In re Jaffan Int'l

In re: Jaffan International, LLC, dba Crave Restaurant and Bar Debtor(s).

No. 8:22-bk-00459-RCT

United States Bankruptcy Court, M.D. Florida, Tampa Division

April 29, 2022

Chapter 11

MEMORANDUM DECISION AND ORDER FOLLOWING TRIAL ON AMENDED MOTION FOR RELIEF FROM THE AUTOMATIC STAY, DENYING REQUEST TO LIFT THE STAY, AND DIRECTING ADDITIONAL ADEQUATE PROTECTION

Roberta A. Colton, United States Bankruptcy Judge

On April 19, 2022, the Court conducted a near day-long trial on the Amended Motion for Relief from the Automatic Stay (Doc 23) (the "Motion") filed by Radhe Krishna Properties LLC (the "Landlord") and Debtor's opposition to the Motion (Doc. 34). The trial on the Motion was set after two preliminary hearings and with the benefit of supplemental briefing by the parties^[1] and was limited in scope to the narrow issue of whether the term of the lease between the parties had been properly extended.^[2]

At trial, the Court heard testimony of Nilesh Sutaria Landlord's corporate representative, Maher Jaffan Debtor's president and principal, and Tushar Choksi, Mr. Sutaria's brother-in-law and the proprietor of a grocery store located in the same shopping center as Debtor. The Court admitted fifteen exhibits offered by the Landlord and twenty-one offered by the Debtor.^[3] After the close of the evidence, the Court provided the parties until April 22 to file their closing arguments. Both arguments were timely filed.^[4]

Based on the documentary evidence and credible testimony adduced at trial, and upon due consideration of the parties' papers, together with the record and the relevant case law, the Court finds that the Motion should be denied, without prejudice. But the Court also finds that for the Debtor to continue to enjoy the benefit of the automatic stay, additional adequate protection must be provided to Landlord.

Jurisdiction

This Court has jurisdiction over this proceeding under 28 U.S.C. §§ 157 and 1334(b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(G).

Facts

In August 2016, Debtor and Landlord entered into a lease agreement for the premises located at 2001 East Fowler Avenue, Suite B, Tampa, Florida 33612 (the "Property"), with an initial five-year term commencing September 1, 2016, and ending August 31, 2021 (the "Lease").^[5] At the Property, Debtor operates a Mediterranean restaurant and bar named Crave Restaurant and Bar. Though the lease term commenced on September 1, 2016 Debtor did not open its doors officially until July 2018. The restaurant's opening was delayed, in part, due to zoning issues. Prior to opening the restaurant's doors, Mr. Jaffan invested significant sums to prepare the premises for Debtor's intended purpose and to resolve the zoning issues.

The parties' first three years under the terms of the lease, while not overly fraught with controversy, were not smooth sailing. Debtor struggled to pay rent timely, and there was confusion over which party was responsible for the payment of the utilities related to Debtor's use of the Property. In October 2019, the parties entered into a Settlement Agreement and Amendment to Lease (the "Addendum")^[6] that in relevant part, contained broad mutual releases, clarified the party responsible for the payment of utilities, provided a means for Debtor to cure disputed unpaid rent for the period ending October 31, 2019, and amended the lease to change the due date for the payment of rent from the first of the month to the tenth.

It is undisputed that the Lease and Addendum constitute the entire formal written agreement between the parties. The relevant provisions of the Lease are:

[2.3] B. RENEWAL OPTIONS. [Debtor] shall have two (2) renewal options, for a period of five (5) years each, which such renewal options may be exercised in accordance with the provisions contained in Section 24 hereof (the Initial Term and any exercised renewal option shall collectively be referred to herein as the "Term").

5.1 LEASE TERM. The Term of this Lease starts on the Commencement Date, and continues for the number of Lease Years specified in Section 2.3. The Term shall end upon the passing of said number of Lease Years after the Commencement Date, subject to extension upon [Debtor's] exercise of its renewal option described in Section 2.3 B.

17.1 LATE CHARGES. . . . Should [Debtor] fail to pay any such Rent or other monetary obligation when due, then interest shall accrue from five (5) days after the due date as the rate of fifteen percent (15%) per annum, but not greater than the maximum rate permitted by law (the "Default Rate"), together with a late charge of [$150.00] to cover Landlord's extra expense involved in collecting such delinquent sums. . . .

