Vill. Commons, LLC v. Marion Cnty. Prosecutor's Office

882 N.E.2d 210 (Ind. Ct. App. 2008)

 

RULE:

Indiana courts have recognized the contractual nature of leases and the applicability of the law of contracts to leases. The construction of a written contract is a question of law. When interpreting a contract, a reviewing court's paramount goal is to ascertain and effectuate the intent of the parties. That requires the contract to be read as a whole, and the language construed so as not to render any words, phrases, or terms ineffective or meaningless. Where the terms of a contract are clear and unambiguous, a reviewing court will not construe the contract or look at extrinsic evidence, but will apply the contractual provisions.

FACTS:

On June 2, 1999, then Marion County Prosecutor Scott C. Newman, executed a lease on behalf of Marion County Prosecutor (collectively, MCPO) with Lombard Associate Limited Partnership (Lombard) to lease the basement of the Victoria Centre in Indianapolis, Indiana (the Lease). Sometime thereafter, Lombard sold the Victoria Centre to Village Commons, LLC and Rynalco, Inc. (collectively, the Landlord) and assigned the Lease to Landlord. The MCPO's Grand Jury Division used the leased premises as its office and evidence storage space. Under the Lease provisions, Landlord was required to maintain all equipment used in common with other tenants - such as elevators, plumbing, heating and similar equipment--and to maintain the premises in good order, condition and repair. In the event of breach by Landlord, the lease provided that the MCPO could sue for injunctive relief or to recover damages for any loss resulting from the breach, but MCPO shall not be entitled to terminate the Lease or withhold, setoff or abate any rent due thereunder. Beginning in 2001, there was a series of water intrusions from the outside and leaks from building equipment, which damaged property secured by the MCPO and affected the areas that the MCPO occupied or used. As a result of repeated water intrusions in the war room, Landlord hired Indoor Air Management (IAM) to conduct microbiological sampling and visual inspections. Following the inspections, several other leaks in different parts of the building were discovered and on January 30, 2003, the MCPO elected to vacate the leased premises. On February 23, 2004, Landlord filed a Complaint against the MCPO, alleging that the MCPO breached the Lease, and sought the damages provided under the Lease. The MCPO filed its answer on April 14, 2004, asserting affirmative defenses and a counterclaim premised on a wrongful eviction theory. On January 9 through 11, 2007, the trial court held a bench trial. Thereafter, the parties submitted proposed findings of fact and conclusions of law pursuant to Ind. Trial Rule 52(C). The trial court's judgment held that the MCPO's defenses and counterclaim were not barred by the Lease's exclusive-remedy provisions. Furthermore, the trial court ruled that the MCPO was "actually" evicted in October 2002 and then "constructively" evicted in January 2003. The trial court also opined that assuming the Landlord could recover against the MCPO, the Landlord did not mitigate its damages reasonably. Therefore, MCPO was awarded $ 7,664 and costs on its wrongful eviction counterclaim. Consequently, the Landlord appealed, arguing that the trial court's judgment is clearly erroneous because it ignored the exclusive-remedy provision of the Lease by concluding that the MCPO had been constructively evicted. 

ISSUE:

Did the exclusive-remedy provision of the Lease bar the MCPO from asserting a wrongful eviction defense?

ANSWER:

No.

CONCLUSION:

The appellate court held that the tenant did not violate the exclusive-remedy provision by defending itself and counterclaiming for wrongful eviction because the landlord evicted the tenant from the premises. The findings of the trial court held that MCPO was actually evicted from the leased premises beginning in October of 2002, and was then constructively evicted as of January 28, 2003, due to repeated and unremedied water intrusions. According to the appellate court, if a landlord committed acts or omissions sufficient to actually evict the tenant, the tenant was no longer obligated to pay rent. And likewise, if a landlord committed acts or omissions sufficient to constructively evict the tenant, and the tenant left within a reasonable period, the tenant was no longer obligated to pay rent under the lease. In the case at bar, the appellate court ruled that the exclusive-remedy provision limited only the MCPO's ability to "terminate this Lease or withhold, setoff or abate any rent due thereunder." Upon the occurrence of eviction, either actual or constructive, it is the lessor's act or omission that ends the obligation to pay rent, not the lessee. Since the appellate court concluded that the trial court's findings that the MCPO had been wrongfully evicted were not clearly erroneous, the court held that it was the Landlord's own act or omission that resulted in extinguishing MCPO's future rent payment obligations.

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