Judges rule on lease dispute involving hospital

The Indiana Court of Appeals concluded that a hospital did owe rent to the property owner for a broken lease involving a third party, but the damages the trial court ordered the hospital pay need to be reconsidered.

Sisters of St. Francis Health Services Inc. had a lease agreement with EON Properties in Schererville beginning in 2000. Over the years, the hospital’s office space was reduced and portions were leased to two separate tenants. When EON entered into a lease agreement with these new tenants, the hospital’s rent was reduced accordingly. As part of its lease with Ameriquest, EON required through a third amendment with the hospital’s lease that the hospital be responsible for the last two years of Ameriquest’s lease if the company vacated before its five-year lease ended. EON would be responsible for the first 3 years if Ameriquest left early.

Ameriquest ended up vacating after only 29 months, so EON sought the last two years’ lease payments from the hospital. The hospital refused to pay, so EON filed this lawsuit for breach of lease and quantum meruit. The hospital counterclaimed for breach of lease and quantum meruit because EON increased the hospital’s rent payments and allegedly accepted overpayments from Sisters of St. Francis. The trial court granted summary judgment for EON and ordered the hospital pay more than $180,000.

In Sisters of St. Francis Health Services, Inc. v. EON Properties, LLC, No. 45A05-1110-PL-587, the Court of Appeals upheld the finding that the hospital was liable for the last two years of the Ameriquest lease, rejecting Sisters of St. Francis’ claim that Ameriquest had to occupy the premises for 36 months and had to properly exercise its option to vacate before the hospital could be held liable under the amendment to the hospital’s lease. But those terms were in the lease agreement between EON and Ameriquest, and the hospital was not a party to those terms.

The trial court did err by granting summary judgment in favor of EON with respect to the amount of damages the hospital owed as there are genuine issues of material fact regarding whether Sisters of St. Francis should receive credits for a security deposit, its claimed overpayments under the second lease amendment, and the improperly increased rent that EON doesn’t dispute. The trial court is to continue with the underlying litigation on the damages issue.