Summary Judgment for Landlord Appropriate

Almost, if not every, commercial lease contains a requirement that the tenant acquire insurance protecting the property and liability interests of the landlord. Failure to fulfill the condition breaches the lease and allows the landlord to evict the tentant.

In Copley Mini Mart, Inc. v. Copley Properties, LLC, C.A. No. 28942, 2019 Ohio 33, State Of Ohio County Of Summit In The Court Of Appeals Ninth Judicial District (January 9, 2019) Copley Mini Mart, Inc., appealed from the judgment of the Akron Municipal Court in favor of Copley Properties, LLC.

FACTUAL BACKGROUND

This case involves a commercial lease of a convenience store. Copley Mini Mart, Inc. (“Tenant”) entered into a five-year lease with Copley Properties, LLC (“Landlord”) that commenced on November 1, 2011 and terminated on October 31, 2016. The lease contained provisions regarding insurance coverage, among others.

Tenant and Landlord had a discussion regarding renewing the lease. After this conversation, Tenant made improvements to the premises and hired a consultant to conduct a local-option election campaign to sell beer and wine at the store. Tenant sent a written notice of its intent to renew the lease to Landlord and a week later, Landlord refused Tenant’s request to renew the lease because it was untimely.

Landlord advised the Tenant that it was in n default of the lease due to alleged deficiencies with the insurance coverage it maintained for the premises and that the lease would expire on a date certain and requested assurances from Tenant that it would vacate the premises by that date. Tenant refused to vacate the premises.

Six weeks prior to the lease expiring, Tenant filed a complaint for declaratory judgment as to the parties’ rights and obligations under the lease and the option to renew. Landlord filed a counterclaim also seeking declaratory judgment as to the parties’ rights and obligations under the lease and the option to renew, in addition to claims for forcible entry and detainer and money damages. Tenant amended its complaint to add a claim for intentional interference with its business.

The trial court granted summary judgment in favor of Landlord and a judgment for a writ of restitution. The next day Landlord evicted Tenant and repossessed the premises pursuant to the self-help provision in the lease by installing new locks and a new security system at the premises.

MOTION TO DISMISS

In a commercial lease, a landlord can evict a tenant by judicial process or pursuant to a self-help provision contained in a lease that waives judicial process. In this case, Landlord proceeded with an eviction via judicial process by filing a counterclaim and obtaining a judgment for forcible entry and detainer, but then promptly exercised the self-help provision in the lease to evict Tenant.  Tenant was not evicted by judicial process because the court did not issue an actual writ of restitution. Because Tenant was not evicted by judicial process, all of Tenant’s arguments premised upon the trial court granting Landlord a judgment for a writ of restitution are moot.

Summary judgment is proper when:

1. no genuine issue as to any material fact exists;
2. the party moving for summary judgment is entitled to judgment as a matter of law; and
3. viewing the evidence most strongly in favor of the nonmoving party, reasonable minds can only reach one conclusion, and that conclusion is adverse to the nonmoving party.

Summary judgment consists of a burden-shifting framework. The movant bears the initial burden of demonstrating the absence of genuine issues of material fact concerning the essential elements of the nonmoving party’s case.  Once the moving party satisfies this burden, the nonmoving party has a “reciprocal burden” to set forth specific facts showing that there is a genuine issue for trial.

In this case the parties sought summary judgment as to their declaratory judgment claims regarding the parties’ rights and obligations under the lease relative to the option to renew the lease. Landlord argued that Tenant was not entitled to exercise the option to renew the lease because Tenant failed to comply with the conditions and requirements of the lease; namely, Tenant failed to maintain insurance coverage naming Landlord as an insured and Tenant operated illegal gambling machines on the premises.

In its combined response to Landlord’s motion for summary judgment and in support of its own summary judgment motion, Tenant presented only one argument: that Landlord had waived the lease provision requiring written notice of renewal and was equitably estopped from refusing Tenant’s notice of renewal of the lease. Tenant presented an affidavit from Mr. Singh, the owner of Copley Mini Mart, Inc., which averred that “[Landlord] has at all times been insured by [Tenant] pursuant to the lease.” This averment, however, contradicts, without explanation, Mr. Singh’s deposition testimony, wherein he conceded that the May 2016 insurance policy did not list Landlord as an insured and Landlord was not added to the policy until six months later, which was after the lease expired. An affidavit of a party opposing summary judgment that contradicts former deposition testimony of that party may not create a genuine issue of material fact to defeat the motion for summary judgment.

Tenant failed to meet its reciprocal burden to present evidence creating a genuine issue of material fact regarding the lease violations. The trial court applied the doctrine of equitable relief and declared Tenant’s four-month written notice sufficient and thus timely.

Tenant contended that equitable considerations precluded the forfeiture of the lease. Tenant argued and the trial court applied the principals of equity to declare that Tenant complied with the written notice requirement of the option to renew. On appeal, Tenant attempts to extend the equity argument to also excuse its violations of various lease terms. Since, Tenant did not make this argument to the trial court, the appellate Court properly declined to address this equity argument for the first time.

The trial court also found that Tenant failed to maintain insurance coverage in accordance with the terms of the lease and conducted unlawful activities on the premises. As to the insurance policy, Tenant on appeal states that it “did attest that it had maintained insurance on the property” and refers to the affidavit of Mr. Singh. The affidavit of Mr. Singh did not create a genuine issue of material fact as to whether there was a lease violation arising from the insurance provision. Summary judgment in favor of Landlord was appropriate on this basis.

ZALMA OPINION

When the Tenant lied – either in an affidavit or in his deposition – about the acquisition of the insurance and naming the landlord as an insured, he raised the ire of the court and defeated the impact of his affidavit. Providing insurance in the name of the landlord was a condition precedent to the lease agreement. Failure to provide the insurance, alone was sufficient to void the lease and allow the eviction under its terms. Insurance is one of the most important conditions of a lease and failure to provide it – along with other breaches – made the eviction automatic.