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LLC v. Atrium Gentlemans Club, Inc.

Court of Appeals of Mississippi

February 21, 2017

110 SOUTH STREET, LLC APPELLANT/CROSS-APPELLEE
v.
ATRIUM GENTLEMANS CLUB, INC. APPELLEE/CROSS-APPELLANT

          DATE OF JUDGMENT: 04/09/2015

         HINDS COUNTY CHANCERY COURT, FIRST JUDICIAL DISTRICT, J. DEWAYNE THOMAS, TRIAL JUDGE

          ATTORNEYS FOR APPELLANT: JEFFREY DALE RAWLINGS JON JERDONE MIMS

          ATTORNEY FOR APPELLEE: MEL J. BREEDEN JR.

         EN BANC.

          CARLTON, J.

         ¶1. 110 South Street LLC filed a complaint in the Hinds County Chancery Court seeking damages against Atrium Gentleman's Club Inc. (Atrium) after Atrium failed to make lease payments. After a hearing on the matter, the chancellor entered an order finding that Atrium owed 110 South Street $9, 800 in back rent. The chancellor's order reflected that the parties orally agreed that Atrium would rent the property at a rate of $3, 500 per month and would take possession of the property on April 1, 2014. The chancellor found that no enforceable written lease agreement existed between the parties since "no such document was ever signed by both parties." The chancellor also held that each party would be responsible for its own attorney fees.

         ¶2. Atrium filed a motion for reconsideration, which the chancellor denied. 110 South Street now appeals the chancellor's order and argues that the chancellor erred by failing to award attorney fees and additional damages. Atrium cross-appeals, asserting that the chancellor erred in: (1) finding that the rental period commenced on April 1, 2014; (2) granting a lien on Atrium's personal property; and (3) failing to order that 110 South Street return Atrium's property. Finding no error, we affirm the chancellor's order and judgment.

         FACTS

         ¶3. In March 2014, Ray Mallard, an agent for Atrium, contacted 110 South Street to inquire about securing a lease agreement for the property. After negotiations, the parties agreed that Atrium would pay $3, 500 per month to lease the property, and Atrium would take possession of the property on April 1, 2014. However, the record reflects that Atrium never signed or executed the proposed lease agreement.[1] Both Atrium and 110 South Street testified that the parties agreed that Atrium could occupy the property for forty-five days rent-free while Atrium made some needed renovations to the property. The parties also both testified that they agreed to extend this rent-free period for an additional forty-five days due to renovation delays, totaling ninety days in all.

         ¶4. On August 21, 2014, after Atrium failed to make lease payments, 110 South Street filed a complaint for a temporary restraining order (TRO), an injunction, and other relief against Atrium, seeking damages, all sums due, injunctive relief, and attorney fees based on the following: 110 South Street's statutory landlord's lien; Atrium's failure to pay past-due rent, expenses, and costs; Atrium's failure to provide proof of insurance; Atrium's failure to transfer utilities; and Atrium's failure to execute a written lease agreement.

         ¶5. On August 27, 2014, the chancellor entered a TRO enjoining and prohibiting Atrium from removing any property from the premises and from entering and accessing the premises. The hearing for the preliminary injunction was set for September 8, 2014. When Atrium failed to respond and attend the hearing, the chancellor entered a permanent injunction on October 3, 2014. On the same day, Atrium and 110 South Street executed a forbearance agreement that allowed Atrium to remain open briefly in exchange for Atrium's agreement that it would have no defenses to the prior action filed against it by 110 South Street.

         ¶6. On October 15, 2014, the chancellor entered an entry of default against Atrium. Atrium filed its answer and motion to set aside the entry of default and permanent injunction on October 16, 2014. The chancellor entered an order on February 18, 2015, finding that the only remaining issues to be determined were: (1) the amount, if any, due to 110 South Street, (2) the items, if any, to which the landlord's lien attached, and (3) the items, if any, to which Atrium was entitled.

