M. Leo Storch Ltd. Partnership v. Erol's, Inc., 797

• Decision Date: 01 September 1992
• Docket Number: No. 797,797
• Citation: 620 A.2d 408,95 Md.App. 253
• Parties: M. LEO STORCH LIMITED PARTNERSHIP et al. v. EROL'S, INC., et al. ,
• Court: Court of Special Appeals of Maryland

Page 253

95 Md.App. 253

620 A.2d 408

M. LEO STORCH LIMITED PARTNERSHIP et al. v. EROL'S, INC., et al.

No. 797, Sept. Term, 1992.

Court of Special Appeals of Maryland.

Feb. 25, 1993.

Edward J. Tolchin (Patricia V. Fettmann and Fettmann & Tolchin, on the brief), Fairfax, VA, for appellants.

William D. Quarles (Fred J. Federici, III and Venable, Baetjer, Howard & Civiletti, on the brief), Washington, DC, for appellees.

Argued before MOYLAN, BISHOP and DAVIS, JJ.

BISHOP, Judge.

Appellants, M. Leo Storch Family Limited Partnership and M. Leo Storch Management Corp. (hereinafter collectively referred to as "Storch"), filed a complaint against Appellees, Erol's, Inc. ("Erol's"), BF Holding Co. ("BF Holding"), Blockbuster Holding Corp., and Blockbuster Entertainment Corp., in the Circuit Court for Prince George's County. Storch claimed, inter alia, breach of a continuous operation clause of its lease with Erol's and sought interlocutory and permanent injunctive relief. On February 3, 1992, the trial court denied Storch's motion for an ex parte and/or interlocutory injunction. The trial court then issued a show cause order. On April 29, 1992, a hearing was held on the show cause order, and the trial court denied Storch's request for an interlocutory injunction. Storch filed a timely notice of appeal to this Court.

Issues

Storch presents the following issues:

I. Was the trial court's determination, that Storch was unlikely to prevail in an action for damages over and above rent which Erol's had agreed to pay, the incorrect standard to apply in this type of case?

II. Did the trial court err when it determined that a greater injury would be suffered by Erol's if it was required to reopen and maintain the losing business than would be suffered by Storch?

III. Did the trial court err when it determined that there is little likelihood of a fact finder judging irreparable harm?

IV. Did the trial court err when it determined that the business operation does not violate the public interest?

Facts

Storch is the owner of Hilltop Plaza Shopping Center located in Bowie, Maryland. The rentable area of Hilltop Plaza is 116,075 square feet. On August 7, 1984, Hannah Storch, Storch's predecessor, and Erol's entered into an agreement for the lease of a 5,400 square foot portion (4.6522%) of the shopping center. Erol's planned to use the leased premises ("Hilltop Erol's") to sell and rent televisions, video cameras, video tape recorders, videotapes, movies, and accessories. The initial term of the lease was five years, beginning October 1, 1984. Erol's exercised its option to renew the lease for an additional five year term, ending September 30, 1994. Erol's rent obligation was fixed--the monthly rent did not fluctuate with Hilltop Erol's monthly gross sales.

Starting in August 1990, Hilltop Erol's averaged 3,000 customers per month. In order to turn a profit, however, Hilltop Erol's was required to average over 5,000 customers per month. Accordingly, Hilltop Erol's operated at a loss; the store projected that it would continue to operate at a loss in 1992. The entire Erol's chain experienced similar difficulties.

On April 19, 1991, BF Holding purchased all of the outstanding shares of Erol's capital stock owned by Erol's majority stockholder, Mr. Erol Onaran. After the acquisition, BF Holding attempted to revive the Erol's chain, including the Hilltop Erol's store. Despite those efforts, however, Erol's decided to close Hilltop Erol's "[b]ecause the store was losing so much money, in spite of all that had been done for it, it didn't make economic sense to continue to operate [the] store."

After learning of Erol's intention to close Hilltop Erol's, Storch filed the action sub judice. In Count III of the complaint, Storch averred:

Defendants are bound to operate the leased premises "during the entire term of this Lease with due diligence and efficiency" and to "carry at all times in said premises a stock of merchandise of such size, character and quality as shall be reasonably designed to produce the maximum return to Landlord and Tenant." Defendants are breaching this covenant by closing the Hilltop Plaza store. Plaintiffs are being irreparably injured and will continue to be irreparably injured by defendants' breach.

WHEREFORE plaintiffs pray that the Court issue a temporary and permanent injunction enjoining defendants closing of the Hilltop Plaza store.

