Reisterstown Plaza Associates v. General Nutrition Center, Inc.

• Decision Date: 01 September 1991
• Docket Number: No. 43,43
• Citation: 89 Md.App. 232,597 A.2d 1049
• Parties: REISTERSTOWN PLAZA ASSOCIATES v. GENERAL NUTRITION CENTER, INC
• Court: Court of Special Appeals of Maryland

Page 232

89 Md.App. 232

597 A.2d 1049

REISTERSTOWN PLAZA ASSOCIATES v. GENERAL NUTRITION CENTER, INC.

No. 43 Sept. Term, 1991.

Court of Special Appeals of Maryland.

Nov. 5, 1991.

Lawrence S. Greenwald (Robert E. Sharkey and Gordon, Feinblatt, Rothman, Hoffberger & Hollander, on the brief), Baltimore, for appellant

Peter J. McNamara (Jervis S. Finney, Charles T. Smith, II and Ober, Kaler, Grimes & Shriver, on the brief), Baltimore, for appellee.

Argued before ROSALYN B. BELL, FISCHER and HARRELL, JJ.

ROSALYN B. BELL, Judge.

In February, 1987, appellant, Reisterstown Plaza Associates (RPA), filed a complaint against the appellee, General Nutrition Center, Inc. (GNC), for unpaid rent and other charges, plus attorneys' fees. RPA alleged that GNC owed it money under a lease agreement for a store located in the Reisterstown Plaza Shopping Center. GNC counterclaimed asserting six counts, including claims based on contractual, common law and tort theories. GNC also asked for attorneys' fees. The jury returned a general verdict in favor of GNC and the trial court awarded damages and attorneys' fees.

On appeal, RPA contends that the trial judge erred in:

-- awarding GNC damages for the loss of the value of its fixtures and leasehold improvements which were not owned or were abandoned by GNC;

-- awarding attorneys' fees and expenses incurred in a case brought for purposes other than enforcement of GNC's lease, where the jury returned a general verdict without specifying the ground for finding in favor of GNC and where under any circumstances the award for attorneys' fees is grossly disproportionate to the amount recovered;

-- awarding prejudgment interest on damages for loss of use of fixtures and equipment, where those items were useable only in a business operating at a loss; and

-- calculating the prejudgment interest rate at 10% per annum when the Maryland Court of Appeals has recently ruled that the proper rate for prejudgment interest is six percent.

While we agree that GNC is entitled to damages for what amounted to a constructive eviction, we remand the case for a recalculation of the prejudgment interest and for the trial judge to determine if GNC is entitled to recover attorneys' fees incurred in defending this appeal.

RPA owns the Reisterstown Plaza and is the landlord in this dispute. GNC, the tenant, is a national retail chain whose stores sell natural foods and health products to the public. RPA leased the Reisterstown store to GNC under an agreement dated November 29, 1982. The lease was a standard commercial lease and was to run for a term of 10 years. Reisterstown Plaza is a one-level mall. GNC faced on the interior of the mall and was surrounded by a common area for which the landlord, RPA, was responsible under the terms of the lease. At the rear of GNC was an exterior door that opened up into the back of the mall. The trash dumpster, which serviced the entire mall, was located immediately behind GNC.

In February or March of 1986, a rodent problem arose at the store, and it worsened despite persistent actions taken by GNC personnel and its exterminators. GNC, its regional managers, and even its national representatives, pressed the mall's management over an extended period of time to control and stop the source of the rodent infestation. Testimony and documents demonstrated that the primary source of the infestation was the common areas of the mall at the front of GNC. GNC, because of its stock of foodstuffs, was particularly susceptible to the rodent problem. RPA was unsuccessful in its attempts to correct the situation, and on September 27, 1986, after the infestation problem at GNC continued to worsen, Alvin Greenberg, Vice President of Real Estate and Construction for GNC, ordered the store to be vacated. Greenberg testified that he "ordered the premises to be vacated because the infestation problem was intolerable and threatened the health and safety of GNC's customers and employees."

