COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA No. 71823 FRANK ZEVCHIK : : JOURNAL ENTRY Plaintiff-appellee : : AND vs. : : OPINION THOMAS KASSAI, ET AL. : : Defendant-appellants: : : DATE OF ANNOUNCEMENT : December 24, 1997 OF DECISION : : CHARACTER OF PROCEEDINGS : Civil appeal from : Court of Common Pleas : Case No. CP-CV-268961 : JUDGMENT : AFFIRMED IN PART AND REVERSED IN PART. DATE OF JOURNALIZATION : APPEARANCES: For defendant-appellants: For plaintiff-appellee: THOMAS J. FRIEL, ESQ. LLOYD J. RAMSEY, ESQ. 448 Leader Building 7530 Lucerne Drive, Suite 200 Cleveland, OH 44114 Middleburg Heights, OH 44130 PATTON, J. This is an appeal from a jury verdict rendered in favor of plaintiff-landlord Frank Zevchik and against defendant-sub-tenant -2- Thomas Kassai on the landlord's complaint for back rent and damages owed under a subtenancy. The issues on appeal are (1) whether the trial court erred by granting landlord's motion for a directed verdict on subtenant's counterclaim, (2) whether the trial court abused its discretion by amending landlord's complaint, (3) whether the trial court erred by refusing to grant subtenant's motion for a directed verdict, and (4) whether the trial court erred by allowing attorney fees as part of the punitive damages award. The tenants, W&T, Inc., operated a bar on premises owned by landlord. Paragraph 7(e) of the lease agreement between landlord and W&T provided: Lessee shall not sublet the premises or any part thereof, nor assign this lease without the written approval of lessors who shall not withhold such approval unreasonably; and any sublease or assignment is subject to subles- sees of assignees being financially responsi- ble. In October 1992, W&T decided to sell the bar business to subtenant. Subtenant owned another tavern and wished to change the name of the bar to match his other establishment. The subtenant entered into discussions with W&T and they agreed that he would operate the bar under a management agreement until such time as he could negotiate a lease with landlord, although he did purchase the assets of the bar. W&T and subtenant agreed that the sale of the bar assets would be contingent upon subtenant obtaining a lease and a certificate of tenancy. Subtenant took possession of the premises and began making payments to the landlord under the same terms as W&T, and also put -3- about $5,000 in improvements to the bar. At the same time, he entered into discussions for a new lease. When subtenant made his application for a liquor license, he was told that needed to obtain a certificate of tenancy. Landlord refused to give the certificate of tenancy, however, until subtenant had a signed lease. The testimony of the parties varies at this point, although some facts remain undisputed. Subtenant sought a lower monthly rent than that paid by the previous tenant. After much discussion, the landlord agreed to lower the rent. However, landlord then submitted sixteen items that he wanted fixed before he would sign the lease and issue a certificate of tenancy. Among those items were repair of damage to the sidewalk and sewer caused by beer deliveries received by the prior tenant, as well as removal of a sign painted on the brick wall of the building by the prior tenant. The cost to repair these items amounted to over $6,000. Subtenant eventually gave up on obtaining a lease and stopped making rent payments. He withdrew his application for the liquor license. Landlord's repeated demands for rent went unanswered, so he initiated a forcible entry and detainer action against subtenant seeking back rent. The Parma Municipal Court granted the forcible entry and detainer and ordered subtenant to leave the premises. Subtenant backed a dumpster into the tavern parking lot and proceeded to remove and dispose of every piece of furniture in the bar, including the bar itself. Landlord brought this action seeking to recover eight months of lost rent and damages to the property caused by subtenant's -4- removal of the bar furniture. Subtenant counterclaimed for breach of the lease agreement claiming landlord failed to execute a certificate of tenancy. Subtenant admitted at trial he owed landlord for back rent, and further admitted that although the sale of the bar had been contingent upon receiving a liquor license, he made no effort to rescind the deal with W&T. At the close of landlord's case, landlord asked the court to amend the complaint to conform to the evidence. Landlord asked for $11,000 in back rent and $9,200 in rent lost in light of subten- ant's removing all the bar furniture. The trial court granted the motion over objection. The court also directed a verdict to landlord on subtenant's counterclaim, finding subtenant had no rights under the lease between landlord and W&T. The jury awarded