Zazanis v. Gold Coast Mall, Inc.

BISHOP, Judge. Steve Zazanis, appellant, and Gus Stikas, now deceased, were defendants in a contract action in the Circuit Court for ³⁶⁶ Worcester County based on their failure to pay, under a lease agreement, a rent deficiency which accrued after their eviction for failure to pay rent under Md. Real Property Code Ann. § 8-401 (1981). Helen Stikas, Executrix under the Last Will and Testament of Gus Stikas, had been substituted as a party appellant; however, pursuant to her motion this Court dismissed her appeal. This appeal involves a judgment based on the granting by the circuit court of summary judgment in favor of appellee Gold Coast Mall, Inc. and the denial of the motion for summary judgment filed by appellant.

Md. Real Property Code Ann. § 8-401 (1981) provides: (a) Right to repossession. — Whenever the tenant under any lease of property, express or implied, verbal or written, shall fail to pay the rent when due and payable, it shall be lawful for the landlord to have again and repossess the premises so rented. (c) ... judgment in favor of landlord; surrender of premises by tenant; effect of tender of rent. (2) If, when the trial occurs, it appears to the satisfaction of the court, that the rent, or any part of the rent, is actually due and unpaid, the court shall determine the amount of rent due and enter a judgment in favor of the landlord for possession of the premises. The court may also give judgment in favor of the landlord for the amount of rent determined to be due together with costs of the suit if the court finds that the actual service of process made on the defendant would have been sufficient to support a judgment in an action in contract or tort.

(3) The court, when entering the judgment, shall also order the tenant to yield and render possession of the premises ... within two days after the trial. ³⁶⁷ (5) However, if the tenant, or someone for him, at the trial, or adjournment of the trial, tenders to the landlord the rent determined by the court to be due and unpaid, together with the costs of the suit, the complaint against the tenant shall be entered as being satisfied. (d) Removal of tenant for noncompliance with judgment in favor of landlord. — If judgment is given in favor of the landlord, and the tenant fails to comply with the requirements of the order within two days, the court shall, at any time after the expiration of the two days, issue its warrant, directed to any official of the county entitled to serve process, ordering him to cause the landlord to have again and repossess the property by putting him (or his duly qualified agent or attorney for his benefit) in possession thereof____ (e) Tenant’s right to redeem leased premises prior to eviction. — In any action of summary ejectment for failure to pay rent where the landlord is awarded a judgment giving him restitution of the leased premises, the tenant shall have the right to redemption of the leased premises by tendering cash, certified check or money order to the landlord or his agent all past due rent and late fees, plus all court awarded costs and fees, at any time before actual execution of the eviction order____ FACTS Pursuant to a lease under which appellant 1 rented store premises from appellee for a ten year term commencing on June 1, 1978, appellant was required to pay a “minimum rent,” an additional “percentage rent” baved upon gross receipts, and miscellaneous other charges which were also characterized as “rent.” Within two years of the beginning ³⁶⁸ of the lease term, a dispute arose regarding the method of calculating the “percentage rent” and as a result, appellee made several attempts to recover possession of the leased premises and the rent alleged to be due. On July 14, 1980, appellee filed an action against appellant under Section 8-401 for repossession of rented property for failure to pay percentage rent. This action was dismissed by the District Court for Worcester County pursuant to appellant’s motion on the ground that under the correct interpretation of the lease, no percentage rent was due.

Appellee’s motion for a new trial on the ground of mutual mistake in the drafting of the percentage rent clause was denied. On July 23, 1980, the same day that the action was dismissed, appellee sent a letter to appellant, by certified mail, which gave thirty days notice to vacate the premises because of several alleged defaults under the lease, including “a history of default in payment of rent, common area maintenance, taxes, and percentage rent____” Appellant did not vacate as requested and on November 19, 1980, appellee filed a forcible detainer action against him. 2 This action was eventually dismissed for lack of prosecution. On May 21, 1981, appellee filed another action pursuant to Section 8-401 for repossession of rental property for failure to pay percentage rent and common area maintenance, and at the same time filed a tenant holding over action pursuant to Section 8-402. 3 The court found for appellant in the holding over action and entered a judgment in favor of appellee for possession and for $1,009.64 percentage rent due in the repossession action. ³⁶⁹ Appellant attempted to redeem the premises pursuant to Section 8-401(e), by tendering a certified check for $1,012.64, the percentage rent judgment and costs. Appellee refused to accept the check, as well as several subsequent tenders on the ground that it was entitled to possession of the premises.

