Warren Zeisloft and Three Z's v. Lawrence Mergenthaler

IN THE COURT OF COMMON PLEAS FOR THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

WARREN ZEISLOFT and THREE Z’s, )
)
Defendants—below, )
Appeilants, )
)
v. ) CA. No. CPU4-14—001133
)
LAWRENCE MERGENTHALER, )
)
Piaintiff—below, )
Appellee. )
Submitted: May 7, 2015
Decided: June 8, 2015
Benjamin C, Wetzel, III Esquire John S. Malik, Esquire
2201 West 11[11 Street 100 East 14‘” Street
Wilmington, DE 19805 Wilmington, DE 19801
Armrneyfor A ppellanls Allomeyfor Appellee

DECISION AFTER TRIAL

RENNIE, J.

INTRODUCTION

This is an appeal from an April 16, 2014 decision of the Justice of the Peace Court No. 13
finding in favor of Plaintiff-below, Appellee Lawrence Mergenthaler (“Mergenthaler”) in the
amount of $15,000.00. The case involves a breach of contract action arising from an oral
agreement to lease commercial space in Mergenthaler’s lot to Defendant—below, Appellants
Warren Zeisloft and Three Z’s, Inc. (“Zeisloft”, “Z’s”, collectively “‘Appellaiits”). Appellants
filed an appeal to the Couit of Common Pleas on April 25, 2014. Mergenthaler filed the
Complaint on Appeal seeking $21,758.06.l Appellants filed an Answer denying the allegations
of the Complaint on Appeal. Trial was held on May 7, 2015. The parties stipulated that a contract
existed and that Appellants owe storage fees. However, Appellants seek set—off of the amount
owed, based on Mergenthaler’s alleged use of their equipment without permission, and
subsequent restriction of Appellants“ access to the equipment.2 This is the Court’s Opinion on
the relief sought by the parties.

FACTUAL BACKGROUND

Creation of the Lease
Three witnesses testified on behalf of lVIergenthalcr.3 Zeisloft testified for the defense.4

The testimony is scattered and at times, inconsistent. However, when the testimony is distilled to

' The amount sought increasod because Appellants’ vehicles remained in storage on Mergenthaler’s lot until May 6,
2015, the day before trial. Mergenthaler’s damages have fluctuated over the life of this action; however, at trial
Mergenthaler also amended his requested damages to reflect an accounting oversight.

2 At trial, Appellants alleged that Mergenthaler unlawfully authorized the use of Appellants’ crane to install a dump
truck frame. Appellants also assert that Mergenthaler prevented the reinovai of their equipment by placing firewood
and a family vehicle at either end of one of Appellants’ trucks. In addition, Appellants claim that other tenants

removed equipment from one of their trucks, rendering the vehicle inoperable.
3Lawrence Mergenthaler, the owner of the lot, testified in his case-in—ehief. Next, David Leager testified. Leager

owns D. Leager Construction, inc. and hauls cargo for other contractors. He has stored several dump trucks at
Mergenthaler’s lot since l988. He knows Zeislofi because his trucks were often parked and stored next to Zeisloft’s
equipment. Finally, Russel] Eaton testified. Eaton is a mechanic and former line worker at General Motors. l-le
operates a garage on Mergenthaler‘s lot and has done so for the last fifty years. He has known Zeislofi for the last
twenty years because he worked on Zeisloft’s trucks from time to time.

