AWP Inc. v. Sec. Self Storage

• Decision Date: 08 March 2022
• Docket Number: 21A-PL-1993
• Court: Indiana Appellate Court
• Parties: AWP Inc., Appellant-Defendant, v. Security Self Storage LLC, Appellee-Plaintiff.

AWP Inc., Appellant-Defendant, v. Security Self Storage LLC, Appellee-Plaintiff.

No. 21A-PL-1993

Court of Appeals of Indiana

March 8, 2022

Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision shall not be regarded as precedent or cited before any court except for the purpose of establishing the defense of res judicata collateral estoppel, or the law of the case.

Appeal from the Miami Superior Court No. 52D01-1709-PL-293. The Honorable James K. Muehlhausen, Special Judge

Attorney for Appellant Craig Roy Patterson Fort Wayne Indiana

Attorney for Appellee Anthony Russel Spahr Peru, Indiana

MEMORANDUM DECISION

TAVITAS, JUDGE

Case Summary

[¶1] This appeal arises from a breach of a commercial lease ("the Lease"). AWP, Inc. ("AWP") entered into the Lease with Security Self Storage, LLC ("Security") for the use of a single-story commercial building in Peru, Indiana.

AWP vacated the property prior to the expiration of the Lease. Security re-let the property for a lesser monthly rent. Security filed suit, seeking, inter alia, lost rent and utilities as well as attorney's fees. The trial court ruled that AWP violated the Lease and awarded $69, 078.11 in damages. AWP now appeals and argues that the trial court erred when it found that Security properly mitigated its damages and that the trial court erred in its award of attorney's fees. We affirm the trial court with respect to both of these issues. We further order the trial court to correct its order to reflect the proper amount of damages.

Issues

[¶2] AWP raises three issues for our review, which we consolidate and restate as:

I. Whether the trial court erred in finding that Security properly mitigated its damages.

II. Whether the trial court erroneously awarded attorney's fees to Security.

Facts

[¶3] Security leased a commercial property to AWP in Peru Indiana, for $2, 600 per month. AWP provides labor, signage, and equipment used to direct traffic away from road construction and sought a base of operations for the region.

[¶4] AWP drafted the Lease, ^[1] which contained this term: "Lessee shall pay for all utilities and services used or consumed upon the Premises up to an aggregate amount of $250 per month. Said utilities [ ] shall be placed in the name of the Lessee where applicable." Appellant's App. Vol. II p. 22. The parties appear to agree, however, that their shared intention was to have Lessor, Security, pay the first $250 of utilities expenses per month and that AWP, Lessee, would pay for any amount in excess of $250.^[2]

[¶5] The Lease included the following provision for remedies in the event of a breach:

12. LESSOR'S REMEDIES UPON DFAULT [sic] [ ] (a) if Lessee shall at any time be in default in the payment of rent or other sums of money required to be paid by Lessee, or in the performance of any of the covenants, terms, conditions, provisions, rules and regulations of this Lease and the Lessee shall fail to remedy any such default within a period of (10) ten days, in the event the default is as to payment of rent or other sums of money, or within thirty (30) days after receipt of notice thereof from Lessor, if the default relates to matters other than the payment of rent and other sums of money (but Lessee shall not be deemed to be in default if Lessee commences to remedy said defaults, other than relate to payment of rent and other sums of money, within said thirty (30) day period and proceeds therewith with due diligence), or if Lessee shall commit waste, shall vacate the Premises, shall fail to continuously occupy and conduct Lessee's business in the Premises of if Lessee shall be adjudged bankrupt or shall make an assignment for the benefit of creditor's [sic] or if a receiver of any property of Lessee in or upon the Premises be appointed in any action, court or proceeding by or against Lessee and not removed within thirty (30) days after an appointment, or if the interest of Lessee in the Premises shall be offered for sale or sold under execution or other legal process, lessor in addition to all other remedies give to Lessor in law or in equity by written notice to Lessee may terminate this Lease, or without terminating this Lease Re-enter the Premises by summary proceedings or otherwise, and in any event may dispossess the Lessee. In the event of such re-entry, Lessor may re-let the Premises without being obligated to do so, and in the event of a re-letting may apply the rent there from [sic] first to the payment of Lessor's expenses, including attorney's fees uncured [sic] by reason of Lessee's default, and the expenses of re-letting, including but not limited to the repairs, renovation or alteration of the Premises, and then to the payment of rent, and all other sums due from Lessee.

Id. at 23 (emphasis added).

[¶6] The parties signed the Lease in June 2016. In January 2017, Security notified AWP that the Lease did not reflect the intent of the parties and that AWP owed money for utilities. AWP did not remedy the lease, put the utilities in its name, or make more than one utility payment. Security notified AWP of the defect in the Lease multiple times, in writing, over the next three months.

