828 A.2d 995 (Pa. 2003), Summit Towne Centre, Inc. v. Shoe Show of Rocky Mount, Inc.

Citation:828 A.2d 995, 573 Pa. 637
Opinion Judge:The opinion of the court was delivered by: Mr. Justice Nigro
Party Name:SUMMIT TOWNE CENTRE, INC., a Pennsylvania Corporation, Appellee v. The SHOE SHOW OF ROCKY MOUNT, INC., a North Carolina Corporation, d/b/a Shoe Department, Appellant.
Case Date:July 21, 2003
Court:Supreme Court of Pennsylvania
 
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Page 995

828 A.2d 995 (Pa. 2003)

573 Pa. 637

SUMMIT TOWNE CENTRE, INC., a Pennsylvania Corporation, Appellee

v.

The SHOE SHOW OF ROCKY MOUNT, INC., a North Carolina Corporation, d/b/a Shoe Department, Appellant.

Supreme Court of Pennsylvania

July 21, 2003.

Argued March 4, 2003.

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[Copyrighted Material Omitted]

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[573 Pa. 640] Geral J. Stuberhofer, Pittsburgh, for Shoe Show of Rocky Mount, Inc., a NC Corp., d/b/a Shoe Dept., Appellant.

Richard A. Lanzillo, Wallace John Knox, Erie, for Summit Towne Centre, Inc., a PA Corp., Appellee.

Before CAPPY, C.J., and CASTILLE, NIGRO, NEWMAN, SAYLOR and LAMB, JJ.

OPINION

JUSTICE NIGRO.

The question presented in this case is whether the Superior Court erred in reversing the trial court's denial of a requested preliminary injunction. We hold that it did.

Appellee Summit Towne Centre, Inc. ("Summit"), a Pennsylvania corporation, owns and operates the Summit Towne Centre ("Centre"), a shopping center located in a "power shopping district" in Millcreek Township, Erie County. The Centre's 550,000 square feet of retail space are divided between twenty to thirty retail and business tenants, including such large "anchor" establishments as Giant Eagle, K-Mart, and Sam's Club, as well as smaller "in-line" tenants such as Fashion Bug, Volume Shoes, and Hallmark Cards. Summit's management strategy has been to maintain a degree of variety among the types of businesses in the Centre, and also to cluster its tenants by retail genre.

Summit leased one of its smaller "in-line" retail units, a single-room, 5,400 square foot space, to Appellant The Shoe Show of Rocky Mount, Inc. ("Shoe Show"), 1 a North Carolina corporation operating approximately 700 retail footwear [573 Pa. 641] stores in twenty-seven states under the names "Burlington Shoes," "Shoe Department," and "Shoe Show." The parties' lease agreement covered a ten-year period commencing August 21, 1992, and required Shoe Show to pay a base rent as well as a percentage of its gross sales above a predetermined "breakpoint" figure. In addition, the forty-eight page lease agreement contained a "use" provision, which provided, in pertinent part:

6. Use

Tenant agrees that the Demised Premises shall be occupied by no other person or entity except upon and with the written consent of Landlord first had, and shall be used for the sole purpose of the operation of a first-class modified rack family shoe store specializing in retail sale of brand name dress, casual, sport and work shoes, as well as handbags, hosiery and other related accessories. Tenant recognizes that the specific limited use prescribed herein is a material consideration to Landlord in

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order that the Shopping Center will maintain an appropriate tenant mix.

* * *

Tenant agrees to keep its Demised Premises adequately illuminated and continuously and uninterruptedly open for business during the same days, nights and hours as any department store or stores located in the Shopping Center and at least, in any event, from the hours of 10:00 a.m. to 9:30 p.m. Monday through Saturday, and 12:00 noon to 5:00 p.m. on Sundays, and shall maintain therein a substantial stock of merchandise and a sufficient number of employees for the purpose of selling said merchandise, unless prevented from doing so by strikes, fire, casualties or other causes beyond Tenant's control. In no event, however, will Tenant be open for business after 10:00 p.m. or before 9:00 a.m. on any day without Landlord's consent.

* * *

Tenant further agrees that during the entire term hereof, no part of the Demised Premises shall be abandoned or left vacant unless the Demised Premises have been destroyed by fire or other casualty.