         ¶7. The chancellor held an evidentiary hearing on these issues on March 18, 2015. At the hearing, 110 South Street asserted that Atrium owed it approximately $18, 000, which included $3, 000 in attorney fees. 110 South Street based this amount on unpaid rent and Atrium's failure to cover costs to improve the building, which included contracted electrical and roofing work, and installation of the sprinkler system. 110 South Street submitted that it also incurred expenses for the electric bills and $3, 000 in losses for a metal-clad fireproof door that was removed from the building. 110 South Street also requested its security deposit for damages, and all of its damages for rent for April, May, June, July, August, and September, in addition to a lien on certain personal property.

         ¶8. However, at the hearing, 110 South Street testified that although Atrium was scheduled to take possession of the property on April 1, 2014, 110 South Street agreed to provide a ninety-day rent-free period to Atrium due to renovations being made to the property. 110 South Street agreed that it was not entitled to receive rent from Atrium until June 15, 2014.

         ¶9. 110 South Street also asserted that when it obtained possession of the property through the injunctive action, the contents in the premises consisted of furniture, kitchen equipment, bar equipment, sound and light equipment, stages, stripper poles, and televisions. The stages were permanently mounted to the concrete floors. 110 South Street sought to establish its lien against the personal property, primarily against the kitchen equipment, explaining that none of the personal property other than the kitchen equipment had any real value to 110 South Street.

         ¶10. At the hearing, Atrium also acknowledged that the parties agreed that Atrium could occupy the property starting on April 1, 2014, but Atrium testified that the parties agreed that Atrium would not pay rent for a forty-five-day period so that it could make the renovations needed for its business. At the end of the initial forty-five-day period, Atrium stated that renovations were still ongoing; as a result, Atrium testified that the parties agreed to extend the rent-free period for an additional forty-five days. Atrium testified that this rent-free period ended on June 15, 2014, when the gentleman's club opened for business.

         ¶11. Atrium further testified that prior to opening for business, 110 South Street requested Specialty Electric to perform some work on the building. Atrium claimed that it never received a bill from 110 South Street for any work performed by Specialty Electric, and Atrium stated that it was never presented a bill for a fire inspection. Atrium also testified that leaks in the roof were corrected without an agreement between the parties as to who would pay for these repairs. Atrium submitted that it paid the Entergy electric bills during the renovations to the building, even though the electricity account remained in 110 South Street's name. Regarding 110 South Street's claim about the metal-clad fireproof door, Atrium testified that 110 South Street ordered that the door be placed outside of the premises, where it later disappeared.

         ¶12. Both parties testified and agreed that Atrium had indeed paid 110 South Street a total of $14, 700. However, despite its prior testimony that the rent-free period ended on June 15, 2014, 110 South Street still claimed that Atrium owed them "[f]or April, May, June, July, August, [and] September, [and for] the $3, 000 missing door that [Atrium] couldn't tell [them] why [they] couldn't put back in place." 110 South Street also disputed that Atrium should receive dollar-for-dollar credit on the $3, 500 security deposit.

         ¶13. The chancellor entered his opinion and order on April 9, 2015, awarding a judgment against Atrium, and in favor of 110 South Street, in the amount of $9, 800 in back rent. The chancellor found that the parties agreed that Atrium would rent the property from 110 South Street at a rate "of $3, 500 per month from April 1, 2014, until the date upon which Atrium was removed from the premises, being October 3, 2014, for a total of $24, 500." The chancellor acknowledged that Atrium had paid a total of $14, 700 to 110 South Street in rent, and held Atrium liable for remaining unpaid rent in the amount of $9, 800. The chancellor ordered Atrium to pay this amount within twenty days.

         ¶14. The chancellor found that although Atrium took possession of the property on April 1, 2014, Atrium failed to sign the lease agreement. As a result, the chancellor found that no enforceable lease agreement existed between the parties. The chancellor granted 110 South Street a lien against Atrium's personal property, but the chancellor explained that the lien would be extinguished, and Atrium could recover all personal property from the location listed on "exhibit B, " if Atrium paid the monetary judgment in full within twenty days. The chancellor also held that any property considered a fixture would not be recoverable by Atrium, and that each party would be responsible for its own attorney fees.

