Bowdoin Square, LLC v. Winn-Dixie Montgomery, Inc.

• Decision Date: 06 June 2003
• Citation: 873 So.2d 1091
• Parties: BOWDOIN SQUARE, L.L.C. v. WINN-DIXIE MONTGOMERY, INC., and Winn-Dixie Stores, Inc.
• Court: Alabama Supreme Court

873 So.2d 1091

BOWDOIN SQUARE, L.L.C. v. WINN-DIXIE MONTGOMERY, INC., and Winn-Dixie Stores, Inc.

1011661.

Supreme Court of Alabama.

June 6, 2003.

Rehearing Denied August 15, 2003.

Stewart M. Cox and F. Wendell Allen of Bradley Arant Rose & White, LLP, Birmingham; and James C. Johnston of Johnston, Druhan, LLP, Mobile, for appellant.

Norton W. Brooker, Jr., Walter M. Cook, Jr., and William E. Shreve, Jr., of Lyons, Pipes & Cook, P.C., Mobile, for appellees.

BROWN, Justice.

The plaintiff, Bowdoin Square, L.L.C., appeals the trial court's judgment entered on a jury verdict in favor of the defendants, Winn-Dixie Montgomery, Inc., and Winn-Dixie Stores, Inc. (hereinafter referred to collectively as "Winn-Dixie"). We reverse and remand.

Facts and Procedural History

This action arises from a lease dispute between the landlord, Bowdoin Square, and the tenant, Winn-Dixie, concerning a shopping center development in Saraland.¹

In the 1980s, David H. Head developed the Saraland Square Shopping Center ("the shopping center"). A Wal-Mart discount department store, occupying approximately 90,000 square feet, and a Winn-Dixie grocery store, occupying approximately 35,000 square feet, were to be the "anchor" stores of the shopping center. In addition to the Wal-Mart store and the Winn-Dixie store, the shopping center included an area for smaller shops, plus a 6,000-square-foot retail space between the Wal-Mart and Winn-Dixie buildings.²

Head sold Wal-Mart that portion of the shopping center development where Wal-Mart later built its store ("the Wal-Mart tract") and retained ownership of the rest of the development, which included the space he leased to Winn-Dixie and to other tenants ("the Winn-Dixie tract").³ As co-owners of the shopping center, Head and Wal-Mart entered into an agreement entitled "Easements with Covenants and Restrictions Affecting Land" ("the ECR"). The ECR stated that Head's and Wal-Mart's properties were "to be developed in conjunction with each other pursuant to a general plan of improvement to form a commercial shopping center." Furthermore, the ECR restricted the use of the buildings in the shopping center to "commercial purposes of the type normally found in a retail shopping center including, without limitation, financial institutions, service shops, offices, and retail stores."

In addition, Head entered into a 20-year lease with Winn-Dixie.⁴ Pursuant to the lease, Winn-Dixie agreed to pay $16,041.67 per month, totaling $192,500 per annum, plus 1% of the gross sales made at the store each fiscal year. In addition, Winn-Dixie agreed to pay a pro rata share of common area maintenance ("CAM") costs accruing each year.

In 1988, Head sold his part of the shopping center development and assigned the Winn-Dixie lease to Peter Lowe, who subsequently formed Bowdoin Square, L.L.C. Bowdoin Square then acquired all rights and duties under the ECR and became subject to its covenants and restrictions.

In 1996, Wal-Mart closed its store in the shopping center. Wal-Mart's closing significantly reduced Winn-Dixie's business and contributed to Winn-Dixie's closing its store in March 1998. Still bound by the lease, Winn-Dixie continued to pay rent and listed the premises with a realtor in an effort to sublease the building.

In the fall of 1999, Wal-Mart contacted Richard Ogburn, Bowdoin Square's property manager, and notified him that Wal-Mart was considering leasing its vacant store to Hertz Corporation ("Hertz"), an automobile rental agency, to be used as a "call center," at which employees would receive telephone reservations for rental cars. In addition, Hertz had requested that Bowdoin Square lease Hertz the 6,000 square-foot area between the Wal-Mart and the Winn-Dixie buildings to be used for interviewing job applicants and as a training area for new employees.

In light of the restrictions in the ECR that the shopping center be used for "commercial purposes of the type normally found in a retail shopping center," Hertz and Wal-Mart requested that Bowdoin Square consent to amending the ECR to specifically list the Hertz call center as a permitted use and to delete the phrase that limited the uses to those "normally" found in a retail shopping center.

