Collins v. McKinney

Decision Date08 August 2007
Docket NumberNo. 02A04-0607-CV-380.,02A04-0607-CV-380.
Citation871 N.E.2d 363
PartiesJane H. COLLINS, Appellant/Cross-Appellee-Defendant/Counterplaintiff, v. T. William McKINNEY, Appellee/Cross-Appellant-Plaintiff/Counterdefendant.
CourtIndiana Appellate Court

Eric E. Snouffer, Snouffer & Snouffer, Fort Wayne, IN, Attorney for Appellant.

John C. Theisen, Holly A. Brady, Fort Wayne, IN, Attorneys for Appellee.

OPINION

VAIDIK, Judge.

Case Summary

Jane Collins ("Collins") appeals the trial court's grant of T. William McKinney's ("McKinney") motion for directed verdict as to Collins' counterclaim for breach of a written lease. The trial court concluded that even if McKinney breached the lease, Collins cannot prevail because there is no evidence to show that the breach was material or that Collins incurred any damage. Finding that there is sufficient evidence to allow a reasonable finder of fact to conclude that McKinney did breach the contract, that the breach was material, and that Collins suffered damages as a result of the breach, we reverse and remand for a new trial.

Facts and Procedural History

Collins owns certain real estate ("the Property") in Fort Wayne, Indiana. The Property consists of two parcels of land: Parcel 1 is a car dealership, and Parcel 2 is a stone parking lot. On November 23, 1999, Collins and her late husband entered into a lease agreement ("the Prime Lease") for the Property with McKinney, whereby McKinney agreed to pay the Collinses $12,500.00 per month for five years. Section 11.1 of the Prime Lease provided, in pertinent part:

[McKinney] may not assign or sublet the demised premises without [Collins'] prior written consent. In the event that [McKinney] shall at any time, during the term of this Lease, sublet all or any part of said premises or assign this Lease after first obtaining the consent of [Collins], it is hereby mutually agreed that [McKinney] shall nevertheless remain fully liable under all of the terms, covenants and conditions of this Lease. If this Lease be assigned or if the demised premises or any part thereof be subleased or occupied by anybody other than [McKinney], [Collins] may collect from the assignee, sublessee or occupant any rent or other charges payable by [McKinney] under this Lease, and apply the amount collected to the rent and other charges herein reserved, but such collection by [Collins] shall not be deemed a release of [McKinney] from the performance by [McKinney] under this Lease.

Appellant's App. p. 57 (emphases added). Section 14.1 of the Prime Lease provided that if McKinney violated any part of the agreement, Collins was to notify him in writing, and McKinney would have thirty days to cure the default. Section 14.1(b) provided that if McKinney failed to cure the default within thirty days, Collins reserved the right to "cancel and terminate [the Prime Lease] by notice in writing to [McKinney]." Id. at 58.

That same day, with Collins' written consent, McKinney entered into a sublease agreement with a conditional option to purchase ("the Sublease") with Tomkinson Chrysler Jeep, Inc. ("Tomkinson"). Tomkinson agreed to pay McKinney $20,000.00 per month for Parcel 1. Paragraph twenty-five of the Sublease provided, "Subject to the terms and conditions of the Prime Lease ... [Tomkinson] may assign this Sublease or sublet the Subleased Premises only with the prior written consent of [McKinney], which consent shall not be unreasonably withheld." Id. at 80 (emphasis added).

Also on that day, Collins, her late husband, McKinney, Tomkinson, and Chrysler Realty Corporation ("Chrysler") entered into an Option for Assignment of Lease ("the Chrysler Option"). Pursuant to the Chrysler Option, Chrysler could purchase all of Tomkinson's interest in the Sublease if the Property ceased to be occupied by an authorized dealer of the Daimler Chrysler Corporation. Paragraph 2 of the Chrysler Option provided, in pertinent part, "[Collins, McKinney,] and [Tomkinson] hereby agree and covenant that [the Sublease] shall not be modified, assigned or terminated by them without the prior written consent of [Chrysler]." Id. at 323.

On July 15, 2004, Tomkinson entered into an Asset Purchase Agreement with Glenbrook Dodge, Inc. ("Glenbrook"), whereby Tomkinson agreed to sell to Glenbrook its Chrysler Jeep dealership. Tomkinson further agreed to assign its interest in the Sublease to Glenbrook upon the closing of the Asset Purchase Agreement. The Asset Purchase Agreement did not close until February 2005. On August 1, 2004, Glenbrook took possession of Parcel 1 and began paying the $20,000.00 monthly lease payments directly to McKinney, who continued to pay Collins $12,500.00 per month pursuant to the Prime Lease. Glenbrook also agreed to separately rent Parcel 2 directly from McKinney for an additional $2,000.00 per month.

