Contract; lease; equitable estoppel; Yellowstone injunction.
By Michael Farinacci | Managing Editor
Plaintiff-tenant entered into a lease agreement with Defendant-landlord for the operation of a supermarket. Under the lease, tenant was responsible for the installation and maintenance of a fire sprinkler system as required by law. The lease provided that a failure of tenant to comply with its obligations shall permit the landlord to terminate the lease. The fire department issued a violation to the tenant for the absence of an interior fire alarm. Tenant obtained price quotes for the alarm system but did not install one due to lack of funds. One year after the violation, the landlord issued a Notice of Default to tenant. It specified that the lease would terminate, if the tenant did not install the fire alarm system within ten days. Tenant attempted to negotiate with landlord for a contribution towards the cost of the fire alarm system. Twenty-seven days after Notice of Default, tenant received Notice of Termination. Tenant brought suit to seek a declaration that Notice of Default was defective and as a result, tenant did not seek a Yellowstone injunction to toll the cure period. Moreover, tenant seeks equitable estoppel against defendant to prevent the termination of the lease.
A Yellowstone injunction is issued to protect the investment of a commercial tenant by allowing the cure period to toll while tenant cures. To obtain a Yellowstone injunction, a commercial tenant must establish that (1) it holds a commercial lease, (2) it received a notice of termination, default, or cure from the landlord, (3) injunctive relief was requested before the termination of the lease and expiration of the cure period, and (4) it has ability to cure the alleged default. Here, the tenant contended that the Notice of Default was invalid and, therefore, there was no cure period to extend. “A Notice of Default ‘must set forth sufficient facts to establish grounds for the tenant’s eviction, and inform the tenant of the lease violation, as well as the conduct required to prevent eviction.’” A Notice of Default is invalid when it does not describe the condition to cure or fails to reference the appropriation section of the lease. The court determined that the notice cited the lease’s sections that tenant violated and stated tenant must install a fire alarm system to cure. However, tenant was not entitled to a Yellowstone injunction because tenant did not seek it prior to the expiration of the cure period and did not have the ability to pay for the cure.
To invoke equitable estoppel, the party sought to be estopped must make an intentional misrepresentation that would induce reasonable reliance, and party invoking estoppel must have relied on the misrepresentation to his or her detriment. Here, there was not detrimental reliance. Tenant tried to negotiate with landlord to pay a portion of the fire alarm costs. However, the landlord stated it would not assist in curing the violation. Therefore, the tenant could not reasonably rely on the landlord to pay a portion of the alarm costs, since tenant knew of landlord’s refusal. Claim for equitable estoppel was denied.
The court held that the Notice of Default and the termination of the lease were valid.