGovern and McGovern soon vacated the premises,”
and “[h]ad Boyington provided the reasonable consent required under the Lease Agreement, JJ Cars
and Mokarzel would not have been in the position of being unable to pay rent and other charges from
November 2015 through April 6, 2016.” Although the second finding was inaccurately labeled as a
conclusion of law by the trial court, its label does not change its character for purposes of our review.
12
Mokarzel, the weight and credibility of which was for the trial court alone to
assign. See Guardianship of Gionest, 2015 ME 154, ¶ 7, 128 A.3d 1062.
[¶16] Finally, H&B argues that, even if it breached the lease by
unreasonably withholding its consent to Wholesale Motors’ sublet of the
property, it did not rise to the level of a material breach.8 “Whether a material
breach has occurred is a question of fact that we review for clear error.” Jenkins,
Inc. v. Walsh Bros., 2001 ME 98, ¶ 13, 776 A.2d 1229. A material breach of
contract is a nonperformance of a contractual obligation that excuses the
injured party from further performance and justifies the injured party in
regarding the whole transaction as at an end. Cellar Dwellers, 2010 ME 32, ¶ 16,
993 A.2d 1[¶17] Here, for nearly three years, JJ Cars had been subletting the
property in order to ensure that the property generated income to pay the rent
owed to H&B. Boyington was well aware that only by subletting the property
8The dissent suggests that the court failed to make a finding that H&B’s breach of the lease
agreement was material because the term “material” does not appear in the trial court’s opinion.
Dissenting Opinion ¶ 29. The trial court, however, explicitly cited to Cellar Dwellers, 2010 ME 32,
¶ 16, 993 A.2d 1, in support of its conclusion that “H&B’s breach of the Lease Agreement therefore
excused JJ Cars and Mokarzel’s lack of performance.” Paragraph sixteen of our opinion in Cellar
Dwellers provides the standard for determining whether a breach of a contract is material and, on the
facts of that case, draws the conclusion that “there is competent evidence in the record to support
the court’s finding that [the appellee] committed a material breach that discharged [the appellant’s]
duties under the [contract].” Id. Given the trial court’s citation to that paragraph, we are
hard-pressed to fault its “failure” to use the word “material” in its decision and conclude that the trial
court found that H&B’s breach of the lease agreement was material.
13
had JJ Cars been able to use the property to generate income in order to meet
its obligations under the lease. Boyington’s breach of his duty to not
unreasonably withhold his consent ended any chance JJ Cars had to use the
property in a way that would continue to generate income to pay rent.
See Morin Bldg. Prods. Co. v. Atl. Design & Constr. Co., 615 A.2d 239, 241
(Me. 1992) (concluding that “[p]revention of performance is a breach of
contract that excuses further performance by the non-breaching party”). The
trial court did not err in determining that this breach was material.
[¶18] Because there is competent record evidence to support the court’s
finding that H&B materially breached the lease by refusing to consent to sublet
the property to Wholesale Motors, we discern no error in the court’s judgment.
The entry is:
Judgment affirmed.
CONNORS, J., with whom HORTON, J., joins, dissenting.
[¶19] Not every breach of a contractual duty excuses the other party
from its duty to perform. For this reason, I dissent.
14
A. JJ Cars’ First Affirmative Defense:9 H&B’s Refusal to Consent to a Sublease
[¶20] H&B and JJ Cars entered into a five-year lease commencing in 2011
and ending in 2016. Over the course of the lease, neither party strictly abided
by the terms of the written agreement. For example, three times prior to the
Wholesale Motors sublease, JJ Cars moved a subtenant into the leased premises
without seeking H&B’s prior consent, contrary to the terms of the lease. Each
time, H&B acquiesced after the fact.
[¶21] The fourth and last time, with Wholesale Motors, JJ Cars once again
moved in its chosen subtenant, this time either before seeking H&B’s consent
or after ignoring H&B’s refusal to consent.
