Renaissance Mgt., Inc. v. Jay-Lor Corp.

2011 Ohio 2792

• Court: Ohio Court of Appeals
• Decided: June 9, 2011
• Docket: 95585
• Status: Published

Opinion

[Cite as Renaissance Mgt., Inc. v. Jay-Lor Corp., 2011-Ohio-2792.]

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION No. 95585

RENAISSANCE MANAGEMENT, INC. PLAINTIFF-APPELLANT

vs.

JAY-LOR, CORP. d.b.a. CAFÉ 56 DEFENDANT-APPELLEE

JUDGMENT: AFFIRMED

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV- 692522

BEFORE: Blackmon, P.J., Stewart, J., and Sweeney, J.

RELEASED AND JOURNALIZED: June 9, 2011

ATTORNEY FOR APPELLANT Mark I. Wachter Wachter Kurant, LLC 30195 Chagrin Blvd., Suite 300 Cleveland, Ohio 44124

ATTORNEYS FOR APPELLEE

Lewis A. Zipkin David M. Smith Zipkin Whiting Co., L.P.A. The Zipkin Whiting Building 3637 South Green Road Beachwood, Ohio 44122

PATRICIA ANN BLACKMON, P.J.:

{¶ 1} Appellant Renaissance Management, Inc. (“Renaissance”) appeals

the trial court’s dismissal of its complaint against Jay-Lor Corp. d.b.a. Café

56 (“Jay-Lor”) and assigns the following errors for our review:

“I. The trial court erred by granting the defendant’s motion to dismiss, pursuant to Rule 41(B)(2) of the Ohio Rules of Civil Procedure.”

“II. The trial court’s finding of fact number 25 is against the manifest weight of the evidence.”

{¶ 2} Having reviewed the record and pertinent law, we affirm the trial

court’s decision. The apposite facts follow. {¶ 3} Beginning in 1973, and continuing through October 2006,

Marlene Leitson, the president of Jay-Lor, operated a restaurant business,

most recently known as Café 56, on the premises located at 23230 Chagrin

Boulevard, Beachwood, Ohio. On October 21, 1999, Leitson signed a

five-year lease with Herbert Chisling, the president of Renaissance. The

lease between the parties would cover the period of February 1, 2003 through

January 31, 2008, for a total amount of $489,157.80, payable in monthly

installments of $8,152.63.

{¶ 4} In the summer or early fall of 2006, as a result of the competitive

restaurant environment, Marlene Leitson and her son, Jay Leitson, who was

also an officer of Jay-Lor, approached Chisling about their idea of converting

the restaurant to a supper club format, with live music. Chisling, however,

was not

{¶ 5} excited about the idea of a supper club at the location and

suggested that Jay-Lor consider converting the restaurant into a delicatessen.

Jay-Lor had no expertise in operating a delicatessen and opted to find a

buyer for the restaurant.

{¶ 6} In the early part of October 2006, Jay-Lor located Z.T.Y., Inc.

(“ZTY”), a business that was interested in buying the restaurant, assuming

the remainder of the lease, and, most importantly, who was very familiar

with operating a delicatessen. Jay-Lor introduced Tony Savy, one of ZTY’s officers, to Chisling, and indicated that ZTY desired to purchase the

restaurant and take over the lease. In the same month, Jay-Lor sold all its

assets and their liquor license to ZTY for the sum of $70,000.

{¶ 7} Subsequent to Jay-Lor’s sale of the restaurant, ZTY and

Renaissance entered in a five-year lease agreement for the premises. The

lease covered the period of October 1, 2006 through September 30, 2011. In

addition, Renaissance granted ZTY three months of free rent for signing the

lease.

{¶ 8} On April 10, 2007, ZTY defaulted on the lease agreement and

abandoned the premises. After ZTY’s default, Renaissance entered into

another lease for the premises with JRS Savy’s, Inc. (“JRS”), which was

owned and operated by Tony Savy, the principal of ZTY. This lease covered

the period of April 1, 2007 through March 31, 2012.

{¶ 9} After making one rent payment, JRS defaulted on the lease. On

August 17, 2007, as a result of a dispute between the partners of JRS, the

restaurant closed. Thereafter, JRS transferred the restaurant’s assets and

liquor license, valued at approximately $122,000, to Renaissance.

{¶ 10} In January 2008, Renaissance filed suit against JRS for

defaulting on the lease. Renaissance obtained a judgment against JRS for

approximately $460,000, the unpaid balance of the lease agreement. However, before Renaissance could collect on the judgment, JRS’s principal

filed for bankruptcy protection.

{¶ 11} On May 12, 2009, Renaissance filed a suit against Jay-Lor to

recover rents due from October 2006, the time they vacated the restaurant,

through January 2008, the end of the lease term. After significant motion

practice, the parties filed cross-motions for summary judgment. The trial

court denied the respective motions and conducted a bench trial on May 28,

2010.

