2019 Ohio 726
Ohio Ct. App.2019Background
- Barley’s Brewing (BRLP and BRC) operated a restaurant/arcade at 467 N. High St.; Brewery Real Estate Partnership (BREP) owned the building and leased it to BRLP. Parties (Jezerinac and Dioun families) were co-owners in related entities; relations soured and litigation followed.
- A receiver was appointed over BRC/BRLP to manage and market the business during the dispute. The lease forbids transfers but (1) requires landlord consent for ownership-change transfers and (2) contains a Jan. 2, 2013 amendment excusing landlord consent when ownership transfers involve persons known to the Jezerinacs for at least three years.
- The lease also contains a default clause permitting landlord termination if a receiver is appointed for tenant and the receivership is not set aside within 30 days.
- Two competing purchase offers emerged: Taste (Dioun-related) for $4.2M and LLJBucksBrew (Jezerinac-related) for $1.875M; receiver favored Taste subject to ability to obtain/enter a lease with BREP. BREP claimed it had refused to deal with Dioun-related entities and executed (but not yet effective) a lease with LLJ/LLJBucksBrew.
- The trial court (1) interpreted the lease as not assignable in this context, (2) upheld the landlord’s right to terminate on receivership default (subject to its stay), and (3) ordered the receiver to accept LLJBucksBrew’s offer. Defendants (Dioun) appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the lease is assignable under §9.01(a) as amended | Jezerinac argued the court should enforce lease terms as written but contended the 2013 exception was narrowly tailored and inapplicable | Dioun argued the 2013 amendment permits assignment without landlord consent to transferees known to the Jezerinacs for ≥3 years; lease therefore assignable to Taste | Court held lease is assignable under §9.01(a) and the Jan. 2, 2013 amendment — assignment to Dioun-related transferees who meet the ‘‘known for 3 years’’ test does not require landlord consent |
| Whether the receiver may assign the lease / sell business without landlord consent | Jezerinac/trial court viewed assignment power limited and stressed landlord termination rights and equity | Dioun contended receiver succeeds to tenant’s contractual rights and may effect assignments allowed by the lease (including under the amendment) | Court held receiver has the same lease-related rights/limitations as tenant and may entertain assignments permitted by the lease; receiver should solicit offers consistent with lease terms |
| Whether appointment of a receiver automatically triggers an enforceable default permitting landlord termination | BREP maintained the lease’s explicit default (receiver appointed >30 days) allows termination and that termination defeated Taste’s offer | Dioun argued the receivership was a technical default, tenant remained solvent/performing, and equitable considerations weigh against rigid enforcement | Court recognized the default clause as valid but declined to mechanically enforce it here; because the trial court had stayed termination and substantive lease obligations had been met, equities weigh against immediate termination; remanded for sale process rather than immediate termination |
| Whether the trial court abused discretion by staying discovery | Dioun asked for discovery to test lease/negotiation facts | Jezerinac/receiver argued lease interpretation is a question of law and the receivership requires limited, focused process | Court found stay of discovery not an abuse of discretion and that the complaint about total denial of discovery is unripe |
Key Cases Cited
- Boone Coleman Constr., Inc. v. Piketon, 145 Ohio St.3d 450 (2016) (contract interpretation is a question of law reviewed de novo)
- Arnott v. Arnott, 132 Ohio St.3d 401 (2012) (principles on contract interpretation and integration)
- Galmish v. Cicchini, 90 Ohio St.3d 22 (2000) (parol evidence rule and integrated agreements)
- Bellman v. AIG, 113 Ohio St.3d 323 (2007) (contracts that appear integrated cannot be contradicted by prior contemporaneous agreements)
- Smith v. Johnson, 57 Ohio St. 486 (1898) (receiver succeeds to title and rights of the entity placed in receivership)
- State ex rel. Petro v. Gold, 166 Ohio App.3d 371 (2006) (discussing receiver powers as officer of the court)
- Takis, LLC v. C.D. Morelock Props., Inc., 180 Ohio App.3d 243 (2008) (equitable weighing required before enforcing termination defaults; remand where mechanical application was improper)
- State ex rel. Celebrezze v. Gibbs, 60 Ohio St.3d 69 (1991) (trial court has broad discretion to define receiver powers)