[¶22] As the Court notes, given our deferential review on appeal, the
record supports the trial court’s finding that when JJ Cars sought consent to the
Wholesale Motors sublease, H&B’s owner, Sterling Boyington, refused to
9 Although we have not held that a breach-of-contract defense must be pleaded affirmatively, see
Court’s Opinion ¶ 1 n.1, any matter “constituting an avoidance” must be set forth as an affirmative
defense, M.R. Civ. P. 8(c). JJ Cars admitted to not paying rent after October 2015 but denied liability
by asserting that H&B unreasonably withheld consent. See Affirmative Defense, Black’s Law
Dictionary (11th ed. 2019) (defining “affirmative defense” as “[a] defendant’s assertion of facts and
arguments that, if true, will defeat the plaintiff’s . . . claim, even if all the allegations in the complaint
are true”); see also Carroll v. Acme-Cleveland Corp., 955 F.2d 1107, 1115 (7th Cir. 1992) (observing
that “Illinois regards a plaintiff’s breach of contract as an affirmative defense”); FDIC v. Modular
Homes, Inc., 859 F. Supp. 117, 122-23 (D.N.J. 1994) (stating that New Jersey recognizes breach of
contract as an affirmative defense). JJ Cars therefore asserted an affirmative defense and bore the
burden of proof. See Hansen v. Sunday River Skiway Corp., 1999 ME 45, ¶ 11 n.2, 726 A.2d 220(“Generally the party opposing a claim, usually a defendant, has the burden of proof on an issue
characterized as an affirmative defense or other issues to avoid or reduce liability.”).
15
consent because he did not like the owner of Wholesale Motors, which was
unreasonable and therefore constituted a breach of the lease. Court’s Opinion
¶¶ 5, 12. That breach did not relieve JJ Cars of its obligation to pay rent,
however, given the disconnect between H&B’s breach and JJ Cars’ inability to
perform its obligations under the lease. It is factually indisputable that
Boyington’s refusal to consent to Wholesale Motors’ subtenancy was simply
ignored by all. This fact and the remainder of the record shows no causal
connection between Boyington’s refusal to consent and JJ Cars’ inability to pay
rent. Put simply, as a matter of law, H&B’s breach was not material.
1. Remedy
[¶23] JJ Cars’ sublease to Wholesale Motors in disregard of H&B’s refusal
to consent was the appropriate and effected remedy by JJ Cars. The
Restatement (Second) of Prop.: Landlord and Tenant § 15.2 cmt. g (Am. L. Inst.
1977), provides:
If the landlord or the tenant withholds unreasonably his consent to
a proposed transfer by the other party, the other party may
proceed to make the transfer without regard to the terms of the
restraint on alienation, because the restraint is valid only to the
extent the consent to a transfer is not withheld unreasonably.
Thus, after H&B unreasonably withheld its consent, JJ Cars was free to sublease
to Wholesale Motors. See Polk v. Gibson Prods. Co. of Hattiesburg, Inc.,
257 So. 2d 225, 230-32 (Miss. 1972) (concluding that the lessees had a right to
16
sublease the premises to preserve the property and mitigate damages after the
lessor unduly withheld consent); Roundup Tavern, Inc. v. Pardini, 413 P.2d 820,
821-22 (Wash. 1966) (requiring the lessor to acknowledge the subtenant as the
rightful lessee after the lessor had unreasonably withheld consent).
[¶24] Critically, this is exactly what JJ Cars did. Not only was JJ Cars free
to sublease, but it did in fact sublease the premises to Wholesale Motors—just
as it had done with the three prior sublessees. JJ Cars took the remedy open to
it, leaving no basis to excuse its duty to perform its obligations under the lease.
2. Lack of a Causal Connection
[¶25] The trial court made no factual finding supported by record
evidence that causally connects H&B’s breach to JJ Cars’ inability to pay rent.
There is no evidence that H&B’s refusal prevented JJ Cars from subleasing to
Wholesale Motors. On the contrary, the record indicates that H&B’s refusal to
consent was simply ignored. Furthermore, there is no evidence that H&B’s
refusal to consent caused Wholesale Motors to renege on its sublease10 or
10The only time that the trial court addressed causation was when it found that, although
Boyington made “bigoted, repulsive, and discriminatory statements” to JJ Cars’ employees, “[t]here
was no credible evidence that Boyington made similar comments directed at the subtenants of JJ Cars,
or that Boyington caused the subtenants to vacate the premises.”
