New Market Acquisitions, Ltd. v. Powerhouse Gym

• Decision Date: 29 March 2001
• Docket Number: No. C2-99-185.,C2-99-185.
• Citation: 154 F.Supp.2d 1213
• Parties: NEW MARKET ACQUISITIONS, LTD., Plaintiff, v. POWERHOUSE GYM, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

154 F.Supp.2d 1213

NEW MARKET ACQUISITIONS, LTD., Plaintiff, v. POWERHOUSE GYM, et al., Defendants.

No. C2-99-185.

United States District Court, S.D. Ohio, Eastern Division.

March 29, 2001.

Dan Jay Binau, Harris, McClellan, Binau & Cox, Columbus, OH, for Plaintiff.

Zora E. Johnson, Dykema & Gossett, Bloomfield Hills, MI, Gregory E. Sutton, Vorys Sater Seymour & Pease, Columbus, OH, Bruce Leroy Ingram, Vorys Sater Seymour & Pease, Columbus, OH, Joseph H. Hickey, Dykeman & Gossett, Andrew Lusk, Bloomfield Hills, MI, Jackie Lee Stewart, David M. Scott, David Michael Whittaker, Luper Sheriff & Neidenthal, Columbus, OH, for Defendants.

MEMORANDUM AND ORDER

HOLSCHUH, District Judge.

Plaintiff New Market Acquisitions, Limited, filed suit against its tenant, ESB One Berger Enterprises, Inc., for breach of a commercial lease agreement, and against William, Ibitsam, Norman, and Nouha Dabish, the personal guarantors on that lease. Jurisdiction is based on diversity of citizenship. This matter is currently before the Court on several motions: (1) Motion of Third Party Defendant ESB One Berger Enterprises, Inc. for Summary Judgment (Record at 47); (2) Defendants' Motion for Partial Summary Judgment (Record at 48); and (3) Plaintiff's Motion for Partial Summary Judgment (Record at 54).

I. Background

Eric Berger is the President of ESB One Berger Enterprises, Inc., ("ESB") an Ohio corporation. In the Summer of 1996, Mr. Berger sought to open a health club in Columbus, Ohio. Mr. Berger met with William Dabish of Powerhouse Gym International, Inc., a health club franchise. Dabish agreed to grant ESB a license to operate a Powerhouse Gym. On September 27, 1996, ESB entered into a commercial lease (the "lease") with NYLIFE Realty Partner I ("NYLIFE") for space in the New Market Shopping Center to house the gym. The lease was for a term of ten years. Rent was to be $9,514.64 per month for the first six months; $16,957.64 per month for months 7-18; $14,476.64 per month for months 19-30; $15,407.01 per month for months 31-60; $16,337.39 per month for months 61-90; and $17,267.76 per month for the remaining 29 months. (Ex. A to Dabishes' Mot. Partial Summ. J. ¶ 5.1).

Article 17 of the lease identifies what shall constitute a default on the lease, and what remedies are available in the event of a default. (Id. at ¶ 17). The default provisions of the lease, contained in section 17.1, list ten events that could constitute a default including "the failure of Tenant to pay any Rent or other sum of money within seven days after the same is due hereunder." Section 17.2 of the lease then provides for the remedies available in the event of a default. Those remedies include the ability to "elect to terminate this Lease." Article 17 of the lease also provides for the damages that are available in the event of a default on the lease:

Whether or not this Lease is terminated by Landlord pursuant to Section 17.2, Tenant nevertheless shall remain liable for any Rent and damages which may be due or sustained by Landlord and all reasonable costs, fees and expenses including, but not limited to, leasing fees, attorneys' fees, renovation costs and any other expenses incurred by Landlord in pursuit of its remedies hereunder ... If this Lease is terminated pursuant to Section 17.2, and this termination may occur after the Landlord has pursued other remedies, the Landlord shall upon such termination be entitled to recover an amount equal to the damages, consequential as well as direct, sustained by the Landlord as a result of the Tenant's default, and in addition thereto, an amount equal to the Rent and Additional Rent provided in this Lease for the residue of the Term hereof, less any offset arising from the Landlord's ability to relet the Premises.

(Id. at ¶ 17.4).

