Page Two, Inc. v. P.C. Management, Inc.
| Decision Date | 28 December 1987 |
| Docket Number | No. 49A02-8703-CV-93,49A02-8703-CV-93 |
| Citation | 517 N.E.2d 103 |
| Parties | PAGE TWO, INC.; Don't Ask, Inc.; David Page; and Matthew Iaria, Appellants (Defendants Below) v. P.C. MANAGEMENT, INC., Appellee (Plaintiff Below). |
| Court | Indiana Appellate Court |
Cory S. Brundage, Anthony P. Gillman, Kevin L. Stock, Ice Miller Donadio & Ryan, Indianapolis, for appellants.
Preston T. Breunig, John D. Schiff, Indianapolis, for appellee.
Page Two, Inc., Don't Ask, Inc., David Page, and Matthew Iaria (Page Two) appeal a declaratory judgment awarding possession of sublet premises to P.C. Management, Inc. We affirm.
1. Whether Page Two waived its right to terminate the sublease of P.C. Management, and
2. Whether the trial court erred in determining the March 6, 1986 master lease did not terminate the sublease.
Page Two does not dispute the factual findings of the trial court. A summary of these facts follows.
LaScala Partnership, owner of a building located at 110 South Meridian Street, Indianapolis, Indiana, leased the building to Theodore Polk and Stephen Teets on June 19, 1984. Polk and Teets assigned the lease to a corporation they formed under the name P & T, Inc. In September, 1984, P & T agreed orally to sublease the second floor of the building to Charles and Patricia Perrin. On or about November 15, 1984, P.C. Management, a corporation solely owned by Patricia Perrin, opened a live comedy club at the sublet premises under the name "Indianapolis Comedy Connection." On March 6, 1985, P & T and P.C. Management executed a written sublease agreement for the second floor of the building.
P & T assigned its June 19, 1984 lease with LaScala Partnership to Page Two, effective March 6, 1986. On March 6, 1986, a new master lease was executed by LaScala Partnership as owner-landlord, and Page Two, d/b/a Don't Ask as tenant.
On May 28, 1986, P.C. Management moved its comedy club but continued to maintain and secure the subleased premises for storage. P.C. Management paid its monthly rent until November 14, 1986, when Page Two rejected P.C. Management's tendered monthly rent.
A few days after the comedy club moved, Page Two had the air conditioning and heating ductwork disconnected from the sublet premises. Thereafter, neither heating nor air conditioning service was provided to the sublet premises.
Under the sublease agreement, P.C. Management agreed to pay a portion of the utilities for the entire building based upon a square footage computation. When Page Two became the sublessor, P.C. Management's share was computed at twenty percent (20%). P.C. Management made these utility payments through June 5, 1986. In July, 1986, P.C. Management received a statement for electricity from June 5 to July 7. The amount was computed on the twenty percent (20%) basis, although P.C. Management's actual use of electricity during that time was limited to an exit light, an alarm system and an occasional use of lights. Charles Perrin, on behalf of P.C. Management, telephoned Page Two, protested the charge as excessive, and refused payment. In August and September, Page Two again submitted 20% billings to P.C. Management which P.C. Management protested in writing and refused to pay. Although Page Two never responded to these protests nor sent any further statements, it continued to accept the monthly rental payments.
In a letter dated September 8, 1986, P.C. Management notified Page Two that, under the provisions of the sublease agreement, it intended to exercise the first two-year renewal option for a term commencing on November 15, 1986. In a letter dated October 29, 1986, and received on November 3, 1986, Page Two notified P.C. Management that it was in default of the sublease agreement for failure to pay its share of the utilities and for failure to provide proof of insurance.
Although Page Two had never inquired or requested proof of insurance carried by In a letter dated November 1, 1986, P.C. Management advised Page Two of its desire to open another comedy club in the sublet premises and requested a meeting to discuss the venture. The meeting never took place. In a letter dated November 13, 1986, Page Two declared the sublease agreement terminated and demanded possession. On November 18, 1986, P.C. Management tendered its monthly rental payment and made a conditional offer to reinstate the general liability insurance. Page Two refused the tender and offer. This suit followed.
P.C. Management, P.C. Management had carried general liability insurance and coverage on the contents of the sublet premises. It cancelled the general liability coverage in June, when it ceased using the premises for the comedy club.
