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Ross Dress for Less, Inc. v. Makarios-Oregon, LLC

United States District Court, D. Oregon

May 31, 2018

ROSS DRESS FOR LESS, INC., Plaintiff,
v.
MAKARIOS-OREGON, LLC, Defendant.

          Thomas V. Dulcich, Joel A. Parker, and Rebecca A. Boyette, Schwabe Williamson & Wyatt, PC, Gregory D. Call and Tracy E. Reichmuth, Crowell & Moring, LLP, Of Attorneys for Plaintiff.

          Jeffrey M. Edelson, Molly K. Honoré, Dallas S. DeLuca, and Paul S. Bierly, Markowitz Herbold, PC, Of Attorneys for Defendant.

          OPINION AND ORDER

          Michael H. Simon, United States District Judge

         Plaintiff, Ross Dress For Less, Inc. (“Ross” or “Plaintiff”), has moved for summary judgment against the three supplemental counterclaims asserted by Defendant Makarios-Oregon, LLC (“Makarios”). These counterclaims relate to Ross' lease of commercial space in the Richmond Building, located in downtown Portland. Under a 1956 lease and its amendments (the “Richmond Lease”) (ECF 61-1), Ross was the successor-in-interest to the original lessee, and Makarios was the successor-in-interest to the original lessor. The lease expired on September 30, 2016, and Ross vacated the premises on or about that date.

         Makarios' first and second counterclaims allege that Ross failed to return the premises in the condition required under the Richmond Lease, causing Ross to be in breach of the lease and its implied covenant of good faith. Makarios' third counterclaim seeks to recover unpaid rent for a 21-month period before September 30, 2016. Ross asserts that it recently learned that Makarios is not, and never has been, the owner of the Richmond Building. Instead, since at least June 30, 2011, the legal owners of the Richmond Building have been Charles W. Calomiris, Katherine Calomiris Tompros, and Jenifer Calomiris, as tenants-in-common. Ross's motion for summary judgment against Makarios' first two counterclaims asks the Court to determine whether Makarios (as opposed to Charles W. Calomiris, Katherine Calomiris Tompros, and Jenifer Calomiris) is entitled to recover any damages on those claims. Ross also moves against Makarios' third counterclaim on other grounds. In the alternative, Ross seeks leave to add Charles W. Calomiris, Katherine Calomiris Tompros, and Jenifer Calomiris as additional defendants in Ross' claim for declaratory relief. For the reasons that follow, Ross' motion for summary judgment against Makarios' supplemental counterclaims is denied, and Ross' alternative motion for leave to add Charles W. Calomiris, Katherine Calomiris Tompros, and Jenifer Calomiris as additional defendants is conditionally granted.

         BACKGROUND

         A. Procedural History

         This case involves a dispute over a lessee's obligations upon the expiration of two leases, negotiated with two separate landlords for two conjoined buildings located in downtown Portland, Oregon. One building was known as the “Richmond Building.” The other was known as the “Failing Building.” The leases spanned more than 50 years and, after several extensions and amendments, expired on September 30, 2016. Ross was the successor-in-interest to the original lessee of both buildings. Makarios and Walker Place, LLC (“Walker Place”) were the successors-in-interest to the original lessors of the Richmond Building and the Failing Building, respectively.

         In December 2014, Ross filed this lawsuit to obtain a judicial declaration that Ross' proposed end-of-lease plans would satisfy Ross' obligations under the relevant leases. Makarios and Walker Place asserted counterclaims, seeking a judicial declaration clarifying the extent of Ross' end-of-lease obligations and money damages for breach of contract. All three parties moved for partial summary judgment, which the Court granted in part and denied in part on March 25, 2016. Ross Dress For Less, Inc. v. Makarios-Oregon, LLC, 180 F.Supp.3d 745 (D. Or. 2016). The parties then agreed to bifurcate this lawsuit. In Phase I, the Court held a bench trial to determine the extent of Ross' end-of-lease obligations, resulting in the Court's written Findings of Fact and Conclusions of Law, issued on June 10, 2016. Ross Dress for Less, Inc. v. Makarios-Oregon, LLC, 191 F.Supp.3d 1189 (D. Or. 2016).

