122 N.E.3d 901
Ind. Ct. App.2019Background
- Indiana Hotel Equities, LLC (the Hotel) was assigned a long‑standing lease for a hotel near Indianapolis Airport and agreed to renovate, rebrand, and operate the property under a national chain by December 31, 2016.
- The Lease (and an Assignment/Lease Amendment) required substantial improvements: well‑appointed rooms, decorated lobby, sit‑down restaurant, full‑service bar serving beer/wine/distilled liquor, fitness center, and a swimming pool; failure to complete these by 12/31/2016 was an express default.
- The Hotel failed to complete at least two required items (a full‑service bar/lounge and a swimming pool) by the deadline. The Authority sent a termination letter on May 11, 2017, giving notice and a cure period ending July 11, 2017; the Hotel did not cure.
- After the termination notice, the Hotel continued making rent payments through at least September 2017; the Authority attempted to stop accepting payments (via counsel and by instructing its lockbox processor) but the bank could not refuse checks. The Authority did not refund post‑notice rent.
- The Hotel sued for damages and injunctive relief; the Authority counterclaimed and sought possession. The trial court converted motions to summary judgment, granted the Authority’s motion, denied the Hotel’s, finding (1) the Hotel defaulted and (2) the Authority did not waive termination by accepting rent. The Hotel appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Hotel’s breaches were material so as to permit forfeiture/termination | Breaches (missing bar/pool) were minor items and not material; court needed to assess materiality | Breaches went to the heart of the Lease: rebranding/major improvements required by the Lease were not completed | Breach was material as a matter of law; no genuine factual dispute that defaults went to the heart of the contract |
| Whether the Authority waived its right to terminate by accepting rent after notice | Continued acceptance/cashing of rent created a factual issue of waiver of forfeiture | Lease contains an explicit written nonwaiver clause and the Authority attempted to avoid accepting payments; bank, not Authority, processed payments | No waiver: the nonwaiver clause controlled and Authority’s efforts to prevent acceptance (plus lack of Authority signature on checks) show intent to preserve rights |
| Whether the Lease’s written nonwaiver provision was satisfied by rent checks | Hotel: checks are written instruments and acceptance constitutes waiver absent written waiver | Authority: nonwaiver clause requires a written instrument signed by party to waive; mere acceptance of checks does not satisfy clause | Nonwaiver clause enforced; checks did not constitute the written waiver required and Authority did not sign them |
| Entitlement to possession as a matter of law after uncured default | Hotel: factual issues preclude summary judgment | Authority: undisputed defaults and no waiver entitle it to possession | Summary judgment for the Authority: no genuine issue of material fact and Authority entitled to judgment as matter of law |
Key Cases Cited
- King v. Conley, 87 N.E.3d 1146 (Ind. Ct. App.) (materiality of breach and forfeiture analysis)
- Page Two, Inc. v. P.C. Mgmt., Inc., 517 N.E.2d 103 (Ind. Ct. App.) (acceptance of rent can waive forfeiture absent nonwaiver language)
- HK New Plan Marwood Sunshine Cheyenne, LLC v. Onofrey Food Servs., Inc., 846 N.E.2d 318 (Ind. Ct. App.) (leases with explicit nonwaiver clauses preclude waiver by acceptance of rent)
- Wagner v. Yates, 912 N.E.2d 805 (Ind.) (summary judgment standard)