Paul Fletcher//November 17, 2014
Paul Fletcher//November 17, 2014//
When thieves stole the copper piping out of four HVAC units for a warehouse in Bluefield in 2012, they probably had no idea they would set in motion a complicated lease dispute that landed in federal court.
The thieves never were caught, but the landlord and the tenant company spent the past year in litigation, and in a decision Nov. 10, each came away from the dispute with a partial victory.
Kroger, the retail grocer, in 2011 rented a building in Bluefield as a warehouse for a beverage business that it ran locally.
The arrangement lasted a year, and Kroger renewed the lease with the owners, the Ackens, for a second year. In early 2012, the company decided to close the beverage business and gave notice to the Ackens that at the end of the year, it would terminate the arrangement.
Kroger slowly withdrew its operations and merchandise; it was out of the building by November. On Dec. 9, the copper thieves struck. The landlord and tenant sparred over who should pay for repair to the HVAC units.
Kroger surrendered the building at the end of the year, but it continued to pay rent until October 2013 when the mistake was discovered. The Ackens refused to return the money.
In Acken v. The Kroger Company (VLW 014-3-576), U.S. District Judge James P. Jones addressed a series of legal issues that cropped up in the case.
Insurance. The lease required Kroger to maintain an insurance policy, but the company self-insured. As a result there are no policy exclusions for theft or other limitations that might be found in a commercial policy, Jones said. The loss of the piping is a casualty loss for which Kroger is liable, he ruled.
Consequential damages. The property has not been re-leased following the damage to the HVAC equipment, but in deposition testimony, Acken never claimed that that loss prevented him from leasing it to another tenant. Without the ability to show actual damages, Jones found, the Ackens could not recover.
Retention of rent. This legal question presented an issue of first impression in Virginia. Acken said that Kroger was a holdover tenant, entitling him to keep the rent money paid in 2013. But Jones cited authority stating the tenant must retain possession of the property for a holdover tenancy. Both parties agreed that Kroger left the building at the end of 2012. Jones said the issue of whether the failure to repair the HVAC units created a holdover tenancy. While a case from Nevada indicated that was a question of fact, Jones noted that the weight of authority said the situation did not create a holdover tenancy. And even if it did, the judge found that Kroger had no duty under the lease to repair. The Ackens could not keep the money.
In the end, both parties won a little and lost a little.
Kroger was required to pay the Ackens for the cost of the HVAC repair, under its duty under the lease to self-insure casualty losses.
And the Ackens had to return the 2013 rent, minus the costs of those repairs. The Ackens were not entitled to any other damages.
Jones left for further determination the repair costs and any awards of costs, prejudgment interest or attorney’s fees.