Joseph J. Freed and Associates, Inc. v. Cassinelli Apparel Corp.

• Decision Date: 16 April 1986
• Docket Number: No. 85-3,85-3
• Citation: 23 OBR 255,491 N.E.2d 1109,23 Ohio St.3d 94
• Parties: , 54 A.L.R.4th 585, 23 O.B.R. 255 JOSEPH J. FREED AND ASSOCIATES, INC., Appellee, v. CASSINELLI APPAREL CORPORATION, d.b.a. Stuarts, Appellant.
• Court: Ohio Supreme Court

Page 94

23 Ohio St.3d 94

491 N.E.2d 1109, 54 A.L.R.4th 585, 23 O.B.R. 255

JOSEPH J. FREED AND ASSOCIATES, INC., Appellee, v. CASSINELLI APPAREL CORPORATION, d.b.a. Stuarts, Appellant.

No. 85-3.

Supreme Court of Ohio.

April 16, 1986.

Plaintiff-appellee, Joseph J. Freed & Associates, Inc., is the owner and operator of a shopping mall in Hamilton County known as Cassinelli Square. Defendant-appellant, Cassinelli Apparel Corporation, d.b.a. Stuarts, is a commercial tenant in the shopping mall. In December 1974, appellant as lessee, and appellee as lessor, entered into a lease agreement, containing approximately sixty covenants, for retail space at Cassinelli Square. Of importance to the instant appeal, appellant-lessee agreed to the following covenant:

" * * * [T]o open for business and remain open at a minimum during such days and hours as shall be determined by Landlord (provided that if Tenant objects to the Landlord's determination of the minimum number of days or the minimum number of hours that the Tenant shall be open for business, then the objection shall be resolved by the Merchant's Association of the Shopping Center in accordance with its by-laws) * * *."

In 1977 appellant opened its store at Cassinelli Square. The record indicates at that all relevant times, the appellee-lessor maintained a policy requiring all tenants at Cassinelli Square to remain open for business between the hours of 10:00 A.M. and 9:00 P.M., Monday through Saturday, and between 12:00 noon and 5:00 P.M. on Sunday. The record further indicates that during the first few months of 1981, appellant reduced its business hours in contravention of appellee's policy; however, this matter was resolved and the appellant resumed the agreed-upon business hours on or about March 25, 1981.

By letter of January 24, 1982, appellant informed appellee that it intended to temporarily deviate from its established business hours. Beginning the next day, appellant pared two hours from each business day from Monday through Friday and one hour from its schedule on Saturday. This second reduction in hours remained in force until March 25, 1982.

Meanwhile, by certified letter dated January 28, 1982, appellee informed appellant that it had ten days to cure this default in the lease obligation. On March 12, 1982, appellee brought this forcible entry and detainer action in the Hamilton County Municipal Court in order to terminate the lease between the parties.

In pursuing its claim for relief, appellee relied upon the sequence of events occurring in 1982, arguing that the reduction in business hours during the first three months of that year amounted to a substantial breach of the lease agreement, and that the agreement explicitly conferred a right to terminate the leasehold in the case of a default that was not cured by the tenant within thirty days after it received notice to do so from the landlord.

The cause proceeded to trial without a jury on February 10, 1983. Approximately nine months later, the trial court granted appellee the equitable relief sought, by issuing a writ of restitution, to regain possession of the premises leased to appellant.

Upon appeal, the court of appeals affirmed in a split decision. The appellate court determined that forfeiture of the leased premises was a proper remedy for appellee, inasmuch as the reduction of business hours by appellant constituted a material breach of the lease agreement. Moreover, the court of appeals noted the specific language contained in the subject lease agreement as the basis for upholding the trial court's disposition. That language contained in Section 10.1 of the lease provides:

"Without further notice, Landlord may terminate this Lease if any default by Tenant continues after written notice of default, in the case of nonpayment of rent or the nonpayment of any other charges or payments provided to be made hereunder for more than ten (10) days or in any other case if Tenant does not cure the default within a reasonable time, but not later than thirty (30) days after written notice of default; or if Tenant makes any assignment for the benefit of creditors, commits any act of bankruptcy or files a petition under any bankruptcy or insolvency law, or if such a petition filed against Tenant is not dismissed within ninety (90) days; or if a receiver or similar officer becomes entitled to this leasehold; or if Tenant's interest in this Lease is taken on execution or other process of law in any action against Tenant; or if the leased Premises are levied upon by any revenue officer or similar officer; or if Tenant does, or permits to be done, any act which creates a mechanic's lien or claim therefor against the land or building of which the Leased Premises are a part which are not discharged or provisions made for payment thereof within thirty (30) days or Tenant does not comply with the provisions of Section 8.2(G) [sic ]. * * * " (Emphasis added.)