4 Warren ‘Wilbur‘ Zeisloft owns a small construction company and has stored his equipment and vehicles at

Mergentlialer’s lot since February I, 1993.

its bare essence, the factual record is as follows: Mergenthaler owns a lot at 1000 Stanton Road
in Wilmington, Delaware, which he leases to business entities for longwterm storage of
commercial vehicles and equipment. 011 February 1, 1993, Mergenthaler orally agreed to store
Zeisloft’s cranes and other vehicles at his lot for $500/month. In 1994, the parties verbally agreed
to decrease the storage fee to $300/month.5 The storage fee was charged in three to six month
increments with Zeisloft tendering payment approximately three times per year.6 Zeisloft fell
behind in payments. According to Mergenthaler, the last payment was received on January 15,
2011, for $2,000.00, leaving a remaining balance of $7,300.00 at that time.7

The Dispute

According to Mergenthaler, at some point in 2011, Zeisloft approached him and stated
that Russell Eaton and David Leager, longtime lessees of Mergenthaler, had used Zcisloft’s crane
without permission. Mergenthaler asked them about it and they denied Zeisloft’s accusation}

Zeislolt also complained that other occupants of the lot were removing equipment from
his trucks. Specifically, Zeisloft noted that his boom truck was missing its tool box, a radiator,
the big lifting block, its accompanying swivel-arm, and the passenger cabin.9 Additionally, he
claimed that the boom truck sustained damage to the front left wheel during storage. m According
to Mergenthaler, Zeisloft never approached him concerning the equipment removal and damage

to the vehicles. Leager testified that Zeisioft never said anything to him about removing parts

5 Zeislofi' testified that the parties had a lump-storage arrangement whereby the storage rate remained the same
regardless of whether he stored one vehicle or ten. '

6 Appellee’s Ex. 1.
7 1d The Complaint on Appeal alleges that the final payment was received on October 7, 20] 1, via check #- 103. At

trial, Mergenthaler testified that it was received on January 15, 201 1, via check it 2156, also reflected in Exhibit 1.
The Court brought the discrepancy to the attention of Mergenthaler’s counsel; however, he could not expiain the
inconsistency.

8 Zeisloft testified that he pulled into the lot and witnessed Mergenthaler standing along the road watching Eaton
operate the crane to attach a dump truck frame to a dump truck. He asked Eaton about the use of the crane and,
Eaton replied that he had permission from Mergenthaler. Mergenthaler and Eaton deny that the event happened.

9 Appellee’s Ex. 32.

10 Id. Zeisloft’s later testimony suggests that the boom truck had sustained damage to the front left wheel prior to
storage.

to the vehicles. Leager testified that Zeisloft never said anything to him about removing parts
from his vehicles and denied ever doing so. Eaton testified that Zeisloi’t complained once that
people were tampering with his equipment, but that he never heard anything else.

Further, Zeisloft testified that at some point he attempted to move his vehicles, but found
that one of his cranes was blocked in by a green bread truck. Zeisloft complained to Baton that
he wanted the green bread truck removed from the lot; however, Mergenthaler states that the
bread truck was current on storage fees and consequently, had a right to remain on the lot.
Mergenthaler testified that in reality, Zeisloft’s crane was actually blocking other customers’
vehicles.” The customary procedure was that customers typically came to Mergenthaier if other
lot users were blocking access to equipment and Mergenthaler would then contact the offending
user to clear the blockage. Zeisloft never made a complaint to Mergenthaler, either verbally or in
writing, that he could not access the crane. Moreover, Mergenthaler testified that the crane has
been sitting in the same spot since 2011 as pictured in Appellee’s Exhibit 3—4.12

Additionally, Zeisloft testified that his green dump truck was blocked in by firewood and
Mergenthaler’s 1953 International R110 pickup truck.‘3 Zeisloft testified that the R110 pickup
was finally removed in May 2011 and the firewood in July 201}. Eventually, Zeisioft decided
that he would terminate the agreement and remove his cranes and equipment from
Mergenthaler’s lot.

Cessation of Rent

In January 2011, Zeisioft ceased paying rent, but continued to store his equipment on

Mergenthaler’s lot. Zeisloft’s rationale for not removing his other vehicles, despite his

'1 See Appellec’s Ex. 3-4.

'2 16!. Exhibit 3—4 shows that Zeisloft’s crane is blocking the green bread truck. Further, upon a review of the
evidence submitted, none of Zeisloft’s vehicles appear to be restricted.