[¶7] AWP acknowledged the error in the Lease but refused to correct it. AWP never put the utilities in its name, and only made one utility payment in the amount of $250. After multiple attempts to get AWP to rectify the Lease, Security indicated that AWP had thirty days to either: (1) amend the Lease and pay the utilities owed; or (2) vacate the premises. AWP's representative indicated that it would vacate the premises within thirty days. Security responded that it "would begin marketing the property to other potential tenants." Ex. Vol. I p. 57. AWP vacated the property in May 2017.

[¶8] On September 5, 2017, Security filed a complaint, seeking judgment against AWP for: (1) unpaid utilities; (2) unpaid rent; (3) prejudgment interest; (4) costs; and (5) attorney's fees in the amount of $9, 491.50. The trial court held a bench trial on August 11, 2021. Zac See, one of the owners of Security, testified, and the following colloquy ensued:

Q. And [ ] when the defendant moved out of the premises did you make diligent efforts to locate a tenant who would be of similar quality?

A. Yes.

Q. And in connection with your attempts to do that were you successful in locating a replacement tenant?

A. Yes.

Q. Were there other attempts that you made to, were there other attempts to find an alternate tenant had you been in contact with another or was there another tenant that you had heard about?

A. Yes.

Q. And who is that individual?

A. Rich Helm.

Q. Okay and was he interested in leasing [ ] the location?

A. Yes[, ] he was.

Q. And did Security Self Storage have a mortgage on the property at the time when AWP vacated?

A. Yes.

Q. Was it a substantial mortgage?

A. Yes.

Q. And did Security Self Storage substantially rely upon the rent coming in from AWP to pay that mortgage?

A. Yes.

Q. And with AWP vacating the property less than a year after the five[-]year lease was signed did that put Security Self Storage in substantially bad financial situation?

A. Yes.

Q. [ ] [S]o were there not sufficient cash reserves to be able to conduct a prolonged search for a suitable alternative tenant?

A. That's correct.

Q. [ ] [W]hen you learned that Richard Helm was interested in the property did you negotiate terms with him?

A. Yes.

Q. Okay and did you eventually end up signing a lease with Richard after AWP had already vacated?

A. Yes.

Q. Okay and under that new lease with Mr. Helm [ ]was he willing to pay the $2, 600 per month?

A. No.

Q. For rent?

A. No.

Q. Okay did he end up agreeing to pay $1, 900 per month?

A. Yes.

Tr. Vol. II pp. 48-50. See also testified, however, that he did not advertise the property or consider any other potential tenants. See knew of Helm's interest via word-of-mouth. When asked why he did not seek potential tenants that could pay the same as AWP had done, See responded: "Because my concern at the time was to cover the mortgage and expenses of owning that building and with the terms Mr. Helm and I discussed we could do that." Id. at 64.

[¶9] On August 27, 2021, the trial court issued its order and found that AWP had violated the Lease. The trial court ordered damages as follows:

A. $3, 000 in unpaid utility damages (13 months of $250.00 payments, less one (1) $250.00 payment made by Defendant);

B. $2, 600 rent for June, 2017;

C. $2, 600 rent for July, 2017;

D. $32, 900.00 for a $700.00 per month rent deficiency for 47 months;

E. Prejudgment interest in the amount of $8, 535.27;

F. $229.92 of costs[;] and

G. $9, 491.50 of reasonable attorney fees.

Appellant's App. Vol. II p. 10. The total damages award, according to the trial court's order, was $69, 078.11. AWP now appeals.

Analysis^[3]

I. Mitigation of Damages

[¶10] AWP first argues that Security failed to mitigate the damages resulting from AWP's breach of contract. When a contract is breached, the non-breaching party has "a right to damages for the 'loss actually suffered as a result of the breach' once [the breaching party] breache[s] the Agreement, but not 'to be placed in a better position than [she] would have been if the contract had not been broken.'" Fischer v. Heymann, 12 N.E.3d 867, 871 (Ind. 2014) (quoting Roche Diagnostics Operations, Inc. v. Marsh Supermarkets, LLC, 987 N.E.2d 72, 89 (Ind.Ct.App. 2013) (citations omitted), trans. denied). The non-breaching party also has "a duty to mitigate her damages." Id. (citing Hawa v. Moore, 947 N.E.2d 421, 427 (Ind.Ct.App. 2011)). "'[T]he duty to mitigate damages is a common law duty independent of the contract terms' that requires 'a non-breaching party [to] make a reasonable effort to act in such a manner as to...