Court Opinion

ID: 4553692
Source: CourtListenerOpinion
Date Created: 2020-08-06 19:11:51.791918+00
Date Added: 2024-06-11T13:13:25.102402
License: Public Domain

08/06/2020
               IN THE COURT OF APPEALS OF TENNESSEE
                            AT JACKSON
                                June 24, 2020 Session

   FORCUM-LANNOM, INC. v. SAKE JAPANESE STEAKHOUSE, INC.

                   Appeal from the Circuit Court for Dyer County
                    No. 2019-CV-73 R. Lee Moore, Jr., Judge
                     ___________________________________

                          No. W2019-02095-COA-R3-CV
                      ___________________________________

Appellant filed a detainer action against Appellee, seeking possession of commercial
property. The lawsuit was premised on Appellant’s assertion that Appellee breached the
commercial lease, under which it purportedly leased Appellant’s property. Appellee,
however, is not a party to the lease. As such, the judgment for breach and for back rents
entered against Appellee is of no force or effect. Vacated and remanded.

       Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
                             Vacated and Remanded

KENNY ARMSTRONG, J., delivered the opinion of the court, in which ARNOLD B. GOLDIN
and CARMA DENNIS MCGEE, JJ., joined.

Christine A. Coronado and Becky Dykes Bartell, Dyersburg, Tennessee, for the
appellant, Forcum-Lannom, Inc.

Vivien Wang, Nashville, Tennessee, for the appellee, Sake Japanese Steakhouse, Inc.
                                  MEMORANDUM OPINION1

        On or about May 1, 2014, Appellant Forcum-Lannom, Inc. (“FLI”) entered into a
commercial lease with Xiaolei Yang and Sake Café Dyersburg, Inc. (“Sake Café”), under
which Mr. Yang and Sake Café leased commercial property owned by FLI for use as a
restaurant. On or about July 1, 2017, FLI entered into an amended and restated
commercial lease (the “Lease”), which is the subject of this lawsuit. The Lease, which is
for a five year term (through June 30, 2022), replaced the original lease and provides:

      (a) Xiaolei Yang and Sake Café Dyersburg, Inc. are the two named lessees
      under that [] Lease Agreement dated as of May 1, 2014, entered into with
      LESSOR in connection with the leasing of the real estate hereinafter
      described.
      (b) The parties desire and intend to amend, replace and re-state, in its
      entirety, the Lease Agreement dated as of May 1, 2014, by the addition of
      Gangding Wang as a third lessee and as otherwise provided in the terms
      and conditions hereinafter stated.

The Lease is executed as follows:

      1
          Tenn. R. Ct. App. 10 states:

      This court, with the concurrence of all judges participating in the case, may affirm,
      reverse or modify the actions of the trial court by memorandum opinion when a formal
      opinion would have no precedential value. When a case is decided by memorandum
      opinion it shall be designated “MEMORANDUM OPINION,” shall not be published, and
      shall not be cited or relied on for any reason in any unrelated case.
                                              -2-
-3-
Accordingly, the Lessees under the Lease are Mr. Xiaolei Yang, Mr. Gangding Wang,
and Sake Café (together with Messrs. Yang and Wang, “Lessees”). Paragraph 8 of the
Lease requires Lessees to maintain certain insurance policies “for the joint benefit of
Lessor and Lessee.” As is relevant to this appeal, Paragraph 8(c) of the Lease provides:

      All of the aforesaid insurance shall be written by one (1) or more
      responsible insurance companies satisfactory to LESSOR, and shall contain
      endorsements that such insurance may not be cancelled or amended with
      respect to LESSOR except upon thirty (30) days written notice by
      registered mail to LESSOR by the insurance company. LESSEE shall be
      solely responsible for payment of premiums for such insurance and
      LESSEE and its insurance company waive all rights to subrogation against
      LESSOR. In the event LESSEE fails to furnish such insurance or the
      required certificate thereof, LESSOR may obtain such insurance and the
      premiums shall be paid by LESSEE upon demand by LESSOR.

Paragraph 14 of the Lease provides:

      If, during the term hereof, LESSEE should . . . neglect to keep and fulfill
      any of its covenants or agreements herein made . . . and remain in default
      thereof for a period of fifteen (15) days after receipt of written notice from
      LESSOR of any such default, LESSOR shall be entitled to immediately
      enter upon the Premises, take possession of the Property.

Finally, the Lease provides that, “This Lease Agreement contains the entire agreement
and understanding of the parties and shall not be modified or amended except by written
instrument duly executed by the parties.” There is no evidence that the Lease was further
modified or amended after July 1, 2017.

      By letter of April 4, 2019, FLI notified Lessees that:

      Although you furnished a certificate of insurance in December, 2018,
      neither the certificate nor the insurance coverages described therein are
      compliant with the Agreement. The certificate is deficient as a result of its
      failure to identify Forcum Lannom, Inc. as a certificate holder and
      additional insured; and its failure to indicate that the policies of insurance
      may not be cancelled or amended with respect to the lessor except upon
      thirty (30) days written notice to the lessor. The insurance coverages
      provided under policies of insurance issued by the Hamilton Insurance
      Company are not acceptable as a result of the Hamilton Company not being
      currently licensed to underwrite insurance in Tennessee.