At Page Two's request, the trial court entered findings of fact required by Indiana Rules of Procedure, Trial Rule 52(A). The standard of review is as follows:
[W]e will not set aside the judgment premised thereon unless it is clearly erroneous, i.e., unless we are definitely and firmly convinced the trial court committed error. The findings must disclose a valid basis for the legal result reached in the judgment, and evidence at trial must support each of the specific findings, with deference given to the court where such evidence conflicts. We will not reweigh the evidence nor reassess the credibility of witnesses before the court but, rather, will affirm if there is sufficient evidence of probative value to support the decision, viewing the evidence most favorable to the judgment and the reasonable inferences drawn therefrom.
Naderman v. Smith (1987), Ind.App., 512 N.E.2d 425, 430, quoting Campins v. Capels (1984), Ind.App., 461 N.E.2d 712, 717 (citations omitted).
Page Two's claim that P.C. Management defaulted is based on purported violations of paragraphs 7 and 8 of the sublease which state:
7. Utilities. Sublessee shall pay for utilities used as determined on the basis of the square footage of the sublet premises to the total square footage of the premises, wherein such utilities are used.
8. Insurance and Liability. Sublessee shall maintain fire, casualty and personal injury insurance to protect sublessor in such amounts as are mutually agreed by the parties and memoralized in an attachment to this sublease. Sublessee shall be liable for all damage to the sublet premises and related damage to the premises, excepting that which is caused by sublessor's negligence. Any damage for which sublessee is liable shall be immediately repaired to the original condition. Sublessee shall hold sublessor harmless for any injury or damage occurring to the sublet premises or because of sublessee's activities.
Record at 394, Exhibit 3.
The right to terminate the sublease upon default is based upon paragraph 18 of the sublease which reads:
18. Rights on default. If sublessee shall neglect or fail to perform or observe any of the terms of the sublease for ten (10) days after notice, or fail to pay the rent or utilities for a period of thirty (30) days, then the sublessor may lawfully reenter and occupy the sublet premises, expel the sublessee and remove its effects without being deemed liable for trespass, and sublessor shall retain all remedies in law and in equity against sublessee for breach of the sublease.
First, Page Two argues the trial court erred in concluding it waived P.C. Management's default in paying its portion of the utilities because Page Two's right to declare default had not yet become "fixed" under the sublease agreement when it accepted the rent payments.
This argument misconstrues the trial court's judgment. The trial court found Page Two waived its right to terminate the sublease because it accepted monthly rental payments from P.C. Management after notice that P.C. Management was protesting and refusing to pay the amount billed for utilities:
The utility dispute was waived by Page Two, Inc. as a basis for termination when it accepted rent after each of the three protests made by P.C. Management. Moreover, P.C. Management disputed the utility bills in good faith. Defendants made no effort to discuss or resolve the dispute. The electricity actually consumed by P.C. Management was substantially less than the sum demanded during the relevant time. The dispute was premised on the lack of heating and air conditioning service during the relevant time, which was the result of actions of [Page Two].
Record at 163. Thus, contrary to Page Two's argument, the trial court did not find Page Two waived its right to terminate the sublease agreement by accepting monthly rental payments after P.C. Management was in default of its utility payments. Rather, the finding of waiver hinges on acceptance of rent after protest.
The appropriate issue, then, is whether the trial court erred in concluding Page Two's undisputed conduct of accepting monthly rental payments from P.C. Management after notice that P.C. Management was protesting the amount stated as due, constitutes a waiver of the contractual right to terminate the sublease. 1 Implicitly, Page Two asserts it cannot because only the acceptance of rent after a breach for which a forfeiture might then have been declared is a waiver of a right to forfeit. We infer this position from Page Two's citation of Eurengy v. Equitable Realty Corp. (1937), Mo., 107 S.W.2d 68.
In Eurengy, the landlord sued the tenant for possession of the leased premises as a result of the tenant's failure to pay rent and taxes as required by the lease. The lease also required notice of any default and an opportunity to cure prior to the landlord's termination of the lease. The landlord accepted partial rent payments prior to sending the notice and after sending the notice of default, but not after the period allowed to cure the default had lapsed. The trial court found for the landlord over the tenant's claim of waiver based upon the landlord's acceptance of the partial payments. The supreme court affirmed the trial court because...
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