246 A.3d 1176
Me.2021Background
- H&B Realty leased dealership property to JJ Cars (five-year lease, 7/1/2011–6/30/2016); John Mokarzel personally guaranteed obligations.
- JJ Cars repeatedly sublet the premises during the term; H&B’s member Sterling Boyington twice consented and once acquiesced to prior sublets.
- In Nov. 2015 JJ Cars sought to sublease to Wholesale Motors (owner Dave McGovern); Boyington refused to consent, and the trial court found his refusal was motivated by personal dislike of McGovern.
- After the refusal, Wholesale Motors vacated (trial court found), JJ Cars stopped paying rent in Nov. 2015, H&B obtained a forcible entry and detainer judgment (Mar. 24, 2016) and sold the property (Apr. 2016).
- JJ Cars and Mokarzel pleaded breach and failure-to-mitigate affirmative defenses and counterclaims; trial court found H&B unreasonably withheld consent and failed to mitigate, concluded H&B’s breach was material, and entered judgment for JJ Cars excusing its nonpayment.
- The Maine Supreme Judicial Court (majority) affirmed the judgment on the subletting/ material-breach ground; the dissent would have vacated judgment and remanded for damages, concluding H&B’s breach was not shown to be material and mitigation duty issues were mistimed.
Issues
| Issue | Plaintiff's Argument (H&B) | Defendant's Argument (JJ Cars) | Held |
|---|---|---|---|
| Whether H&B unreasonably withheld consent to sublease to Wholesale Motors | Withholding consent was reasonable because Wholesale Motors did not provide financials, written agreement, or fee and sought a longer term; also JJ Cars was in material default | Boyington withheld consent out of personal dislike for McGovern, not for business reasons; prior practice shows H&B tolerated sublets | Court: There was competent evidence Boyington refused consent because he "didn't like" McGovern; withholding was unreasonable and thus a breach of Article XIII |
| Whether lease precondition (written assumption, financials, $250 fee) barred the sublease absent compliance | Those documents/fee were preconditions to valid subletting | Those post-consent requirements apply only after the landlord has consented; because consent was unreasonably withheld, tenant never had opportunity to provide them | Court: Article XIII’s listed documents/fee are required only after landlord consent; H&B cannot rely on them because consent was withheld unreasonably |
| Whether H&B’s breach was material, excusing JJ Cars’ nonpayment of rent | Even if withholding was unreasonable, breach was not material and lacked causal connection to JJ Cars’ failure to pay; Wholesale Motors occupied premises despite refusal | Breach was material because withholding consent deprived JJ Cars of its ability to generate income by subletting and therefore excused further performance | Court (majority): Breach was material — it prevented JJ Cars’ reasonably expected use of the property and excused JJ Cars’ nonpayment; dissent disagreed, finding no causal link |
| Whether H&B had a duty to mitigate rent damages and when it arose | Duty to mitigate arises only upon termination of tenant’s right of possession (after forcible entry and detainer) | H&B failed to use commercially reasonable efforts to relet once JJ Cars stopped paying (per lease Article XX); thus H&B failed to mitigate earlier | Majority: did not reach mitigation because the material-breach ruling was dispositive; trial court had found failure to mitigate but appellate majority affirmed on the breach ground; dissent maintained mitigation duty did not arise until possession terminated |
Key Cases Cited
- Cellar Dwellers, Inc. v. D’Alessio, 993 A.2d 1 (2010 ME 32) (establishes material-breach standard that may excuse the other party’s performance)
- Chapman v. Katz, 862 N.E.2d 735 (Mass. 2007) (refusal to consent to sublease is reasonable only for factors related to preserving property or ensuring lease performance)
- Morin Bldg. Prods. Co. v. Atl. Design & Constr. Co., 615 A.2d 239 (Me. 1992) (prevention of performance by one party can excuse the other party’s further performance)
- Jenkins, Inc. v. Walsh Bros., 776 A.2d 1229 (Me. 2001) (materiality of breach is a factual question reviewed for clear error)
- 20 Thames St. LLC v. Ocean State Job Lot of Me. 2017, LLC, 231 A.3d 426 (2020 ME 55) (forcible entry and detainer determines right to possession and timing for statutory summary remedies)