Lastly, the appellate court opined that the trial court did not abuse its discretion in weighing the equities of the case in favor of a forfeiture of the leased premises.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Porter, Wright, Morris & Arthur and Louis J. Schneider, Jr., for appellee.

Frost & Jacobs, Michael L. Cioffi, Pierce E. Cunningham and Terrence L. Goodman, for appellant.

PER CURIAM.

The central issue involved in the cause sub judice is whether the trial court acted properly in ordering a forfeiture of the leased premises by finding a material breach of the lease covenant requiring uniformity of business hours. More specifically, we must determine whether the trial court abused its discretion in weighing the equities of this cause in favor of a forfeiture of the leased premises.

The appellant submits the usual equitable maxims in urging a reversal of the decision below, i.e., that equity abhors a forfeiture; that a forfeiture clause, when ambiguous, must be strictly construed against the lessor (in favor of denying a forfeiture); and that the equities weigh against forfeiture since the breach was immaterial and non-substantial.

The appellee generally agrees with the equitable considerations posited by appellant, but argues that none of these considerations is applicable here which would necessitate a reversal of the lower court rulings.

In reviewing the lease agreement, and in particular, Section 10.1 as set forth above, it is readily apparent that the terms of the agreement extend the right of forfeiture to "any default by tenant." As pointed out by the court of appeals below, " * * * the term 'default' is not possessed of any ambiguity or of any special definition in the context in which it appears in the lease." Therefore, it is reasonable to conclude that because the appellant's obligation to remain open for business in accordance with the policy set forth in the lease is plain and unambiguous, the appellee was afforded a contractual right of forfeiture in the event that appellant breached its obligations under the lease by deviating from the uniform business hours established by the lessor.

The fact that the subject lease does afford the lessor the right of forfeiture for the breach in issue does not necessarily require affirmance of the lower court decisions. As indicated before, the crucial issue becomes whether the trial court abused its discretion in weighing the equities in favor of appellee and enforcing the contractual right of forfeiture.

Our review of the record reveals that there is competent evidence to support appellant's assertions that its reduction in business hours was a minor deviation from the policy established by the lessor, and that such a reduction of hours was in the best economic interests of the appellant.

On the other hand, the record indicates the necessity of a shopping mall enterprise to maintain uniform hours in order to further the collective success of the mall's tenants. Likewise, the lease itself contained a mechanism whereby the lessee had the right to submit any objection concerning business hours to a retail merchant's association and to have the dispute resolved by the association in accordance with its by-laws. There is no evidence whatsoever that the appellant even attempted to seek the assistance of the retail merchant's association. Instead, appellant chose to unilaterally reduce its business hours during the winter months.

While there is evidence to support the arguments submitted by both parties to this controversy, we cannot find that the lower courts erred in finding the balance of equities in favor of the appellee, nor can we find that such a disposition amounted to an abuse of discretion on the part of the trier-of-fact.

As this court stated in State v. Adams (1980), 62 Ohio St.2d 151, 157, 404 N.E.2d 144, :

"The term 'abuse of discretion' connotes more than an error of law or judgment; it implies that the court's attitude is unreasonable, arbitrary or unconscionable. Steiner v. Custer (1940), 137 Ohio St. 448 ; Conner v. Conner (1959), 170 Ohio St. 85 ; Chester Township v. Geauga Co. Budget Comm. (1976), 48 Ohio St.2d 372 ." See, also, Blakemore v. Blakemore (1983), 5 Ohio St.3d 217, 219, 450 N.E.2d 1140.

Given this precise definition we cannot hold that the trial court abused its discretion by ordering a forfeiture of the leasehold. Our affirmance of the lower courts takes into account several key factors. First, in the cause sub judice, we are dealing with a commercial leasehold where the parties appear to have entered an agreement in equal bargaining positions. Second, the lease in issue provided that "any default" can result in a forfeiture upon written notice by the lessor coupled with a failure to cure the default by the lessee in the time frame set forth in the lease agreement. In the instant case, this procedure was undertaken in accordance with the terms of the lease. Third, the appellant did not...