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Ultimate Salon & SPA, Inc. v. Legends Construction Group

Court of Appeals of Ohio, Eleventh District, Lake

June 24, 2019

ULTIMATE SALON AND SPA, INC., Plaintiff-Appellant/ Cross-Appellee,
LEGENDS CONSTRUCTION GROUP, Defendant-Appellee/ Cross-Appellant.

          Civil Appeal from the Willoughby Municipal Court, Case No. 2017 CVF 00564.

          Judson J. Hawkins, OH 44095 (For Plaintiff-Appellant/Cross-Appellee).

          Russell Andrew Randazzo, Randazzo Law, L.L.C., OH 44113 (For Defendant-Appellee/Cross-Appellant).


          TIMOTHY P. CANNON, J.

         {¶1} Appellant, Ultimate Salon and Spa, Inc. ("Ultimate"), and cross-appellant, Legends Construction Group ("Legends"), appeal the May 7, 2018 judgment of the Willoughby Municipal Court. The trial court entered judgment in favor of Ultimate against Legends, in the amount of $5, 000.00 on Ultimate's claim for return of its security deposit. The trial court entered judgment in favor of Legends on its counterclaim for breach of the parties' lease agreement, in the amount of $15, 000.00, resulting in a net judgment for Legends in the amount of $10, 000.00.

         {¶2} This case stems from the lease agreement entered into between the parties on October 20, 2006. Ultimate leased from Legends' space in the commercial property located at 36005 Lakeshore Boulevard in Eastlake, Ohio for the purpose of running a cosmetology business. The lease states the leased premises is "approximately 3, 000 sq. feet." The lease term was for "one (1) three-year period with two (2) three-year period options commencing on January 1, 2007 and ending on December 31, 2015." Ultimate was to pay a total of $72, 000.00 for the first full term, payable in monthly installments of $2, 000.00. For the first three-year option, Ultimate was to pay a total of $90, 000.00 in monthly installments of $2, 500.00, and for the second three-year option, Ultimate was to pay a total of $99, 000.00 in monthly installments of $2, 750.00. Ultimate occupied the premises from January 1, 2007, through December 31, 2016.

         {¶3} On March 21, 2017, Ultimate filed a small claims action against Legends in the Willoughby Municipal Court for the return of a security deposit in the amount of $5, 000.00. The complaint alleged: "Plaintiff and defendant entered into a lease in Jan. of 2007[.] Plaintiff has met all obligations pursuant to the lease and vacated the premises. Defendant has violated the lease by failing to return the security deposit." Attached to the complaint were several exhibits: (1) a letter from Ultimate's attorney to Matthew Miozzi, President of Legends, demanding the $5, 000.00 security deposit; (2) a letter to Legends from Frank and Ann Bergant, co-owners of Ultimate, regarding vacating the leased premises; (3) a declaration of facts by Frank Bergant, signed by Frank and Ann Bergant; and (4) an undated lease agreement signed by Ann Bergant as lessee and Frank Bergant as witness with a handwritten note at the top, which states, "2nd lease 1st page [and] last page [different] from original lease." The undated lease contains no signature on the signature block designated for the lessor.

         {¶4} After the case was transferred to the regular docket on April 11, 2017, Legends filed an answer, denying the allegations in the complaint and denying the content of the exhibits. Legends also filed a counterclaim, alleging that Ultimate breached the lease agreement when it failed to return the leased premises in the same condition it was received. Legends alleged Ultimate made "in excess of $50, 000, worth of alterations, changes, and construction changes to the premises" during the term of the lease, and Legends spent "tens of thousands of dollars in construction costs" to return the premises to its pre-lease condition. Legends requested monetary damages in the amount of $15, 000.00. The following documents were attached to the answer and counterclaim: (1) several plans depicting the layout of the leased premises; (2) the lease agreement of October 20, 2006, signed by Matthew Miozzi as lessor, Ann Bergant as lessee, and a witness; and (3) permits from the City of Eastlake Building Department. Ultimate filed an answer to the counterclaim on May 26, 2017.

         {¶5} On December 1, 2017, Ultimate filed a motion for summary judgment. Ultimate contended that two lease agreements existed between the parties: (1) the October 20, 2006 lease agreement and (2) a subsequent lease agreement sent to Ultimate by Legends in "October or November of 2007," which was the same document that was attached to its complaint. Ultimate argued that under both lease agreements, it was entitled to the return of the security deposit. Attached to its summary judgment motion were copies of both lease agreements and the affidavits of Frank and Ann Bergant.

         {¶6} On December 14, 2017, Ultimate filed a motion for a protective order, requesting an order of protection "prohibiting the Defendant from obtaining any information concerning the independent contractors used by the Plaintiff in the pursuit of its business." Ultimate maintained that Legends sent a set of interrogatories and a request to produce, "requesting proprietary information concerning the identities and rates of compensation between Plaintiff and its independent contractors."

