F.W. Woolworth Co. v. Plaza North, Inc.
| Decision Date | 19 June 1986 |
| Docket Number | No. 4684A149,4684A149 |
| Citation | 493 N.E.2d 1304 |
| Parties | F.W. WOOLWORTH CO., Appellant/Cross Appellee (Defendant Below), v. PLAZA NORTH, INC., Appellee/Cross Appellant (Plaintiff Below), and SCOA Industries, Inc. and Tonn and Blank, Incorporated, Nominal Appellees (Defendants Below). |
| Court | Indiana Appellate Court |
B. Guille Cox, Jr., Robert D. Hepburn, Cox, Zwerner, Gambill & Sullivan, Terre Haute, for appellant/cross appellee.
George A. Brattain, David I. Day, Jr., Marshall, Batman, Day, Swango & Brattain, Terre Haute, for appellee/cross appellant.
Wolfe, Frey, Hunt & Olah, Terre Haute, for nominal appellees.
In 1965 F.W. Woolworth Co., Inc. leased premises for a Woolco Department Store from Plaza North, Inc. at Plaza North's Shopping Center in Terre Haute, Indiana. The fifteen (15) year lease had a provision for five (5) successive options to extend the term of the lease up to five (5) years on each option. During the first option period, in January 1983, Woolworth closed its store and, after Plaza North's failure to exercise its right to terminate the lease within ninety (90) days, Woolworth sublet the premises to SCOA Industries for the operation of a Hills Department Store and notified Plaza North it was exercising its second and third options to extend the term of the original lease. In an action to determine the rights of the parties, the trial court granted a summary judgment in favor of Plaza North, finding that Woolworth did not have the right to exercise its second and third options, that the sublease expired at the end of the first five (5) year option terms, and that the percentage rent feature in the original Woolco contract was applicable to the sublease agreement thus requiring Woolco to pay rent based on the gross sales of SCOA, the sublessee.
After examining the language of the lease agreement we conclude that the trial court erred in finding that Woolworth did not have the right to exercise its second and third options, and that the percentage rent agreement was not applicable to the sublease.
The parties raise the following issues:
1. Whether Woolworth had the right to extend the term of the lease after having notified Plaza North that it was ceasing operations and after Plaza North failed to exercise its option to cancel the lease.
2. Whether the April 15, 1983 attempt by Woolworth to exercise two options to extend the term of the lease was effective.
3. Whether the contract between Woolworth and SCOA is a sublease or an assignment.
4. Whether Plaza North is entitled to percentage rent for use and occupancy of its premises based upon the same calculations agreed upon in lease Article 5A.
On April 6, 1965, Plaza North, Inc. leased the subject premises, which are part of Woolworth opened a Woolco in 1966 and, by a letter dated July 11, 1980, exercised a 5-year extension of its lease term which extended its leasehold to January 31, 1987.
Plaza North Shopping Center in Terre Haute, Indiana to F.W. Woolworth Co. for use as a Woolco Department Store. The lease provided that Woolworth pay an annual minimum rent of $113,297.00 in equal monthly installments, that Woolworth would pay to Plaza North a percentage rent based on Woolco's annual gross sales, that the lease term would expire on January 31, 1982, and that Plaza North granted Woolworth five successive options to extend the term of the lease up to five years on each such option. The lease further provided that Woolworth could discontinue the operation of its Woolco store and, upon discontinuance, Woolworth's obligation to pay percentage rent would cease, and that, in case of discontinuance of Woolco operations, Plaza North had an option to cancel the lease agreement. Finally, the lease stated Woolworth had the right to sublease all or part of the premises subject to certain restrictions.
In 1982 Woolworth decided to close all of its Woolco stores nationwide. Woolworth notified Plaza North by letter dated October 4, 1982 that it planned to discontinue operation of its Plaza North Woolco in the near future. The lease allowed Plaza North 90 days from the notice of discontinuation to terminate the lease with Woolworth. If Plaza North did not exercise its option to terminate, Woolworth, upon vacation of the premises, would be liable only for the minimum rent for the remainder of the term of the lease.
Woolworth discontinued the operation of its Plaza North Woolco on January 22, 1983. On January 29, 1983, Plaza North notified Woolworth that, while it had missed its 90-day option date by about three weeks, it still wished to exercise its right to terminate the lease. Woolworth responded that Plaza North had missed its 90-day deadline, that Woolworth did not want the lease terminated, and that Woolworth was negotiating to sublease the premises to SCOA Industries, Inc.
Eventually, on April 15, 1983, Woolworth and SCOA entered into an agreement entitled "sublease." The stated expiration date of the sublease is January 30, 1997 with two options on the part of SCOA to extend for five years each. Also on April 15, 1983 Woolworth mailed a letter notifying Plaza North that it was exercising the second and third options to extend the term of the original lease.
Plaza North, after receiving notification from Woolworth of the extensions, attempted to determine the terms of Woolworth's agreement with SCOA. Woolworth refused to disclose the terms. Plaza North then filed a complaint for injunction and declaratory judgment, asserting that the Woolworth/SCOA "sublease" was really an assignment which was in violation of the overlease. Plaza North asked the court for a judicial declaration of the rights of the parties to the lease and sublease.
The trial court concluded: (1) that Woolworth did not have the right to exercise its options to extend the term of the lease after it ceased operations and thus the lease expires on January 31, 1987, the expiration date (exclusive of options to extend) when it ceased operations; (2) Woolworth's agreement with SCOA was a valid sublease, but only conveyed a term to expire on January 31, 1987; and (3) that Plaza North had the right to receive percentage rent based on the amount of gross sales in the premises, substituting SCOA's or any other tenant's sales for those sales by Woolco in making such calculations.
It is a general rule that the intention of the parties to a contract is to be determined from the "four corners" of the document. Shrum v. Dalton (1982), Ind.App., 442 N.E.2d 366. Absent any ambiguity, the court will not construe the contract. Reeder v. Ramsey (1984), Ind.App., 458 N.E.2d 682. Rather, where the terms of the contract are plain and clear on the face of the document, such terms are conclusive as to the meaning of the contract and the court will apply the contract's provisions according to the plain language of the document. Young v. Van Zandt (1983), Ind.App., 449 N.E.2d 300, 307. Thus, we focus on the language found in the lease and sublease.
Plaza North argues, and the trial court concluded, that cessation of operations by Woolworth precluded the exercise of any options to extend. Woolworth counters that there is nothing in the lease that hinges its options to extend on the continued operation of its Woolco store. We have examined the lease and are compelled to agree with Woolworth. The pertinent provisions of the lease are as follows:
Article 3 "To have and to hold the same for the term to commence on the date of delivery of the demised premises as in this lease provided, and end on the last day of January, 1982, at midnight, unless sooner terminated or extended as herein provided."
Article 29 (Emphasis added.)
Article 3 provides the term of the lease goes to January 31, 1982 unless extended or earlier terminated. It does not state "or unless Woolworth ceases operations." Article 29 provides that all lease terms apply to extended terms except that Woolworth cannot extend after the fifth option. It makes no reference to Woolworth ceasing operations.
Nor is there any language in Articles 5 or 5A that limits Woolworth's options to extend. Article 5, quoted infra, fixes minimum annual rent at $113,297.00, while the first part of Article 5A sets a schedule for percentage rent. The second part of Article 5A governs cessation of operations and provides in pertinent part as follows:
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