Marcovich Land Co. v. J. J. Newberry Co.

• Decision Date: 16 December 1980
• Docket Number: No. 3-679A156,3-679A156
• Parties: MARCOVICH LAND CORPORATION, an Indiana corporation, Paul March and Michael H. March, individually, Paul March and Michael H. March, d/b/a March Realty and March Realty, Appellants (Defendants below), v. J. J. NEWBERRY COMPANY, a Delaware Corporation, Appellee (Plaintiff below).
• Court: Indiana Appellate Court

Page 935

413 N.E.2d 935

MARCOVICH LAND CORPORATION, an Indiana corporation, Paul March and Michael H. March, individually, Paul March and Michael H. March, d/b/a March Realty and March Realty Appellants (Defendants below), v. J. J. NEWBERRY COMPANY, a Delaware Corporation, Appellee (Plaintiff below).

No. 3-679A156.

Court of Appeals of Indiana, Fourth District.

Dec. 16, 1980.

Frederick J. Ball, Goldsmith, Goodman, Ball & Van Bokkelen, Highland, for appellants.

Timothy F. Kelly, Randall J. Nye, Beckman, Kelly & Smith, Hammond, Leon R. Kaminski, Newby, Lewis, Kaminski & Jones, La Porte, for appellees.

MILLER, Judge.

Paul March and Walter March (the latter being the executor of the estate of defendant Michael H. March, deceased), legal successors in interest to defendant-landlord Marcovich Land Corporation, appeal a judgment granting plaintiff-tenant, J. J. Newberry Company, a variety store chain, some $117,000, and denying the Marches the damages they requested in a counterclaim. ¹ Newberry, former tenant in a building owned by Marcovich located in East Chicago, Indiana, was awarded lost business profits On appeal, the legal successors to Marcovich present several questions for our review, which issues may be summarized as follows:

for a period of three years ² because Marcovich refused to rebuild the structure occupied by Newberry after it was destroyed by fire. The parties had a written lease which the trial court determined was enforceable and required such reconstruction by Marcovich. The court rejected the Marches' dual contentions in their counterclaim or set off that Newberry had not cooperated in efforts to rebuild and that in any event the covenant requiring rebuilding was impossible to perform. We affirm the trial court's judgment.

1) that the lease does not anticipate or require rebuilding where there has been a total destruction as occurred under the circumstances of the instant case;

2) that it would be "unconscionable" as well as impossible (or, as the Marches contend, commercially impractical) to require such rebuilding in light of the amount of the insurance proceeds, the time remaining on the lease, the "blighted" condition of the area, and the alleged difficulty in obtaining financing;

3) that the trial court improperly ignored the prohibitive circumstances noted in 2) above, as evidence by its findings and conclusions;

4) that Marcovich should in any event be excused from performance because Newberry did not cooperate or provide plans allegedly required by the parties' prior course of dealing; and

5) that the trial court improperly denied discovery requests by the Marches, including a motion to produce profit and loss statements of other Newberry stores in the East Chicago area, and that it made erroneous rulings on exhibits and testimony offered into evidence. ³

Newberry's complaint, filed January 4, 1973, generally alleged the parties entered into their 25-year written lease agreement on September 30, 1953 with respect to real estate and the improvements thereon located in the Indiana Harbor region of the City of East Chicago, and that thereafter, on July 14, 1958, Marcovich assigned its interest in the lease to Paul March and Michael H. March as trustees operating under the name of March Realty. The parties do not dispute these general facts, nor the further assertion that a fire of unknown origin completely destroyed the building in question on December 30, 1971. Newberry's complaint also alleges, however, that Marcovich violated a "fire clause" in the parties' lease agreement by failing to reconstruct and that as a result Newberry was unable to operate its retail business (a variety store) on the premises. Accordingly, in Count I of the complaint, (which was subsequently dismissed) Newberry requested that the trial court order specific performance of the lease by requiring Marcovich to rebuild.

Count II of the complaint presents the issue involved in the instant appeal, since specific performance was prevented by the condemnation of the property on June 16, 1976 by the City of East Chicago. Newberry contends it lost net profits as a result of the failure by Marcovich to reconstruct the demised premises, and accordingly, in its complaint requested damages of $210,000. As noted above, the trial court award Newberry approximately $117,000, consisting of lost profits of about $122,000 until June 16, 1976 minus $5,000 Newberry owed under the rental obligation imposed by the lease.