On August 19, 2004, Collins informed McKinney, via letter, that she refused to consent to the assignment from Tomkinson to Glenbrook. In addition, Collins formally notified McKinney that, by allowing Glenbrook to sublet the Property without her consent, McKinney was in default of the Prime Lease and had thirty days to cure the default by removing Glenbrook from the Property, pursuant to Section 14.1 of the Prime Lease.

On September 24, 2004, in response to Collins' letter, McKinney initiated this suit by filing a Complaint for Declaratory Judgment ("Complaint") against Collins, asking for a declaratory judgment that "Tomkinson does not need the consent of Jane Collins to any assignment of the Sublease to Glenbrook Dodge, Inc. or any other entity but only needs the consent of McKinney, whose consent cannot be unreasonably withheld." Id. at 49. McKinney filed a Motion for Speedy Hearing on his Complaint, which the trial court granted as to the issue of Collins' consent. The trial court entered an order providing that Collins' consent was required prior to any assignment or sublease of the Prime Lease, Sublease, or any leasehold interest flowing therefrom, including the proposed assignment from Tomkinson to Glenbrook.

Collins filed a counterclaim ("the Counterclaim"), alleging that McKinney was in breach of the Prime Lease because Glenbrook was in possession of the Property without Collins' consent, in violation of Section 11.1 of the Prime Lease. Pursuant to Section 14.1 of the Prime Lease, Collins sought to cancel and terminate the Prime Lease based on this alleged violation.1 In his answer to Collins' Counterclaim McKinney raised the affirmative defense that any alleged breach was not material and, accordingly, did not support termination of the Prime Lease.

A few days before trial, McKinney filed a Motion in Limine seeking an order "prohibiting Collins, her counsel or any witness from testifying to, presenting any evidence of, or in any way referring to the conduct of the parties after December 17, 2004." Appellee's App. p. 21. The trial court granted the motion.2

On June 14 and June 15, 2006, a jury trial was held regarding McKinney's Complaint and Collins' Counterclaim. During his opening statement, McKinney's attorney stated, "At one point in time from approximately August of 2004 to some time in February of 2005 in this little back vacant lot, Glenbrook parked cars there for awhile." Tr. p. 35. As to the nature of the relationship between Tomkinson and Glenbrook, Doug McKibben, the owner of Glenbrook, testified, "We had a Management Agreement." Id. at 123. However, he also testified that the "only" agreement between Tomkinson and Glenbrook was the Asset Purchase Agreement. Id. at 123-24.

After Collins and McKinney finished presenting their evidence, McKinney filed a Motion for Directed Verdict, which the trial court granted. On June 23, 2006, the trial court issued a written order supporting its decision. The order provided, in pertinent part:

Does evidence of possession of the premises, without a written sublease, constitute a subleasing of the premises in violation of the lease covenants? Ancillary to that question is: does the renting of Parcel 2 by [McKinney] to Glenbrook to park cars constitute a subleasing in violation of the lease? Assuming that the answer to one or both of these two questions is `yes[,]' the next question is: does that violation constitute a breach which would permit the relief requested by [Collins]? The essential elements of a breach of contract action are: (1) the existence of a contract, (2) [McKinney's] breach thereof, (3) and damages. [Collins] has requested the relief of forfeiture of the lease agreement. If there is an express provision in the lease which permits the violation of a covenant to work a forfeiture of the agreement, the covenant will be enforced if the breach is material. Was there sufficient evidence which would constitute a breach and/or a material breach of the lease?

The factors to be considered in determining the materiality of a breach are found in the Restatement of Contracts, Section 275, and are restated in Page Two v. PC Management, Inc. One of the factors to be considered in determining the materiality of a breach is the extent to which the "injured" party will obtain the substantial benefit which she could have reasonably anticipated. In this case, [Collins] could have reasonably anticipated $150,000.00 per year under her lease with [McKinney]. [Collins] has received $150,000.00 per year. [Collins] has presented no evidence that she has suffered any damage or that she has not received the benefit of her bargain under the original lease. [Collins] has received all of the payments due and owing under the terms of her contract. No testimony or other evidence has been presented that "she lost the ability of her freedom to contract[,]" as [she argues]. As a result, that "injury" constitutes argument and speculation, but not evidence. No evidence has been presented that [Collins] did not wish to contract with [Glenbrook], that she has lost an opportunity to contract with anyone else or that she has lost an...

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