U.S. Bank, N.A. v. Higbee Lancoms, L.P.

[Cite as U.S. Bank, N.A. v. Higbee Lancoms, L.P., 2021-Ohio-1799.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
U.S. BANK, N.A., AS TRUSTEE, AS : APPEAL NO. C-200247
SUCCESSOR IN INTEREST TO BANK TRIAL NO. A-1806448
OF AMERICA, N.A., AS TRUSTEE, :
SUCCESSOR BY MERGER TO
LASALLE BANK, N.A., AS TRUSTEE :
FOR THE REGISTERED HOLDERS O P I N I O N.
OF CD 2006-CD3, COMMERCIAL :
MORTGAGE PASS-THROUGH
CERTIFICATES, :
Plaintiff-Appellee, :
vs. :
HIGBEE LANCOMS, LP, :
Defendant-Appellant. :
Civil Appeal From: Hamilton County Common Pleas Court
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: May 26, 2021
Taft Stettinius & Hollister LLP, Aaron M. Herzig, Nicholas J. Pieczonka, and
Michael L. Meyer, for Plaintiff-Appellee,
Ulmer & Berne LLP, Reuel D. Ash and Jesse R. Lipcius, for Defendant-Appellant.
OHIO FIRST DISTRICT COURT OF APPEALS
BOCK, Judge.
{¶1} Defendant-appellant Higbee Lancoms, LP, (“Higbee”) appeals the trial
court’s judgment, which held Higbee liable to plaintiff-appellee U.S. Bank National
Association (“the Bank”) for past rent, common-area maintenance charges (“CAM”),
taxes, carrying costs, and attorney’s fees totaling $831,902. For the reasons stated
herein, we affirm.
I. Facts and Procedure
{¶2} Higbee operated a Dillard’s retail department store at 6290 Glenway
Avenue in Cincinnati (“the premises”) under a lease (“the lease”) which began in
1998 and expired on July 14, 2018. Under the lease, Higbee was obligated to pay
$56,250 per month in rent, along with taxes, CAM, and other operating expenses.
The lease required any changes in the terms to be in writing and signed by both
parties.
{¶3} After some transfers, Dillard’s Realty Associates, LLC, assumed
interest in the lease and the loan obligation. It defaulted and the Bank foreclosed on
the property. Michael Bergman was appointed as the receiver in the foreclosure.
A. The Proposed Agreement
{¶4} The parties began communicating via email in January 2018. In
February 2018, Bergman emailed Chris Johnson, a corporate representative of
Higbee, as follows: “Thanks for your time last week. Attached is a lease renewal
proposal that demonstrates our understanding of your needs and our desire to work
with you. After you have a chance to review, let’s set up some time to chat at your
convenience.” Johnson responded that Higbee was not interested in staying on the
premises if it had to pay rent.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶5} Johnson emailed Bergman in April 2018 stating that Higbee would
stay on the premises for a term of one year for $0 rent, with Higbee paying expenses.
Johnson added that he wanted to confirm these terms before sending them to
Higbee’s legal department to draft the agreement.
{¶6} Bergman emailed CIII (the umbrella organization over Bergman’s
company and special servicer of the Bank) Higbee’s proposed terms. CIII responded,
“Yes, let’s make the proposal.”
{¶7} Later in April 2018, Bergman emailed Johnson to tell him that he had
sent the proposal to the appropriate parties for approval.
{¶8} Bergman emailed Johnson in early May 2018, stating in part: “Wanted
to let you know that ownership is working on moving the lease proposal forward -
hope to hear back from them in the coming days.”
{¶9} In late May 2018, Higbee’s counsel emailed Bergman with the first
draft of “a lease amendment for the Dillard’s store at West Town Center extending
the Initial Term of the Lease for one year * * *.” The parties continued sending
redlined drafts.
{¶10} After the lease expired in July 2018, Bergman continued to invoice
Higbee for rent under the lease.
{¶11} In an August 2018 email, Bergman informed Johnson that Higbee was
a holdover tenant and requested that Higbee pay past-due rent. Johnson responded,
“the deal we had was no rent for one year.”
{¶12} In a September 2018 email, Bergman told Johnson that the one-year
rent abatement would begin when the parties signed the lease amendment and that
rent would continue to accrue until that time. Johnson told Bergman that Higbee
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OHIO FIRST DISTRICT COURT OF APPEALS
was relying on the terms they had discussed and back rent was not a part of those
discussions. Bergman again informed Johnson that he considered Higbee to be a
holdover tenant because there was no signed agreement.
{¶13} In mid-September 2018, Higbee’s counsel sent a draft of the lease
amendment to Bergman for signature. In October 2018, Bergman sent Higbee a
demand letter requesting that it pay the past-due rent.
