3637 Green Rd. Co. v. Specialized Component Sales Co.

• Decision Date: 11 August 2016
• Docket Number: No. 103599.,103599.
• Citation: 69 N.E.3d 1083,2016 Ohio 5324
• Parties: 3637 GREEN ROAD CO., LTD., Plaintiff–Appellant v. SPECIALIZED COMPONENT SALES CO., INC., Defendant–Appellee.
• Court: Ohio Court of Appeals

69 N.E.3d 1083

2016 Ohio 5324

3637 GREEN ROAD CO., LTD., Plaintiff–Appellant

v.SPECIALIZED COMPONENT SALES CO., INC., Defendant–Appellee.

No. 103599.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Aug. 11, 2016.

Lewis A. Zipkin, In Son J. Loving, Zipkin Whiting Co., L.P.A., The Zipkin Whiting Building, Beachwood, OH, for appellant.

Frank P. Giaimo, Beachwood, OH, for appellee.

Before: E.A. GALLAGHER, P.J., E.T. GALLAGHER, J., and CELEBREZZE, J.

EILEEN A. GALLAGHER, P.J.

{¶ 1} Plaintiff-appellant 3637 Green Road Co., Ltd. ("3637 Green Road") appeals from a judgment of the Shaker Heights Municipal Court in its favor and against defendant-appellee Specialized Component Sales Co., Inc. ("Specialized Component Sales") for breach of a commercial lease. 3637 Green Road contends that the trial court erred (1) in enforcing an alleged oral modification of the lease that reduced the monthly rent, (2) in concluding that Specialized Component Sales was liable only for rent through December 2012 and (3) in offsetting rent due for November and December 2012 by Specialized Component Sales' security deposit. 3637 Green Road asserts that instead of the $1,196.50 in damages it was awarded by the trial court, it should have been awarded the court's jurisdictional limit of $15,000 in damages. For the reasons that follow, we affirm the trial court's judgment.

Factual Background and Procedural History

{¶ 2} On September 22, 2014, 3637 Green Road filed a complaint in the Shaker Heights Municipal Court against Specialized Component Sales, seeking $7,368.75 in damages plus statutory interest and costs as a result of its alleged breach of a month-to-month commercial lease with 3637 Green Road. 3637 Green Road alleged that Specialized Component Sales "willfully and/or negligently" breached its obligations under the lease to pay monthly rent and to "refrain from damaging the premises in excess of ordinary wear and tear." Attached to the complaint was a statement of account (the "statement of account") showing that monthly rent of $1,473.75 had been invoiced from January 1, 2011 through March 1, 2013 but had not been paid from November 2012 through March 2013, totaling $7,368.75.

{¶ 3} In its answer, Specialized Component Sales admitted that the parties had a month-to-month lease for the premises but denied that it owed 3637 Green Road any amount under the lease. It maintained that 3637 Green Road's claims were barred by setoff based on 3637 Green Road's retention of Specialized Component Sales's security deposit and rent 3637 Green Road received from subsequent tenants of the premises. A bench trial was held on August 15, 2015. Lewis Zipkin, the then-sole remaining partner of 3637 Green Road, Flo Goldkrantz, Zipkin's secretary and receptionist and Steve Sulzberger, principal of Specialized Component Sales, testified at trial. A summary of the relevant evidence follows.

{¶ 4} On April 17, 1981, 3637 Green Road and Specialized Component Sales, a distributor of industrial electrical components, entered into a lease for warehouse and office space (suites 2B and 3A) in the Green Park Building on 3637 Green Road in Beachwood (the "original lease"). Suite 2B was warehouse space and suite 3A was office and warehouse space (collectively, the "premises"). The original lease was for a term of three years, beginning on June 1, 1981 and terminating on May 31, 1984, at a monthly rent of $1,600, with an option to renew the lease for another three-year term at a monthly rent of $1,882. Paragraph 23 of the original lease, entitled "holding over," states:

Should the Lessee remain in possession of the leased premises after the date of the expiration of this Lease, Lessee shall be a tenant from month to month, and such tenancy shall be otherwise subject to all the conditions and covenants of this Lease.

Paragraph 22 of the original lease, entitled "vacation of premises," states:

Lessee shall deliver up and surrender to Lessor possession of the leased premises upon the expiration of the Lease or its termination in any way in as good condition and repair as the same shall be at the commencement of said term * * * and deliver the keys at the office of Lessor or Lessor's agent.

