Chesapeake Bank v. Monro

• Decision Date: 31 January 2006
• Docket Number: No. 2288, September Term, 2004.,2288, September Term, 2004.
• Citation: 166 Md. App. 695,891 A.2d 384
• Parties: CHESAPEAKE BANK OF MARYLAND v. MONRO MUFFLER/BRAKE, INC.
• Court: Court of Special Appeals of Maryland

891 A.2d 384

166 Md. App. 695

CHESAPEAKE BANK OF MARYLAND v. MONRO MUFFLER/BRAKE, INC.

No. 2288, September Term, 2004.

Court of Special Appeals of Maryland.

January 31, 2006.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Robert L. Hanley, Jr., Towson, for appellant.

Howard S. Stevens, Baltimore, for appellee.

Panel: KENNEY, DEBORAH S. EYLER, WOODWARD, JJ.

KENNEY, J.

Chesapeake Bank of Maryland appeals the decision of the Circuit Court for Baltimore County granting the petition for judgment of renewal of lease agreement and for declaratory judgment filed by Monro Muffler/Brake, Inc., appellee. Chesapeake Bank of Maryland presents two questions:

1. Did the trial court err in holding that Monro's letter dated August 29, 2002 constituted an effective renewal of its lease with Chesapeake even though it was sent 27 days after the deadline specified in the Lease?

2. Did the trial court err in holding that Monro's untimely notice of renewal was a default subject to cure under the lease?

For the following reasons, we shall reverse and remand to the circuit court.

FACTUAL AND PROCEDURAL HISTORY

In 1981, Chesapeake Bank of Maryland ("the Bank"), then doing business as Chesapeake Federal Savings and Loan Associates, leased property located at 10501 York Road in Baltimore County to Kimmel Automotive, Inc. The lease provided for a term of twenty years, to expire on October 31, 2002. It further provided:

LESSEE shall have and is hereby granted a total of 3 successive options to extend the term of this lease for any period of time not exceeding 5 years for each such option upon the same covenants and conditions as herein provided. If LESSEE shall elect to exercise one or more of such options it shall do so by giving LESSOR written notice at least ninety (90) days prior to the expiration of the primary term or of the then current extension, and in such notice LESSEE shall state the date to which it elects to extend the term.

* * *

In the event LESSEE shall default in the performance of any of the terms or provisions of this lease other than the payment of monthly rent, LESSOR shall promptly so notify LESSEE in writing. If LESSEE shall fail to cure such default within twenty days after receipt of such notice, or if the default is of such character as to require more than twenty days to cure and LESSEE shall fail to commence to do so within twenty days after receipt of such notice and thereafter deligently [sic] proceed to cure such default, then in either such event LESSOR may cure such default and such expense shall be added to the rent otherwise due, but any such default shall not work as a forfeiture of this lease.

In a letter dated March 20, 2002, Monro Muffler/Brake, Inc. ("Monro") informed the Bank that it was in the process of purchasing all the shares of Kimmel Automotive. Along with the letter, Monro sent the Bank a "landlord's estoppel certificate," which provided in part:

2. The Lease is valid, in full force and effect on the date hereof and enforceable in accordance with its terms and has not been modified or amended from the date of its execution to the date hereof, except as may otherwise be indicated in said Schedule.

3. The term of the Lease commenced on the date of commencement shown in said Schedule and will terminate, unless renewed or extended in accordance with its terms, on the date of termination shown in said Schedule.

The "Schedule" referred to in the estoppel certificate confirmed that the termination date on the lease was October 31, 2002, and that the lessee had three options to extend the lease for terms of up to five years each. The Bank signed the estoppel certificate on April 10, 2002, and returned it to Monro as provided for in Monro's letter.

In a letter dated May 8, 2002, Monro informed the Bank that it "has finalized its purchase of all of Kimmel Tire and Tread Quarters' business." The letter, which was signed by Thomas Aspenleiter, Monro's Vice President of Real Estate, concluded: "We look forward to a long and prosperous relationship with you and we welcome any questions or comments you may have relative to this relationship." In a letter dated August 8, 2002, Monro stated that it was updating its landlord information and asked the Bank to verify its name and contact information. The Bank provided Monro with the requested information.

Monro informed the Bank of its intention to exercise its option of extending the lease in a letter dated August 29, 2002:

Please accept this letter as Monro Muffler / Brake, Inc.'s official notification of our intent to renew said lease agreement for the first five-year renewal period commencing November 1, 2002 and expiring October 31, 2007. . . .