'3 See Appellee’s Ex. 3-3.

dissatisfaction, was based on the lump-storage arrangement, whereby he wouid still be charged
$300.00/momzh because the blocked-in vehicle remained on Mergenthaler’s lot. Zeisloft testified
that he verbally communicated his intention to terminate the lease to Mergenthalcr after his final
payment in January 201 1.

Mergenthaler testified that Zeisloft had made the threat that he was moving his
equipment out for years, but never followed through on it. Over the life of the agreement,
Zeisloft never provided written notice of his complaints, requests for removal, or his ultimate
termination of the storage agreement. Further, at the time of the last payment in January 2011,
Zeisloft was more than 2.5 years in arrears on his storage fees.[4 As a result, from that time,
Mergenthaler began sending Zeisloft computerized statements and invoices.15 Despite receiving
the statements and invoices, Zeisloft did not make any further payments beyond the January
2011 payment. As a result, Mergenthaler initiated this action.

DISCUSSION

To prevail on a claim for breach of contract, the plaintiff must establish by a
preponderance of the evidence that: (1) a contract existed between the parties; (2) the defendant
breached an obligation imposed by the contract; and (3) the plaintiff suffered damages as a result
of that breach. ‘ 6

A. Mergenthaler’s Breach of Contract Claim

The parties agree that a lease — and therefore a contract m— existed. The parties also agree
that Appellants ceased payment of their storage fees since January 2011. Where the parties
disagree is on the amount of damages owed by Appellants for failure to pay the storage fees. To

"' See Appeilee‘s Ex.1 m 2-16.

‘5 1d. The statements reflect Zeislofi’s current mailing address. The most recent statement was issued on May 5,
2015.

m Gregory v. Frazer, 2010 WL 4262030, *1 (Del. Com. Pl. Oct. 8, 2010); VLIW Technology, LLC v. Hewiett-
Packard, Ca, 840 A.2d 606, 612 (Del. 2003).

prove his damages, Mergenthaler introduced the ledger documenting storage fees charged to
Appellants from the inception of the lease in February 1993 to the last payment received in
January 2011.17 The ledger shows a past due balance of $7,300.00 as of the receipt of Zeisloft’s
$2,000.00 January 15, 2011 payment.18 In addition, Mergenthaler introduced statements and
invoices showing balances accrued in three—month intervals from January 15, 2011 to May 6,
2015.19 There is no dispute concerning the amounts outstanding on Zeisloft’s account to
Mergenthaler. Accordingly, the Court finds that Mergenthaler has proven his claim for breach of
contract. However, Zeisloft disputes that he is obligated to make all of the payments set forth in
the invoices.
B. Appellants’ Set-off Claim

Appellants argue that Mergenthaler’s actions over the course of the lease, specifically (1)
Mergenthaler’s alleged approval of the unauthorized use of Zeisloft’s crane; (2) the incontinent
removal of equipment frOm Zeisloft’s trucks; and (3) Mergenthaler’s attempt to restrict Zeisloft’s
access to his equipment by blocking it with the R110 pickup and firewood, when viewed
together, constitute a material breach of contract excusing Appellants’ duty to perform. it is on
this argument that Appellants base their defense of set—off.20 Appellants” argument is

unpersuasive.

'7 See Appellec’s Ex.1.

'8 Id. Although the ledger is handwritten, Appellants did not dispute its accuracy.

19 See Appellee’s Exhibits 2~l 7 L16. See also Appellee’s Exhibits 3~l a 3'5. Mergenthaler presented photographs
and testimony at trial that Zeisloft’s vehicles were present on the property until May 6, 2015.

20 In a case where a defendant invokes the defense of recoupment, otherwise known as set-Off, he carries the burden
of proof to Show his damages. See Claringbold v. Newark Garage & Electric Ca, 97 A. 386, 387 (Del. Super.
1915).

