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JETZ LAUNDRY SYSTEMS, INC. v. LARRY JENKINS, JR.
Jetz Laundry Systems, Inc. appeals from a Fayette Circuit Court order granting summary judgment to Larry Jenkins, Jr. in a dispute regarding an apartment laundry facility lease. At issue is whether the doctrine of equitable estoppel should bar Jetz's breach of contract action against Jenkins.
On September 29, 2005, Jenkins purchased the Preston Arms Apartments building in Lexington from the Kinglander Company. At the time of the purchase, the building had a coin laundry facility that was operated by Jetz pursuant to a lease it had entered into with Kinglander about eighteen months before, on March 15, 2004. The lease allowed Jetz, in exchange for a monthly rental fee, to install several coin-operated washers and dryers at the apartments. The lease provided for a three-year term, with an automatic renewal of an additional three-year term unless canceled in writing with notification to the other party by “registered or certified mail, return receipt requested, no less than ninety (90) days but not more than one hundred twenty (120) days prior to the expiration of the initial term, or any then current renewal term, as the case may be.” Thus, the lease would automatically renew on March 15, 2007, unless Jetz was notified of a cancellation during the thirty-day termination window running from November 15, 2006 to December 15, 2006.
The lease also contained a non-competition provision under which the lessor agreed not to “furnish, provide, lease, rent, or in any other manner cause to be installed ․ washers and/or dryers in any of the rental units ․ at the Preston Arms Apartments ․ without express written consent of the Lessee.”
Finally, the lease also stated that
The provisions of this agreement shall be covenants running with the ownership of the real property ․ and shall be binding upon ․ the respective parties hereto and their respective heirs, executors, administrators, successors or assigns including ․ any person or entity who shall obtain ownership of the real property by assignment, contract for sale, warranty deed, quit claim deed, or by operation of law through a judicial foreclosure or bankruptcy sale.
On September 13, 2005, about two weeks before the ownership of the apartment building changed hands from Kinglander to Jenkins, Jetz recorded a Memorandum of Lease at the Fayette County Clerk's Office. It stated in part that “A copy of the unrecorded lease is available for inspection by persons having a legitimate interest in the Property from the Home Office of the Lessee located at 901 NE River Road, Topeka, Kansas 66616–1133.”
At the closing on the apartment building purchase, Jenkins asked Kinglander for a copy of the Jetz lease, but was informed that Kinglander did not have a copy. On the next day, September 30, 2005, Jenkins called the Jetz office in Louisville to request a copy of the lease. On October 5, 2005, he received, not a copy of the lease, but a preprinted form which he characterizes as an “Amendment of the Lease,” and which Jetz characterizes as a “Change of Ownership,” which stated in part as follows:
This is to amend the Lease of laundry room(s) dated 3/15/2004 between JETZ LAUNDRY SYSTEMS, INC. and Preston Arms Apartments to show that the new owner of the property (Lessor) is Larry Jenkins as of the date September 26, 2005 and that rent checks are to be sent to the name and address designated below, Lessor and Lessee will continue to operate under all other terms of the Lease.
Jenkins called the Jetz Louisville office again and told them he would not sign the form until he was provided with a copy of the original lease. He was informed that he needed to call the Jetz home office in Topeka, Kansas, to request a copy of the lease. Jenkins called the home office and was told he would be sent a copy of the lease. Instead, on October 12, 2005, he received another copy of the form, but no copy of the lease. On the next day, he called the Jetz home office again and stated that he would not sign the form until he had been provided with a copy of the original lease. He was told that until he signed the form, the rental checks would continue to be sent to Kinglander. He refused to sign the form, and the checks were sent to Kinglander, which indorsed the checks to Jenkins. According to Jetz, it was not obliged to provide a copy of the lease to Jenkins because he provided no proof of his ownership of the property that would qualify him as a person having a “legitimate interest in the Property,” as stated in the Memorandum of Lease filed in the County Clerk's Office.
On December 16, 2006, Jenkins was informed that the Kinglander Company had dissolved, and that unless he signed the Jetz form, the rental checks would be sent to Kinglander co-owner Mark King as part of the Kinglander property settlement. Jenkins signed the form on December 18, 2006, after the termination window had expired. Double He henceforth received rental checks directly from Jetz for the months of January, February, March and April 2007. In May 2007, Jenkins disconnected Jetz's laundry equipment and replaced it with his own. Jenkins finally received a copy of the lease by regular mail on June 26, 2007, and by certified mail on June 29, 2007.
On February 11, 2008, Jetz filed suit against Jenkins, alleging that he had breached the terms of the lease. Jetz filed a motion for summary judgment which the trial court denied, relying on the doctrine of equitable estoppel to hold that Jenkins should not be faulted for improperly terminating the lease, because he had not been provided with notice of its terms. The trial court also stated that a question of fact existed as to whether Jetz was dealing with Jenkins in good faith. Jenkins then filed a motion for summary judgment which was granted. This appeal followed.
