R & A Inc v. Kozy Korner Inc

• Decision Date: 29 February 1996
• Docket Number: No. 93-CV-1691,No. 93-CV-1384,No. 93-CV-1697,No. 93-CV-1454,No. 93-CV-1690,No. 94-CV-756.,No. 93-CV-1487,No. 93-CV-1436,93-CV-1384,93-CV-1436,93-CV-1454,93-CV-1487,93-CV-1690,93-CV-1691,93-CV-1697,94-CV-756.
• Citation: 672 A.2d 1062
• Parties: R & A, INC., Alex Gatzionis and Valerie Gatzionis, Appellants/Cross-Appellees, v. KOZY KORNER, INC. and John Vassilas, Appellees/Cross-Appellants.
• Court: D.C. Court of Appeals

672 A.2d 1062

R & A, INC., Alex Gatzionis and Valerie Gatzionis, Appellants/Cross-Appellees,

v.KOZY KORNER, INC. and John Vassilas, Appellees/Cross-Appellants.

No. 93-CV-1384

No. 93-CV-1436

No. 93-CV-1454

No. 93-CV-1487

No. 93-CV-1690

No. 93-CV-1691

No. 93-CV-1697

No. 94-CV-756.

District of Columbia Court of Appeals.

Argued: March 16, 1995.

Decided: February 29, 1996.

Richard B. Nettler, with whom Stacy E. Costello, Washington, DC, was on the brief, for appellants/cross-appellees.

Allen M. Hutter, Washington, DC, for appellees/cross-appellants.

Before FERREN and RUIZ, Associate Judges, and KERN, Senior Judge.

KERN Senior Judge:

These appeals arise out of a dispute between R & A, Inc. and its president and vice-president, Alex and Valerie Gatzionis, and Kozy Korner, Inc. and its president, John Vassilas.¹ The dispute centers on the use and occupancy of the Kozy Korner Cafe, a restaurant and carry-out located on the first floor of a three-story building owned by Vassilas at the corner of 20th and N Streets, Northwest. The eight appeals consolidated into and presented by this case challenge various orders and judgments the trial court has entered in resolving this protracted dispute. We affirm in part and reverse in part and remand to the trial court for further proceedings.

The record reflects that in June 1992, the parties entered into a lease agreement for seven years. R & A, Inc. and Mr. and Mrs. Gatzionis, individually (R & A), agreed to pay a monthly rental of $3,400 for the occupancy and operation of the restaurant, and Kozy Korner, Inc. and Vassilas, individually (Kozy Korner), agreed to renew and transfer to R & A (at R & A's election) a license to sell liquor in the restaurant.²

The lease provided in pertinent part:

Lessor [Kozy Korner] hereby warrants [to] the Lessee [R & A] that it is the owner of the Liquor License currently in effect for the demised premises.... Lessor shall retain and renew said Liquor License for the use of the demised premises for the term of this Lease Agreement.... In the event Lessor fails to retain or renew said Liquor License[,]... this Lease shall become null and void and of no effect at the option of Lessee. The Lessee at its election may apply for a transfer of the said license in its name at any time. Lessor shall cooperate with Lessee in obtaining a Liquor License in its own name by executing any and all necessary permits, licenses and other documents.... [Emphasis added.]

In October 1992, Kozy Korner refused to transfer the liquor license to R & A asrequested by R & A one month earlier pursuant to the lease agreement. The liquor license expired on October 30, 1992, because Kozy Korner had failed to renew it. As a consequence, R & A could no longer serve alcohol in the restaurant and suffered a marked decrease in its profits.

Also according to Alex Gatzionis, who was the restaurant's chef, John Vassilas had orally agreed in the spring of 1989 to sell the restaurant to him and R &amp A, Inc. for $180,000.³According to Gatzionis Vassilas had agreed that the purchase price could be paid in monthly installments of $3,000 over a five-year period at which time Vassilas represented that Kozy Korner would transfer ownership of the restaurant and all its fixtures and equipment to R & A. As of September 1992, Gatzionis asserted that R & A had paid $120,000 toward the purchase of the restaurant. On the other hand, Vassilas denied that he had ever agreed to sell the restaurant to Gatzionis and R & A, Inc., alleging that these $3,000 monthly payments had been part of the parties' rental agreement.

In November 1992, Kozy Korner sent R & A a written notice to quit the premises, asserting that it was in default under the lease for failure to pay the October rent. R & A justified its failure to pay Kozy Korner the full amount due⁴ on the grounds of (1) the denial by Vassilas that any sales agreement existed between the parties, and (2) the refusal by Kozy Korner to transfer the liquor license as well as to remedy other alleged breaches of the lease relating to the use and occupancy permits which affected the restaurant's marketability.

