Child World, Inc. v. South Towne Centre, Ltd.

• Decision Date: 17 April 1986
• Docket Number: No. C-3-8629.,C-3-8629.
• Citation: 634 F. Supp. 1121
• Parties: CHILD WORLD, INC., Plaintiff, v. SOUTH TOWNE CENTRE, LTD., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

634 F. Supp. 1121

CHILD WORLD, INC., Plaintiff, v. SOUTH TOWNE CENTRE, LTD., et al., Defendants.

No. C-3-8629.

United States District Court, S.D. Ohio, W.D.

April 17, 1986.

Charles J. Faruki, John E. Tate, Dayton, Ohio, Robert R. Weller, Cleveland, Ohio, for plaintiff.

Roger J. Makley, John A. Cumming, Dayton, Ohio, for defendants.

OPINION; DECISION AND ENTRY SETTING FORTH FINDINGS OF FACT AND CONCLUSIONS OF LAW; JUDGMENT TO BE ENTERED FOR PLAINTIFF AND AGAINST DEFENDANTS ON PLAINTIFF'S COMPLAINT; SECTION 43(A) OF LEASE DECLARED LAWFUL AND ENFORCEABLE AS APPLIED IN THIS CASE; DEFENDANTS PERMANENTLY ENJOINED FROM VIOLATION OF SECTION 43(A) AS APPLIED; JUDGMENT ENTERED FOR PLAINTIFF AND AGAINST DEFENDANTS ON DEFENDANTS' COUNTERCLAIM FOR DECLARATORY RELIEF; TERMINATION ENTRY

RICE, District Judge.

This case was submitted to the Court, on the basis of stipulated facts, set forward infra, Plaintiff's trial exhibits, and the briefs of the parties. The Court has admitted into evidence Plaintiff's six trial exhibits.

I. Findings of Fact

The first fifteen findings of fact were stipulated to, by the parties, in their Final Pretrial Order. (Doc. # 14).

(1) Plaintiff Child World, Inc. is a corporation organized under the laws of the State of Massachusetts, having its principal place of business in Massachusetts and qualified to do business in the State of Ohio. Child World operates large retail toy stores, throughout the State of Ohio and elsewhere, under the name of "Children's Palace."

(2) Defendant South Towne Centre, Ltd. ("South Towne") is a limited partnership organized under the laws of Ohio. South Towne owns certain real property located on State Route 725 in Miami Township, Ohio that is leased to and occupied by Child World, which operates a Children's Palace retail store on the site. This Children's Palace store is adjacent to, and part of the development of, South Towne Centre, a shopping center complex owned by this Defendant.

(3) Defendant Barbara Beerman Weprin, a citizen of the State of Ohio, is the sole General Partner of South Towne.

(4) Defendant Mad River Ltd. is a limited partnership organized under the laws of Ohio. Its sole general partner is Defendant Weprin. Mad River Ltd. has a substantial identity of interest with Defendant South Towne. Mad River Ltd. owns a parcel of land, consisting of slightly over fourteen acres, located on State Route 725 approximately one-half mile away from the property which South Towne leases to Child World.

(5) All of the limited partners of South Towne and Mad River Ltd. are citizens of the State of Ohio.

(6) There is complete diversity of citizenship among the parties, and the matter in controversy exceeds the value of $10,000, exclusive of interest and costs.

(7) On February 6, 1976, Children's Palace, Inc. entered into a Lease Agreement ("Lease") with Jessie Beerman, widow of Arthur Beerman, and Rhea Beerman Peal, for the lease of property and improvements located on State Route 725 in Miami Township, Ohio. Plaintiff's Exhibit 1 is an authentic copy of the Lease. During or about August, 1976, South Towne, with Defendant Weprin as General Partner, succeeded to all the rights and obligations of Landlord under the Lease. Barbara Weprin is a daughter of Jessie and Arthur Beerman. Child World is the corporate successor by reason of merger with the original lessee corporation, Children's Palace, Inc., and is the Tenant under such Lease.

(8) Among other provisions, Landlord and Tenant mutually agreed in pertinent part as follows in Section 43 of the Lease:

Except insofar as the following shall be unlawful, the parties mutually agree as follows:

A. Landlord shall not use or permit or suffer any other person, firm, corporation or other entity to use any portion of the Shopping Center or any other property located within six (6) miles from the Shopping Center and owned, leased or otherwise controlled by Landlord (meaning thereby the real property or parties in interest and not a "straw" person or entity) or any person or entity having a substantial identity of interest, for the operation of a toys and games store principally for the sale at retail of toys and games, juvenile furniture and sporting goods, such as is exemplified by the Child World and Children's Palace stores operated by Tenant's parent company, Child World, Inc., at the demised premises and elsewhere.