         On September 6, 2016, Ross moved for an order determining whether Ross, over the objections of Makarios and Walker Place, may remain on the premises of the two buildings after the leases expire in order to complete the work needed to surrender the premises in the condition required under the leases. On September 27, 2016, the Court ruled that after the leases expire on September 30, 2016, neither Ross nor its agents may enter or remain on the premises of the Richmond Building or the Failing Building over the objection of either Makarios or Walker Place, respectively. Ross Dress for Less, Inc. v. Makarios-Oregon, LLC, 210 F.Supp.3d 1259 (D. Or. 2016). On April 3, 2017, both Makarios and Walker Place filed supplemental counterclaims against Ross, to be resolved in Phase II. Several months later, Ross and Walker Place settled their dispute, and Walker Place is no longer a party in this lawsuit.

         Makarios asserts three supplemental counterclaims. As its first Phase II counterclaim, Makarios asserts that the Richmond Lease expired on September 30, 2016 and that Ross vacated the Richmond Building on or around that date but failed to return the premises in the condition required under the Richmond Lease. As stated in its first counterclaim, Markarios alleges breach of contract and seeks money damages for:

(a) “costs of the required work and repairs, architectural, engineering, and other professional fees, legal fees, permit fees, inspection fees, and fees and costs associated with bringing the Richmond Building to the condition required by the Richmond Lease”; and
(b) “lost rental income and damage to the reputation of the Richmond Building due to the dilapidated condition plaintiff left the Richmond Building, along with damages for delays to make the Richmond Building tenantable resulting from plaintiff's conduct.”

ECF 242, ¶¶ 11-12 (Supplemental Counterclaims). As its second counterclaim, Makarios alleges breach of the implied covenant of good faith and fair dealing and seeks “damages in an amount to be proved at trial.” ECF 242, ¶ 19.

         As its third counterclaim, Makarios alleges breach of a contract to pay rent and seeks an award of $48, 166.61. This amount reflects unpaid rent of $2, 333.33 per month for approximately 21 months, during which Ross occupied the leased premises in the Richmond Building and tendered rent, but Makarios declined to accept those payments. At the time, Makarios was litigating in state court its claim of forcible entry and detainer (“FED”), seeking to evict Ross from the Richmond Building. Makarios asserts that it refused to accept Ross' tender of rent payments while the FED matter was being litigated in order to avoid potentially waiving Makarios' claim to evict Ross. Although Makarios lost its FED action at the state trial court, that matter is currently on appeal to the Oregon Court of Appeals.

         B. Ownership of the Richmond Building

         1. The Richmond Building through the End of 2011

         At some point before 2002, William Calomiris appears to have been the owner of the Richmond Building. In 2002, after his passing, personal representative deeds were recorded to transfer title of the Richmond Building to Mary Calomiris and her four children, George, Charles, Katherine, and Jenifer, as trustees of the William Calomiris Marital Trust Under the Will of William Calomiris. ECF 261-5 at 30-34. On June 17, 2011, the four Calomiris children transferred their interests to their mother, Mary Calomiris. Id. at 21-22. On June 30, 2011, Mary Calomiris deeded her interest to three of her children, Charles, Katherine, and Jenifer, as tenants in common, each with a one-third share. Id. at 17-18. According to the deed records, Makarios-Oregon, LLC never owned the Richmond Building.

         Makarios' only legal interest in the Richmond Building arose under a July 27, 2011 Assignment and Assumption Agreement (the “Assignment and Assumption Agreement”). This document was entered into among Mary Calomiris, Charles W. Calomiris, Katherine Calomiris Tompros, and Jenifer Calomiris (collectively, “Assignor”), on the one hand, and Makarios-Oregon, LLC (“Assignee”) on the other. In relevant part, the Assignment and Assumption Agreement provides:

Assignor, by and through Makarios, LLC[1] which is owned by Assignor, hereby transfers, conveys, and assigns to Assignee [Makarios-Oregon, LLC] all of their right, title, and interest in, to and under the Leases and Security Deposits with respect [the Richmond Building] 600 SW 5th Avenue, Portland, OR, as such property is more particularly described in Exhibit A, to Assignee, ...

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