Bowdoin Square advised Hertz and Wal-Mart that, pursuant to Winn-Dixie's lease, Winn-Dixie's consent was necessary before the ECR could be amended.⁵ Additionally, the lease between Bowdoin Square and Winn-Dixie limited the use of that part of the shopping center owned by Bowdoin Square to "retail and/or service stores"; the only exception to this restriction was that "2,800 square feet ... [of] the 11,200 square feet of local shops" located elsewhere on the shopping center property could be used as "business or professional offices";⁶ thus, Bowdoin Square was also required to obtain Winn-Dixie's consent before it could lease the 6,000-square-foot space to Hertz.

In November 1999, Ogburn contacted Winn-Dixie to request its consent to the proposed amendment to the ECR and permission to lease the 6,000-square-foot space to Hertz. After determining that Hertz's proposed use of the Wal-Mart building and the 6,000-square-foot space would not be in its best interest, Winn-Dixie refused to consent to the amendment of the ECR. Winn-Dixie believed that using the property in the manner Bowdoin Square proposed would hamper its efforts to sublease its building as a retail store and that the proposed use would have a detrimental effect on parking spaces available for potential customers of a retail store. Thus, Bowdoin Square notified Wal-Mart that Wal-Mart could not amend the ECR or lease Hertz the 6,000-square-foot space.

On December 3, 1999, before Winn-Dixie had refused to consent to the amendment, Hertz contacted Ogburn and obtained keys to the 6,000-square-foot space to obtain a price quote for having carpet installed. Ogburn testified that around the first part of January 2000, he discovered that Hertz was "building out" the 6,000-square-foot area without Bowdoin Square's permission. Ogburn wrote Hertz a letter noting that Bowdoin Square's agreement to lease the space was "contingent to Bowdoin Square receiving approval from Winn-Dixie to lease this space for a non-retail use" and that Bowdoin Square, so far, had been unsuccessful in obtaining that approval. However, because Hertz had already completed so much work, Ogburn also indicated in the letter that Hertz could continue with the build-out at its own risk, but that it would have to vacate the premises if Winn-Dixie did not approve of the nonretail use of the space. Furthermore, Ogburn stated that "[Bowdoin Square could not] do anything to jeopardize its lease with Winn-Dixie." Hertz proceeded with renovating the 6,000-square-foot space and subsequently used it for a short time to interview job applicants and to train new employees. Hertz paid Bowdoin Square three months' rent for the space, which Bowdoin Square gave to its attorney with instructions that the amount be held in escrow.

On December 24, 1999, Hertz began leasing the Wal-Mart building; it opened the call center in March 2000. The call center was equipped to accommodate up to 623 agents working at a single time and was open from 6 a.m. to 2:30 a.m. The number of employees at the call center since its opening has ranged from 400 to 600 people working multiple shifts. During this time, Winn-Dixie voiced no concern about the decision by Wal-Mart to allow Hertz to open the call center.

On March 8, 2000, Winn-Dixie mailed a letter to Bowdoin Square notifying it that Winn-Dixie believed Bowdoin Square had breached the lease. The letter stated in part:

"According to our information, you have rented a portion of Saraland Square shopping center to Hertz ... and are utilizing a portion of the shopping center for training of employees to be utilized in the Hertz [call center].... This constitutes a breach of our lease....

"We believe that the easements, covenants and restrictions which are subordinate to the Winn-Dixie lease have also been modified, either formally or informally, which we maintain is an additional breach of the lease.

"... Winn-Dixie is of the opinion that the leasing of 6,000 square feet of space in the Saraland Square shopping center to Hertz is a violation of the lease agreement because the use is not of a commercial purpose of the type normally found in a retail shopping center and does not constitute a financial institution, service shop, office or retail store.

"In addition, your formal or informal modification of the ECR violates the terms thereof and also violates the terms of the Winn-Dixie lease in that, among other things, the parking area utilized by employees of the Hertz communication center will severely restrict Winn-Dixie's right (or its sub-lessee's right) to utilize such parking area. This type of activity is clearly one that was never contemplated in the original lease agreement due to the clear intent of limiting the parking lot to a use which would not constitute the parking of motor vehicles in the parking lot for extended periods of time.

"... [U]ntil such time as the common area and the rental area of the shopping center [are] utilized for [their] intended purpose, [Winn-Dixie] will not pay any rent, common maintenance, taxes, or the like with respect to the [leased] property...."

On April 18, 2000, counsel for Winn-Dixie faxed a letter to the attorney for Bowdoin Square advising the attorney that "the lease ... has terminated as a result of [Bowdoin Square's] various defaults ... as [of] 12:01 a.m. on April 14, 2000."⁷ However, the letter also stated it was "not an attempt to impact either Wal-Mart or Hertz."

Thereafter, on April 21, 2000, in response to Winn-Dixie's purported termination of the lease and its abandonment of the premises, Bowdoin Square sued Winn-Dixie seeking to recover the amounts due under the remainder of the term of the lease, including all remaining rent, CAM costs, and...