{¶ 12} At the trial, Jay Leitson testified that when he and his mother

introduced Savy as the potential purchaser of the restaurant, Chisling was

excited because Savy had experience in running a delicatessen, which was the

business model that Chisling thought was more appropriate for the location.

Jay Leitson testified that they requested an assignment of the balance of the

lease to ZTY, but Chisling refused and opted to enter into a five year lease

with ZTY. The new lease included the balance of Jay-Lor’s lease with

Renaissance.

{¶ 13} Jay Leitson testified that Renaissance never notified them at the

time ZTY and JRS defaulted on their respective leases. Jay Leitson stated

that it was not until August 2008, that Chisling sent a letter threatening to

sue Jay-Lor for the remaining balance of the lease. Jay Leitson stated that if

Renaissance had notified them of the subsequent defaults, and indicated that they were still liable, Jay-Lor would have re-entered the premises and

resumed operation of the restaurant.

{¶ 14} Marlene Leitson testified that Jay-Lor had been a tenant of

Renaissance for more than 35 years and had never missed a rent payment.

Marlene Leitson also stated that Renaissance refused to assign the remaining

balance of Jay-Lor’s lease term to ZTY. Marlene Leitson further stated that

Renaissance had never notified Jay-Lor of the subsequent defaults of ZTY

and JRS. Finally, Marlene Leitson testified that Chisling knew how to get in

touch with her, because Chisling hired her to cater a private party at his

home after Jay-Lor sold the restaurant’s assets and liquor license to ZTY.

{¶ 15} Chisling confirmed that he entered into two separate leases after

Jay-Lor vacated the premises in October 2006, but insists that it was done to

mitigate Renaissance’s damages. Chisling also admitted that the terms of

the subsequent leases differed from Renaissance’s lease with Jay-Lor. In

addition, Chisling admitted that he never notified Jay-Lor when ZTY and

JRS defaulted on the terms of their respective leases.

{¶ 16} At the close of Renaissance’s case, the trial court granted

Jay-Lor’s motion to dismiss pursuant to Civ.R. 41(B)(2). Renaissance

requested findings of fact and conclusions of law. After considering the

parties proposed findings, the trial court issued its findings of fact and

conclusions of law. Renaissance now appeals. Motion to Dismiss

{¶ 17} In the first assigned error, Renaissance argues the trial court

erred in granting Jay-Lor’s motion to dismiss.

{¶ 18} Civ.R. 41(B)(2) provides, in pertinent part:

“After the plaintiff, in an action tried by the court without a jury, has completed the presentation of the plaintiff's evidence, the defendant, * * * may move for a dismissal on the grounds that upon the facts and the law, the plaintiff has shown no right to relief.”

{¶ 19} Civ.R. 41(B)(2) thus permits a defendant in a nonjury action to

move for dismissal of the action after the close of the plaintiff’s case.

Dismissals under Civ.R. 41(B)(2) are similar in nature to directed verdicts in

jury actions; however, because a dismissal under Civ.R. 41(B)(2) is used in

nonjury actions, it requires the trial court and reviewing court to apply

different tests. See Peterman Plumbing & Heating, Inc. v. Pickerington Local

School Dist., Bd. of Edn., 5th Dist No. 10 CA 9, 2010-Ohio-6587, citing

Central Motors Corp. v. Pepper Pike (1979), 63 Ohio App.2d 34, 48, 409

N.E.2d 258. Civ.R. 41(B)(2) specifically provides the trial court may

consider both the law and the facts.

{¶ 20} Therefore, under the rule, the trial judge, as the trier of fact, does

not view the evidence in a light most favorable to the plaintiff, but instead

actually determines whether the plaintiff has proven the necessary facts by the appropriate evidentiary standard. Id., citing L.W. Shoemaker, M.D., Inc.

v. Connor (1992), 81 Ohio App.3d 74, 610 N.E.2d 470.

{¶ 21} Even if the plaintiff has presented a prima facie case, dismissal

may still occur if the trial court determines that the necessary quantum of

proof makes it clear that the plaintiff will not prevail. Webb v. C & J

Properties, L.L.C., 12th Dist. No. CA2010-01-016, 2010-Ohio-3818. A trial

court’s ruling on a Civ.R. 41(B)(2) motion will be set aside on appeal “only if

erroneous as a matter of law or against the manifest weight of the evidence.”

Tillman v. Watson, 2d Dist. No. 06-CA-10, 2007-Ohio-2429, ¶11-12, citing

Bank One, Dayton, N.A. v. Doughman (1988), 59 Ohio App.3d 60, 63, 571

N.E.2d 442.

{¶ 22} Judgments supported by some competent, credible evidence going

to all the essential elements of the case will not be reversed as being against

the manifest weight of the evidence. Dalesandro v. Ohio Dept. of Transp.,

10th Dist. No. 10AP-241, 2010-Ohio-6177, citing C.E. Morris Co. v. Foley

Constr. Co. (1978), 54 Ohio St.2d 279, 376 N.E.2d 578, syllabus. An

appellate court neither weighs the evidence nor judges the credibility of the

witnesses, but, instead, determines whether there is relevant, competent, and

credible evidence upon which the fact finder could base its judgment. Hoover

v. James, 5th Dist. No. 02-COA-045, 2003-Ohio-4373, ¶18. {¶ 23} In the instant case, the trial court weighed the evidence and

determined that Renaissance’s actions, prior to and subsequent to Jay-Lor

vacating the premises, demonstrated their intent to surrender the lease with

Jay-Lor. For the reasons that follow, we agree with the trial court’s

determination.