As a prerequisite for the execution of the lease, NYLIFE asked Mr. Berger for a guaranty on the lease. Mr. Berger again contacted William Dabish, who agreed to sign a personal guaranty (the "guaranty") on the lease, and did so on October 1, 1996.¹ The guaranty reads in pertinent part:

[Guarantor] hereby guarantees to Landlord the full and prompt payment of rent, including, but not limited to, the annual minimum rent, operating costs and tax reimbursements, additional rent, and any and all other sums and charges payable by Tenant under said Lease and any extension or renewal thereof, as well as guarantees the full and timely performance and observance of all the covenants, terms, conditions, provisions, and agreements therein provided to be performed and observed by Tenant; and Guarantor hereby covenants and agrees to and with Landlord that, if Tenant should at any time default in the payment of any such annual minimum rent, operating costs and tax reimbursements, additional rent, or any other such sums and due and payable by Tenant under said Lease, or if Tenant should default in the performance and observance of any other terms, covenants, conditions, provisions, and agreements contained in said Lease, then Guarantor shall and will forthwith pay such rent and other such sums and charges to Landlord and shall and will forthwith faithfully perform and fulfill all of such terms, covenants, conditions, provisions and agreements and will forthwith pay to Landlord all damages that may arise in consequence of any such default by Tenant under said Lease, including, without limitation, all reasonable attorneys' fees and disbursements incurred by Landlord or caused by any such default and/or by the enforcement of this Guaranty.

This Guaranty is an absolute and unconditional Guaranty of payment and of performance. It shall be enforceable by Landlord in a joint action against Guarantor, Tenant, and/or any other guarantor of the Lease, or in a separate and independent action against Guarantor without the necessity for any suit or proceedings on Landlord's part of any kind or nature whatsoever against Tenant or Guarantor of Tenant's failure to pay rent or other charges due under the Lease or of Tenant's default or breach under the Lease or of any other notice or demand to which Guarantor might otherwise be entitled, all of which notices Guarantor hereby expressly waives; and Guarantor hereby expressly agrees that the validity of this Guaranty and the obligations of Guarantor hereunder shall in no way be terminated, affected, diminished, or impaired by reason of the assertion, or the failure to assert, by Landlord against Tenant of any of the rights or remedies reserved to Landlord pursuant to the provisions of the Lease or any other remedy or right which Landlord may have at law or in equity. Guarantor hereby expressly consents and agrees that any such actions against Guarantor may be brought and pursued against Guarantor in the county or judicial district or circuit in which are located the premises which are the subject of the Lease.

This Guaranty shall be a continuing guaranty, and the liability of Guarantor hereunder shall in no way be affected, modified, or diminished by reason of any assignment, renewal, modification, or extension of the Lease or by reason of any modification or waiver of or change in any of the terms, covenants, conditions, provisions, or agreements of said Lease, or by reason of any extension of time that may be granted by Landlord to Tenant, or by reason of any unilateral action of either Landlord or Tenant, or by reason of any dealings or transactions or matter or thing occurring between Landlord and Tenant, including, without limitation, any adjustments, compromises, settlements, accord and satisfactions, or releases, or any bankruptcy, insolvency, reorganization, arrangement, assignment for benefit of creditors, receivership, or trusteeship affecting Tenant, whether or not notice thereof is given to Guarantor, all of which notices Guarantor expressly waives.

(Ex. B to Dabishes' Mot. Partial Summ. J. ¶¶ 1-3).

Originally, William Dabish was the only guarantor. However, when NYLIFE asked for more personal guarantors, William Dabish proceeded to sign on behalf of his wife Ibitsam Dabish, his brother Norman Dabish, and sister-in-law Nouha Dabish ("the Dabishes"). Ibitsam, Norman, and Nouha Dabish subsequently ratified the signatures. (William Dabish Dep. at 51-52.) On May 14, 1997, NYLIFE assigned the lease to the Plaintiff in this case, New Market Acquisitions, Ltd. ("New Market").

In August of 1997, ESB began to fall behind on its rent payments. (Berger Dep. at 15.) For several months, ESB attempted to make back payments in order to draw level on the rent due and, eventually, ESB attempted to tender payment to New Market in an amount that would have paid all rent in arrears. However, New Market had already viewed the missed payments as a default on the lease and, in June of 1998, in an effort to mitigate its damages, New Market began negotiating with California Fitness I, Inc., to re-let the premises.

In response to ESB's default on the lease, New Market filed suit on September 17, 1998, in the Franklin County Court of Common Pleas (Case No. 98CVE-07-7221), naming ESB and the Dabishes as defendants. New Market sought: (1) possession of the premises; (2) $125,684, representing rent in arrears, interest, and penalties; (3) $1,823,411.15, representing future rent and other charges; and (4) any other direct or consequential damages. On December 15, 1998, New Market entered into a new lease with California Fitness I, Inc.

On February 1, 1999, without the Dabishes' consent or approval, ESB and New Market entered into a settlement agreement. (Ex. C to Dabishes' Mot. Partial Summ. J.). ESB agreed to pay New Market $174,061.56 in exchange for the release of ESB's liability under the lease and the dismissal of ESB from the action pending in the Franklin County Court of Common Pleas.² The settlement agreement terminated the lease upon the earlier of midnight April 30, 1999, or when ESB delivered the keys to the premises to New Market. ESB returned the keys on ...