Opinion
No. 2014EF847.
07-09-2014
COR VETERANS MEMORIAL DRIVE COMPANY, LLC, Plaintiff, v. MICHAELS STORES, INC., Defendant.
Anthony F. Copani, Esq., of Manion & Copani, for Plaintiff. Dennis K. Schaeffer, Esq., of Jaeckle, Fleischmann & Mugel, LLP for Defendant.
Anthony F. Copani, Esq., of Manion & Copani, for Plaintiff.
Dennis K. Schaeffer, Esq., of Jaeckle, Fleischmann & Mugel, LLP for Defendant.
Opinion
DONALD A. GREENWOOD, J.
The plaintiff COR Veterans Memorial Drive Company, LLC has commenced a declaratory judgment action seeking an order declaring the rights and remedies of the parties under the lease between plaintiff and defendant Michaels Stores, Inc. In its complaint, plaintiff seeks a determination that plaintiff had the right to enter into a lease with Five Below, Inc. without it being in breach of a restrictive covenant contained in the subject lease prohibiting the location of a “dollar store” within proximity to the defendant on the ground that Five Below is not a dollar store. The lease agreement was drafted by the defendant and was executed on March 17, 2008. It concerns the defendant's rental of certain space in plaintiff's shopping center located in Batavia, New York. The restrictive covenant contains nine such prohibitions preventing the plaintiff from leasing additional/separate space to a variety of establishments. The fourth item specifically prohibits the location of a “dollar store within 250 feet of the premises (provided however if any portion of the Target Tract is located within 250 feet of the premises then this No.4 shall only apply to such portion of the Target Tract to the extent Landlord has the legal right to prohibit such portion of the Target Tract from being used for a dollar store.)” Exhibit J to Shopping Center Lease.
The complaint alleges in the first cause of action that plaintiff seeks a declaration that based upon the facts and the lease language plaintiff has the right to enter into a lease with Five Below without being in violation of the restrictive covenant. The second cause of action seeks attorney's fees as the lease provides that the prevailing party in any action or proceeding relating to the lease provisions is entitled to recover reasonable and necessary costs and attorney's fees. Subsequent to the filing of the complaint, the defendant interposed an answer and counterclaim and plaintiff then served its reply to the counterclaim. Thereafter plaintiff presented an Order to Show Cause to this Court requiring the defendant to show cause why an order should not be entered declaring the rights and remedies of the parties under the subject lease, including a determination that plaintiff had a right to enter into a lease with Five Below, Inc. without the plaintiff being in breach of the restrictive covenant contained in the subject lease agreement. In its opposition papers the defendant seeks denial of the plaintiff's application and asks this Court to instead grant summary judgment to the defendant pursuant to CPLR § 3212(b) and dismiss the plaintiff's complaint with prejudice on the merits and issue an order declaring that plaintiff's lease with Five Below violates the dollar store restriction in the subject lease. The defendant argues that this Court has the discretion to search the record and grant summary judgment in its favor as a nonmoving party, even in the absence of a cross-motion, because the record establishes its entitlement to such relief. See, Cagnina v. Onondaga County, 90 AD3d 1626 (4th Dept.2011). Despite the fact that their submissions may have been technically deficient, both parties waived such defects at oral argument and agreed that they were seeking summary judgement and asked the Court to consider the papers as such. Therefore, this Court will treat plaintiff's application as one for partial summary judgment and the defendant's opposition pursuant to CPLR § 3212(b).
The plaintiff's application and Order to Show Cause reference only the first cause of action wherein plaintiff seeks a declaration in its favor. Plaintiff has not moved for relief with respect to its second cause of action seeking reasonable and necessary costs and attorney's fees pursuant to the subject lease.
The plaintiff contends that Five Below is not a “dollar store”, that the plain and ordinary meaning of the term is a store which sells merchandise for one dollar, and relies upon dictionary definitions of the term in its support. Plaintiff argues that had defendant wanted to include stores that sell merchandise for $10 as a “dollar store” it was incumbent upon it to so state as such in its restrictive covenant and/or to provide a definition of a “dollar store” in the lease, and that it failed to do so. Plaintiff provides an affidavit from one of its owners, Steven Aiello, which indicates that plaintiff entered into the lease with Five Below for 8,000 sq. ft. at the shopping center on November 12, 2013. According to Aiello, plaintiff received a letter from defendant on February 10, 2014 which stated that the restrictive covenant concerning “dollar stores” in the lease prohibited the plaintiff from entering into the lease with Five Below. He points to plaintiff's lease with Five Below which provides that the premises leased by Five Below may be used “for the retail sale of variety and general merchandise with a price point under ten dollars subject to an inflation adjustment ...” Five Below Lease, para. 7.1(a). He also relies upon the definition of the term “dollar store” in the Five Below Lease, which indicates that it is a store that “sells all of the items in its premises at a price point of two dollars ($2) or less ...” Five Below Lease, para. 7.3. He contends therefore that Five Below does not prohibit the operation of a so called dollar store in the same shopping center. As a result, the parties exchanged correspondence reiterating their respective positions and Aiello indicates that there has been no further communication between the parties since February of 2014. In the alternative, the plaintiff contends that the term as interpreted by the defendant is ambiguous and that any ambiguity contained in the restrictive covenant must be construed against the defendant.