17.2 EVENTS OF DEFAULT: REMEDIES. The following shall constitute Event of Default by [Debtor]:

A. [Debtor] fails or refuses to pay any Rent, other monies payable as Rent under this Lease at the specified time and place and such default should continue for more than five (5) days; or, . . .

C. [Debtor] shall be late twice during the Lease Year^[7] in the payment of Rent or other sums or charges due Landlord under this Lease or shall repeatedly default in the keeping, observing or performing of any other covenants or agreements herein contained to be kept, observed or performed by [Debtor] . . . .

17.3 NO WAIVER. No waiver of any agreement of this Lease, or of the breach thereof, shall be taken to constitute a waiver of any subsequent breach of such agreement, nor to justify or authorize the non-observance of any other occasion of the same or any other agreement hereof; nor shall the acceptance of Rent by Landlord at any time when [Debtor] is in default be construed as a waiver of such default or of Landlord's right to terminate this Lease on account of such default; nor shall any waiver or indulgence granted by Landlord to [Debtor] be taken as an estoppel against Landlord, it being expressly understood that if at any time [Debtor] shall be in default hereunder, an acceptance by Landlord of Rent during the continuance of such default or the failure on the part of Landlord promptly to avail itself of such other rights or remedies as Landlord may have, shall not be construed as a waiver of such default, but Landlord may at any time thereafter, if such default continues, terminate this Lease on account of such default in the manner herein provided.

23.1 NOTICE. Any bill, statement, notice, communication or payment which Landlord or [Debtor] may desire or be required to give to the other Party shall be in writing and shall be sent to the other Party b[y] either: (a) certified mail, return receipt requested, postage prepaid; (b) personal delivery; (c) nationally recognized overnight delivery service; or (d) facsimile with a "hard copy" sent by either of the means provided in (b) or (c) above to the address specified in Section 1.0, . . . and such notice shall be deemed delivered and received: (i) if by certified mail, upon three (3) days after being deposited in an official United States Post Office, postage prepaid; (ii) if by courier, upon delivery by courier; (iii) if be nationally recognized overnight delivery service, one (1) day after the deposit thereof with all delivery charges prepaid; or (iv) if by facsimile, on the date of transmission, provided that such facsimile is sent on a business day and a confirmation sheet is received and a copy of the notice is simultaneously delivered by either of the means provided in (b) or (c) above, respectively. Nothing contained herein shall limit either Party from posting notices in a manner authorized by Florida law.

SECTION 24.0 OPTION TO RENEW.

Provided [Debtor] is not in default, and has not been in default, of any provisions of this Lease, Landlord grants to [Debtor] the right to extend this Lease for two (2) periods of five (5) years, under the same terms and conditions as the Initial Term, except that Minimum Annual Rent shall be as stated in Section 2.4 hereof.

If [Debtor] elects to exercise this option, [Debtor] shall notify Landlord in writing at least six (6) months prior to the end of the Initial Term. If this Lease is terminated during the Initial Term for any reason whatsoever, [Debtor] shall have no rights to extend this Lease pursuant to this Section. [Debtor]'s failure to provide the written notice as required herein shall render such options null and void.

Shortly after the Addendum was executed, the COVID-19 pandemic gripped the nation, causing interruptions in Debtor's business which, in turn, caused Debtor to fall behind on its rent obligations under the Lease. Debtor failed to pay rent in April and May 2020, and again in November and December 2020. However, it is undisputed that the unpaid amounts, plus late fees, were cured prior to the expiration of the initial term of the lease.^[8]

By letter dated October 28, 2020 (the "Renewal Notice"), ^[9] Debtor advised Landlord of his intent to renew the Lease for the second five-year term. Debtor also advised that it planned to remodel the bathrooms and kitchen at the Property and would be closed during the month of November for the renovations.^[10] During the end of 2020 and into the late spring of 2021, Debtor made several upgrades to the Property and paid for repairs to mechanical systems, aimed at improving its customers' experience and responding to their health and safety concerns related to the COVID-19 pandemic.^[11] Mr. Jaffan testified that all of these expenses were incurred "in anticipation of renewal" of the Lease.

Mr Jaffan sent the Renewal Notice by first class mail to Landlord at the address contained in the Lease. It was not returned to him as undeliverable. Nonetheless, Mr. Sutaria testified that the Renewal Notice was not received. In fact, Mr. Sutaria testified that he...