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Preferred Medical Associates, LLC v. The Abraham Family Trust

Court of Appeals of Arkansas, Division III

April 26, 2017



          Ethredge & Copeland, P.A., by: David L. Ethredge, for appellants.

          Jeremy B. Lowrey; and Cooper & Bayless, P.A., by: Mark Cooper, for appellees.

          PHILLIP T. WHITEAKER, Judge

         Preferred Medical Associates, LLC ("PMA"), Dr. Adam Wozniak, and Dianna Owen appeal from a judgment holding them liable for breach of a commercial lease. We affirm.

         I. Background

         PMA is a limited-liability medical practice of which Dr. Adam Wozniak is a member and Dianna Owen is an employee. In February 2010, PMA was in the market for leasing office space. Dr. Simon Abraham practiced medicine in Mountain Home, Arkansas, under the name Abraham Medical Center. PMA negotiated a lease for office space in the same facility that housed Dr. Abraham's practice, and the lease contemplated that the two doctors would coexist and share certain medical equipment. PMA agreed to pay a $20, 000 deposit and rent of $10, 000 per month for a term of eighteen months. The lease was signed by Dr. Abraham and his wife, Annie Abraham, as lessors; by Dr. Wozniak individually and on behalf of PMA; and by Ms. Owen individually.[1]

         Five and a half months into the lease, appellants vacated the leased premises. As a result, the Abrahams sued appellants for breach of the lease and sought $125, 000 in rent due under the remaining twelve and a half months of the lease term, plus incidental damages. Appellants responded that their decision to vacate was justified because Dr. Abraham's conduct toward them amounted to a constructive eviction from the premises.

         A bench trial began in January 2013, but the proceedings were halted when appellants discovered that the Abrahams did not own the leased premises. The Abrahams had previously created a revocable trust, the Abraham Family Trust ("the Trust"), and had funded the Trust with the leased premises. As a result, the Trust owned the facility where the leased premises was located. The Abrahams took the position that this information was not detrimental because they were the sole trustees of the Trust with full authority to execute a lease of Trust property. Appellants argued that, in light of this new information, the Abrahams lacked standing to enforce the lease because they filed suit as individuals rather than as trustees. Appellants also argued that the lease contract was invalid because the Abrahams failed to identify themselves as trustees thereon. The trial court asked for briefs on the issue and, after considering the parties' arguments, ruled that the lease was valid and enforceable.

         The trial resumed, and appellants presented evidence on their claim of constructive eviction. Dr. Wozniak and Ms. Owen testified that Dr. Abraham made such unreasonable demands and placed such unreasonable restrictions on them during their occupancy that he deprived them of the use and benefit of the leasehold. By contrast, Dr. Abraham testified that the lease arrangement was working fine, with only minor adjustments being required. After hearing the evidence, the court found that Dr. Abraham's conduct did not rise to the level of constructive eviction, despite the "numerous relatively petty conflicts" that developed between the parties during their five and a half months of shared occupancy. The court therefore ruled that appellants breached the lease without justification and owed the remaining twelve and a half months of rent in the amount of $125, 000, less the $20, 000 deposit, for a total of $105, 000. The court also found that Dr. Abraham acted reasonably to mitigate the damages and that all defendants, including the individual signatories on the lease, were jointly and severally liable for the damages award.

         Appellants filed this appeal and present ten arguments for our consideration. For convenience, we have grouped their arguments into four categories: (1) standing to sue and authority to execute the lease; (2) constructive eviction; (3) mitigation of damages; and (4) liability of individual signatories.

         II. Standards of Review

         In an appeal from a bench trial, we will not reverse the circuit court's findings of fact unless they are clearly erroneous or clearly against the preponderance of the evidence. Academy, Inc. v. Paradigm Bldg., LLC, 2017 Ark.App. 79, __ S.W.3d __. On questions of law, such as the issue of standing discussed below, our review is de novo. Bibbs v. Cmty. Bank, 101 Ark.App. 462, 278 S.W.3d 564 (2008).

         III. Standing to Sue and Authority ...

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