The standard of review on appeal of a summary judgment is “whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App.1996) (citing Kentucky Rules of Civil Procedure (CR) 56.03).
Jetz argues that summary judgment was inappropriate because (1) Jetz has met the elements necessary to show a breach of contract on Jenkins's part; (2) Jenkins failed to properly terminate the lease prior to his breach; (3) Jenkins has failed to show the elements of estoppel; and (4) Jetz's calculation of damages is reasonable.
Jenkins does not dispute that, in order to keep the lease from automatically renewing, he would have had to provide written notice of termination to Jetz by certified mail at least 90 days prior to the renewal date of January 15, 2007. He argues that he did not and could not know the terms of the lease, because Jetz repeatedly refused to provide him with a copy of the lease until June 2007, long after the thirty-day termination period had passed.
Equitable estoppel is “a defensive doctrine founded on the principles of fraud, under which one party is prevented from taking advantage of another party whom it has falsely induced to act in some injurious our detrimental way.” Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581, 594–95 (Ky.2012).
The essential elements of equitable estoppel are:
(1) conduct which amounts to a false representation or concealment of material facts, or, at least, which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) the intention, or at least the expectation, that such conduct shall be acted upon by, or influence, the other party or other persons; and (3) knowledge, actual or constructive, of the real facts. And, broadly speaking, as related to the party claiming the estoppel, the essential elements are (1) lack of knowledge and of the means of knowledge of the truth as to the facts in question; (2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and (3) action or inaction based thereon of such a character as to change the position or status of the party claiming the estoppel, to his injury, detriment, or prejudice.
Sebastian–Voor Properties, LLC v. Lexington–Fayette Urban County Government, 265 S.W.3d 190, 194–95 (Ky.2008) (citations omitted).
Jetz's argument on appeal does not address the first part of the definition which relates to its own conduct. Jetz addresses only the second part of the definition, arguing that Jenkins has not met the elements necessary to claim estoppel. We will address each of these elements in turn.
As to the first element, Jetz argues that Jenkins cannot show that he lacked knowledge of the terms of the lease or the means to attain such knowledge because he could have requested Kinglander to obtain a copy of the lease for him. Since Kinglander was no longer the owner of the apartment building, however, it would presumably not meet the definition of a person with “a legitimate interest” in the property which Jetz consistently insisted was a prerequisite to obtaining a copy of the lease. In the alternative, Jetz argues that Jenkins could simply have signed the form provided to him by Jetz. But signing the form would have required Jenkins to acquiesce to the terms of a lease he had never seen. We therefore disagree with Jetz that the terms of the lease were “readily accessible.”
As to the second element, Jetz argues that Jenkins cannot show that he relied in good faith upon Jetz's conduct or statements, because if he had responded appropriately by signing the form, he would have received a copy of the lease prior to the expiration of the termination window. As we have already stated, however, signing the form would have required Jenkins to acquiesce to the terms of a lease he had never seen. “In every contract, there is an implied covenant of good faith and fair dealing.” Ranier v. Mount Sterling Nat. Bank, 812 S.W.2d 154, 156 (Ky.1991). At no time was Jenkins notified by Jetz that the lease contained an automatic renewal provision. As the party with superior knowledge of the terms of the lease, Jetz owed a duty to disclose its terms to Jenkins. “It is, of course, well established that mere silence is not fraudulent absent a duty to disclose. A duty to disclose may arise ․ where one party to a contract has superior knowledge and is relied upon to disclose same.” Smith v. General Motors Corp., 979 S.W.2d 127, 129 (Ky.App.1998) (internal citations omitted). “Where one party to a contract knows that the other relies on him to disclose all facts material to execution thereof, the duty rests on him not to conceal anything material to the bargain, and one causing damage by concealment must assume the entire responsibility.” Faulkner Drilling Co., Inc. v. Gross, 943 S.W.2d 634, 638 (Ky.App.1997) (internal citation omitted).
Finally, as to the third element, Jetz argues that Jenkins failed to show action or inaction based on Jetz's conduct that caused him to change his position or status which was to his injury, detriment or prejudice. Jetz points out that Jenkins received the benefits of the lease in the form of rental payments from September 2005 until May 2007, and that Jenkins's own conduct caused him to miss the opportunity to terminate the lease because Jetz always acted in accordance with its reasonable requirement that a new owner furnish proof of ownership. What was not reasonable, however, was the requirement that the new owner acquiesce to the terms of the lease without first being provided with a copy. Although Jetz has argued that it takes time, money and effort to provide a copy of the lease, the copy of the lease in the record consists of only two pages. Furthermore, the record is devoid of any evidence that Jetz provided Jenkins with some acceptable alternative means of proving his ownership of the Kinglander apartments.
The summary judgment granted by the Fayette Circuit Court is therefore affirmed.
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Docket No: NO. 2012–CA–000850–MR
Decided: June 28, 2013
Court: Court of Appeals of Kentucky.
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