         {¶7} On January 2, 2018, Legends filed a "Brief in Opposition to Plaintiffs Motion For Summary Judgment and Defendant's Motion for Summary Judgment." Legends argued it never executed the purported second lease agreement, noting the agreement does not indicate the parties to the lease and was not signed by Legends or one of its representatives. Legends contended it was entitled to judgment on its breach of contract claim because Ultimate breached multiple terms of the October 20, 2006 lease agreement, to wit: (1) Ultimate "allowed other business owners to operate their own businesses out of the Leased Premises in violation [of] Section 2 of the Lease Agreement"; (2) "Ultimate breached the rent obligation of the Lease Agreement" in violation of Section 18; and (3) Ultimate returned the leased premises in a condition materially different from the condition it was received on January 1, 2007. Legends further argued that due to its breach of the lease agreement, Ultimate was not entitled to return of the security deposit. No exhibits were attached to the motion for summary judgment. On the same day, however, Legends filed a "Notice of Filing of Deposition Transcript and Exhibits." Attached to that notice were the depositions of Frank and Ann Bergant and Matthew Miozzi; plans depicting the leased premises; Ultimate's 2015 income tax return; the October 20, 2006 lease agreement; permits from the City of Eastlake Building Department; and notes from the "Division of Inspection" dated October 25, 2007.

         {¶8} A magistrate's decision was issued on January 30, 2018, which addressed Ultimate's motion for a protective order and the parties' competing motions for summary judgment. Regarding Ultimate's motion for a protective order, the magistrate's decision states:

Plaintiff has requested an order of protection prohibiting Defendant from obtaining any information, either through discovery, or at trial regarding independent contractors used by the Plaintiff in pursuit of its business. It is the position of the Defendant that the independent contractors are "legally not employees' and therefore permitting them to work in the leased premises was in violation of the Lease. Defendant cites no authority where independent contractors engaged in the salon business, working solely at a salon, are not employees for purposes of the salon business.
Whether a worker is an 'employee' or 'independent contractor' is critical when it comes to such issues as pension eligibility, workers' compensation, and wage and hour law. The Internal Revenue Service has an interest in this distinction, perhaps more than other agencies. Additionally, an important distinction on the definition of an employee vs. an independent contractor is whether the service provided by the independent contractor is an integral part of the employer's business. See U.S. v. Silk, 331 U.S. 704, 67 S. C.t. 1463, 1469, 91 L.Ed. 1757 (1947). There is no argument where salon workers are not integral to the work in a salon.
The protection order is granted as to no discovery may be had regarding the subject of independent contractors used by the Plaintiff in the pursuit of its business.

         The magistrate's decision further states that there remain genuine issues of material fact to be litigated and that both motions for summary judgment are denied. Neither party filed objections to the magistrate's decision.

         {¶9} The trial court entered an order adopting the magistrate's decision on the same day. The trial court ordered Ultimate's motion for a protection order was granted and summarily denied both motions for summary judgment.

         {¶10} The matter proceeded to a bench trial on March 23, 2018.

         {¶11} Frank Bergant, Vice-President of Ultimate, testified that he first approached Matthew Miozzi in the summer of 2006 about renting space in the building at 36005 Lakeshore Boulevard. He and his wife Ann Bergant intended to use the space for their salon and spa business. The parties entered into a lease agreement in October 2006. The building had previously been a Burger King restaurant, and renovations were necessary to make it suitable for a salon. Mr. Bergant testified he paid Mr. Miozzi to renovate the leased premises. After the renovations, the Bergants took possession of the premises on January 1, 2007.

         {¶12} Towards the end of 2007, the Bergants wanted to expand their business. After a discussion with Mr. Miozzi, they took possession of an additional 1, 000 square feet of the building. They paid Mr. Miozzi to renovate the expansion. Mr. Bergant explained: "We paid him to do the remodel of it, because it was his building and he asked if he can do the work."

         {¶13} Mr. Bergant testified that after acquiring the additional area, Mr. Miozzi sent him a new lease agreement. The second lease agreement was entered into evidence. It does not list a lessor and lessee and is undated. It also states a different lease term and payment terms than the first lease. The term of the second lease is "for one (1) three-year period with one (1) five-year period option commencing on January 1, 2007 and ending on December 31, 2014." The payment terms provide:

For the initial term, Lessee shall pay to Lessor at the address specified above as rent ("Base Rent") for the Premises for the full term thereof the sum of $79, 200.00, payable in payments of $2, 000.00 for the first twelve (12) months and $2, 300.00 for the next twenty-four (24) months on the first day of each month for the term of this lease. Base Rent owed for any period less than a calendar month shall be computed on pro-rated basis. For the first five-year option, the total sum of $162, 000.00 in sixty (60) monthly payments of $2, 700.00.

         There are two handwritten notes in the margins of the second lease. Next to the description of the premises, which states it is "approximately 3, 000 sq. feet," there is a handwritten "4, 000-". Next to the payment terms there is a handwritten "3, 500-". Mr. Bergant testified those notes were made by Mr. Miozzi and were in his handwriting. Mr. Bergant explained the note of "4, 000" reflected the increased square footage of the leased premises and the note of "3, 500" indicated the increased rent.

         {¶14} Mr. Bergant testified that he and his wife signed the new agreement and returned it to Mr. Miozzi. When presented with the new lease agreement, Mr. Bergant affirmed it was not signed by Mr. Miozzi. The only signatures on the lease are "Frank Bergant" on the signature block for "Witness" and "Ann M. Bergant" on the signature block for "Lessee." Mr. Bergant testified they began paying $3, 500.00 in rent beginning in 2010.

         {¶15} Additional renovations were made to the premises in 2011, which included relocation of the ceiling. Mr. Bergant testified that subsequently there was also "work done on our reception area, our pedicure area and our hair station area where we had the ceilings lowered down." All of the renovations were discussed with Mr. Miozzi, and Mr. Bergant explained: "Since it was his building, again he wanted to do the work. So we paid him."

         {¶16} Mr. Bergant testified he believed Mr. Miozzi was doing all the renovation work through "Legends Construction," the same company that was the landlord for the building. He ...

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