EBC Props. v. Urge Food Corp.

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EBC PROPERTIES, LLC v. URGE FOOD CORPORATION

No. 1952-2021

Court of Special Appeals of Maryland ^[*]

February 28, 2023

Circuit Court for Prince George's County Case No CAL1931614

Berger, Leahy, Zic, JJ.

OPINION

Berger, J.

This appeal arises from a dispute between a landlord and its tenant regarding the transfer of chattels installed in the rented commercial realty and the restoration of the rented realty at the conclusion of the lease. On September 27, 2019, Appellee and tenant Urge Food Corporation ("Urge") filed suit in the Circuit Court for Prince George's County seeking a declaratory judgment and damages for breach of contract. Appellant and landlord EBC Properties, LLC ("EBC") filed a counterclaim and a third-party complaint against Urge and the individual guarantors of the lease contract between Urge and EBC, for breach of contract, as well as for detinue and conversion.

The circuit court conducted a two-day bench trial via Zoom on May 24 and 25, 2021.^[1] The court ruled in favor of EBC regarding Urge's complaint for breach of contract and requested post-trial briefing from both parties as to the remaining issues. After both parties submitted such briefing, the trial judge issued a ruling from the bench. The court issued judgment in favor of EBC as to its claims that Urge breached the contract by failing to pay additional rents. The court ruled in favor of Urge as to EBC's claims of conversion, damages, and detinue regarding Urge removing property it installed to operate its grocery business on the premises and as to EBC's claim that Urge failed to fully repair the premises to the same condition it was in prior to the start of Urge's tenancy. The circuit court entered its judgment, and EBC filed its notice of appeal the following day.

EBC presents three questions for our review, which we reorder but otherwise present verbatim below:

I. Whether the Circuit Court erred when it ruled that all of Urge's installations were trade fixtures and, therefore, "Tenant's Property" under the terms of the Lease.

II. Whether the Circuit Court erred when it found that Urge retained a right to remove its "Tenant's Property," and that such items had not become the property of EBC.

III. Whether the Circuit Court erred when it found that Urge was not liable to EBC for the costs to restore the Premises to the condition required in the Lease.

For the reasons explained herein, we affirm on the first two questions and remand for further proceedings, without affirming or reversing, on the third question.

FACTS AND PROCEDURAL HISTORY

The Relevant Provisions of the Lease Contract

On August 30, 2006, Urge and EBC -- as Tenant and Landlord respectively --entered into a thirteen-year contract ("the Lease"), running from October 1, 2006 to September 30, 2019, in which Urge rented 2340 University Boulevard East in Adelphi, Maryland ("the Premises"), a commercial retail space in a strip mall owned by EBC. Section 14 of the Lease permitted Urge to freely make improvements and alterations to the Premises, so long as such improvements did not affect utility systems or the building's structure. Section 14 further provided that such improvements (including "trade fixtures") not permanently affixed to the building, would remain Urge's property unless "abandoned" in the event of default or the termination of the lease.^[2] In the event of Urge's default under Section 15 of the Lease, EBC reserved the right to terminate the lease, to re-enter and repossess the Premises -- including all of Tenant's Property deemed abandoned therein --and to re-rent the Premises. Section 15 further provided that the Landlord would be considered in default if it failed to cure an alleged breach of the Lease within 30 days of receiving written notice thereof.

Section 4 of the Lease imposed the responsibility on Urge to pay two categories of rent, noting that the failure to pay either would be treated as a default under the Lease. "Basic Rent" referred to the yearly cost for Urge to use and enjoy the Premises, paid in monthly installments, with relevant provisions regarding annual increases and late fees. The Lease also required the payment of "Additional Rent," related to the Tenant's Covenants under Section 8 of the Lease, including section 8(K), which required Urge to contribute to Common Area Costs ("CAM Charges") such as utilities, insurance premiums, maintenance and repair expenses, trash removal, and "fees and personnel costs" related to the hiring of engineers, superintendents, and security.