17
prevented JJ Cars from seeking another subtenant after Wholesale Motors
vacated the premises.
[¶26] The Court’s opinion states that “[b]ecause H&B refused to approve
the sublease, Wholesale Motors vacated the property in November of 2015.”
Court’s Opinion ¶ 5. But there is no such finding by the trial court linking those
events, and there is no evidence in the record indicating that H&B’s refusal to
consent was the reason why Wholesale Motors departed.11 The owner of
JJ Cars, John Mokarzel, testified that he ignored Boyington’s refusal to consent
and that Wholesale Motors occupied the property until January 2016.12 Indeed,
the evidence shows that during the three months that Wholesale Motors
subleased the premises, one of its rent checks to JJ Cars bounced, suggesting
that the problem was not H&B’s ignored refusal to consent to Wholesale Motors
as a subtenant, but rather Wholesale Motors’ inability to pay.
11 Because H&B filed a motion for further findings of fact and conclusions of law, “we do not
assume that the [trial court] made all the findings necessary to support its judgment.” Cellar
Dwellers, Inc. v. D’Alessio, 2010 ME 32, ¶ 15 n.6, 993 A.2d 1. “Rather, we review the court’s findings
to determine if they are sufficient, as a matter of law, to support the result and if they are supported
by the evidence in the record.” Id. (quotation marks omitted). The trial court found that Wholesale
Motors vacated the premises “soon” after Boyington’s refusal, but it made no finding pinpointing the
date further or, more importantly, tying Wholesale Motors’ departure, whenever it occurred, to
H&B’s refusal to consent.
12 Mokarzel testified that, although Wholesale Motors was not actively running its business on
H&B’s property in December 2015 and January 2016, Wholesale Motors was using the property as
an overflow parking lot for its business located next door.
18
[¶27] The trial court stated in its conclusions of law that “[h]ad
Boyington provided the reasonable consent required under the Lease
Agreement, JJ Cars and Mokarzel would not have been in the position of being
unable to pay rent.” But no finding of fact in its decision supports this
conclusion either, nor does the record evidence. Despite Wholesale Motors’
paying rent to JJ Cars from November 2015 to January 2016, JJ Cars last paid
rent to H&B in October 2015.
[¶28] Hence, even accepting that H&B breached the lease by refusing to
consent to Wholesale Motors as a subtenant,13 H&B’s breach is insufficient to
sustain JJ Cars’ affirmative defense given the lack of connection between H&B’s
refusal and JJ Cars’ inability to pay rent.14
13By Mokarzel’s own admission, JJ Cars had not paid the full amount of rent owed since year two
of the contract, constituting a material breach. Pursuant to Article XIII(c) of the contract, if JJ Cars
was in material breach of the contract, then H&B was not obligated to consent to the sublease.
Furthermore, Article XXIV(b) of the contract contained an integration clause requiring any changes
to be in writing, and Mokarzel testified that the lease was never amended to allow the lesser payment.
The Court states that the trial court’s finding that JJ Cars had “paid rent as required” for over four
years is supported by the record. Court’s Opinion ¶ 14. Mokarzel did testify—disputed by
Boyington—that Boyington forgave the difference, but there is no factual finding by the trial court on
this point, and we cannot fill in the blanks. See supra n.2; see also Ehret v. Ehret, 2016 ME 43, ¶¶ 12,
15-16, 135 A.3d 101; Guardianship of Grenier, 2018 ME 66, ¶¶ 7-8, 11-13, 185 A.3d 728.