GNC made no further payment to RPA under the lease, and RPA brought suit, in the Circuit Court for Baltimore City, for breach of the lease and damages. Based on an agreement between the parties a bifurcated trial was held. The jury returned a general verdict in favor of GNC. In the second half of the proceedings, the trial court returned a damage award in favor of GNC. The Court awarded

                $2,948.35 for products in inventory lost due to infestation while GNC was operating.   This award is not challenged by RPA.   The Court also awarded GNC $76,389.56 for the loss of fixtures and loss of leasehold improvements in the store;  $141,784.42 for attorneys' fees and expenses;  and prejudgment interest on the damages awarded at the rate of 10 percent per annum
                

LOSS OF FIXTURES AND LEASEHOLD IMPROVEMENTS

RPA contends that GNC is not entitled to the $76,389.56 in damages for the loss of fixtures and leasehold improvements made to the store since the items were not owned or were abandoned by GNC. RPA claims this is especially true in light of the fact that the GNC store was not profitable and, therefore, GNC actually derived a benefit from its early closing. We find no merit in either argument.

Paragraph 14.04 of the lease agreement between the parties provides:

"... All installations, alterations, additions, betterments and improvements upon the Demised Premises made by any party, including without limitation, all pipes, ducts, conduits, wiring, panelling, partitions, railings, mezzanine floors, galleries and the like shall become the property of Landlord when installed and shall remain upon and be surrendered with the Demised Premises as part thereof at the expiration or sooner termination of the Term. Movable trade fixtures and other personal property which Tenant installs at its own expense shall remain Tenant's property and may be removed at any time provided Tenant promptly repairs any damage caused by such removal."

RPA argues that under this agreement all improvements became the property of RPA "when installed" and were to be "surrendered with the Demised Premises" at the end of the lease term. While the terms of the lease In National Micrographic Systems, Inc. v. OCE-Industries, Inc., 55 Md.App. 526, 538, 465 A.2d 862, cert. denied, 298 Md. 395, 470 A.2d 353 (1984), this Court stated:

                contract between the parties are clear, RPA breached the agreement.   GNC is, therefore, entitled to recover the benefit it would have received had the lease run its full term
                

"The law seeks to encourage reliable contracting by giving the non-breaching party the benefit of the bargain--placing it in the position it would have occupied had no breach occurred. The law also seeks to discourage breach of contract by seeing to it that a party does not benefit from its breach."

In Stevan v. Brown, 54 Md.App. 235, 242-43, 458 A.2d 466, cert. denied, Tower Building Corp. v. Stevan, 297 Md. 111 (1983), this Court cited with approval Weighley v. Muller, 51 Pa.Super.Ct. 125, 132 (1912), which held:

"If the tenant was evicted by the landlord or by acts equivalent to an eviction was deprived of his pecuniary interest under the lease, he was entitled to recover as damages the loss suffered by him--to be put in the same position pecuniarily as he would have been if the contract had been kept--when the damages are the natural result of such breach of contract and can be ascertained with reasonable certainty."

Greenberg testified at trial that, except for small appliances, such as the cash register and peanut butter machine, all of the furniture and fixtures were, in fact, abandoned when the store was closed. According to Greenberg, this is routinely done whenever GNC closes a store, since such items cannot be used in another GNC store. The items cannot be reused because each store has its own unique dimensions and specifications. He testified that the salvage value for the small items is minimal, maybe "a couple thousand dollars." Greenberg based his testimony on experience and the history of the closings of GNC stores. His testimony was supported by Edward Kozlowski, the Vice-President and Chief Financial Officer of GNC, who In calculating the $76,389.56 figure for the loss of fixtures and loss of leasehold improvements in the store, the trial judge excluded the value of the cash register and peanut butter machine which GNC officials had removed when they closed the store. ¹ Then he subtracted straight-line depreciation from the original cost of the remaining items. In explaining how he arrived at the damage figure, the judge said:

stated that the furniture and fixtures in the store have no fair market value when removed from the GNC store.

"When it came to consideration of the claim by GNC for the value of loss--for the loss rather, of fixtures and leasehold improvements, the Court did have a method of determination and did have a reasonable way of arriving at what that loss could be. Obviously and clearly it was not the best method. We had no way of determining a market value since this, these fixtures and leasehold improvements were in fact as the testimony showed, custom built specifically to be used in one location and obviously could not be used anywhere else so that upon the expiration of that use they would have at best scrap value aside from the registers as we all noted. That is not to say however, that there was [no] value to these fixtures and to those leasehold improvements. That is not to say that the defendant did not lose considerable money because it was proven to the satisfaction of the Court that there was a substantial life remaining in these fixtures and improvements that had they been permitted to serve the remainder of their lease and any possible renewal of that lease, they would have been of tremendous value to the operator.

"As I have indicated, if the Court had allowed loss of profits it would not have allowed loss of fixtures as a "This is an accepted method of appraisal and the Court had...