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Indiana Hotel Equities, LLC v. Indianapolis Airport Authority

Court of Appeals of Indiana

April 18, 2019

Indiana Hotel Equities, LLC, Appellant-Plaintiff,
Indianapolis Airport Authority, Appellee-Defendant/Counterclaimant

          Appeal from the Marion Superior Court The Honorable Heather A. Welch, Judge Trial Court Cause No. 49D01-1707-PL-27076

          ATTORNEY FOR APPELLANT Jeffrey C. Gerish Plunkett Cooney Bloomfield Hills, Michigan

          ATTORNEY FOR APPELLEE R.C. Richmond, III Taft Stettinius & Hollister LLP Indianapolis, Indiana

          BAKER, JUDGE.

         [¶1] Indianapolis Airport Authority (the Authority) and Indiana Hotel Equities, LLC (the Hotel), had a lease agreement (the Lease) for property on which the Hotel operated a hotel. The parties sued each other, each alleging that the other had breached the Lease and each filing a motion for summary judgment. The trial court, finding that the Hotel breached the Lease and that the Authority did not waive its ability to terminate the Lease, ruled in favor of the Authority. The Hotel appeals, arguing that the trial court erred by not directly addressing the materiality of its breach and by finding that the Authority did not waive its ability to terminate the Lease. Finding no error, we affirm.


         [¶2] The Lease originated in 1960 for a hotel located in Indianapolis near the airport. A hotel was constructed and over the years, was managed and modified by various operators. At some point, it fell into disrepair and financial trouble.

         [¶3] On January 6, 2016, the Lease was assigned to the Hotel. The assignment obligated the Hotel to make certain improvements and renovations to the property and to rebrand and operate it under a national chain brand name and of a certain level of quality as recognized by the hotel industry. The Hotel had until December 31, 2016, to complete the work. The renovations required by the assignment included "well-appointed rooms, decorated lobby area, sit-down restaurant offering breakfast and dinner . . ., a full-service bar or lounge area serving beer, wine and distilled liquor, fitness center and swimming pool." Appellant's App. Vol. II p. 81-82. The Lease required the Hotel to pay the Authority rent equal to the greater of $2, 000/month or a certain percentage of gross receipts from room rentals and a certain percentage of the monthly gross receipts derived from the sale of alcoholic beverages.

         [¶4] In addition, a Product Improvement Plan (PIP), which was a document between a national hotel brand and the Hotel, contained a varied list of smaller tasks to be completed, including cleaning and repairing ceiling tiles, walls, and carpet; cleaning and repairing sidewalks and parking areas; installing new artwork and decorative lighting; ensuring a certain level of internet access; implementing employee uniforms; updating the brand signage; removing an ATM; and replacing mattresses and installing new bedding.

         [¶5] On December 31, 2016, the Hotel had neither a full-service bar or lounge area serving beer, wine, and distilled liquor, nor a swimming pool. On May 11, 2017, the Authority sent the Hotel a letter terminating the Lease, stating as follows:

. . . As you know, Indiana Hotel Equities, LLC, failed to complete by December 31, 2016, the renovations and rebranding it was required to perform pursuant to the Lease Amendment, which failure constitutes an event of default under the Lease. As a result of said default, the Authority has the right, pursuant to Section 15 of the Lease, to cancel the Lease in its entirety, and notice is hereby given on behalf of the Authority that the Authority is cancelling the Lease in its entirety . . . .
In the meantime, Indiana Hotel Equities, LLC, remains obligated to perform its obligations under the Lease, and the Authority hereby requests that Indiana Hotel Equities, LLC, provide the Authority with adequate assurance that it will do so. Please provide same, in writing, setting forth Indiana Hotel Equities, LLC's intentions and the actions it will take during the next sixty (60) days, so that the Authority can make appropriate plans for retaking possession of the Premises . . . .

         Appellant's App. Vol. IV p. 74. Pursuant to the Lease, the Hotel had until midnight on July 11, 2017, to cure its defaults.

         [¶6] Following this notification, the Hotel continued to make monthly rent payments at least through September 2017. The Authority uses a remittance processing service, also called a lockbox, pursuant to which rent checks from its tenants, including the Hotel, are sent to a post office box maintained by Chase Bank (Chase). Chase receives and processes the checks.

         [¶7] On July 12, 2017, the Authority's counsel emailed Dena Marietta, its Tenant Relations & Contract Specialist, advising Marietta to "confirm that you will tell whoever receives the rent payments NOT to cash or deposit any further checks received from [the Hotel]. This is CRITICAL." Appellant's App. Vol. V p. 215 (emphasis original). Marietta then asked Elias Maqueda, the Authority's Director of Accounting, to instruct Chase not to accept any future checks sent to the lockbox from the Hotel and to return any checks to the Hotel. Maqueda called Chase and told Arina Foster, a Client Services Associate, that the Authority wanted Chase to refuse to accept any future checks sent to the lockbox by one of the Authority's tenants and to return the checks to the tenant. Foster advised Maqueda that Chase was unable to refuse to accept a check or to return a check. The Authority has not refunded the Hotel the rent that the Hotel has paid following the termination of the Lease.

         [¶8] The Authority based its notice to the Hotel on the following Lease provisions:[2]

Section 15. Remedies: Cancellation by Board. The Board shall have the right subject to the conditions herein set forth, upon written notice to the Company and to the owner and holder of a mortgage upon the leasehold estate herein created, as long as the mortgage shall remain in full force and effect, to cancel this Agreement in its entirety, upon or after the happening of any of the events set forth in this Section, subsections (a) through (f) and the lapse of time as herein set forth, such notice to be given within one year after the Board first has knowledge of the happening of the event, and to be given not less than sixty (60) days and not more than one hundred twenty (120) days in advance of the date of cancellation specified in such notice:
(e) If the Company shall default in the performance or fulfillment of any of the terms, covenants or conditions to be performed by it hereunder.
The Company, at any time before the rights of the Company shall have been forfeited, may pay any of the rents or other amounts due hereunder, or effect any insurance, or pay any taxes and assessments, or make any repairs or improvements, or make any deposits, or do any other act or thing required of the Company by the terms of this Lease or do any act or thing which may be necessary and proper to be done in the observance of the covenants and conditions of this Lease, or to prevent the forfeiture of this Lease.
Section 19. Surrender and Holding Over. The Company covenants that at the expiration of the period for which this Lease or any option period thereof is leased or at any earlier termination under the terms hereof, it will surrender the premises and all structures and improvements thereon which by and under the terms of this Agreement are to remain on the premises as the property of the Board . . .; and the Board shall have the right on such termination to enter upon and take possession of the premises.
Should the Company hold over and continue in possession of the property after the termination of the Lease herein granted, such holding over shall be deemed merely a holding over from month to month and at the rental herein provided for, payable monthly in advance, and otherwise on the same terms and conditions as herein set forth, provided, however, that the Board saves and reserves all legal rights or recourse to remove Company from the premises upon such holding over.
Section 21. Miscellaneous. . . . Neither this Lease nor any term or provision hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which the enforcement of the change, waiver, discharge or termination is sought. . . .

         Appellant's App. Vol. II 67-69, 72-73.

         [¶9] The Authority also based its notice on the following ...

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