14 Both parties testified that Wholesale Motors not only wanted to lease the property but wanted
an extension of the lease period, which H&B refused. It is not clear, but the trial court appeared to
include this refusal to extend the lease as a reason why it concluded that H&B’s refusal to consent
was unreasonable and constituted a breach of the lease. There is support in the record that
Wholesale Motors’ departure was animated by H&B’s refusal to extend the lease, and it is upon this
refusal to extend that JJ Cars stopped paying rent. Not only does this testimony further reflect a
disconnect between H&B’s refusal to consent and JJ Cars’ failure to pay rent, but it supports a
conclusion that Wholesale Motors’ departure was due to H&B’s refusal to extend the lease, not its
refusal to consent to the sublease. H&B, however, had no contractual duty to agree to a lease
19
3. Materiality of the Breach
[¶29] H&B’s refusal to consent lacked materiality. The trial court’s
opinion tersely states, “H&B’s breach of the Lease Agreement therefore excused
JJ Cars and Mokarzel’s lack of performance.” The term “material” appears
nowhere in the trial court’s opinion. But even if we concluded that the trial
court implicitly found materiality by citing to Cellar Dwellers, Inc. v. D’Alessio,
2010 ME 32, ¶ 16, 993 A.2d 1, which we should not, see supra n.2, no record
evidence would support that conclusion. See Jenkins, Inc. v. Walsh Bros.,
2001 ME 98, ¶ 13, 776 A.2d 1229 (“A trial court’s factual finding [regarding the
materiality of a breach] is clearly erroneous if there is no competent evidence
in the record to support it.” (quotation marks omitted)). The trial court’s
conclusion that JJ Cars was excused from further performance under the
contract without finding that H&B’s breach was material is an error as a matter
of law.
[¶30] When determining whether a party has committed a material
breach, traditional contract principles apply. Associated Builders, Inc. v. Coggins,
1999 ME 12, ¶ 6, 722 A.2d 1278. “A material breach of contract is a
extension. Hence, to the extent that H&B’s refusal to extend the lease formed a part of the trial court’s
reasoning, it constitutes legal error and is another reason why the affirmative defense fails.
20
non-performance of a duty that is so material and important as to justify the
injured party in regarding the whole transaction as at an end.” Cellar Dwellers,
2010 ME 32, ¶ 16, 993 A.2d 1 (quotation marks omitted). Conversely, a breach
by one party that is not material does not justify the other party’s subsequent
failure to perform under the contract. See Down E. Energy Corp. v. RMR, Inc.,
1997 ME 148, ¶ 10, 697 A.2d 417. Materiality is a fact-bound determination
that should be applied “in such a way as to further the purpose of securing for
each party his expectation of an exchange of performances.” Restatement
(Second) of Conts. § 241 cmt. a (Am. L. Inst. 1981).15
[¶31] Here, the record demonstrates, in several ways, that H&B’s breach
was not material. First, because it ignored H&B’s refusal to consent, JJ Cars
suffered no detriment or prejudice.16 See Coggins, 1999 ME 12, ¶¶ 6-7,
722 A.2d 1278. Second, JJ Cars was not deprived of the benefit that it
reasonably expected—that is, JJ Cars had possession of the property, it leased
the property to Wholesale Motors, and it had the ability to lease to another
The Restatement (Second) of Conts. § 241 (Am. L. Inst. 1981) provides a set of circumstances
15
that may be considered in determining whether a breach is material. Although the factors listed in
section 241 are not intended for leases, see Restatement (Second) of Conts. § 231 cmt. e (Am. L. Inst.
1981), they nevertheless provide useful criteria in evaluating landlord-tenant cases, see, e.g.,
LR Ranch Co. v. Murnion, No. DA 14-0103, 2014 Mont. LEXIS 612, at *7 (Mont. Oct. 7, 2014); DiBella v.
Fiumara, 828 N.E.2d 534, 539-42 & n.7 (Mass. App. Ct. 2005).
The trial court denied JJ Cars’ counterclaim against H&B for unreasonably withholding consent
16
because, although H&B breached the lease by doing so, JJ Cars had suffered no damages.
21
subtenant after Wholesale Motors moved out. See Restatement (Second) of
Conts. § 241 cmt. b (Am. L. Inst. 1981). Finally, looking at the historical
relationship between the parties and their respective failures to strictly adhere
to the terms of the contract, the trial court could not have rationally interpreted
H&B’s withholding of consent to constitute a breach that signaled the end of the
contract. See Brunswick Diggers, Inc. v. Anthony Grace & Sons, Inc., 159 Me. 21,
25-26, 187 A.2d 391, 393 (1963).
