"Walk-Through" Inventory "Walks Out"
by Ron Davis
The owners of a Rhode Island shopping center must reimburse a tenant for items that he claimed were taken from his premises after he leased his "turn-key" restaurant business.
The shopping center, Brick Market Place in Newport, had leased to the tenant a space previously occupied by another restaurant. The tenant had made a "walk-through" inventory of the assets of that restaurant while it was still operating and apparently believed that he would he would simply step in and take over after renaming the restaurant.
Before the signing of the arrangement, however, the tenant learned that some items were being removed from the premises. The tenant reported the removal to the shopping center owners, but they assured the tenant that $50,000 they had placed "in escrow" would cover the replacement of improperly removed assets. With that assurance, the tenant consummated the deal and began operations.
Within days, however, he reported that most of the glassware, silverware and dishes from the restaurant were missing. And when he presented a bill to the shopping center owners for replacement of those items, the owners refused to pay.
In explanation, the shopping center owners pointed out that the agreement between the two parties states that the shopping center "assumes all risk of destruction, loss or damage…up to the date of closing" of the arrangement. The owners added that the tenant did not, however, report the loss until two days after he began operations.
The tenant sued to force payment for the missing items. And a county judge ruled in his favor. The shopping center owners appealed.
The Rhode Island Supreme Court upheld the lower court ruling, explaining, "At the consummation of the agreement, the tenant was not scheduled to take possession of the premises and its inventory until two days after the closing. Based upon assurances, he participated in the execution of the agreement. When he actually took possession of the premises, he discovered that many items were missing. He promptly informed the landlord about the loss and was advised to replace the missing items and that the purchase price would be refunded from the escrow account. From this evidence, we conclude that the lower court did not err when it found in favor of the tenant on the issue of the missing inventory." (Sea Fare’s Am. Café v. Brick Market, 787 A.2d 472 [R.I. 2001])
Decision: December 2001
Published: March 2002