Tenant Improvements and Installations

Prior to Urge's tenancy, the Property had served as a used clothing store. When Urge took possession, the Premises was "completely empty." Urge undertook extensive efforts to ready the location for its intended use as a grocery store. Urge installed numerous chattels related to operating a grocery, making the requisite improvements to the plumbing, electrical, and HVAC systems to accommodate these installations, including seafood, meat, and deli counters; a bakery, including an oven and hood for ventilation; display cases; checkout counters and registers; interior freezer cases; and similar chattels common to grocery stores. Notably, there were four walk-in coolers connected to the outside of the building that required holes to be cut in an exterior wall, the installation of a concrete slab to which the coolers were bolted, wood framing to be erected for their support, and connections made to the HVAC and fire suppression systems. EBC approved all such improvements where it was required to do so.

Dispute Over Security and Departure from the Premises

Shortly after Urge began operating, crime became an issue, with customers and employees falling victim to automobile break-ins, stolen property, robbery, and knife attacks. After notifying EBC, and finding their response insufficient, Urge began hiring its own security personnel to keep watch of the grocery store ("Mega Mart") and parking lot but not the other properties in the strip mall. By December of 2017 -- roughly a decade later -- EBC also became concerned about crime and hired its own security company to patrol the entire strip mall property, including the Mega Mart. When EBC sought proportional compensation from Urge, Urge refused to pay, maintaining that it was content with the security company it already contracted with and did not see a need to pay for redundant services. EBC pointed out that such security costs were part of the CAM Charges that Urge was required to pay under "Additional Rent" in Sections 4 and 8(K) of the Lease.

EBC, through counsel, sent a letter to Urge on May 15, 2019, noting that under the terms of the Lease, the Lease would terminate on September 30, 2019, at which point Urge should vacate the Premises. The letter also demanded Urge cure its breach of the Lease by May 22, 2019, pertaining to $52,083.97 in unpaid CAM Charges, or EBC would have "no alternative but to pursue all legal remedies available." EBC sent Urge another letter on June 7, 2019, again requesting that the outstanding balance of $52,083.97 be paid by June 17, 2019, and explaining the origins of the security charges, water usage, grease trap charge, and cleaning charge. On September 17, 2019, EBC sent another letter to Urge as notice of the Additional Rent arrearages that had been accruing since 2017. In the letter, EBC warned that the owed amounts continued to accrue, and that failure to timely pay would be considered a default under the Lease. Further, the letter reminded Urge that in the event of default, Section 14(A) of the Lease prevented Urge from removing its installed chattels, which EBC expressly listed, thus removal would be considered additional breach.

Around this same time, Urge believed it was paying above-market rent and decided to vacate the Premises at the end of the term of the Lease and move to a new location.^[3]During September of 2019, Urge began removing most of the items it installed as it prepared to vacate. The security company hired by EBC confronted Urge personnel while they were removing the installations at night, informing Urge employees they were to "leave it how it is." Urge proceeded to cover the windows so EBC's security could no longer see inside as Urge continued removing the installations from the Mega Mart.

Security personnel alerted EBC to Urge's actions, but EBC told security to not intervene and to avoid conflict.

Prior Legal Proceedings

On September 27, 2019, Urge filed a two-count complaint in the Circuit Court for Prince George's County, alleging EBC breached the contract by preventing Urge from removing all of its property, including the exterior walk-in coolers, which were trade fixtures. Urge also sought declaratory relief that Urge was the sole owner of the exterior trade fixtures and thus had a right to remove such fixtures. Urge further maintained that EBC should be enjoined from preventing the removal of the remaining trade fixtures.

EBC responded with a three-count counterclaim on October 24 2019, eventually filing its fourth-amended counterclaim and third-party complaint on April 23, 2021.^[4] In Count I, EBC alleged Urge breached the contract by failing to pay the additional rent, and then further breached the Lease by removing fixtures and failing to make necessary repairs in violation of the Lease. EBC sought damages in excess of $75,000.00, as well as attorney's fees. In Count II, EBC sought detinue for the return of the installations Urge had removed. EBC claimed such removal was in violation of the lease and committed through trespass, and that Urge unjustly detained the removed chattels. Similarly, Count III alleged conversion of the chattels removed as well as the walk-in coolers left at the...