landlord $20,200 in compensatory damages as prayed for in the amended complaint and $100 in punitive damages. It also authorized an award of attorney fees based upon the punitive damage award. At a hearing held following trial, the court awarded $12,000 in fees. I The first assignment of error complains the trial court erred by directing a verdict on subtenant's counterclaim concerning landlord's refusal to execute a certificate of tenancy. Subtenant argues that he had third party beneficiary rights under the lease agreement between landlord and W&T, and thus has standing to challenge landlord's refusal to grant the certificate of tenancy. This contention lacks merit because subtenant cannot show that he -5- had third party beneficiary status as an intended beneficiary of the lease between landlord and W&T. Only a party to a contract or an intended third-party beneficiary of a contract may bring an action on a contract in Ohio. Grant Thornton v. Windsor House, Inc. (1991), 57 Ohio St.3d 158, 161, citing Visintine & Co. v. New York, Chicago and St. Louis RR. Co. (1959), 169 Ohio St. 505. A third person may only enforce a contract if it appears the promise was made directly or primarily for his benefit. TRINOVA Corp. v. Pilkington Bros. P.L.C. (1994), 70 Ohio St.3d 271, 277-288; Am. Rock Mechanics, Inc. v. Thermex Energy Corp. (1992), 80 Ohio App.3d 53, 58. Civ.R. 50(A)(4) provides that a motion for a directed verdict should be granted when the evidence, construed in a light most favorable to the non-moving party, shows that reasonable minds can come to but one conclusion, and that conclusion is adverse to the party opposing the motion. The Limited Stores, Inc. v. Pan American World Airways, Inc. (1992), 65 Ohio St.3d 66, 73. The undisputed evidence presented at trial showed that landlord did not consent to subtenant being an intended beneficiary under his lease with W&T. Paragraph 7(e) of the lease agreement between landlord and W&T states, [l]essee shall not sublet the premises or any part thereof, nor assign this lease without the written approval of lessors who shall not withhold such approval unreasonably; and any sublease or assignment is subject to sublessees of assignees being financially responsible. This provision of the lease shows -6- landlord could not have agreed to grant subtenant (or any other possible subtenant) any rights as a subtenant under W&T's lease until he gave written approval. See Duvin v. First Union Manage- ment, Inc. (Feb. 17, 1983), Cuyahoga App. No. 44942, unreported. Because landlord did not give written approval, subtenant could not be an intended beneficiary under the lease agreement. We also find the assignment of a sublease in this circumstance precludes application of third-party beneficiary rights. In general terms, the courts distinguish between the assignment of a lease and the assignment of a sublease. Because the landlord- tenant relationship is based on concepts of privity of contract and privity of estate, a tenant's liability for rent payments is contractual in nature. An assignment of a lease conveys the whole term of the lease to another party, while a sublease grants an interest in the lease premises that is less than the interest the lessee has. House of LaRose v. Lakeshore Power Boats, Inc. (June 18, 1992), Cuyahoga App. No. 60904, unreported at 3. In other words, in a sublease, there is no privity of contract between the sublessee and the landlord the lessee and the landlord continue their contractual relationship under the lease and lessee remains liable to the landlord for anything done by sublessee. Discussion at trial centered on the question whether subtenant wrongfully refused to exercise W&T's option to renew the lease. This discussion arose because the lease held by W&T expired on its own without being renewed in any form by W&T. The trial court correctly concluded that the only entity able to exercise the -7- renewal option would be W&T, and W&T expressly declined to exercise that option. There is ample authority for the proposition that a landlord may not unreasonably withhold consent to a subtenancy; however, none of the cases finds the issue in play when the sublessee attempts to enforce that part of the agreement between the landlord and the lessee. See, e.g., Stern v. Taft (1976), 49 Ohio App.2d 405. Any right to enforce the lease agreement belonged to W&T, not to subtenant. The general rule is that as between the original lessor and a sublessee, there is no privity of contract or estate, and therefore the subtenant does not acquire, by virtue of the sublease contract merely, any right to enforce the covenants or agreements of the lessor as contained in the original lease. See Coffman v. Huber (C.P. 1965), 13 Ohio Misc. 126, 128. Given this lack of privity, the trial court did not