{¶ 5} The original lease also contained a written waiver provision and a no-oral-modification provision. Paragraph 24 of the original lease, the written waiver provision, states, in relevant part:

No waiver of any condition or legal right or remedy shall be implied by the failure of Lessor to declare a forfeiture, or for any other reason, and no waiver of any condition or covenant shall be valid unless it be in writing signed by Lessor. * * *

Paragraph 42 of the original lease, which includes the no-oral-modification provision, states, in relevant part:

This Lease contains the entire agreement between the parties, and any other agreement hereafter made shall be ineffective to change, modify or discharge it in whole or in part unless in writing and signed by the party against whom enforcement of the change, modification or discharge is sought. * * *

Specialized Component Sales stipulated that the original lease required that any modification to the lease be in writing.

{¶ 6} The parties executed six written extensions to the original lease. After the expiration of the final written lease extension, Specialized Component Sales remained in possession of the premises. The parties agree that from the expiration of the sixth lease extension until October 31, 2012, Specialized Component Services was a month-to-month tenant; however, the parties dispute the amount of the monthly rent that was owed during the tenancy and when the lease terminated.

{¶ 7} The base monthly rent under the fifth lease extension, commencing January 1, 1998, was $1,737 for the first 17 months and $1,824 for the remaining 24 months, with the possibility of additional rent payments based on "real estate tax escalation" and "operating expense escalation" provisions. Because it had been unable to locate a copy of the sixth lease extension (which 3637 Green Road claims specified a higher rent)¹ until shortly before trial, 3637 Green Road's claims for unpaid rent were based on the rent specified in the fifth lease extension. Thus, 3637 Green Road argued, based on the fifth lease extension, that it was entitled to monthly rent of $1,824 for the entirety of Specialized Component Sales' month-to-month tenancy. Steve Sulzberger, principal of Specialized Component Sales, acknowledged that under the last written extension of the lease the rent was "something in the $1,800 range." However, he testified that at "roughly the end of 2003" or the beginning of 2004, he "had a discussion" with Nelson Barman, 3637 Green Road's property manager, "about business being fairly bad at the time" and the fact that he would have to find another, cheaper place to rent unless 3637 Green Road agreed to reduce the rent on the premises. Sulzberger testified that, as a result of their discussion, the monthly rent was reduced to $1,473.75 but that no written agreement was executed confirming the rent reduction.

{¶ 8} Sulzberger stated that Specialized Component Sales paid the reduced monthly rent of $1,473.75 from "roughly 2004" until October 2012. During that time period, he never received any communications from 3637 Green Road suggesting that Specialized Component Sales had not paid sufficient rent or that it owed the balance between the $1,473.75 it had paid each month and the monthly rent agreed to in the fifth lease extension (or any other written lease extension). He further testified that when Specialized Component Sales made its final rent payment on October 17, 2012 (for the rent due October 1, 2012), it was his understanding, consistent with the statement of account attached to the complaint, that there was a zero balance due under the lease as of that date.

{¶ 9} The fifth lease extension also addressed the security deposit Specialized Component Sales was required to provide under the lease, stating in relevant part:

Upon the execution of this Fifth Extension of Lease, Lessee agrees to deposit and maintain with Lessor the sum of Seventeen Hundred Thirty-seven dollars ($1,737.00) which means that an additional Fourteen dollars ($14.00) shall be added to the security deposit currently on deposit, to be held without interest to secure the faithful performance of all of the covenants of the Lease and if the same have been faithfully performed, said deposit shall be refunded at the expiration of this Lease. * * *²

{¶ 10} Sulzberger testified that it was his belief that Specialized Component Sales had paid the security deposit required under the fifth lease extension but that because it was so long ago, he either did not have or could not locate, copies of checks or other documents confirming that the security deposit had been paid. He testified that he had never received any notice that any part of the security deposit had been applied to rent or any other expense. 3637 Green Road offered no evidence that the security deposit had not been paid or that unpaid rent or any other expense had been previously offset against the security deposit.

{¶ 11} In September 2012, Zipkin, the then-sole remaining partner of 3637 Green Road,³ told Sulzberger that Specialized Component Sales needed to vacate suite 2B by October 31 or pay an additional $1,800 a month in rent, i.e., $1,800 a month in addition to the rent it was currently paying for that space and suite 3A, because 3637 Green Road had located a new tenant for suite 2B. Zipkin informed Sulzberger that Specialized Component Sales could continue leasing suite 3A but that there would be no reduction in rent notwithstanding the reduction in space. Sulzberger testified that he rejected Zipkin's offer to continuing renting suite 3A at the same rent and that Specialized Component Sales began taking steps to vacate the premises. 3637 Green Road did not provide any written notice to Specialized Component Sales of its...