Storch relied on, in part, the "continuous operation clause" found in paragraph nine of the agreement which provides:

Tenant shall operate all of the leased premises during the entire term of this Lease with due diligence and efficiency so as to produce all of the gross sales which may be produced by such manner of operation, unless prevented from doing so by causes beyond Tenant's control. Subject to inability by reason of strikes or labor disputes, Tenant shall carry at all times in said premises a stock of merchandise of such size, character and quality as shall be reasonably designed to produce the maximum return to Landlord and Tenant.

On February 3, 1992, the trial court denied Storch's motion for ex parte injunctive relief, and, instead, issued a show cause order. Three days later, Hilltop Erol's closed. At the time of the hearing on the show cause order (i.e., the hearing on the motion for interlocutory injunctive relief), Hilltop Erol's had been closed for over six weeks; two years, five months remained until Erol's obligation under the lease agreement would terminate.

Pamela Handy ("Handy"), Erol's district manager, testified that each Erol's store requires a manager, assistant manager, two part-time managers and two part-time associates. Erol's managers must be able to control inventory and "shrinkage," review profit and loss reports, work within budgets, and handle payroll, hiring and firing. Erol's employees undergo a ninety-day training class when they are first hired. According to Handy, in order to be successful within the video industry you really need to have some type of movie knowledge; being able to select and help purchase tapes that [Erol's] will select for certain stores. You have to know your customers, what titles are going to rent in a particular store, how many copies you need to buy for that. You need to be able to supply customers with that knowledge; to be able to put a movie in their hands and let them rent.

Handy testified that, in order to reopen Hilltop Erol's, Erol's would have to interview, hire, and train new employees, and would have to purchase five to eight thousand movie titles.

Discussion

I Scope of Review

"[I]t is a rare instance in which a trial court's discretionary decision to grant or to deny a preliminary injunction will be disturbed by this Court...." State Dep't of Health & Mental Hygiene v. Baltimore County, 281 Md. 548, 550, 383 A.2d 51 (1977). "The granting or denying of an injunction is within the sound discretion of the trial court and will not be disturbed on appeal unless that discretion has been abused." Teferi v. Dupont Plaza Assocs., 77 Md.App. 566, 578, 551 A.2d 477 (1989) (citing Holiday Universal Club v. Montgomery County, 67 Md.App. 568, 576, 508 A.2d 991, cert. denied, 307 Md. 260, 513 A.2d 314 (1986), appeal dismissed, 479 U.S. 1049, 107 S.Ct. 920, 93 L.Ed.2d 973 (1987); SECI, Inc. v. Chafitz, Inc., 63 Md.App. 719, 725, 493 A.2d 1100 (1985)).

It is well-settled that

a proper exercise of discretion requires the court to consider four factors: likelihood of success on the merits; the "balance of convenience"; irreparable injury, which can include the necessity to maintain the status quo; and, where appropriate, the public interest. And it is the complainant who has the burden of presenting a case justifying the granting of a preliminary injunction, Baltimore v. Warren Manuf. Co., 59 Md. 96, 105 (1882), so that if the facts as stated in the bill of complaint or, when appropriate, as shown by the evidence, are not "full and sufficiently definite and clear, in support of the right asserted, and that such right has been violated," the court will not order preliminary relief. Id.

Baltimore County, 281 Md. at 554, 383 A.2d 51 (citation omitted). Furthermore, the "failure to show any one of the four factors is sufficient to preclude relief." Nationwide Mut. Ins. Co. v. Hart, 73 Md.App. 406, 411, 534 A.2d 999 (1988).

Within the framework of the foregoing principles, we now turn to Storch's contentions. We hold that the trial court did not abuse its discretion when it denied interlocutory injunctive relief because Storch did not prove a "likelihood of success on the merits." Therefore, we will not address the "irreparable injury," "balance of convenience," or "public interest" factors of the four-part test.

II Likelihood of Success on the Merits

The trial court found as a fact that "the likelihood of the plaintiffs prevailing in an action for damages over and above rent which the defendant has agreed to pay is unlikely." Storch argues that

[s]uch a determination is not only incorrect, it is not a relevant basis for determining whether or not to grant an interlocutory injunction.... The amount of damages recovered is not part of this consideration. The question which should have been addressed ... is the likelihood of ... being able to enforce the continuing operation provisions of the defendants' lease.

Although this may be true, we nevertheless hold that despite Erol's alleged breach, it was unlikely that Storch would succeed in obtaining a permanent injunction to enforce specifically the continuous operation clause of the lease. "[W]here the record in a case adequately demonstrates that the decision of the trial court was correct, although on a ground not relied upon by the trial court ..., an appellate court will affirm." See Robeson v. State, 285 Md. 498, 502, 403 A.2d 1221 (1979), cert. denied, 444 U.S. 1021, 100 S.Ct. 680, 62 L.Ed.2d 654 (1980).

Storch is seeking injunctive relief to...