err by directing a verdict against subtenant on his counterclaim. The first assignment of error is overruled. II The second assignment of error is that the trial court erred by permitting landlord to amend his complaint at the close of his case to assert a claim for back rent lost as a result of the length of time it took to relet the premises in the wake of subtenant removing all the furniture. Landlord specifically premised the amendment as conforming to the evidence. Civ.R. 15(B) permits the trial court to amend the pleadings to conform to the evidence, directing the trial courts to: -8- do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits. The decision to allow an amendment of pleadings to conform to the evidence is within the discretion of the trial judge. Northfield Park Associates v. Northeast Ohio Harness (1987), 36 Ohio App.3d 14, 24. In order to show an abuse of discretion, the objecting party must satisfy the court that the admission of the evidence will work a serious disadvantage in presenting the case. Hall v. Bunn (1984), 11 Ohio St.3d 118, paragraph one of the syllabus. The trial court did not abuse its discretion by permitting the amendment. Landlord's amended complaint sought damages caused by subtenant's intentional, wilfull and malicious removal of fixtures attached to the property. We believe this allegation would have encompassed landlord's request during trial for damages resulting from that conduct. Moreover, we find subtenant did not show prejudice. Because the amendment was made at the close of landlord's case, subtenant had sufficient opportunity to rebut landlord's allegations. In fact, subtenant himself admitted he removed all the furniture, so any prejudice was likely caused by his own testimony. On these facts, there is no abuse of discre- tion. The second assignment of error is overruled. III The third assignment of error complains the trial court erred by refusing to grant subtenant's motion for a directed verdict on -9- the claim for wilful and malicious destruction of property caused when subtenant removed the furniture from the bar. Subtenant claims landlord failed to establish the extent of damage to the building. Count two of the complaint alleged that: during the time [subtenant] was in possession of the premises and as he was leaving the premises, he intentionally, willfully and maliciously damaged the property by his re- moval of fixtures attached to the property. Subtenant admitted he removed every piece of furniture in the bar because he claimed he owned the bar furniture and could do with it as he pleased. Landlord conceded during his own opening statement that subtenant had every right to take the furniture: and when I say they owned the bar, I mean, there is a bar down there that you sit at, and there's a back bar where the liquor sits and there is [sic] stools and chairs and a liquor license. And that's when I say you own a bar, that is what you own. *** Now, we don't have a claim against him for what he did to the bar cutting it up and throwing it out because we didn't own that. That was something he bought from [W&T] *** It he chose to tear it up, that was his property and he tore it up. For his part, landlord claimed the premises had been damaged when subtenant removed the furniture. But other than testifying that there had been holes in the walls, floor and ceiling, landlord did not provide any monetary proof of damages. He claimed it took eight months to relet the premises and testified that he charged the new tenants $1,150 per month. He asked the court to award him $9,200, which sum represented $1,150 for eight months. -10- There is no question that, once ejected from the premises, subtenant had every right to remove his possessions. Landlord conceded this point at the start of trial and makes no argument otherwise. The gravaman of the cause of action was that subtenant should be responsible for the collateral damage caused to shell of the building when subtenant removed his furniture. This recovery is permitted under a theory that damages for temporary injury to real property are allowed for (1) reasonable restoration costs, (2) compensation for the loss of the use of the property between the time of the injury and the restoration of the property, and (3) damages for personal annoyance and discomfort caused to the occupier of the premises. See Horrisberger v. Mohlmaster (1995), 102 Ohio App.3d 494, 499. In order to avoid a directed verdict, landlord had the burden of presenting evidence from which reasonable minds could determine the amount of collateral damage caused by subtenant's removal of his furniture. Henderson v. Spring Run Allotment (1994), 99 Ohio App.3d 633, 641-642. We find the court erred by denying subtenant's motion for a directed verdict. While landlord arguably