Tonetti Enterprises, LLC v. Mendon Road Leasing Corp.

943 A.2d 1063, 2008 R.I. LEXIS 32, 2008 WL 818986
CourtSupreme Court of Rhode Island
DecidedMarch 28, 2008
Docket2006-195-Appeal
StatusPublished
Cited by9 cases

This text of 943 A.2d 1063 (Tonetti Enterprises, LLC v. Mendon Road Leasing Corp.) is published on Counsel Stack Legal Research, covering Supreme Court of Rhode Island primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tonetti Enterprises, LLC v. Mendon Road Leasing Corp., 943 A.2d 1063, 2008 R.I. LEXIS 32, 2008 WL 818986 (R.I. 2008).

Opinion

OPINION

Justice SUTTELL, for the Court.

The defendant, Mendon Road Leasing Corp. (Mendon Road) appeals from a Superior Court judgment denying its motion to vacate a District Court default judgment awarding the plaintiff, Tonetti Enterprises, LLC (Tonetti), possession of the premises that Mendon Road had been leasing from Tonetti. Also before the Court is an appeal by Digital Federal Credit Union (Digital) from an order denying its motion to intervene in this commercial ejectment action. For the reasons set forth in this opinion, we reverse the judgment and order of the Superior Court.

I

Facts and Procedural History

The appeals before this Court arise out of a lease agreement entered into by To-netti and Mendon Road’s predecessor, 99A Management Corporation, 1 for the lease of commercial property located at 1754 Men-don Road, Cumberland, Rhode Island. Under the terms of the lease agreement, lessee was to pay rent on an annual basis and was also required to pay common area maintenance (CAM) charges as additional rent at the end of each year. The lease agreement stated that at the end of each year, Tonetti would adjust the CAM charges to reflect the actual expenses incurred by Tonetti, but lessee had the right to review Tonetti’s records concerning the CAM charges within sixty days of the assessment of the CAM charges. Furthermore, the lease agreement contained a clause providing that if lessee has given notice to Tonetti of the name and address *1066 of any mortgagee, Tonetti was obligated to send that mortgagee a duplicate copy of any notice that was given to lessee.

On January 4, 2002, Tonetti filed an action against Hemisphere Management Corp. in District Court claiming an arrear-age in rental payments and seeking repossession of the leased premises. On February 27, 2002, the parties entered into a consent order setting forth a payment schedule for certain rental and CAM expenses, and establishing an electronic fund transfer mechanism for payments due after May 1, 2002. In the event of default, the consent order provided that Tonetti’s “remedy shall be a motion for the entry of judgment of possession,” with seven days notice of failure to pay to be forwarded to Hemisphere Management Corp., attention Demetrios E. Haseotes, with a copy to its two named attorneys.

Several years later, another dispute arose between landlord and tenant. On August 1, 2005, Tonetti advised Mendon Road that an audit had revealed an additional fee of $3,285.92 owing for CAM expenses. This was followed by a notice of default under the provisions of the lease and a notice of violation of the consent order sent by certified mail to Mendon Road’s corporate address in New York. Copies of the notice, however, were not sent to the attorneys listed in the consent order. When these notices failed to engender payment of the disputed expenses, Tonetti forwarded to Mendon Road a notice of termination of lease by facsimile and certified mail.

On December 15, 2005, Tonetti initiated two separate actions against Mendon Road, each seeking repossession of the premises. First, Tonetti filed a motion for entry of a judgment of possession under the provisions of the February 27, 2002 consent order. A hearing date on said motion was scheduled for January 3, 2006. 2 Secondly, Tonetti filed a new complaint against Mendon Road in District Court under G.L. 1956 § 34-18.1-9, asserting that Mendon Road had defaulted in the payment of rent, additional rent, CAM charges, and/or taxes under the terms of the lease.

The summons was served on Demetrios B. Haseotes in Cumberland, Rhode Island, on December 27, 2005. The summons stated that the appearance date was set for 9 a.m. on January 4, 2006, and in bold print, “If you fail to appear on the date stated below, judgment by default will be taken against you for the relief demanded in the complaint.”

Mr. Haseotes accepted service of process. However, he is not the president of defendant corporation; rather, it is his son, Demetrios E. Haseotes who is president. Nevertheless, Mendon Road’s attorney submitted an affidavit stating that at some time between December 27, 2005, and January 3, 2006, Demetrios E. Ha-seotes contacted him and forwarded him a copy of the complaint. Mendon Road responded to the complaint on January 3, 2006, -with an answer denying that it had defaulted under the terms of the lease. Mendon Road also raised a number of affirmative defenses in its answer including accord and satisfaction, release, waiver, laches, and unclean hands, along with defenses under Rule 12 of the District Court Civil Rules for failure to state a claim upon which relief can be granted and lack of subject-matter jurisdiction. It is undisputed, however, that neither Mendon Road *1067 nor its attorney appeared in District Court on January 4, 2006.

At the hearing on January 4, 2006, plaintiff presented the testimony of its manager, Gino Tonetti, and judgment for possession was entered in its favor. On January 20, 2006, Mendon Road filed a motion to vacate entry of judgment by default, as well as a motion for stay of execution, both of which were denied. The defendant then filed a notice of appeal to the Superior Court. 3

In its written submissions to the Superi- or Court, Mendon Road argued that before the hearing in District Court, it had, in fact, cured the alleged default by wiring to Tonetti’s account sufficient funds to pay the CAM charges in full. Mendon Road also advanced the following arguments: (1) clerical error justified relief because the clerk of the District Court failed to note that defendant filed an answer on January 3, 2006, and incorrectly noted on the civil face sheet that “Pres Haseotes served”; (2) the judgment was void for inadequate service of process; (3) Mendon Road’s failure to attend the hearing was due to excusable neglect because of a combination of inadequate service of process and confusion over hearing dates caused by the previous action Tonetti filed seeking similar relief; (4) Tonetti misrepresented to the court that defendant’s president had been served, when in fact it was the president’s father who was served, and further misrepresented that defendant had not paid the CAM charges when in fact the CAM charges had been paid in full on December 19, 2005, by means of electronic transfer; and (5) Mendon Road had not been provided notice under either Rule 55 or Rule 77 of the District Court Civil Rules.

On March 3, 2006, Digital filed a motion to intervene in the Superior Court asserting that it had an interest in the litigation as the holder of a leasehold mortgage of $1.55 million. Digital asserted that the outcome of Tonetti’s commercial ejectment action could impair its ability to protect its property interest, and that the existing parties did not adequately represent Digital’s interests. More specifically, Digital argued that if Mendon Road was unsuccessful in this litigation, its ability to continue making payments to Digital would be severely affected, as would Digital’s ability to foreclose on the property, if necessary.

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943 A.2d 1063, 2008 R.I. LEXIS 32, 2008 WL 818986, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tonetti-enterprises-llc-v-mendon-road-leasing-corp-ri-2008.