Church not entitled to $322,000 on breach of contract claim

A trial court erred when it determined that a church was entitled to $322,000 on its breach of contract claim after its building lessor ordered the church to vacate the premises before the end of its contract, the Indiana Court of Appeals ruled.

Randy Faulkner, owner of Randy Faulkner & Associates, leased premises it owned to The Restoration Church Inc. in Greenwood, where Faulkner attended. The lease, which charged the church $100 a month in rent, began in October 2009. In 2012, RFA gave the church written notice to vacate the premises. The notice came in response to the church’s pastor’s wife, Cindy Stephenson, manufacturing false documents that purported to show the church’s timely notices of intent to renew for the prior years. The church actually never provided RFA with timely written notices of its intent to renew the lease; instead, it wrote out checks for $1,200 to RFA for the years 2011 and 2012.

The church sued Falkner and RFA for breach of contract, among other claims; Faulkner and RFA countersued for breach of contract and various tort claims. After a bench trial, the judge ruled in favor of the church on the breach of contract claims and awarded damages of $322,000.

Also, the trial court ruled in favor of RFA and Faulkner on their claim of tortious interference with a business relationship. Faulkner claimed an employee of RFA and his other business, The Christian Phonebook, left because of statements made by Pastor David Stephenson. However, the judge did not award any damages because the evidence of damages was speculative.

The church was fined $2,500 as a sanction for Cindy Stephenson manufacturing false documents.

In Randy Faulkner & Associates, Inc. and Randall W. Faulkner v. The Restoration Church, Inc., 41A01-1506-PL-706, the Court of Appeals reversed the ruling in favor of the church.

“In sum, case law, the lease agreement, and the undisputed facts make clear that the Church was a holdover tenant following the expiration of the lease agreement’s original term. As a holdover tenant, the Church continued to pay the same rent it had been paying, and RFA waived its right to the increased rent payments due from the Church as a holdover tenant. But the lease agreement makes clear that RFA’s waiver of its right to collect the increased rent cannot operate to waive another right under the lease agreement,” Judge Margret Robb wrote.

“Accordingly, the trial court erred when it found that the Church’s continued occupancy and RFA’s continued acceptance of rent demonstrated RFA’s intent to waive its right to written notice from the Church of the Church’s intent to exercise the option terms. Because RFA was dealing with a holdover tenant in July of 2012, RFA was within its rights under the lease agreement to evict the Church so long as RFA provided the Church with at least thirty days’ written notice, which it is undisputed that RFA did. Hence, RFA did not breach its contract with the Church, and it owes the Church no damages on that claim.”

The judges also affirmed the ruling that RFA and Faulkner aren’t entitled to damages on their tortious interference claim, noting that their argument on damages is simply a request for the COA to credit evidence that the trial court expressly refused to credit, which the judges will not do. Faulkner’s only evidence was that he had to sell The Christian Phonebook company at a discounted price after the employee left, which the trial court found to be speculative.

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