The defendant provides an affidavit from Wendi Levine Frost, its director of real estate, in opposition. She indicates that she served as director of real estate for the Family Dollar Stores and that Family Dollar was established by members of her family. She contends that two of the country's leading dollar stores-Family Dollar and Dollar General-have for many years sold their merchandise for dollar specific price points that range from one dollar up to ten dollars. She notes that defendant has approximately 1,040 stores throughout the United States and in negotiating with local landlords defendant frequently required certain prohibited uses relative to the shopping center in which defendant's store will be situated. It does so both to ensure that a shopping center maintains a complimentary and desirable mix and to protect against uncaptured overlap with its business that might not be fully contained by the exclusive use rights that defendant obtains for that shopping center. With respect to the plaintiff's alternative argument concerning the ambiguity of the restrictive covenant and that it must be enforced against the defendant as the drafter, she points to one of the lease's general provisions that sets forth a rule of interpretation regarding the lease which provides “this lease will be construed with equal weight for the rights of both parties, the terms hereof having been determined by fair negotiation with due consideration for the rights and requirements of the parties.” Lease, para. 17.4. Defendant further claims that even assuming arguendo that a review of extrinsic evidence is necessary, it would be patently improper to conflate the Five Below lease and the subject lease because the evidence of that to which plaintiff and Five Below may have self-servingly agreed in 2013 has no bearing on what plaintiff and defendant negotiated in 2008.
The law is well settled that the subject lease as a contract must be interpreted so as to give effect to the intention of the parties as expressed in the unequivocal language employed. See, Wallace v.. 600 Partners Co., 86 N.Y.2d 543 (1995). Thus, clear complete writing should generally be enforced according to their terms. See, WWW Associates v. Giancontieri, 77 N.Y.2d 157 (1990). The rule has even greater force in the context of real property transactions where a commercial certainty is the paramount concern and where the instrument was negotiated between sophisticated counseled business people negotiating at arms length. See, id. Unambiguous provisions of a contract must be given their plain and ordinary meaning and their interpretation is a question of law for the court. See, White v. Continental Casualty Co., 9 NY3d 264 (2007) ; see also, WWW, supra. A contract is considered unambiguous if the language it uses has a definite and precise meaning unattended by the danger of misconception and the purport of the agreement itself and concerning which there is no reasonable basis for a difference of opinion. See, White, supra. Therefore if the agreement on its face is reasonably susceptible to only one meaning a court is not free to alter the contract to reflect its personal notions of fairness in equity. See, id. On the other hand, a writing is considered ambiguous if it is susceptible to different meanings. See, 67 Wall Street Co. v. Franklin National Bank, 37 N.Y.2d 245 (1975). If several constructions are possible, the court can look to the surrounding facts and circumstances to determine the intent of the parties and thus parole evidence is admissible generally to explain ambiguities in contracts and in particular in a lease. See, id. When a lease contains an ambiguity, the ambiguity is to be construed against the drafter. See, id. Although the defendant points to the general lease provision requiring the lease to be construed with equal weight for the rights of both parties, restrictive covenants such as the one contained in the lease are commonly categorized as a “negative easements” which restrain landowners from making otherwise lawful uses of their property. See, National Urban Ventures v. City of Niagra Falls, 78 AD3d 1529 (4th Dept.2010). The law has long favored the free and unencumbered use of real property and covenants restricting use are strictly construed against those who seek to enforce them. See, Ludwig v. Chautauqua Shores Improvement Ass'n, 5 AD3d 1119 (4th Dept.2004).
After examining the entire lease, considering the relationship of the parties and the circumstances under which it was executed, with the wording viewed in the light of the obligation as a whole and the intention of the parties as manifested thereby, this Court has determined that the language contained in the restrictive covenant is unambiguous to the extent that it prohibits the location of a “dollar store” in the shopping plaza within 250 feet of the defendant. Unlike an adult book store, which is thoroughly defined in paragraph 5 of the restrictive covenant contained in the lease, the term “dollar store” is not clearly defined, only recited. Furthermore, unlike other uses such as drug store or gas station, the term “dollar store”, as the parties agree, does not have a clear definition within the general population or within the real estate industry. Thus, the term dollar store itself is ambiguous.
Therefore, it is for this Court to determine from parole evidence what the parties intended by the use of the term “dollar store” in the subject lease in 2008. The Court's review of this is not a renegotiation of the lease, nor is it a view of what the parties would agree to in 2014. Nor may this Court rewrite the lease for the purpose of accomplishing that which, in its opinion, is a proper result or remake the lease “under the guise of construction because it later appears that a different agreement should have been consummated in the first instance.” LHR, Inc. V. T–Mobile USA, Inc., 112 AD3d 1294 (4th Dept.2013). Based upon the submissions, the defendant would have the Court believe that all low price point general merchandise stores would be prohibited. However, had that been the intent of the parties, that would have been clearly been stated in the lease. The more persuasive argument is, as the record demonstrates, that at the time of the drafting and executing of the lease, a dollar store for the purposes of this lease was a store that sold a wide range of general merchandise at retail price points of generally a dollar or less, although some is higher. Five Below, on the other hand, is a specialty retail store that sells certain discounted items, carrying national label brands and targeting a pre-teen and teen market at prices generally five dollars and below, although some higher. In addition, while Five Below stores are located in prominent shopping and side by side with major, national specialty and value retailers, dollar stores are often located in less desirable shopping centers and strip malls in inexpensive spaces to accommodate lower profit margins.
It is this Court's determination that when negotiating and executing the subject lease in 2008, the parties did not contemplate a store with the targeted price points, demographic or locations such as Five Below in their meaning of the term “dollar stores.” Therefore, the plaintiff's execution of the lease with Five Below does not violate the restriction against the placement of a dollar store within 250 feet of the defendant.
NOW, therefore, for the foregoing reasons, it is
ORDERED, ADJUDGED AND DECREED, that the plaintiff COR has a right to enter into a lease with Five Below without the plaintiff being in violation of the restrictive covenant contained in paragraph 4 of the “Prohibited Uses Provision” at Exhibit J to the subject lease.