Cheshire Inn Hotel allowed to break lease with management company: Lawsuit charges managers ran down restaurant business

$255,339.57 verdict

The Cheshire Inn is under old management – now that a St. Louis circuit judge has ordered the management company’s lease to be rescinded.

Plaintiff Apted-Hulling Inc. owns the real estate upon which the Cheshire Inn Hotel, known as the lodge, and Cheshire Inn Bar & Restaurant, known as the inn, operate. Plaintiff Cheshire Inn Motor Hotel Inc. is the business entity that actually operates the lodge.

Apted-Hulling leased the inn to defendant John Lueders, who assigned it to his company, co-defendant L&S Properties Ltd., which operates the inn’s bar, banquet and restaurant businesses. Pursuant to the parties’ lease, the defendants were obligated to “provide continuous room service” to lodge guests, and to maintain the same hours of operation that were in place when the lease was signed. The lease also obligated the defendants to pay all utility bills, including the sewer bill to MSD.

Fourteen years after the initial lease was signed, the plaintiffs, Apted-Hulling and Cheshire Inn Motor Hotel, filed a suit against the defendants for breach of contract and unlawful detainer. The petition was amended to include claims for declaratory judgment and rescission. In sum, the plaintiffs alleged that the defendants had breached the agreement by, among other things, failing to provide continuous room service, failing to maintain the same hours of operation and by failing to pay the MSD bill. The plaintiffs alleged that such failures caused harm to their reputation and caused them to incur lost profits and suffer other financial damages. Lastly, the plaintiff asked the court to rescind the lease agreement and/or declare the lease to be commercially impracticable to perform, and order the defendants to vacate the property immediately.

The defendants denied the allegations, claiming that they did not breach any term of the lease agreement and that, even if they did, the corresponding damage was so insignificant that it did not justify the drastic relief requested by the plaintiffs, such as rescission or the issuance of a declaratory judgment.

At trial, the plaintiffs introduced evidence to demonstrate that the defendants’ business had changed significantly. It no longer was a restaurant doing more than $2.5 million in sales as it had at the start of the lease; instead, restaurant sales decreased to just a third of former sales, and liquor sales increased by 40 percent or more – due mostly to a late night liquor license the defendants obtained. The plaintiffs argued that since obtaining that license, the defendants no longer made any serious attempt to provide a first-class breakfast to its lodge guests or to provide its guests timely room service or food service. The plaintiffs argued that as a result in the loss of these services over the years, and the decrease in banquet sales and service levels, single room rentals at the lodge decreased significantly and caused it to lose $244,236.02 in lost profits over the last two years alone. The plaintiffs also claimed that the defendants’ failure to pay the MSD bills timely resulted in a lien for $11,103.55 being placed upon its real estate.

The defendants countered by claiming that the vast majority of its room service and food service was excellent and that problems of the sort the plaintiffs complained of were exaggerated in significance and frequency. Thus, the defendants maintained they had not breached the lease or caused any damage to the plaintiffs’ reputation or finances. And finally, the defendants argued that the plaintiffs’ allegations were not consistent with the fact that it invested more than $600,000 in the property and that removing them from the property was not justified or warranted given this history and the evidence submitted.

After four days of trial, plaintiffs received: (a) a verdict against the defendants, jointly and severally, for $255,339.57 in lost profits and MSD liens; (b) rescission of the lease agreement; (c) a declaration that the lease is commercially impracticable to defendants; and (d) immediate possession of the Cheshire Inn.

Facts of the case
Type of Action: Breach of lease agreement; declaratory judgment and rescission
Type of Injuries: Monetary injuries, plus injuries to corporate reputation.
Court/Case Number/Date: City of St. Louis/040-6567/Feb. 14, 2006
Caption: Apted-Hulling Inc. & Cheshire Inn Motor Hotel Inc. v. L&S Properties Ltd. and John Lueders
Judge, Jury or ADR: Judge
Name of Judge: David L. Dowd
Verdict or Settlement: verdict of $255,339.57 and immediate possession of the property. Lease ordered rescinded and declared to be commercially impracticable.
Special Damages: N/A
Allocation of Fault: N/A
Last Demand: N/A
Last Offer: N/A
Attorney for Plaintiff: Noel A. Sevastianos, Sevastianos & Associates, PC, Clayton

Insurance Carrier: N/A
Plaintiff’s Experts: Unretained: Ms. Margie Piot, Plaintiff’s Vice-President & Comptroller
Defendants’ Experts: N/A