In re Print Harmony, LLC

567 B.R. 632, 27 Fla. L. Weekly Fed. B 27, 2017 Bankr. LEXIS 936
CourtUnited States Bankruptcy Court, M.D. Florida
DecidedApril 4, 2017
DocketCase No. 8:15-bk-06982-MGW
StatusPublished

This text of 567 B.R. 632 (In re Print Harmony, LLC) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Print Harmony, LLC, 567 B.R. 632, 27 Fla. L. Weekly Fed. B 27, 2017 Bankr. LEXIS 936 (Fla. 2017).

Opinion

[634]*634ORDER AND FINDINGS OF FACT AND CONCLUSIONS OF LAW

Michael G. Williamson, Chief United States Bankruptcy Judge

The Debtor leased commercial space from Rubin Automobile Boulevard, LLC under a triple net lease. Rubin filed a proof of claim in this case seeking $676,713.05 for amounts allegedly due under the lease, including unpaid prepetition and postpetition rent, repairs to the leased premises, rejection damages for future rent, and breach of a purchase obligation. According to Rubin, the Debtor used a flood in a small portion of the premises as a pretext to stop paying rent for the entire premises, thwarted Rubin from repairing the flood damage, and then moved out, leaving the premises trashed.

But the evidence at trial on the Debtor’s objection to the Landlord’s proof of claim told a slightly different story. By seeking to use the casualty event as an opportunity to upgrade the building’s electrical system, it was Rubin that prevented the flood damage from being repaired. And while there was evidence the property had been damaged, Rubin was unable to prove whether the damage had been done by the Debtor or a predecessor tenant. Even if it had proven that the Debtor caused the damage, Rubin could not prove the repairs it was proposing were necessary to restore the property to its preexisting condition— or that they would ever be done at all. As for the purchase obligation, all of the evidence at trial showed that Rubin waived any right to require the Debtor to buy the leased premises. In the end, Rubin was only able to prove it was entitled to a $123,169.21 allowed claim for prepetition rent and a $6,041.40 administrative claim for postpetition rent that had been abated during the case.

Findings of Fact

The Parties

The Debtor is a commercial wholesale internet printer.1 Its customers mostly consist of other (small) printers and advertising agencies who generally insist on a short turnaround time.2 The Debtor’s principal, Jason Gabay, also owns Press Ex, Inc.,3 a separate retail internet printing company that filed for chapter 11 bankruptcy in 2009 and confirmed a chapter 11 plan on March 7, 2011. Rubin Automobile Boulevard, LLC (the “Landlord”) owns office and warehouse space located at 12910 Automobile Boulevard, Clearwater, Florida, which had previously been leased by PressEx.

The Lease

On July 25, 2011, the Debtor entered into a five-year lease with the Landlord for 38,700 square feet of office and warehouse space that PressEx had been leasing.4 According to the lease, the leased premises consisted of 10,750 air-conditioned square feet of office space and 27,950 air-conditioned square feet of production space.5 The lease term began on March 1, 2011, and was to expire on February 28, 2016. An addendum to the lease, however, provided that the Debtor would buy the leased premises from the Landlord at the end of the third lease year for $1.4 million.6

[635]*635The Debtor’s rent under the lease for the fourth and fifth lease years, which is the relevant time period in this dispute, was $11,500 and $12,000 per month, respectively.7 But the lease expressly provided that the monthly rent would be abated if the premises were damaged:

If the Premises are damaged, either partially or totally, the Rent for the period required for the repair or restoration of damage shall be paid up to the time of the casualty and thenceforth shall be abated, in proportion to the degree to which [Debtor’s] use of the Premises is impaired, up to, but not in excess of, the proceeds received by Landlord under Landlord’s rent loss coverage.8

In the event the leased premises were partially or totally damaged, the lease also obligated the Landlord to make the proceeds from its casualty insurance policy available to the Debtor so the Debtor could restore the premises to their existing condition.9

The Flood

On November 5, 2014, a plumbing issue damaged the Debtor’s interior office space at the leased premises.10 Around 6:00 or 7:00 that night, Jason Gabay (the Debtor’s owner) noticed water flooding out of two bathrooms (either from the urinals or toilets) on the north side of the office space.11 Apparently some shop towels or paper towels had clogged the toilet.12 The water flooded about 30 feet from the northern edge of the building into the Debtor’s customer service and sales offices.13 As soon as he discovered the flood, Gabay called Level Construction, who referred him to a plumber that came out and stopped the flooding.14 After stopping the leak, the plumber referred the Debtor to Synergy Restoration & Construction to remediate the flood damage. Synergy came out and pulled up the carpet, removed wet drywall, moved furniture, and ran fans to dry out the wet areas.15

The cost of the initial remediation work was $12,127.35.16 The Debtor’s insurance policy did not cover the flood damage.17 But the Landlord’s insurance policy did. Hartford Insurance Company, the Landlord’s insurance carrier, issued the Landlord a $7,127.35 check (the $12,127.35 cost of the repair less a $5,000 deductible) to cover the remediation work.

The Dispute over the Scope of Repairs

And this is where the first dispute began: the Landlord had insurance coverage to fix the remaining damage too, but the parties could not agree on the scope of the repair work. The Landlord obtained an estimate from Synergy, which did the [636]*636initial remediation work for the Debtor. Synergy’s estimate, prepared after a joint inspection with Hartford (the Landlord’s insurer), was for $113,592.62, which included $30,312.60 in code upgrades.18 On December 31, 2014, Hartford issued the Landlord a $74,952.02 check, which covered the total cost of the repairs less nearly $39,000 for code upgrades and building depreciation (those amounts would be paid once the code repairs were actually completed).19

But the Debtor objected to the Landlord’s proposed scope of repairs. The Debt- or believed the code upgrades were unnecessary. And it was concerned about what it perceived as unnecessary repairs, particularly the electrical upgrades, because those repairs potentially could have shut down the Debtor’s business for a substantial amount-of time.20 The Debtor feared that if it lost customers because its business was shut down, those customers would not come back.21 In short, the Debtor believed the Landlord was trying to improve its building at the expense of the Debtor’s business.22 In the Debtor’s view, the safest thing to do was to simply put the building back the way it was.23 So the Debtor obtained a $45,548.06 estimate from Level Construction & Design to ' restore the building to its previous condition.24

Suffice it to say, despite months of “negotiating,” the parties were never able to agree on the scope of repairs.25

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Cite This Page — Counsel Stack

Bluebook (online)
567 B.R. 632, 27 Fla. L. Weekly Fed. B 27, 2017 Bankr. LEXIS 936, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-print-harmony-llc-flmb-2017.