At issue in Village Commons, LLC and Rynalco, Inc. v. The Marion County Prosecutor's Office and Carl Brizzi, No. 49A05-0704-CV-195, is whether the exclusive-remedy provision in the lease between Village Commons and Rynalco (landlords), and the prosecutor's office barred the office from asserting it was evicted by acts or omissions of Village Commons; whether the trial court's findings that the prosecutor's office was actually evicted and constructively evicted were erroneous; and whether a provision limiting the prosecutor's office's time to sue barred its defenses and counterclaims.
In 1999, then-Prosecutor Scott Newman executed a lease between Lombard Associate Limited Partnership and the Marion County Prosecutor's Office to lease the basement of the Victoria Centre in Indianapolis. Later, Village Commons and Rynalco purchased the building and became the new landlords.
The prosecutor's office used the space for its Grand Jury Division offices and evidence storage. Two years later, the office started experiencing numerous water leaks. Because of costs, the landlords decided not to re-pour a concrete sidewalk above the offices to help prevent leaks or to repair drywall. Boxes of evidence had been destroyed and the phones went out as a result of the leaks. The water leaks continued into 2002. In October 2002, the landlords sent a letter to the office suggesting the Grand Jury Division move the evidence it was storing and other materials away from the part of the building that was vulnerable to water damage.
On Jan. 30, 2003, the Grand Jury Division vacated the office and relocated. That was also the last month the office paid rent to the landlords. In February 2004, the landlords brought a complaint against the prosecutor's office, alleging it breached the lease and sought damages provided under the lease. The prosecutor's office counterclaimed with a wrongful-eviction theory, arguing it had been constructively evicted in August 2002.
A bench trial ruled the prosecutor's office's defense and counterclaims were not barred by the lease's exclusive-remedy provisions, which said the office could sue for injunctive relief or recover damages resulting from a breach, but it isn't entitled to terminate the lease or withhold rent. The trial court also found the office to be "actually" evicted in October 2002 and "constructively" evicted in January 2003, and the landlords didn't mitigate its damages reasonably. The prosecutor's office was awarded more than $7,000 and costs on its wrongful-eviction counterclaim.
The Court of Appeals concluded the exclusive-remedy provision only limited the prosecutor's office's ability to terminate the lease, not the landlords' ability, so any occurrence by the landlords that actually or constructively evicts the prosecutor's office ends the office's liability to pay rent.
It was the landlords' own act or admission - not properly fixing the water leaks and preventing water damage - that resulted in the prosecutor's office not having to pay future rent, wrote Judge Patricia Riley.
The appellate court agreed that the office was actually evicted in October 2002, when the landlords asked the office to stop using part of the space that was most vulnerable to the water leaks, and that the office was constructively evicted in January 2003 because of repeated water leaks that went unfixed. The evidence at the trial court supports the finding that the prosecutor's office was deprived of a material part of the leased premises because of the water issues, which resulted in the actual eviction, wrote Judge Riley.
Finally, the Court of Appeals affirmed that the prosecutor's office was allowed to bring a counterclaim and assert the defense it had been evicted. The landlords argued the prosecutor's office was barred from claims after one year of the date of inaction or event. This provision in the contract bars the prosecutor's office from initiating an action more than a year later; however, it was the landlords who initiated this action, so the prosecutor's office's defense and counterclaim are not barred by the lease, she wrote.