(9) The restrictive provision in Section 43(A) of the Lease was negotiated as an inducement for the Tenant to enter into the Lease and in return for provisions of the Lease at Section 2 and Section 9, by which Tenant agreed to lease the property for a term of 20 years of continuous operation and to use the leased premises "for the operation of a standard Children's Palace Toy Store facility and for no other purpose without the express written consent of the Landlord." Also, Tenant agrees in Sections 3(b) and 8 of the Lease to pay rent based on a percentage of sales exceeding $4 million in addition to a minimum rent and to furnish the Landlord with a statement of its monthly gross sales.

(10) The Lease also provides at part C of Section 43 that "in the event of a breach or threatened breach" of the covenants contained at Section 43, "Tenant shall be entitled to any injunctive relief and any other appropriate remedy."

(11) On December 24, 1985, acting by its attorney, Raymond Clayman, Landlord advised Tenant by letter that Mad River, Ltd. had entered into an agreement to sell a portion of its real estate located on State Route 725 in Miami Township, Ohio to Toys "R" Us, Inc. Plaintiff's Exhibit 2 is an authentic copy of this letter from Landlord's attorney. This letter further stated that Toys "R" Us intends to construct on that real estate a facility for the sale of toys, games and similar items to which Section 43(A) of the Lease refers, and that Mad River, Ltd. intended to complete the sale of real estate to Toys "R" Us on or before January 31, 1986.

(12) Defendant Barbara Weprin, as General Partner of Mad River Ltd., purchased on or about late 1984, a slightly over fourteen acre parcel of land approximately one-half mile from the Children's Palace facility covered by the Lease. Through the efforts of Defendant Weprin, the land was rezoned to permit retail business use. Defendants Weprin and Mad River Ltd. agreed to sell an approximately four and one-half acre parcel of that real estate to the corporation known as Toys "R" Us, Inc., which is the largest toy supermarket retailer in the United States. Plaintiff's Exhibit 3 is an authentic copy of these Defendants' Sales Contract, dated December 19, 1985, with Toys "R" Us, Inc. Plaintiff's Exhibit 4 is an authentic copy of Defendants' Development Agreement with Toys "R" Us, Inc., dated December 19, 1985; and Plaintiff's Exhibit 5, is an authentic copy of Defendants' Escrow Agreement, dated December 19, 1985, relating to the sale of real estate to Toys "R" Us, Inc. Toys "R" Us, Inc. intends to construct a toy store (containing approximately 41,900 square feet, a mezzanine, and other facilities) of the type prohibited by Section 43, part A, of the Lease. Defendants Weprin and Mad River Ltd. plan to complete the proposed sale to Toys "R" Us, Inc. on or before June 1, 1986. The Development Agreement contemplates the Defendants' commencement of site improvement work on April 1, 1986.

(13) Toys "R" Us, Inc. is free to purchase other parcels of land at other locations in Miami Township or elsewhere to the extent not owned or controlled by Landlord.

(14) If enjoined, Defendants will endeavor to sell the real estate presently contemplated for sale to Toys "R" Us, Inc. to persons other than Toys "R" Us, Inc.

(15) Section 43(A) of the Lease, if lawful and enforceable, prohibits Defendants' proposed sale of real estate to Toys "R" Us, Inc.

The following four findings of fact have been proven to the Court by a preponderance of the evidence:

(16) Defendants notified Child World of the agreement of Mad River Ltd. to sell real estate to Toys "R" Us within one-half mile of Child World's Children's Palace store located at South Towne Centre shopping center by letter of their counsel, dated December 24, 1985. Plaintiff's Tr. Exh. 2. This letter informed Child World that Defendants, on advice of counsel, considered the covenant at Section 43(A) of the Lease to be unlawful and unenforceable, and therefore Defendants intended to proceed with the sale of the real estate to Toys "R" Us, Inc. on or before January 31, 1986.

(17) Defendants will be able to sell the real estate presently slated for sale to Toys "R" Us to other persons at a price approximating the agreed sale, given the continuing enhancement of the value of this real estate. Plaintiff's Tr. Exh. 6, Deposition of J. Tim Logan, at 14.

(18) The intent and purpose behind the inclusion of a provision such as Section 43(C) of the Lease, which entitles the Tenant (Plaintiff) to injunctive relief in the event of a breach or threatened breach, is to make certain that the Lease provisions are enforced and that the other party honors its agreements. Plaintiff's Trial Exh. 6, Deposition of J. Tim Logan, at 55.

(19) Section 6.01(b) of the Reciprocal Easement and Operation Agreement signed by Defendants Weprin and Mad River Ltd. and Toys "R" Us provides that either party to the agreement is entitled to obtain an injunction to specifically enforce performance of the obligations included in the Agreement. Plaintiff's Tr. Exh. 3, Exh. F, § 6.01(b).

II. Conclusions of Law

(1) This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332, in that there is complete diversity of citizenship among the parties, and the matter in controversy exceeds the value of $10,000, exclusive of interest and costs. Venue lies in this district pursuant to 28 U.S.C. § 1391(a). Ohio law governs the issues of state law in this diversity action. Rule 501, Fed.R.Evid.

(2) Defendants South Towne, Weprin...