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11/27/91 RENE GARCIA v. LORENZO LLERENA

November 27, 1991

RENE GARCIA, APPELLANT
v.
LORENZO LLERENA, APPELLEE



Appeal from the Superior Court of the District of Columbia; (Hon. John F. Doyle, Trial Judge).

Before Ferren, Terry, and Schwelb, Associate Judges.

The opinion of the court was delivered by: Ferren

FERREN, Associate Judge:

Plaintiff-appellant sold his restaurant business to a purchaser for cash and a promissory note. The purchaser, continuing to operate a restaurant, signed a new lease for the premises with the appellee-landlord. Appellant entered into a separate option contract with the landlord requiring the landlord to notify appellant if the purchaser defaulted on the lease. The contract further provided that appellant could cure any default and re-enter the premises to operate the restaurant. The purchaser-tenant defaulted, but the appellee-landlord failed to notify appellant. The tenant was evicted. when appellant found out about the default, he sued the appellee-landlord for breach of the option contract. The landlord conceded that he had evicted the tenant without giving appellant the agreed-upon notice and opportunity to re-enter. The trial court, however, directed a verdict for the appellee-landlord because appellant failed to prove damages.

Appellant raises four issues on appeal: (1) the trial court abused its discretion in excluding evidence of the appellee-landlord's offers to purchase the tenant's rights under the lease, since the amounts of these offers were relevant to damages; (2) the court erred in granting a directed verdict for the appellee-landlord on the ground of insufficient proof of damages; (3) the court erred in refusing to disqualify appellee's counsel, Philip M. Musolino, Esq., based on counsel's participation in the events giving rise to this litigation; and (4) the court abused its discretion in forbidding appellant to call Musolino and his associate, Lisa Dessel, Esq., as fact witnesses. We affirm.

I. THE FACTS AND PROCEEDINGS

Appellant Rene Garcia is a former stockholder and officer of G.O., Inc., an entity which operated a restaurant at 702 and 702 1/2 5th Street, N.W., on premises the corporation leased from Lorenzo Llerena, the appellee-landlord. Garcia had personally guaranteed G.O., Inc.'s first lease from Llerena. In late 1981, Garcia and his partners sold their stock in G.O., Inc., with its restaurant business, to Narinder Sharma for $140,000 in cash and promissory notes. At about the same time, on November 17, 1981, Llerena, the landlord, entered into a new lease with G.O., Inc., guaranteed this time by Sharma and his wife.

During the period of negotiations for sale of the restaurant, Garcia and Llerena entered into a separate agreement, the "Option to Assume Lease Agreement," which is the subject of this litigation. The express purpose of this option contract was to assure Garcia, as the optionee, the right to take over the lease from Sharma and to continue the restaurant business on the leased premises if the Sharmas defaulted on their lease obligation. The option contract obligated Llerena, as the landlord, to give Garcia written notice of any default by G.O., Inc. or the Sharmas. If the tenant failed to cure the default within the time period set forth in the lease agreement, then Garcia, at his option, had the right to cure the default and to assume the new lease.

In June 1985, Llerena hired attorney Pablo Santiago, Jr., to investigate possible tenant violations of the lease. Santiago wrote to Sharma asking him to verify that the property was insured in the manner, and at the value, required by the lease. This letter, which was never introduced in evidence, was the basis for Llerena's position at trial that Sharma had been on notice of default if, in fact, his insurance coverage was inadequate. Sharma denied receiving any notice of default in June 1985. Nor was Garcia notified of any default in 1985.

In July 1985 Group Health Association (GHA) offered Llerena $379,400 to buy the building in which the restaurant was located. GHA conditioned its offer, however, on purchasing the property free of tenants.

Twice in December 1985, Llerena offered, through Santiago, to purchase the tenant's rights under the lease for $25,000. Santiago sent the first letter on December 24, 1985. Although it referred to the tenant's "violations of a variety of the provisions in the lease, and violations of the terms of liquor license," Llerena did not notify Garcia of the alleged violations as he had agreed to do under the option contract. Santiago sent Llerena's second offer for $25,000 to James F. Flint, the Sharmas' attorney, on December 31, 1985. This letter gave the tenant only until the close of business on January 3, 1986 to accept the offer, because the sale of the property to GHA was scheduled to close on January 7. The tenant allowed the time for acceptance to expire.

On January 24, 1986, landlord Llerena, through attorney Santiago, sent a notice of default to the tenant, alleging that "dancing and loud music" emanating from the restaurant, without the written consent of the landlord, was a violation of Paragraph 5 of the lease. Despite his obligation to notify Garcia of any such default, Llerena failed again to inform Garcia.

In March 1986, the landlord made another offer to purchase the tenant's rights under the lease, this time for $50,000. Although characterized as an offer to settle the landlord-tenant dispute, the offer included the following terms:

My clients will pay your clients $50,000.00 representing a reimbursement for loss of business, loss of good will, and the difference in rent between what your clients are presently paying and ...


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