established that collateral damage occurred, he failed to give any testimony on the amount of collateral damage caused by subtenant's removal of his furniture. The only evidence of collateral damage consisted of landlord's testimony that subtenant left holes in the wall, floor and ceiling. Landlord made no attempt to repair this damage, -11- testifying he chose to wait eight months until he could find a tenant willing to make those repairs. The repair costs for the collateral damage, as opposed to the cost to replace the furniture rightfully removed by subtenant, were not proven to any degree. We say this because the $9,200 the jury awarded for eight months lost rent (which figure matched landlord's prayer for relief) consisted of $1,150 per month. This was considerably less than the $1,375 paid by subtenant and matched the monthly rent landlord proposed to charge subtenant as they negotiated the terms of a lease. If the lost rent claim sought rent plus damages to the premises, it would have to have exceeded the amount of rent currently being paid by W&T. Because the court accepted landlord's request for eight months of damages at $1,150 per month, there could not have been any compensation for damage to the premises, just recoupment of rent that would have been paid had landlord been able to relet the premises promptly. It might be argued that landlord lowered the monthly rent charged to the new tenants as a means of enticing their tenancy. However, if this were the case, landlord's affirmative duty to establish the amount of damage caused by subtenant would actually be greater, since landlord himself conceded he needed to find a new tenant willing to replace the furniture rightfully taken by subtenant. Given that concession, the trier of fact would have to differentiate between actual damages caused by collateral damage as opposed to that lessened amount of rent needed to entice a prospective tenant into investing money into the building in order -12- to establish a tavern. Landlord failed to show either amount, so reasonable minds would have had no evidence from which to make that differentiation. Cconsequently, landlord failed to prove with certainty any amount of collateral damage to the premises. We are aware that damage formulae cannot be applied arbitrarily or exactly in every case. Adcock v. Rollins Protective Services, Co. (1981), 1 Ohio App.3d 160, 161. Nevertheless, damages must be shown to a reasonable certainty and cannot be based upon mere speculation or conjecture, regardless whether the action is contract or tort. Id., quoting Wagenheim v. Alexander Grant & Co. (1983), 19 Ohio App.3d 7, 17. Any attempt to find that some portion of the $9,200 awarded by the jury for lost rent included an amount for damage caused to the premises would be mere speculation or conjecture. The entire $9,200 award is vacated. Our disposition necessarily means that landlord failed to establish compensatory damages sufficient to sustain an award of punitive damages. Absent compensatory damages for collateral damage caused to the property, the court should not have permitted the jury to consider a punitive damage award. Moskovitz v. Mt. Sinai Medical Ctr. (1994), 69 Ohio St.3d 638, 653; Horrisberger, supra, at 500-501. We therefore vacate the award of punitive damages, and likewise vacate the attorney fees premised on the punitive damages. Pursuant to App.R. 12A(A)(1)(c), the fourth assignment of error is now moot. Judgment affirmed in part; reversed in part. -13- -14- This cause is affirmed in part, reversed in part and remanded to the lower court for further proceedings consistent with this opinion. It is, therefore, considered that said appellee recover of said appellants his costs herein. It is ordered that a special mandate be sent to said court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. BLACKMON, P.J. CONCURS. DYKE, J., DISSENTS. See Dissenting Opinion attached. JUDGE JOHN T. PATTON N.B. This entry is an announcement of the court's decision. See App.R. 22(B), 22(D) and 26(A); Loc.App.R. 27. This decision will be journalized and will become the judgment and order of the court pursuant to App.R. 22(E) unless a motion for reconsideration with supporting brief, per App.R. 26(A), is filed within ten (10) days of the announcement of the court's decision. The time period for review by the Supreme Court of Ohio shall begin to run upon the journalization of this court's announcement of decision by the clerk per App.R. 22(E). See, also S.Ct.Prac.R. II, Section 2(A)(1). COURT OF APPEALS OF OHIO COUNTY OF CUYAHOGA NO. 71823 FRANK ZEVCHIK : : Plaintiff-Appellee : : D I S S E N T I N G -vs- : O P I N I O N : THOMAS KASSAI, ET AL. : : Defendant-Appellant : DATE OF ANNOUNCEMENT December 24, 1997 OF DECISION: DYKE, J., DISSENTING: I would affirm the judgment of the trial court in its entirety, and I therefore respectfully dissent from the judgment rendered this day by the majority. As an initial matter, it is well to clarify the facts of record. First, it must be noted that in relevant part, the lease provided: 7. (e) Lessees shall not sublet the Premises or any part thereof, nor assign this Lease without the written approval of Lessors who shall not withhold such approval unreasonably; and any sublease or assignment is subject to sublessees or assignees being financially responsible. 