Dart Drug Corp. v. Nicholakos, 790194

• Decision Date: 24 April 1981
• Docket Number: No. 790194,790194
• Citation: 221 Va. 989,277 S.E.2d 155
• Parties: DART DRUG CORPORATION, Virginia v. Demetrios NICHOLAKOS, et al., etc. Record
• Court: Virginia Supreme Court

Page 155

277 S.E.2d 155

221 Va. 989

DART DRUG CORPORATION, Virginia v. Demetrios NICHOLAKOS, et al., etc.

Record No. 790194.

Supreme Court of Virginia.

April 24, 1981.

Burton A. Schwalb, Washington, D. C. (James K. Stewart, David M. Davenport, Schwalb, Donnenfeld, Bray & Silbert, Davenport & Associates, P. C., Washington, D. C., on briefs), for appellant.

Douglas J. Sanderson, Fairfax (Marc E. Bettius, Russell S. Rosenberger, Jr., Bettius, Rosenberger & Carter, P. C., Fairfax, on brief), for appellees.

Before CARRICO, C. J., and HARRISON, COCHRAN, POFF, COMPTON, THOMPSON and STEPHENSON, JJ.

CARRICO, Chief Justice.

This appeal involves a declaratory judgment proceeding brought in the court below for the construction of a lease existing between the plaintiff, a partnership composed of Demetrios Nicholakos and George Nicholakos, trading as D & G Associates (D & G), and the defendant, Dart Drug Corporation, Virginia (Dart). D & G owns a shopping center in Fairfax County in which Dart and Safeway Stores are the major tenants. D & G sought a declaration that it had the right under Dart's lease to enlarge Safeway's building and expand the shopping center without Dart's consent. After a hearing, the trial court declared D & G had the right to proceed with its expansion plans without Dart's approval.

Dart occupies store premises in the shopping center under a 20-year lease dated July 15, 1970. A site plan, designated as Exhibit "A" and attached to and made a part of the lease, depicts the layout of the shopping center and the location of its buildings, as contemplated at the time the lease was executed.

In 1977, D & G proposed to enlarge Safeway's 21,000 square-foot building by erecting an addition containing approximately 13,000 square feet. About one-half the addition would be located on the original shopping center tract. This portion of the addition would occupy an area reserved originally for the common use of the center's tenants. The remainder of the addition would be located on other land purchased by D & G to accommodate the expansion.

D & G asked Dart to consent to the proposed expansion. In a letter dated June 8, 1977, ¹ Dart refused to consent, claiming the expansion would have "an adverse effect on the shopping center as a whole as well as Dart Drug." Some months later, the present litigation commenced.

The parties rely upon various portions of Dart's lease to support their respective positions. Dart maintains the lease prohibits any expansion absent Dart's consent. D & G insists the lease contains no restrictions against expansion. The quintessence of the dispute between the parties, however, is found in paragraph 3 of Dart's lease. In pertinent part, this paragraph provides:

3. Layout and Common Area.

The location of all the buildings in the Shopping Center, and the layout of the parking and service areas and access and service roads are designated and fixed on Exhibit "A," and shall remain so throughout the term of this Lease .... All that portion of the Shopping Center not designated as buildings or service area is to be a common area for the use of the tenants, their customers, invitees and employees. Landlord will maintain, during the term of this Lease, within the Shopping Center, and within any additions thereto or extensions thereof, parking areas for at least six hundred (600) automobiles in accordance with Fairfax County requirements.

During the course of opening statements below, D & G moved for summary judgment. In discussing this motion, the trial court indicated that the first two sentences of paragraph 3 had the effect of prohibiting the proposed expansion. Upon further consideration, the court stated that the language of the third sentence relating to "additions" or "extensions" created an ambiguity requiring the court to hear the "evidence of both sides."

Contrary to what one would have expected, the evidence submitted did not pertain to the intention of the parties to the lease at the time of execution. Instead, D & G submitted evidence concerning the details of the proposed expansion. In turn, Dart attempted to introduce evidence concerning the reasons given D & G for the refusal to consent to the expansion. Upon D & G's objection that this evidence consisted of statements made during an attempt to reach "an accord or compromise," the trial court excluded the evidence.

Thereafter, the trial court found that Dart had drafted the lease and, accordingly, that any ambiguity in the provisions should be construed strictly against Dart. The court found further that, to the extent the lease provisions purported to prohibit expansion, Dart was attempting to enforce restrictive covenants not favored in law. Focusing upon the ambiguity in the language of paragraph 3 caused by the words "additions" or "extensions," the court resolved the ambiguity against Dart and held that the lease did not preclude expansion. Then, noting that Dart, as the author of the lease, had failed to include any standards for determining when expansion would be permitted, the court held that Dart had the burden of showing "the extension should not be granted." Finally, the court ruled Dart had failed to carry its burden.

On appeal, Dart contends the trial court erred in determining Dart drafted the lease and, accordingly, was subject to a rule of strict construction. While we agree with the trial court's finding that the provisions of the lease concerning expansion are ambiguous, we concur in Dart's assertion that no evidence of the lease's authorship appears in the record. Nothing more appears than argumentative statements by D & G's counsel, unchallenged below by Dart, that Dart prepared the lease.

The lack of evidence on this subject, however, does not relieve Dart from the full impact of a rule of strict construction. Dart does not challenge the trial court's finding that, to the extent the lease provisions purported to prohibit expansion, Dart was attempting to enforce covenants restricting the free use of land. Such covenants are not favored and are construed strictly against the party seeking their enforcement. Bank v. Standard Cary, 208 Va. 298, 304, 156 S.E.2d 778, 784 (1967). Thus, although the trial court erred in finding that Dart drafted the lease, the error is harmless.

This brings us to Dart's principal contention, viz., that the trial court erred in construing the lease to permit D & G's proposed expansion. In this connection, although the case involves the construction of covenants requiring strict construction, we agree with Dart that the intention of the parties is the controlling factor. Traylor v. Holloway, 206 Va. 257, 260-61, 142 S.E.2d 521, 523 (1965). Ordinarily, when ambiguous contractual provisions are at issue, extrinsic evidence is available to discern the intention of the parties. Here, however, we have no such extrinsic evidence. We must, therefore, divine the parties' intention from the provisions of the lease, however ambiguous they may be, aided by any practical construction the parties themselves may have placed upon the provisions in dealings subsequent to the lease's execution. Bank v. Standard Cary, 208...