[¶32] The Court concludes that H&B’s breach was material because H&B
was aware that JJ Cars was only able to generate income by subletting the
property, and, therefore, by withholding consent, H&B “ended any chance
JJ Cars had to use the property in a way that would continue to generate
income.” Court’s Opinion ¶ 17. Although “[p]revention of performance is a
breach of contract that excuses further performance by the non-breaching
party,” Morin Bldg. Prods. Co. v. Atl. Design & Constr. Co., 615 A.2d 239, 241
(Me. 1992), as noted above, nothing in the record supports a conclusion that
H&B’s ignored refusal to consent affected JJ Cars’ ability to collect rent from
Wholesale Motors or any other viable subtenant.
[¶33] In sum, although the trial court could find on this record that
Boyington’s rejection of Wholesale Motors based on a general antipathy toward
22
its owner was unreasonable, the facts also reflect that no one paid any attention
to this rejection. Given that Boyington’s refusal to consent was ignored and that
Wholesale Motors moved into the leased premises anyway, and given that
Wholesale Motors did not vacate the premises based on this refusal, the lack of
connection between H&B’s breach and that of JJ Cars is fatal to JJ Cars’
affirmative defense. Neither the trial court’s factual findings nor the record
evidence supports a legal conclusion that JJ Cars met its burden of proof to show
that H&B’s breach excused JJ Cars from its duty to perform.
B. JJ Cars’ Second Affirmative Defense: Mitigation of Damages
[¶34] Because I believe that JJ Cars’ breach-of-contract affirmative
defense fails, I must address the trial court’s conclusion on JJ Cars’ second
affirmative defense—that H&B failed to mitigate its damages. The trial court
based its ruling on the conclusion that H&B’s duty to mitigate damages arose in
November 2015. Pursuant to Article XX(a)(iv) of the lease, however, H&B had
no duty to mitigate until JJ Cars’ right of possession was terminated, and this
did not occur until H&B regained legal possession through a forcible entry and
detainer action, after which it swiftly sold the property. See M.R. Civ. P. 80D.
Given the language of the lease, whether the property was lying dormant for
some period before that is immaterial because there is no duty to mitigate
23
outside the terms of a lease when that lease is commercial. See 14 M.R.S.
§§ 6010-A, 6017 (2020).
[¶35] The right to possession is determined by a forcible entry and
detainer action. See 20 Thames St. LLC v. Ocean State Job Lot of Me. 2017, LLC,
2020 ME 55, ¶ 5, 231 A.3d 426 (stating that the forcible entry and detainer
process for commercial leases is governed by statute); Rubin v. Josephson,
478 A.2d 665, 667 (Me. 1984) (recognizing that a forcible entry and detainer
action is “a summary proceeding to determine who has a right to immediate
possession of real property to the exclusion of another” and that judicial power
in this type of action is “purely statutory in origin”).
[¶36] Because the terms of the lease unambiguously state that H&B’s
duty to mitigate was triggered when JJ Cars’ right to possession was terminated,
see Am. Prot. Ins. Co. v. Acadia Ins. Co., 2003 ME 6, ¶ 11, 814 A.2d 989, and JJ Cars’
right of possession was terminated only as of March 24, 2016, at the conclusion
of the forcible entry and detainer action, see Ocean State Job Lot., 2020 ME 55,
¶ 5, 231 A.3d 426, the trial court erred when it found that H&B’s duty to
mitigate arose in November 2015. See also Dahl v. Comber, 444 A.2d 392,
393-96 (Me. 1982).
24
C. Conclusion
[¶37] For the foregoing reasons, the judgment should be vacated and the
matter remanded for a calculation of H&B’s damages arising from JJ Cars’
breach.
Marshall J. Tinkle, Esq., Thompson, MacColl & Bass, LLC, Portland, for appellant
H&B Realty, LLC
Neal L. Weinstein, Esq., Old Orchard Beach, for appellee JJ Cars, LLC, and John
Mokarzel
Business and Consumer Docket docket number CV-2016-33
FOR CLERK REFERENCE ONLY