8. *** Lessees shall have, at all times, the obligation of maintenance and repair of the parking area which shall include snow removal. It shall be Lessees' responsi- bility to ensure that no vending trucks are permitted to park in front of the building or in the parking lot in order to prevent any destruction of the sidewalk. *** 10. Removal of Improvements. Except as otherwise provided all improvements, furnishings, trade fixtures, including decorative lighting fixtures, installed in the Premises by Lessees and paid for by Lessees, shall remain the property of Lessees upon the termination of this Lease, provided: (a) that any of such as are affixed to the Premises and require severance may be removed only if Lessee shall repair any damage caused by such removal; and (b) that Lessees shall have fully performed all of the covenants and agreements to be performed by Lessees under the provisions of this Lease. *** -3- 16. *** Lessees shall keep and maintain the interior of the premises in good condition and repair, including but not limited to the heating, electrical, plumbing, air conditioning units, whether or not such units are located in the interior or exterior of the Premises, and sewer systems, the exterior doors, window frames, and the replacement of all broken and cracked glass and except- ing, however, all repairs made necessary by reason of damage due to fire or other casualty covered by standard fire and extended coverage insurance. *** 24. Waiver. No waiver of any condition of legal right or remedy shall be implied by the failure of Lessors to declare a forfeiture, or for any other reason, and no waiver of any condition or covenants shall be valid unless it be in writing signed by Lessors. No waiver by Lessors in respect to one tenant of the building in which the Premises are located shall constitute a waiver in favor of any other tenant, nor shall the waiver of a breach of any condition be claimed or pleaded to excuse a future breach of the same condition or covenant or any other condition or covenant. *** 26. Lease Inures to Benefit of Assignees. The Lease and all the covenants, provisions and conditions herein contained shall *** be binding upon the heirs, personal representative, successors and assigns respectively of the parties hereto; provided, however, that no assignment by, from, through or under Lessees in violation of the provisions hereof shall vest in the assigns any right, title or interest whatever. Secondly, in October 1992, W & T, Inc. executed an Assignment of Lease in which it transferred its interest in the Zevchik pro- perty to Kassai. In a related Assumption of Lease, Kassai agreed to pay rent as provided in the lease and to perform all obligations and conditions of the lease. Thirdly, the lease clearly remains applicable to any assignees or sublessees, and the record reveals that at the time W & T, Inc. assigned its interest to Kassai there were various items of -4- disrepair, including damage to the parking lot caused by vending trucks, a provision specifically included in the lease as a lessee obligation. Kassai refused to correct these items and also failed to pay rent for the months of September 1993, October 1993, November 1993, December 1993, January 1994, February 1994, and March 1994. Thereafter, on February 4, 1994, Zevchik filed a forcible entry and detainer action against Kassai, in Parma Municipal Court. Zevchik also prayed for recovery of unpaid rent, until plaintiff is restored to possession of the premises, and recovery for damages to the premises. Thereafter, on March 3, 1994, the Parma Municipal Court awarded restitution of the premises to Zevchik. Kassai filed a counterclaim which exceeded the jurisdiction of the municipal court and was therefore heard by the court of common pleas. On October 18, 1994, Zevchik was granted leave to file an amended complaint in the portion of the action which was pending in the court of common pleas. Within this pleading, Zevchik amended his claims for relief as follows: During the time the Defendant was in possession of the premises and as he was leaving the premises, he inten- tionally, willfully and maliciously damaged the property by his removal of fixtures attached to the property. Thus, Zevchik did not simply seek