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Old Capitol Trail, LLC v. Megarents, Inc.

Superior Court of Delaware

June 23, 2017

OLD CAPITOL TRAIL, LLC, Successor by Merger to HUMES PROPERTIES, LLC, Plaintiff,
v.
MEGARENTS, INC., t/a Events Unlimited, Defendant.

          Submitted: March 20, 2017

          Thomas C. Marconi, Esquire, Losco & Marconi, P.A., 1813 North Franklin Street, P.O. Box 1677, Wilmington, Delaware 19899; Attorney for Plaintiff.

          Louis J. Rizzo, Jr., Esquire, Reger Rizzo & Darnall LLP, 1523 Concord Pike, Suite 200, Brandywine Plaza East, Wilmington, Delaware 19803; Attorney for Defendant.

          DECISION AFTER TRIAL

          FERRIS W. WHAFTON, JUDGE

         I. INTRODUCTION

         Below is the Court's decision following a bench trial on February 13, 2017 and the submission of post-trial memoranda. For the reasons set forth below, the Court enters judgment in favor of Defendant Megarents, Inc., t/a Events Unlimited and against Plaintiff 3410 Old Capitol Trail, LLC, Successor by Merger to Humes Properties, LLC.

         II. FACTS AND PROCEDURAL CONTEXT

         This dispute centers on the nature of the relationship between the parties upon the expiration of a commercial lease. Plaintiff 3410 Old Capitol Trail, LLC ("3410") is the successor by merger to the original lessor Humes Properties, LLC. Under the lease, executed on January 6, 2004, Defendant Megarents, Inc. ("Megarents") leased storage space for a period of one year beginning on April 1, 2004 with a base rent of $12, 780.00, payable at the rate of $1, 065.00 per month. By its terms, the lease expired on March 31, 2005. The parties agree that the lease was not renewed. Nevertheless, Megarents continued to occupy the leased premises until August 31, 2015 and continued to make payments to 3410. There were gaps in the payments, however, with 3410 alleging that delinquencies accrued in the period from July 1, 2010 through August 31, 2015. While most monthly payments made during that period were for $1, 065.00, other months the payments ranged from $0.00 to $2, 130.00. Megarents also made three payments of $500.00 and one of $130.00 between September 30, 2015 and December 5, 2015 after it had vacated the leased premises.

         Eventually, 3410 brought this lawsuit seeking damages of $28, 476.10 for unpaid rent, including late payment fees of 25%, interest, attorney's fees, and costs. For various reasons, both legal and factual, Megarents denies that it has any liability to 3410.

         A bench trial was held on February 13, 2017. At trial, each side presented a single witness. Humberto Humes ("Humes") represented 3410 and testified in both its case-in-chief and in rebuttal. Philip Eckstrand ("Eckstrand"), founder and president of Megarents, testified for the defense. Exhibits consisted of the lease, 3410's Quickbooks record of lease payments, cancelled checks produced by Megarents, 3410's running balance calculation, and 3410's responses to Megarents request for admissions.

         On direct examination, Humes explained that, after the lease expired, the tenancy converted to a month-to-month lease under all of the same terms as the original lease, including a 25% late fee if the monthly rental payment of $1, 065.00, due on the first of the month, was not paid within 10 days of the due date. The balance of Humes' direct testimony consisted of explaining how the total amount of $21, 328.50 that 3410 now claims it is due was calculated.

         On cross-examination, Humes acknowledged that he never sent Megarents any regular monthly invoices, late payment notices, or default notices. He did say that he occasionally hand delivered notices to Eckstrand and a few times gave him statements, but was not sure whether he gave Eckstrand Quickbooks invoices (which did not reflect late fees) or late fee balances. In any event, no copies of statements or notices were introduced into evidence. Humes was asked about the total amounts paid by Megarents for each year from 2012 through 2015 and the total amount of rent due, excluding any late charges for that same time frame. Humes' testimony on this issue was based on records produced at trial which included 3410's Quickbooks record of lease payments, cancelled checks from Megarents to 3410 and its predecessor Humes Properties, LLC, and a running balance calculation prepared by 3410's counsel's office. The running balance document, which includes late fees, shows an amount due as of December 5, 2015 of $21, 328.50. The Quickbooks record, which does not include late fees, shows an open balance of $3, 337.34 as of April 28, 2016. An open balance of $2, 684.01 appears on April 1, 2012, but after that no open balance appears again until March 1, 2014 when an open balance of $1, 065.00 appears. Humes was unable to explain the absence of an open balance from April 2012 to March 2014. As invoices are docketed and payments are made, the open balance fluctuates between $0.00 and $1, 065.00 until the end of 2014 when the open balance is $0.00. Two invoices are docketed in 2015-one for $1, 065.00 on January 1, 2015 and the other for $5, 956.48 on August 31, 2015. The open balance on August 31, 2015 is recorded as $5, 966.48. The final invoice is recorded as $3, 337.34 on April 28, 2016 with an open balance of the same amount on the same date. No payments are recorded as being made after a payment of $1, 065.00 on December 22, 2014.

         Eckstrand told a different story about the parties' relationship after the lease expired. He said Megarents stayed on as a tenant on a month-to-month basis. He described the space Megarents rented from 3410 as overflow space which Megarents could always vacate if 3410 secured another tenant. He claimed that Megarents was never threatened with termination or eviction and never received any late fee notice. He said that, if a 25% late charge had been applied, Megarents simply would have moved out. When cross-examined, Eckstrand explained that when the national economy took a downturn, his business suffered and it became difficult to make consistent rental payments. He had a discussion with Humes, telling Humes that Megarents would pay rent as best as it could, but if that did not work out, Megarents would vacate the rental unit. In Eckstrand's telling, Humes agreed because "something is better than nothing."

         Humes testified again in rebuttal. His testimony consisted of saying that he did not recall having a conversation with Eckstrand in which Eckstrand told ...


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