It is certainly true that under Delaware law, a material breach of contract obviates the
nonubreaching party’s duty of performance under the contract.” However, a finding of material
breach requires much more than mere violation of a contract term. As stated by Willinonz

{F]or a breach of contract to be material, it must go to the root or
essence of the agreement between the parties, or be one which
touches the fundamental purpose of the contract and defeats the
object of the parties in entering into the contract. A breach is

"material" if a party fails to perform a substantial pad of the
contract or one or more of its essential terms or conditions.22

In this case, the evidence and testimony before the Court does not support Appellants’
claim for setwoff. Here, there is little testimony or evidence which shows that Mergenthaler’s
actions described above, if they did occur, disturbed the fundamental purpose of the contract.
During Mergenthaler’s case-in—chief, Mergenthaier, Leager, and Eaton denied each of Zeisloft’s
claims. Moreover, Zeisloft did not present any persuasive evidence documenting the alleged
breaches or rebutting Appellee’s denials.

In contrast, Mergenthaler presented testimony and evidence which shows that Zeisloft’s
vehicles and equipment were freely accessible to him; that Mergenthaler never used the
equipment without Zeisloft’s approval; and that although Zeisloft complained to Mergenthaler
once, concerning the green bread truck after his return from California, his sole complaint was
invalid. Without more, the Court cannot find that a material breach of contract occurred, and
therefore, cannot grant Appellants an award that would set—off the damages they owe for their

breach of the lease agreement.23

2' See, e.g., Biolffia Solutions, Inc. v, Endocare, Inc, 838 A.2d 268, 278 (Del. Ch. 2003).

2223 SAMUEL Wlmsrou & RICHARD A. LORD, A TRI'aA'risu ON run LAw or CON'I‘RAC'I‘S § 63:3 (4111 ed. 2002)
(internal citations omitted).

23 Although there may be some truth to Zeisloft’s accusations, there is simply not enough evidence in the record
before the Court to support a reduction in damages based on the allegations.

7

C. The Court’s Damages Calculation
Mergenthaler seeks judgment in the amount of $21,758.06 for back rent. At trial,
Appellants agreed that they did not pay the storage fees. Appellants also stipulated that the
monthly amount of storage fees charged after the 1994 oral modification of the lease is $300.
Further, Appellants admit that, at a minimum, they owe $7,300.00, comprising the past-due
balance at the time of the January 15, 2011 payment.24 Therefore, the Court’s damages

calculation begins with that amount.

According to the statements and invoices presented by Mergenthaler, from January 15,
2011 to May 6, 2015, Appellants incurred $16,200.00 in storage fees. However, there are
inconsistencies in the statements and invoices. Specifically, the Court notes that Appellee’s
Exhibit 2—8 lists a payment on October 7, 201 l for 2,000.00. Further, Mergenthaler testified that
Zeisloft removed his final vehicle from the lot on May 6, 2015, one day before the trial, yet the
final invoice lists charges for the full months of May and June 2015. Thus, the storage fees in
May 2015 will be prorated based on Appellants” partial occupancy for the period, totaling
$58.06. Also, the Court will exclude the storage fee for June 2015 from the rent calculation.
Additionally, the October 7, 2011 payment for $2,000.00 decreases the charges incurred for this
period to $14,258.06. When added to Appellants” prior balance of $7,300.00, the Court finds

Appellants jointly and severally liable for damages totaling $21,558.06.

24 See Appellee’s Ex. 1.

CONCLUSION

For the foregoing reasons, the Court finds in favor of Appellee Lawrence Mergenthaler

and against Appellants Warren Zeisloft and Thl'eeZ’s, 1110., jointly and severally, in the amount

of $2 1,558.06, plus post—judgment interest at the rate 0 ‘ ‘ ntil paid in full.

IT IS SO ORDERED this 8th day of June, 20