B. The Lawsuit
{¶14} Bergman sued Higbee, asserting that Higbee had not paid rent since
the expiration of the lease in July 2018, that it remained a holdover tenant, and that
negotiations to extend the lease had failed. Bergman demanded back rent along with
other relief. In June 2019, the trial court granted the Bank’s unopposed “Motion to
Substitute as Party Plaintiff.”
{¶15} The Bank filed an amended complaint, seeking damages for past and
future rent for an alleged breach of a commercial-real-property lease. Higbee’s
counterclaim sought to estop the Bank from pursuing rent payments because the
Bank and Bergman had told Higbee that it could remain in the premises rent-free for
a year after the lease expired in exchange for Higbee paying CAM, taxes, and
insurance.
{¶16} The trial court granted the Bank’s summary-judgment motion,
awarding $831,902. The trial court did not offer a rationale for its decision.
{¶17} Higbee timely filed its notice of appeal.
II. Standard of Review
{¶18} We conduct a de novo review of summary-judgment decisions.
Holloman v. Permanent Gen. Assur. Corp., 1st Dist. Hamilton No. C-180692, 2019-
Ohio-5077, ¶ 8.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶19} Under Civ.R. 56(C), summary judgment is proper when the moving
party establishes that “(1) no genuine issue of any material fact remains, (2) the
moving party is entitled to judgment as a matter of law, and (3) it appears from the
evidence that reasonable minds can come to but one conclusion, and construing the
evidence most strongly in favor of the nonmoving party, that conclusion is adverse to
the party against whom the motion for summary judgment is made.” Id. at ¶ 7.
III. Assignment of Error
{¶20} Higbee’s single assignment of error asserts that the trial court
erroneously granted the Bank summary judgment, arguing that (1) the parties had an
oral lease, which the Bank breached; (2) Higbee’s partial performance removed the
oral lease from the statute of frauds; and (3) regardless of whether a lease existed,
equitable estoppel prevents the Bank from pursuing rent payments.
{¶21} For the following reasons, we find no merit in Higbee’s assignment of
error and affirm the trial court’s judgment.
A. There Was No New Oral Contract
{¶22} Higbee asserts that the parties’ communications created a new oral
agreement in which Higbee would remain on the premises for one year, without any
rent, but paying for CAM, taxes, and insurance.
{¶23} For a contract to exist, the parties must consent to its terms, a meeting
of the minds must occur, and the terms of the contract must be definite and certain.
Roth v. Natl. City Bank, 1st Dist. Hamilton No. C-100216, 2010-Ohio-5812, ¶ 10.
{¶24} In Vogel v. Albi, 1st Dist. Hamilton No. C-190746, 2020-Ohio-5242,
this court found that emails exchanged between the parties failed to demonstrate a
meeting of the minds. Id. at ¶ 2. The emails showed that the parties had negotiated
the sale of real property from Frank Albi and Third Street Associates, LLC,
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OHIO FIRST DISTRICT COURT OF APPEALS
(collectively, “Albi”) to Joe Vogel. Id. ¶ 4-10. An Albi representative stated in an
email that Vogel’s proposal was acceptable, but the deal would not be final until the
parties signed a written contract. Id. at ¶ 8. Vogel emailed Albi acknowledging that
he had not signed the contract, but implied that the parties should rely on Vogel’s
verbal commitment. Id. at ¶ 11. Albi sold the property to another buyer. Id. Vogel
sued for breach of contract. Id. at ¶ 12. This court found that the trial court properly
granted judgment in Albi’s favor because any acceptance of an offer by the seller was
contingent upon both parties signing a written contract. Id. at ¶ 2.
{¶25} Like in Vogel, the trial court properly granted summary judgment. The
parties did not anticipate a new oral agreement. Instead, their communications show
that the parties anticipated amending or extending the lease. And that lease was clear
that no amendment could be final until the parties had signed an amended lease.
Bergman’s and Higbee’s emails show that their intention was to memorialize the
agreement in writing. The parties discussed a proposal and exchanged drafts for an
amended lease, but they did not finalize an agreement because they never signed an
amended lease.
{¶26} For example, an April 2018 email from Johnson, Higbee’s corporate
representative, sought confirmation of the terms of the lease before it was turned
over to Higbee’s legal department to draft the lease. Further, an April 2018 email
from Bergman to Johnson stated that the proposal was being presented for approval
to the appropriate parties.
{¶27} Moreover, the first draft of a post-July 14, 2018 lease term was drafted
by Higbee, with Higbee’s counsel stating that she was attaching, “a lease amendment
for the Dillard’s store at West Town Center extending the Initial Term of the Lease
for one year.” (Emphasis added.)
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶28} Finally, the parties’ email communications about the terms of the
contract began six months before the expiration of the lease and continued through
September 2018—long past the July 14, 2018 expiration of the lease—with exchanges
of drafts going back and forth between the parties. And Johnson testified in his
deposition that it was necessary to turn the matter over to Higbee’s legal department
because “they draft the leases and I don’t.”