Because of its significance to the instant appeal, the so-called "fire clause" relied "In the event the demised premises are damaged or destroyed by fire or other casualty, or damaged by the demolition of any portion of the building necessitated by the enforcement of any law or Ordinance, or declared unsafe by any public authority, the Landlord shall, at own cost (sic) and expense, immediately repair, reconstruct and replace the demised premises, including improvements, extensions, alterations and additions to building made by Landlord or Tenant, all such work to be done in compliance with State Laws and City Ordinances. If the extent or character of such damage, destruction or unsafe condition renders the demised premises unfit for the proper conduct of the business of the Tenant, all rent shall cease and abate during the cessation of business of the Tenant and until the complete restoration of the demised premises ready for occupancy. If, however, the Tenant is able to and does continue its business in said premises pending the restoration or reconstruction of the demised premises, then a fair and just proportion of the rent shall abate until the demised premises are restored and ready for occupancy. Any rent paid in advance beyond the happening of any of the contingencies above mentioned shall be returned by the Landlord to the Tenant."

upon by both parties is quoted herein at the outset. That language in the lease provides as follows:

Before applying such provision in its judgment and conclusions of law, the trial court, which decided this case without intervention of a jury, arrived at the following findings of fact significant to the rights of Newberry and the successors to Marcovich's interest:

"6. That at the time the lease of September 30, 1953 was negotiated between the parties, the defendants, Paul March and Michael March, deceased, principals of the defendant, Marcovich Land Corporation, were experienced and competent real estate brokers and landlords.

7. That the defendant, Paul March, had over 40 years of experience in the real estate field which included purchasing, selling and leasing of real estate including commercial properties.

8. That the defendant, Michael March, had over 60 years of experience in the real estate field which included purchasing, selling and leasing of real estate including commercial properties.

9. That at all times during the negotiation of the lease agreement of September 30, 1953, both the plaintiff and the defendants had equal bargaining power for the purposes of negotiating said lease.

10. That from September 30, 1953 until the time of the fire (December 30, 1971) both parties to the lease had completely performed pursuant to the terms of the lease and that neither of the parties to the lease had in any way breached the lease or its terms and conditions.

11. That on December 30, 1971, the building which was the subject-matter of the lease of September 30, 1953, was complete (sic) destroyed by fire. The building was a total loss and nothing was saved.

13. That on December 31, 1971 the defendants were advised by J. J. Newberry Company that the plaintiff wanted the building rebuilt pursuant to the lease agreement.

14. That the 1953 lease in question was the culmination of a similar business relationship between the parties since 1926 as to the leasing of the premises for a variety store. Plaintiff built the original building with its own plans and specifications.... Each time the building was expanded, altered, modified on at least three (3) occasions plaintiff utilized its own plans and specifications and construction supervisors.... On each occasion plaintiff used its own architects.

15. That the defendants, Paul March and Michael March, deceased, demanded that the plaintiff supply them with architectural plans and specifications for the purpose of rebuilding the demised premises. Additionally the defendants requested that plaintiff extend the term of years 16. That there is no express covenant or provision in the lease of September 30, 1953 requiring the plaintiff to extend the term of years on the original lease agreement should the fire clause be invoked; or requiring the plaintiff to supply architectural plans and specifications for the purposes of rebuilding the demised premises should the fire clause be invoked.

on the lease agreement of September 30, 1953.

17. That defendants continued to demand architectural plans and specifications until May 9, 1972 when M. H. March informed plaintiff, by letter, that defendants March brothers intended to do nothing further under the lease.

18. If the defendants had complied with the fire clause in the lease agreement of September 30, 1953, one (1) year would have provided them with a reasonable time within which to build such a structure.

19. That as of December 30, 1971, the lease of September 30, 1953, had a period of six (6) years nine (9) months and one (1) day to run and that said lease would expire on September 30, 1978.

20. That on June 16, 1976 the City of East Chicago Indiana pursuant to its powers of eminent domain, condemned the property which the (sic) subject matter of the lease agreement of September 30, 1953.

21. That the plaintiff's damages will encompass the period of time from May of 1973 until June, 1976, the date on which the City of East Chicago took said property."

Significantly, the conclusions of law which accompanied the above findings determined that the lease agreement between...