S. Michael Citak

The plaintiffs, owners of a laundromat business, brought an action against their landlords for wrongful distraint, unlawful termination of their commercial lease, conversion, and defamation.

The landlords had seized the premises without notice, changed the locks, and posted notices accusing the plaintiff of fraud and embezzlement.

The court found the distraint and lease termination were unlawful, as a landlord cannot simultaneously terminate a lease and distrain property.

The court also found the landlords liable for conversion of the business and for defamation due to the false and malicious notices.

The plaintiffs were awarded $362,675 in total damages, including $50,000 for defamation and $50,000 in aggravated and punitive damages.

The defendants' counterclaim for alleged rental arrears was dismissed.

The trustee in bankruptcy disclaimed the bankrupt tenant's commercial lease.

The landlord subsequently drew down the full $2.5 million of a letter of credit provided as security under the lease.

The trustee brought a motion to determine the amount the landlord was entitled to draw.

The court held that upon disclaimer of the lease, the bankrupt's obligations to the landlord ceased, and the landlord was only entitled to draw $623,196.84 for its preferred claim of three months' accelerated rent under the Bankruptcy and Insolvency Act.

The landlord was ordered to pay the balance to the trustee.