Tenant shall have two five-year renewal options remaining.

Please sign below as confirmation of said renewal and fax back. . . .

The Bank refused to confirm the extension, informing Monro of its decision in a letter dated September 5, 2002: "I acknowledge receipt of your request to renew the lease for the above premises; however, the time period within which to exercise the right to renew the lease expired on or about August 2, 2002. Therefore, effective November 1, 2002, the lease for the above premises is terminated."

In the hearing before the circuit court, Aspenleiter testified that he had entered the lease's expiration date into a computer system Monro uses to keep track of its approximately 615 locations. In entering the data, however, he inadvertently entered that the lease called for sixty days' notice of extension, rather than the ninety days stated in the lease. Hence, Monro's records showed that it had until September 1 to extend the lease.

Monro responded to the Bank's termination of the lease in a letter dated September 11, 2002, stating:

Although, admittedly, the renewal notice was not received ninety (90) days before the expiration of the lease, the intent to renew was clear. The undersigned acquire [sic] the rights to this lease, one of 38 sites acquired earlier this year, with the clear intent of conducting ongoing business in the area. An administrative oversight caused the delayed issuance of the notice to renew, the receipt of which was acknowledged by you on September 5, 2002.

We have no intention of recognizing the termination notice and plan to remain as a tenant under the terms of the renewal lease. . . .

Indeed, Monro refused to vacate the property. In a letter dated September 30, 2002, Monro informed the Bank of its intention to exercise its option to purchase, as provided for in the lease. The parties sought appraisals of the property, and Monro made an offer. But, Aspenleiter testified, Monro ultimately decided not to purchase the property because, under the county zoning regulations, it would also have had to purchase an adjacent lot.

On November 14, 2002, the Bank filed a complaint and summons against tenant holding over in the District Court of Maryland for Baltimore County. On November 19, 2003, Monro filed a petition for judgment of renewal of lease agreement and for declaratory judgment in the Circuit Court for Baltimore County. Pursuant to a consent order from the District Court, the cases were consolidated in the circuit court.

The circuit court held a hearing on October 5, 2004, and issued its disposition of the case on November 4, 2004, "granting Monro's Petition for Judgment of renewal of the lease." The court issued a declaratory judgment to that effect on December 15, 2004. Thereafter, the Bank noted this timely appeal.

STANDARD OF REVIEW

Maryland Rule 8-131(c) states:

When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses.

Accordingly, we "review the case on both the law and the evidence." Id. When "`there is any competent, material evidence to support the factual findings below, we cannot hold those findings to be clearly erroneous.'" Cannon v. Cannon, 156 Md.App. 387, 404, 846 A.2d 1127 (2004), aff'd, 384 Md. 537, 865 A.2d 563 (2005) (quoting Shallow Run Ltd. P'ship v. State Highway Admin., 113 Md.App. 156, 174, 686 A.2d 1113 (1996)). But, whereas "the factual determinations of the circuit court are afforded significant deference on review, its legal determinations are not." Liberty Mut. Ins. Co. v. Maryland Auto. Ins. Fund, 154 Md.App. 604, 609, 841 A.2d 46 (2004). "Indeed, the appropriate inquiry for such determinations is whether the circuit court was `legally correct.'" Id. at 609-610, 841 A.2d 46 (citing Maryland Envtl. Trust v. Gaynor, 140 Md.App. 433, 440, 780 A.2d 1193 (2001)).

DISCUSSION

I. Was the Lease Effectively Renewed?

The circuit court granted Monro's petition for renewal of lease agreement because it found that Monro's correspondence with the Bank, including its untimely notice of extension, clearly demonstrated its intent to exercise the extension option. The court also based its decision on principles of equity, granting the extension despite Monro's untimely notice. The Bank contends that the court erred in both respects.

Monro argues that its notice of extension was timely under the terms of the lease. Monro also contends that the circuit court was correct in finding that its correspondence with the Bank constituted an effective extension. Additionally, Monro presents a number of equitable arguments in support of the circuit court's judgment.

A. Monro's Notice of Extension

The circuit court did not find that Monro's notice was timely. Rather, the court concluded that its untimely notice was nevertheless effective. The Bank contends that the court erred because "[t]he lease provision at issue in this case is clear and unambiguous," and that "[t]here is no doubt . . . that Monro failed to comply with the renewal provision."

"Leases are...