         ¶15. On April 17, 2015, Atrium filed a motion for a new trial, reconsideration, or to set aside the judgment. On May 13, 2015, the chancellor entered an order denying Atrium's motion. 110 South Street filed its appeal on June 5, 2015, and Atrium subsequently filed its cross-appeal.[2]

         STANDARD OF REVIEW

         ¶16. This Court employs a limited standard of review when reviewing a chancellor's decisions. McNeil v. Hester, 753 So.2d 1057, 1063 (¶21) (Miss. 2000). This Court "review[s] a chancellor's decision for abuse of discretion[, ] . . . [and we] will affirm a chancellor's decision when it is supported by substantial credible evidence." Venture Sales LLC v. Perkins, 86 So.3d 910, 913 (¶11) (Miss. 2012) (citations omitted). We only disturb the chancellor's findings if "they are manifestly wrong or clearly erroneous, or the chancellor applied an erroneous legal standard." Ainsworth v. Ainsworth, 139 So.3d 761, 762 (¶3) (Miss. Ct. App. 2014). However, we review a chancellor's conclusions of law de novo. Lowrey v. Lowrey, 25 So.3d 274, 285 (¶26) (Miss. 2009).

         DISCUSSION

          I. Appeal by 110 South Street

         ¶17. The chancellor ordered each party to be responsible for its own attorney fees, and like Judge Wilson's separate opinion, we find no abuse of discretion by the chancellor in denying 110 South Street's request for attorney fees herein. See Jordan v. Fountain, 986 So.2d 1018, 1021 (¶7) (Miss. Ct. App. 2008). 110 South Street argues that the chancellor erred in failing to award it damages and attorney fees. 110 South Street submits that the chancellor limited 110 South Street's damages to the total amount of rent owed by Atrium subtracted by the amount already paid by Atrium, amounting to a total of $9, 800. 110 South Street argues that based on the forbearance agreement and the presentation at the hearing of the damages incurred by 110 South Street, the chancellor should have awarded 110 South Street actual damages in the amount of $18, 512.33, which includes attorney fees of approximately $2, 500.

         ¶18. The record reflects that on October 3, 2014, Atrium executed the forbearance agreement wherein Atrium agreed that "it has no defenses to the action filed against it by 110 South Street, LLC, " in exchange for 110 South Street allowing a forbearance of the permanent injunction. 110 South Street argues that the chancellor erred in failing to award it damages and attorney fees because, as a matter of contract, Atrium agreed by execution of the forbearance agreement that it possessed no defenses to 110 South Street's complaint. As a result, 110 South Street argues that Atrium was contractually estopped from defending against its liability as to 110 South Street's request for damages and attorney fees, and estopped from arguing that the terms of the lease agreement were not enforceable based on the fact that the lease was never signed and executed.

         ¶19. Upon review, the record reflects that the forbearance agreement provides, in pertinent part, that:

110 South Street, LLC has agreed to forbear from enforcing the Permanent Injunction until October 4, 2014[, ] at 5:00 a.m. under certain terms and conditions. In consideration for this agreement, Atrium . . . has agreed to the following terms and conditions.
Atrium . . . agrees that it has no defenses to the action filed against it by 110 South Street . . . and agrees that the Permanent Injunction is valid and enforceable in all respects and that 110 South Street . . . is entitled to immediate possession of the subject premises.

         However, the forbearance agreement failed to provide for an award of attorney fees or an award for any special damages. "[A]ttorney[] fees are a special remedy available only when expressly provided for in either a statute or contract, or when there is sufficient proof to award punitive damages." Falkner v. Stubbs, 121 So.3d 899, 903 (¶15) (Miss. 2013). A forbearance agreement constitutes a collateral agreement that must be independently binding in its terms. See ...


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