Beckenheimer's Inc. v. Alameda Associates Ltd. Partnership

• Decision Date: 01 September 1991
• Docket Number: No. 124,124
• Citation: 611 A.2d 105,327 Md. 536
• Parties: BECKENHEIMER'S INC. et al. v. ALAMEDA ASSOCIATES LIMITED PARTNERSHIP et al. ,
• Court: Maryland Court of Appeals

Page 536

327 Md. 536

611 A.2d 105

BECKENHEIMER'S INC. et al. v. ALAMEDA ASSOCIATES LIMITED PARTNERSHIP et al.

No. 124, Sept. Term, 1991.

Court of Appeals of Maryland.

Aug. 25, 1992.

Angus R. Everton (Roy L. Mason, David J. Norman, Mason, Ketterman & Morgan, P.C., Marvin I. Singer, Hooper, Kiefer & Cornell, all on brief), Baltimore, for appellants.

Lawrence S. Greenwald (David H. Fishman, David W. Lease, Gordon, Feinblatt, Rothman, Hoffberger & Hollander, all on brief), Rob Ross Hendrickson (Albert G. Boyce, Boyd, Benson and Hendrickson, all on brief), Baltimore, for appellee.

Argued before MURPHY, C.J., and ELDRIDGE, RODOWSKY, McAULIFFE, CHASANOW, KARWACKI and ROBERT M. BELL, JJ.

RODOWSKY, Judge.

This case involves efforts by a subtenant to renew a sublease of food supermarket premises in a shopping center. The principal question is whether certain departures by the subtenant from strict compliance with the renewal provisions nevertheless leave the renewal efforts within tolerances that permit equity to enforce the sublessor's covenant to renew.

The shopping center involved is in the northwest quadrant of the Alameda and Chinquapin Parkway in northeast Baltimore City. The center was developed in the mid-1950s as "Alameda Shopping Center," but was later renamed "Belvedere Plaza Shopping Center," (Shopping Center). The supermarket premises, containing 20,000 square feet on the first floor and a 10,000 square foot basement, with the use of 876 parking spaces, were leased in 1957 by Samuel M. and Constance V. Pistorio (the Pistorios) to American Stores Company, assignor of Acme Markets, Inc. (Acme), one of the two appellees herein (the Prime Lease). That original Prime Lease was for a term of fifteen years, with renewals. The fixed rent was $3,333.34 per month, plus a percentage rent of one percent of gross sales in excess of $4 million per year. The tenant covenanted to "furnish Landlord with a statement supporting said rental payment certified to as correct by Tenant's Accounting Department."

Amendments to the Prime Lease in 1958 reduced the parking to spaces for 745 cars. In 1978 the Pistorios and Acme again amended their lease when Acme obtained the right to make certain improvements, at its expense. The then current term was extended through August 31, 1989, with an option in the tenant to renew for five additional terms of five years each. The fixed rent was changed to $5,000 per month, with a percentage rent of one percent on gross sales exceeding $10 million per year.

The sublease with which we are here concerned was made in 1982, after the Pistorios had sent Acme a notice of termination. That notice was withdrawn when Acme, on November 29, executed a sublease (the Sublease) with one of the appellants, Beckenheimer's, Inc. (Beckenheimer's). The Sublease "continue[d] for the remainder of the term of the Lease (less one month) and any renewal or extended term(s) (less one month)." Acme and Beckenheimer's agreed that "each and every covenant and agreement of the Lease" was "a term, condition, covenant and agreement of [the] Sublease," except as provided in the Sublease. The rent was $60,000 per year, payable monthly in advance in $5,000 installments, and a percentage rent. At the same time the percentage rent under the Prime Lease was modified to one percent on gross sales exceeding $7,500,000. This change was effected by a "Consent Agreement" executed by the Pistorios and agreed to both by Acme and by Beckenheimer's. ¹

The Sublease contains the following paragraph concerning Beckenheimer's right to renew.

"Sublessee shall have the right to renew this Sublease for the additional five (5) year [sic] terms of five (5) years each (the 'Renewal Term(s)') provided for in the Lease, provided as a precondition to the exercise of each Renewal Term, (1) Sublessee shall have given Sublessor notice of Sublessee's election to do so at least one hundred twenty (120) days prior to the expiration of the initial ten (10) year term or the then current Renewal Term of the Lease (2) Sublessee shall not be in default under this Sublease at the time of such notice and (3) the net worth of Sublessee on the date of such notice (as evidenced by the most recent certified financial statements of Sublessee which shall be included with such notice) is at least equal to the net worth of Sublessee on the date hereof. All terms and conditions of this Sublease for each Renewal Term shall remain the same as for the initial term except that the annual base rental (not including percentage rental) shall be Sixty-six Thousand and 00/100 Dollars ($66,000)."

(Emphasis added).