R.R. 17a-18a. The agreement also afforded various remedies to Summit, including liquidated damages, in the event that Shoe Show failed to perform its duties under the lease:

24. Default by Tenant

* * *

Landlord, Tenant and Guarantor, if any, covenant and agree, because of the difficulty or impossibility of determining Landlord's damages, should Tenant (i) fail to take possession of and open for business in the Demised Premises in accordance with the terms of this Lease; or (ii) vacate, abandon or desert the Demised Premises; or (iii) cease operating Tenant's business therein (except where the Demised Premises are rendered untenantable by reason of fire, casualty or other causes beyond Tenant's control not resulting from negligent acts or omissions of Tenant or Tenant's employees, agents, contractors, licensees, concessionaires or invitees); or (iv) fail or refuse to maintain the business hours, days or nights or any part thereof as provided in this Lease, then, in any of such events (hereinafter referred to as "failure to do business"), Landlord, at its option, shall have the right:

(a) to collect not only the fixed annual Minimum Rent and other rentals and charges herein reserved, but also to collect an additional amount equal to the total of: (1) one hundred fifteen percent (115%) [of] the greatest amount of any Percentage Rent payable by Tenant in any lease year as provided herein, plus (2) fifteen percent (15%) of the fixed annual Minimum Rent herein reserved, plus (3) fifteen percent (15%) of all other rentals and charges herein reserved; said additional amount shall be payable for the period of Tenant's failure to do business, computed at a daily rate each and every day during such period, and such additional [573 Pa. 643] amount shall be deemed to be liquidated damages for such period; and/or

(b) to treat such failure to do business as a default.

* * *

The rights and remedies given to Landlord by this Lease shall be deemed to be cumulative and no one of such rights and remedies shall be exclusive at law or in equity of the rights and remedies which Landlord might otherwise have by virtue of a default under this

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Lease, and the exercise of one such right or remedy by Landlord shall not impair Landlord's standing to exercise any other right or remedy against Tenant or any Guarantor....

R.R. 37a-41a (boldface in original).

Shoe Show began doing business at the Centre as a "Burlington Shoes" in November 1992. 2 By 1994, however, Shoe Show apparently concluded that its store at the Centre was an unsuccessful venture, 3 and therefore began attempting to negotiate with Summit for termination of the lease agreement. In spite of repeated attempts to reach an amicable end to the lease, Summit consistently refused to allow Shoe Show to terminate its operations. Meanwhile, Shoe Show's financial shortfalls from its operations at the Centre began to mount, as it lost $98,280 in fiscal year 1998 and $108,846 in fiscal year 1999. Consequently, on or about January 4, 2000, Shoe Show notified Summit that it intended to vacate the premises, yet simultaneously pledged to continue its payment of the base rent required by the lease agreement. 4 Summit responded that Shoe Show was obligated by the agreement to keep the store open.

[573 Pa. 644] Nevertheless, Shoe Show ceased its operations and vacated the store premises on January 30, 2000. In response, Summit filed both a complaint in equity and a petition for a preliminary injunction in the Erie County Court of Common Pleas on February 17, 2000, seeking an order that Shoe Show reopen its store at the Centre. 5 At the May 2000 preliminary injunction hearing, Summit presented a single witness in support of its contentions that the "use" provision was an essential term of the lease agreement, and that the Centre is an economically interdependent unit that suffers a "domino effect" of harm when a tenant vacates in violation of that provision. Shoe Show responded with a witness of its own in support of its contentions that Summit's claim, at bottom, was for monetary damages and thus could be remedied at law, and that the balance of harms favored Shoe Show because it would have lost a projected $121,906 in fiscal year 2000 and would have been faced with $272,913 in costs to reopen the closed Centre location.

In June 2000, the trial court denied Summit's petition for a preliminary injunction, concluding that Summit had failed to prove immediate and irreparable harm, that Summit had an adequate remedy at law, and that injunctive relief would disproportionately harm Shoe Show. On appeal, the Superior Court reversed and remanded, concluding that the trial court had failed to accord appropriate significance to the "real and immeasurable" harm...

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