In River Square University, LLC v. Aspect Properties, LLC,[1] the Michigan Court of Appeals held that under the plain meaning rule, a landlord can still be entitled to post-eviction damages even if the lease does not include an acceleration clause.
In River Square, Plaintiffs and Defendants had entered into a five-year commercial lease from October 2015 to October 2020. However, from January 2016 to November 2016, Defendants failed to pay the full amount of rent and in December 2016, stopped paying rent altogether. The next month, Plaintiffs filed a summary proceeding action to recover possession of the premises, which the district court granted.
After the Defendants vacated the premises, Plaintiffs filed a complaint, alleging breaches of contract regarding the lease and guarantees. After Defendants failed to answer Plaintiffs’ complaint, Plaintiffs moved for entry of a default judgment for rent and damages from January 2016 to the end of the lease term. During the evidentiary hearing on damages, the trial court denied Plaintiffs any damages after April 28, 2017, the date the Defendants had vacated the premises, because the lease did not contain an acceleration clause. Subsequently, on January 24, 2019, the trial court entered a final default judgment in the amount of $54,962.00, with the judgment earning interest at 18% per annum until it was satisfied. Plaintiffs filed a motion for reconsideration, challenging the court’s failure to award post-eviction damages, which the trial court denied.
On appeal, the Michigan Court of Appeals agreed with Plaintiffs that the trial court erred in not permitting post-eviction damages. By giving the parties’ lease agreement its ordinary and plain meaning, the Court of Appeals held that the absence of an acceleration clause did not preclude Plaintiffs from collecting damages after the lease ended. Rather, after looking at how the lease discussed the consequences of the Defendants’ default, the Court concluded that regardless of Plaintiffs’ ability to evict Defendants and regain possession of the premises, the plain language entitled Plaintiffs to post-eviction damages.
After determining that Plaintiffs were permitted to recover post-eviction damage, the Court of Appeals went on to determine the proper measure of damages. The Court of Appeals held that the proper measure of post-eviction damages was the amount of rent owed by Defendants after their eviction until proper mitigation by Plaintiffs in re-leasing the property. Additionally, Plaintiffs were entitled to “expenses incurred in repossessing the premises, including attorney fees,” as well as late fees, administrative fees, and 18% interest per annum on any amount Defendants failed to pay when due under the lease. With the proper measure of damages set forth, the Court of Appeals reversed and remanded the trial court’s decision to determine the proper value of both post-eviction and mitigation damages.
A link to the opinion can be found here: https://law.justia.com/cases/michigan/court-of-appeals-unpublished/2020/347452.html
[1] Unpublished per curiam opinion of the Michigan Court of Appeals, issued April 16, 2020 (Docket NO. 347452).