{¶29} The communications between Higbee and Bergman were dialogue
between two sophisticated businesses discussing a proposed deal, not a final one. As
negotiations began six months before the expiration of the lease, Higbee could have
ensured that the deal was final by the lease’s expiration date.
{¶30} The parties’ communications show that they did not intend to create a
new oral contract.
B. Higbee’s Statute of Frauds Argument is Moot
{¶31} Higbee argues that the doctrine of partial performance removes the
parties’ oral agreement from the operation of the statute of frauds, which would
require the parties’ lease to be in writing. But because we have determined that the
parties did not have an oral contract, we find this issue to be moot and decline to
consider Higbee’s argument. See State v. Smith, 1st Dist. Hamilton No. C-190558,
2021-Ohio-1389.
C. Equitable Estoppel
{¶32} “Equitable estoppel prevents relief when one party induces another to
believe certain facts exist and the other party changes [its] position in reasonable
reliance on those facts to [its] detriment.” Wright v. Mirza, 2017-Ohio-7183, 95
N.E.3d 1108, ¶ 13 (1st Dist.), quoting State ex rel. Chavis v. Sycamore City School
Dist. Bd. of Edn., 71 Ohio St.3d 26, 34, 641 N.E.2d 188 (1994).
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶33} To make a prima facie case of equitable estoppel, Higbee must show
(1) the Bank made a factual misrepresentation; (2) the misrepresentation was
misleading; (3) the Bank’s misrepresentation induced Higbee’s actual reliance that
was reasonable and in good faith; and (4) Higbee’s reliance caused detriment. Kunz
v. Reisenfeld, 1st Dist. Hamilton No. C-120179, 2012-Ohio-5460, ¶ 20. This court
requires parties seeking equitable estoppel to demonstrate actual or constructive
fraud. Id.{¶34} Higbee’s equitable-estoppel argument is not well taken because the
Bank made no factual misrepresentation and there was no showing of fraud. The
parties were in negotiations. Bergman was clear that any deal was contingent on
approval by the appropriate parties. The parties continued sending drafts back and
forth long after the lease expired. The parties’ communications show that they were
discussing a proposal—and nothing more. Equitable estoppel does not apply.
D. Holdover Tenancy
{¶35} A tenant who remains in possession of leased property after a lease
term expires is a tenant at sufferance. Adams v. Relmax, 2018-Ohio-1751, 111 N.E.3d
758, ¶ 10 (8th Dist.). A holdover tenant is not relieved from its obligation to pay the
rent. B. & O. RR. Co. v. West, 57 Ohio St. 161, 49 N.E. 344 (1897).
{¶36} If a tenant holds over and operates according to the expired contract’s
terms, the law implies a contract under those same terms. Kazmaier v. Fat Jacks,
LLC, 6th Dist. Wood Nos. WD–09–048 and WD–09–057, 2010-Ohio-3627, ¶ 18. To
determine the length of the term of a holdover tenancy, courts look to the expired
lease’s provision for rent payment. Id. An expired lease that provided for annual rent
creates a holdover tenancy from year to year, even if the payments were to be made
in monthly increments. Id.
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{¶37} Higbee argues that it was not a holdover tenant because the parties’
negotiations were for a new oral agreement. Therefore, Higbee argues, the purported
oral agreement was an entirely new agreement, not an extension of the lease. But as
described above, the parties’ communications show that Higbee was aware that the
parties contemplated extending its existing lease via a written lease amendment.
{¶38} Therefore, as of July 15, 2018, Higbee was a holdover tenant. The
terms and conditions of the lease—which required Higbee to pay “annual base rent *
* * payable in equal monthly installments * * * during each and every calendar
month during the Initial Term and any Renewal Term”—created a year-to-year
holdover tenancy. Id. Despite Higbee leaving the premises in February 2019, all of
its obligations under the lease lasted until July 14, 2019.
IV. Conclusion
{¶39} The record shows that Higbee and the Bank did not create a new oral
contract or extend/amend the lease. The parties engaged in lengthy negotiations, but
failed to agree to or sign a final written agreement. Therefore, the terms of the
agreement were never definite and there was no meeting of the minds.
{¶40} The amount that the trial court ordered Higbee to pay is substantial.
But the law and the record support the Bank’s position that Higbee was a year-to-
year holdover tenant. As a result, it was obligated to meet all of the terms of the lease
for the remainder of the holdover term.
{¶41} The trial court did not err in granting the Bank’s motion for summary
judgment. Higbee’s assignment of error is overruled and the trial court’s judgment is
affirmed.
Judgment affirmed.
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OHIO FIRST DISTRICT COURT OF APPEALS
ZAYAS, P.J., and, BERGERON J., concur.
Please note:
The court has recorded its entry on the date of the release of this opinion
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