                                           -4-
      By letter of April 29, 2019, FLI informed Lessees that:

              Our letter of April 4, 2019, was delivered to Mr. Wang at Sake
      Japanese Steakhouse at 2495 Lake Road in Dyersburg, Tennessee, on April
      6, 2019. The letter was also delivered to Mr. Yang, as registered agent of
      your corporation, in Lebanon, Tennessee, on April 8, 2019. In spite of the
      passage of more than twenty (20) days from the date of your receipt of our
      letter, you have failed and refused to offer any response or to furnish us a
      proper Certificate of Insurance as specified by the Lease Agreement. You
      have also failed and refused to furnish us evidence of the required insurance
      coverages issued by an insuror authorized to underwrite insurance in
      Tennessee.
              As a result of your failures referenced above and your default under
      the Lease Agreement, Forcum-Lannom, Inc. does terminate the Lease
      Agreement as of the date hereof. . . . Please know that in the event you fail
      to timely remove your possessions and property from the leased premises,
      Forcum-Lannom, Inc., will re-enter the premises, remove your property
      therefrom, and assess the cost of such removal against you.

        Lessees disputed that they were non-compliant with the terms of the Lease and
continued to tender rent checks to FLI. FLI maintained its position (as set out in the
foregoing letters), refused the rent checks, and filed a Detainer Summons in the General
Sessions Court for Dyer County on May 24, 2019. The Detainer Summons was filed by
FLI against “Sake Japanese Steakhouse, Inc.” FLI’s claim for possession was based on
the following averments:

      Defendant’s initial possession was based on a written lease and the right to
      possession has now terminated because of Defendant’s violation of the
      Lease Agreement, Section 8, Insurance. Written notice to vacate was given
      to Defendant(s) on or about April 29, 2019. Plaintiff asks for possession of
      the property, attorney fees, and all court costs and litigation taxes.

On July 9, 2019, FLI received a judgment for possession against “Sake Japanese
Steakhouse, Inc.,” and “Sake Japanese Steakhouse, Inc.” filed an appeal to the Circuit
Court of Dyer County (the “trial court”). The trial court conducted a de novo hearing on
September 30, 2019. On October 30, 2019, the trial court entered an order styled:

                                          -5-
                             FORCUM-LANNOM, INC.

                             Plaintiff,

                             vs.

                             SAKE JAPANESE STEAKHOUSE, INC.

                             Defendant.

Substantively, the trial court’s order provides, in relevant part:

       This cause came to be heard on the 30th of September. 2019, on the appeal
       from the General Sessions Court for Dyer County, Tennessee, on a detainer
       warrant filed by the Plaintiff, Forcum Lannom, Inc., against the Defendant,
       Sake Japanese Steakhouse, Inc. Based on the testimony presented,
       statements of counsel and the entire record in this cause the Court finds as
       follows:

       1. The Court finds that there was an amended lease agreement where
       Forcum-Lannom Inc. leased to Mr. Xoailei Yang and Mr. Gangding Wang
       property located at 2495 Lake Road, Dyersburg, Tennessee. . . .They
       operate Sake Cafe Dyersburg, Inc., a Tennessee corporation, at the leased
       property.

                                             ***

       9. The Court further finds that while the Defendant has breached the
       contract, the question is whether or not the breach is material enough to
       actually cancel the Lease Agreement, which could create a hardship on the
       Defendant.

                                             ***

       [T]he Court holds that the Defendant breached the Lease Agreement and
       that the Plaintiff suffered damages due to the breach; however, the breach is
       not material enough for a forfeiture.
               THEREFORE, the Court hereby orders the Defendant to pay all of
       the back rent due and owing to Forcum-Lannom and the expenses suffered
       by the Plaintiff in the amount of $13,367.40.
               The Court further Orders that the Lease Agreement between the
       parties is not cancelled.

                                             -6-
       FLI appeals and raises two issues for review:

       1. The trial court failed to award FLI possession of the property, despite
          finding that Sake had breached the parties’ Lease Agreement.
       2. The [Appellant is] entitled to recovery of its attorneys’ fees on appeal,
          pursuant to the parties’ Lease Agreement.

       We do not reach the substantive issues due to a procedural error. Although FLI
brought this lawsuit as a detainer action, its right of possession is premised on a breach of
the Lease. As set out in context above, in its Detainer Summons, FLI averred that
“Defendants’ initial possession was based on a written lease and the right to possession
has now terminated because of Defendant’s violation of the Lease Agreement.” The
Lessees under the Lease are Messrs. Yang and Wang, and Sake Café. However, FLI
brought its suit against “Sake Japanese Steakhouse, Inc.,” which is not a party to the
Lease. This error was not corrected in the trial court by filing a complaint, and the trial
court entered its judgment for breach of contract and back rents against “Sake Japanese
Steakhouse, Inc.”—this despite the trial court’s acknowledgment, in its October 30, 2019
order, that under the Lease, “Forcum-Lannom Inc. leased to Mr. Xoailei Yang and Mr.
Gangding Wang property located at 2495 Lake Road, Dyersburg, Tennessee. . . .They
operate Sake Cafe Dyersburg, Inc., a Tennessee corporation, at the leased property.”
Because “Sake Japanese Steakhouse, Inc.” is not in privity of contract with FLI, the trial
court’s finding that “Sake Japanese Steakhouse, Inc.” breached the Lease, and its
judgment against “Sake Japanese Steakhouse, Inc.” for back rents under the Lease is of
no force or effect.

       For the foregoing reasons, we vacate the trial court’s order. The case is remanded
for such further proceedings as may be necessary and are consistent with this opinion.
Costs of the appeal are assessed against the Appellant, Forcum-Lannom, Inc., for all of
which execution may issue if necessary.

                                                  _________________________________
                                                  KENNY ARMSTRONG, JUDGE

                                            -7-