The Sublease also provided that notices from one party to the other be in writing and personally delivered or sent by registered or certified mail. Further, "[a]ny such notices shall not be deemed to have been given to Sublessor until actual receipt thereof by Sublessor." Thus, any Beckenheimer's notice of a renewal to follow expiration of the original term of the Sublease was to be received by Acme on or before May 4, 1989. Cf. Maryland Rule 1-203(b) (computation of time before a day).

At the end of 1983 all of the Pistorios' interest in the Shopping Center was acquired by the other appellee, Alameda Associates Limited Partnership (Alameda). Counsel for Beckenheimer's represent that "[t]he outstanding stock of Beckenheimer's [was] purchased by B. Green [ & Co., Inc. (B. Green) ] in 1986, and was subsequently sold by B. Green to Farm Fresh Supermarkets of Maryland in 1989." Brief of Appellant at 1 n. 1.

On April 26, 1989, a letter was sent by certified mail to Acme in Philadelphia, to the attention of Acme's Director of Real Estate, Mr. Henry Flieck, and received on May 1, 1989. It reads as follows:

"Dear Henry,

In accordance with the terms of the sublease dated November 29, 1982 between Acme Markets, Inc. and Beckenheimer's, Inc. and the lease between Samuel M. Pesterio [sic] and Constance Pesterio [sic], husband and wife with American Stores Company, as amended ... which collectively are referred to as the lease, we wish to exercise our option to renew the lease for another five years at the expiration of our present term.

Sincerely,

Martin Braun, Jr."

This letter was on the letterhead of B. Green, 3601 Washington Boulevard, Baltimore.

By letter dated May 4, 1989, signed by Benjamin L. Green as president of Beckenheimer's, Beckenheimer's wrote to Acme, to the attention of its house counsel, John Doerr, Esquire, as follows:

"Dear Mr. Doerr,

You are in possession of a certified letter dated April 26, 1989 addressed to Mr. Henry Flieck of your organization putting you on notice of the intention to renew our lease for the store in The Alameda Shopping Center. It was on B. Green & Co., Inc. stationary and signed by Martin Braun, head of real estate for B. Green and all of its subsidiaries. In further discussion with you, we found out that the lease in question was in Beckenheimer's, Inc. name, our wholly owned subsidiary, rather than B. Green & Co., Inc.

The purpose of this letter is to clarify the prior letter and to formally acknowledge on the part of Beckenheimer's, Inc., the intent to renew the lease of our store in The Alameda Shopping Center. I sincerely apologize for any difficulty this oversight may have caused.

Sincerely,

Benjamin L. Green

President

Beckenheimer's, Inc."

The foregoing letter, which does not appear to be registered or certified, was received by Acme on May 8. Prior thereto, on May 5, 1989, Acme, by Henry Flieck, had written to Beckenheimer's, by certified mail, addressed to 1607 North Washington Boulevard, the address for Beckenheimer's appearing in a notice paragraph of the Sublease. This letter advised that Beckenheimer's had failed to renew the Sublease by failure to give "timely notice and failure to provide a required net worth statement." ²

Nevertheless, with respect to the Prime Lease, Acme, by letter of May 15 to Alameda, "exercise[d] the first five year option granted under [the Prime Lease], thereby extending the termination to August 31, 1994."

The net worth requirement in the conditions for renewal of the Sublease was addressed by Beckenheimer's in a letter of May 16 from counsel for Beckenheimer's, courier delivered to Acme on May 19. Among enclosures to that letter was a copy of the federal income tax return for the fiscal year of Beckenheimer's ended June 27, 1988. The balance sheet in the tax return reflected a net worth of nearly $3.7 million. Also enclosed was a "[c]ertificate" by the president of Beckenheimer's representing that records showing that corporation's net worth in 1982 had not been located, that as of August 25, 1984, the net worth was $791,937, and that "[t]he last certified financial statement," as of December 28, 1985, showed a net worth of $1.581 million.

Meanwhile Alameda, apparently because it hoped to put a fast food operation on the parking lot, sought to have Acme withdraw its renewal of the Prime Lease. There is no evidence that Acme ever did so. ³ Thereafter, by an agreement intended to be effective August 31, 1989, and in consideration of the payment by Alameda to Acme of $100,000, Alameda and Acme terminated the Prime Lease (Lease Termination Agreement). In the Lease Termination Agreement Acme certified that the Sublease was the only sublease to which the supermarket premises were subject, Acme assigned all of its interest in the Sublease to Alameda, and Alameda agreed to assume all of Acme's obligations, if any, under the Sublease, and to hold Acme harmless under the Sublease after the termination of the Prime Lease.

Eventually, following some confusion concerning the rent paid by Beckenheimer's and after a "standstill" agreement had been effected, Alameda brought the subject declaratory judgment and injunction action. ⁴ The principal theory alleged in Alameda's complaint is that the Lease Termination Agreement terminated the Sublease. Acme intervened as a plaintiff,...