Appellee’s letters to appellant which accompanied the return of the checks stated that: —our returning these checks does not constitute any waiver of our right to any moneys which are due us pursuant to the terms of the lease, however, we are entitled to possession of the premises and will not accept any funds at this time____ —under the circumstances, until the matter of repossession of premises is resolved, since I understand you are appealing the Order of the Court, we are returning to you herewith all checks which you have tendered reserving to ourself the right to require you to pay this money at an appropriate time. Our returning these checks to you constitutes no waiver on our part of any of the obligations contained in your lease____ On July 15, 1981, appellee filed a petition for warrant of restitution pursuant to Section 8-401(d) alleging that appellant had waived the right of redemption pursuant to Section 21.05 of the lease which provides that Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Owner obtaining possession of the leased premises, by reason of the violation by Tenant of any of the covenants or conditions of this lease, or otherwise. The district court order of restitution of September 16, 1981, was upheld, on appeal, by the circuit court and appellant was evicted on December 10, 1981. ³⁷⁰ Appellee filed the present action for rent deficiency from the time of eviction up to, but not beyond the time the premises were re-let in November 1982. The amount of the judgment after the granting of appellee’s motion for summary judgment represents the minimum rent, common area maintenance, legal fees, and interest which the parties stipulated would be the damages due if appellee is entitled to a judgment.

Discussion As a general rule, lease obligations are terminated upon re-entry or eviction for breach of a covenant in a lease; See Jones v. Albert, 50 Md.App. 685, 690 , 440 A.2d 416 (1982); Mackubin v. Whetcroft, 4 H. & McH. 135, 153 (1798); Hinsman v. Marble Sav. Bank, 156 A. 874, 875 (Vt.1931); however, a tenant may continue to be liable to the landlord based upon a provision in the lease which imposes liability for rent, damages, or deficiency arising in the case of reletting. McArthur v. Rostek, 483 P.2d 1351, 1352 (Colo.App.1971); Satin v. Buckley, 246 A.2d 778, 780-81 (D.C.1968); Halpern v. Bargans, 46 App.Div.2d 657, 359 N.Y.S.2d 837, 838 (1974); see generally 52 C.J.S. Landlord & Tenant § 490 (1968) at 428-29. The pertinent provisions of the lease at issue here are: SECTION 21.01.

Right to Re-enter. In the event of any failure of Tenant to pay any rental due hereunder within ten (10) days after the same shall be due, or any failure to perform any other of the terms, conditions or covenants of this lease to be observed or performed by Tenant for more than thirty (30) days after written notice of such default shall have been given to Tenant ... then Owner besides other rights or remedies it may have, shall have the immediate right of re-entry.... SECTION 21.02. Right to Relet.

Should Owner elect to re-enter, as herein provided, or should it take possession pursuant to legal proceedings or ³⁷¹ pursuant to any notice provided for by law, it may either terminate this lease or it may from time to time without terminating this lease, make such alterations and repairs as may be necessary in order to relet the premises, and relet said premises or any part thereof for such term or terms (which may be for a term extending beyond the term of this lease) and at such rental or rentals and upon such other terms and conditions as Owner in its sole discretion may deem advisable; upon each such reletting all rentals received by the Owner from such reletting shall be applied, first, to the payment of any indebtedness other than rent due hereunder from Tenant to Owner; second, to the payment of any costs and expenses of such reletting, including brokerage fees and attorney’s fees and cost of such alterations and repairs; third, to the payment of rent due and unpaid hereunder, and the residue, if any, shall be held by Owner and applied in payment of future rent as the same may become due and payable hereunder. If such rentals received from such reletting during any month be less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Owner. Such deficiency shall be calculated and paid monthly. No such re-entry or taking possession of said premises by Owner shall be construed as an election on its part to terminate this lease unless a written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction.

Notwithstanding any such reletting without termination, Owner may at any time thereafter elect to terminate this lease for such previous breach. Should Owner at any time terminate this lease