{¶ 24} Initially, we note that the evidence indicates that Jay-Lor sought

to assign the balance of their lease to ZTY, but Renaissance refused. An

assignment is a transaction whereby the lessee transfers its entire interest in

a premises for the unexpired term of the original lease to another party, an

assignee. See, e.g., N.R.I. Co. v. N.R. Dayton Mall, Inc. (Nov. 1, 1991), 2d

Dist. No. 12528. The assignment divests the lessee of any interest in the

property and transfers it to the assignee. The lessee, however, is still in

privity of contract with the original lessor, and the assignment thus does not

relieve the lessee of its express obligation to pay rent. Szwec v. Sheban

(1947), 50 Ohio Law Abs. 513, 80 N.E.2d 172. In essence, had

Renaissance granted the requested assignment, Jay-Lor would have

remained contractually obligated and would have been on notice that they

would be liable for any unpaid rents if ZTY defaulted.

{¶ 25} Instead, Renaissance, after rejecting Jay-Lor’s request to assign

the remainder of their lease to ZTY, entered into a new five-year lease with

ZTY. In addition, when ZTY defaulted on that lease, Renaissance entered into another five-year lease with JRS, who also defaulted. Both subsequent

leases absorbed the remaining term of the original lease between Renaissance

and Jay-Lor.

{¶ 26} The general rule is that an agreement to make a new lease

between the landlord and a lessee’s assignee extinguishes the liability of the

lessee/assignor. Norris v. D.D. Fashions, Inc. (Apr. 3, 1991), 9th Dist. No.

14843, citing City Natl. Bank & Trust Co. v. Swain (Mar. 21, 1939), 2d Dist.

No. 2871. Here, despite Renaissance’s refusal to allow Jay-Lor to assign the

balance of the lease term to ZTY, under the circumstances, ZTY became

Jay-Lor’s de facto assignee.

{¶ 27} Given that Renaissance entered into a new lease with ZTY,

Jay-Lor’s obligation under the original lease with Renaissance was

extinguished. A new lease agreement is a surrender of the old lease, the

effect of which is to terminate the former landlord-tenant relationship and to

put an end to the old lease. Morse & Hamilton Ltd. Partnership v. Gourmet

Bagel Co. (Sept. 29, 2000), 10th Dist. No. 99AP-1253.

{¶ 28} Further, a surrender of a lease may also result from the lessor’s

entry into an agreement with the assignee containing materially different

provisions from the old lease amounting to a new lease. Id., citing Swain,

supra. The evidence adduced at the bench trial established that the lease

between Renaissance and ZTY contained different terms from the original lease with Jay-Lor. The evidence established that the new lease included

three months of free rent.

{¶ 29} The evidence also established that in addition to entering into

two subsequent leases, following Jay-Lor’s departure, Renaissance failed to

notify Jay-Lor when the lessees defaulted. Instead, when ZTY defaulted,

Renaissance entered into a new lease with JRS, whose principal happen to

have also been the principal of ZTY. When JRS subsequently defaulted,

Renaissance filed suit against them and recovered a judgment of

approximately $460,000.

{¶ 30} The evidence established that it was not until JRS proved

uncollectible and judgment proof, by virtue of filing bankruptcy, that

Renaissance decided to proceed against Jay-Lor. Chisling admitted at trial

that he knew the whereabouts of Jay-Lor’s principals, that he had hired

Marlene Leitson to cater a private party at his home, and that he never

indicated that the subsequent lessees had defaulted. Further, to allow

Renaissance to also prevail against Jay-Lor would amount to double recovery,

resulting in an impermissible economic windfall.

{¶ 31} On the record before us, we conclude that the trial court’s decision

was supported by relevant, competent, and credible evidence. Renaissance’s

actions, especially those subsequent to Jay-Lor vacating the premises,

signaled their intentions to surrender the lease with Jay-Lor. As such, the trial court properly granted Jay-Lor’s motion to dismiss pursuant to Civ.R.

41(B)(2). Accordingly, we overrule the first assigned error.

{¶ 32} Our disposition of the first assigned error, renders the second

assigned error moot. App.R. 12(A)(1)(C).

Judgment affirmed.

It is ordered that appellee recover from appellant its costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate be sent to said court to carry this

judgment into execution.

A certified copy of this entry shall constitute the mandate pursuant to

Rule 27 of the Rules of Appellate Procedure.

PATRICIA ANN BLACKMON, PRESIDING JUDGE

MELODY J. STEWART, J., and JAMES J. SWEENEY, J., CONCUR