compensation for Kassai's removal of all the furniture as stated by the majority, but rather, sought compensation for his removal of the fixtures, i.e., attachments, and the resulting damage to the leasehold. Moreover, as to whether Zevchik provided proper proof in order to withstand a motion for a directed verdict as to his claim for -5- malicious destruction of property, it is clear that the trial court could only grant this motion if, construing the evidence most strongly in favor of Zevchik, it found that reasonable minds could only find in favor of Kassai on this claim. Civ. R. 50(A)(4); The Limited Stores, Inc. v. Pan American World Airways, Inc., (1992), 65 Ohio St.3d 66, 73. Conversely, it is the duty of the trial court to submit an essential issue to the jury when there is sufficient evidence relating to that issue to permit reasonable minds to reach different conclusions on it. O'Day v. Webb (1972), 29 Ohio St.2d 215, paragraph four of the syllabus. Applying that standard, it is clear that the essential elements of Zevchik's claim for wilful or malicious destruction of property are compensatory damages and actual malice. Moskovitz v. Mt. Sinai Medical Center (194), 69 Ohio St.3d 638, 653. As to the compensatory damages for injuries to real property, I note that the general measure of compensatory damages is the reasonable cost of restoration plus the reasonable value of loss of use, unless the cost of restoration exceeds the difference in the market value before and after the damage. Adcock v. Rollins Protective Services, Co. (1981) 1 Ohio App.3d 160-161. Nonethe- less, this formula cannot be applied arbitrarily or exactly in every case without regard to whether its application would compensate injured party fully for losses which are the proximate cause of the wrongdoers's conduct; the cardinal rule is that the injured party should be fully compensated. Id. Moreover, in Horrisberger v. Mohlmaster (1995), 102 Ohio App.3d 494, the court -6- noted the following separate and distinct types of recovery for temporary injury to real property: reasonable restoration costs; compensation for loss of use of property between time of injury and restoration; and damages for personal annoyance and discomfort if the plaintiff is the occupant of the premises. The court further noted that since each of the foregoing is a separate and distinct type of damage, the absence of one does not preclude recovery for the others. As to the proof required to demonstrate actual malice, it must be further noted that: Actual malice, necessary for an award of punitive damages, is (1) that state of mind under which a person's conduct is characterized by hatred, ill will or a spirit of revenge, or (2) conscious disregard for the rights and safety of other persons that has a great probability of causing substantial harm. Moskovitz v. Mt. Sinai Medical Center, supra, at 652. In this instance, plaintiff presented evidence that Zevchik had the right to approve any prospective assignment of the lease and that any successors to W & T, Inc. were obligated to perform the repairs and/or maintenance items listed in the lease. Plaintiff also presented correspondence from Kassai's attorney requesting completion of the certificate of tenancy and further discussions so that the final assignment may be effectuated. Other correspondence in the file pertains to negotiations for a new lease at lower monthly rent and demonstrates that negotiations eventually terminated after Kassai stopped paying rent. Finally, plaintiff presented evidence that Kassai could have availed himself of the contractual remedy of having his agreements with W & T, Inc. -7- set aside upon his failure to obtain a lease with Zevchik, but chose not to do so. Instead, on March 20, 1994, following Zevchik's receipt of a court order removing Kassai from the premises for a rent arrearage which exceeded $10,000, Kassai brought a dumpster to the property, removed the fixtures of the premises with a chainsaw and discarded them. In addition, Kassai removed the outside awning of the building. Zevchik also testified that the removal of the fixtures left holes in the walls, floor and ceiling of the building. Zevchik also testified that it took eight months to find a new tenant who would accept the premises in the condition in which they were left and repair them, thereby causing him to lose an additional $9,200 in rental payments. In light of this evidence, I believe that reasonable minds could reach dif- ferent conclusions as to whether Kassai acted with actual malice and whether his conduct of removing fixtures, i.e., items attached to the leasehold, with a chainsaw, resulted in a loss of use of the rental property. Accordingly, I respectfully dissent from the judgment of the majority rendered this day which has completely .