In January 1993, Kozy Korner filed in the Landlord & Tenant Branch of the trial court a complaint for possession and back rent allegedly due and owing. In March 1993, R & A filed an action in the trial court's Civil Division for damages arising out of (1) Kozy Korner's breach of the lease's requirement that it maintain and transfer to R & A (at R & A's election) the restaurant's liquor license, and (2) Kozy Korner's fraudulent conduct in denying its contractual obligation to sell the restaurant to R & A.⁵

The trial court consolidated Kozy Korner's complaint for possession and back rent with R & A's action for damages for alleged fraud and breach of contract. On October 25, 1993, the trial of these issues commenced before a jury. The trial court, after R & A's witnesses had testified but before R & A concluded its case, directed a verdict in favor of Kozy Korner on the entirety of R & A's claims.⁶ The jury ultimately proceeded to deliberation on Kozy Korner's claim for back rent and rendered a verdict on November 3, 1993, in favor of R & A, finding that it owed no rent to Kozy Korner.

I.

Super.Ct.Civ.R 50(a)(1) provides in pertinent part:

[If]... a party has been fully heard with respect to an issue and there is no legally sufficient evidentiary basis for a reasonable jury to have found for that party with respect to that issue, the Court may grant a motion for judgment as a matter of law [(also known as a motion for directed verdict)] against that party.... [Emphasis added.]

In Remeikis v. Boss & Phelps, Inc., 419 A.2d 986 (D.C.1980), this court cited with approval the following statement:

On a motion for directed verdict, it is well settled that the evidence must be construed most favorably to the plaintiff; to this end he is entitled to the full effect of every legitimate inference therefrom. If upon the evidence, so considered, reasonable men might differ, the case should go to the jury; if, on the other hand, no reasonable man could reach a verdict in favor of the plaintiff, the motion should be granted.

Id. at 988 (citations omitted).

Accordingly we must review the evidence R & A presented in support of its fraud and breach of contract claims against Kozy Korner, construing such evidence "most favorably" to R & A, and determine whether upon such evidence "reasonable men might differ" or whether "no reasonable man could reach a verdict in favor of" R & A.

We turn first to the propriety of the trial court's direction of a verdict in favor of Kozy Korner on R & A's claim of fraud. Alex Gatzionis testified at trial on behalf of R & A that Vassilas made the following representations over the course of several meetings during the months of May and June 1989: (1) that Vassilas, acting on behalf of himself and Kozy Korner, Inc., would sell the restaurant to R & A for $180,000; (2) that if $180,000 was paid in monthly installments of $3,000 over a five-year period, then Vassilas, acting on behalf of himself and Kozy Korner, Inc., would transfer ownership of the restaurant along with the restaurant's various permits and licenses (including the liquor license) to R & A; and (3) that R & A had a security interest in the restaurant's fixtures, furniture and equipment which would turn into an ownership interest upon payment of the $180,000. [Oct. 26, 1993 Tr. at 34-36; 42; Oct. 27, 1993 Tr. at 8-9].

Gatzionis also testified that (1) the purchase agreement was not reduced to writing because Vassilas did not want the sale in writing; (2) the $3,000 monthly payments were made in cash because Vassilas requested in July 1989 that these payments be made in cash; and (3) when he attempted to make these payments by check in September and October 1992 (pursuant to the advice of his new accountant), Vassilas would only accept cash. [Oct. 26 Tr. at 41-43; 67-69].

We are persuaded that, viewing Gatzionis' testimony in the light most favorable to R & A, reasonable jurors could conclude (1) that Vassilas, acting on behalf of himself and Kozy Korner, Inc., knowingly misled R & A into believing that he wanted to sell his restaurant business, and (2) that R & A made its $3,000 a month payments acting upon this belief. Specifically, a jury could reasonably conclude upon hearing testimony presented by R & A that Vassilas deliberately made a false representation of material fact with the intent to deceive and that R & A paid Kozy Korner $120,000 (as of September 1992) in reliance upon this misrepresentation.

We note that this court in Remeikis stated with respect to a claim of fraud:

The elements of fraud are (1) a false representation (2) of material fact (3) knowingly made (4) with intent to deceive and (5) action taken in reliance upon the misrepresentation.

Remeikis, supra, 419 A.2d at 988 (citations omitted). Accordingly, we conclude that R & A, like the plaintiffs in the Remeikis case, presented sufficient evidence to withstand a motion for directed verdict and the court should have allowed its fraud claim to go to the jury.⁷ Id. at 988-89 (appellants presented sufficient evidence of fraudulent scheme misrepresenting extent of termite damage in newly purchased house).

The record reflects that the trial court accepted as true, for the purpose of determining whether to direct a verdict against R & A, the claim by R & A that its $3,000 a month payment was for the purchase of the restaurant and that Vassilas wanted this payment to be in cash. [Oct. 28, 1993 Tr. at 111A]. The court also accepted as true R & A's claim that in October 1992, acting upon the advice of an accountant, it insisted for their own protection that the purchase payments be made by check. [Id.at 112A]. Nevertheless, the trial court reasoned:

[R & A] apparently wanted to protect their own interests but I don't see how they could force at that time... Mr. Vassilas to accept a check. They didn't agree on a...