Kroger Co. v. Chimneyville Properties, Ltd., Civ. A. No. J90-0378(L).

• Decision Date: 19 November 1991
• Docket Number: Civ. A. No. J90-0378(L).
• Citation: 784 F. Supp. 331
• Parties: The KROGER COMPANY, Plaintiff, v. CHIMNEYVILLE PROPERTIES, LTD. and Jefferson-Pilot Life Insurance Company, Defendants.
• Court: U.S. District Court — Southern District of Mississippi

784 F. Supp. 331

The KROGER COMPANY, Plaintiff, v. CHIMNEYVILLE PROPERTIES, LTD. and Jefferson-Pilot Life Insurance Company, Defendants.

Civ. A. No. J90-0378(L).

United States District Court, S.D. Mississippi, Jackson Division.

November 19, 1991.

P.N. Harkins, III, Watkins & Eager, Jackson, Miss., for plaintiff.

William H. Glover, Jr., John E. Hughes, III, Jackson, Miss., for Jefferson-P Life Ins. Co.

Erwin C. Ward, Jackson, Miss., Kenneth R. Hall, Herring, Long & Joiner, Canton, Miss., for Chimneyville Properties, Ltd.

MEMORANDUM OPINION AND ORDER

TOM S. LEE, District Judge.

This case was tried to the court sitting without a jury and the court, having considered the testimony of witnesses and documents admitted in evidence makes the following findings of fact and conclusions of law.

Kroger entered into a lease agreement and memorandum lease with Sunflower Development Company dated November 22, 1978 covering certain land and property located in Robinson Road Plaza Shopping Center on Robinson Road in Jackson, Mississippi. The primary term of the lease agreement was twenty years, beginning November 22, 1978 and ending July 31, 1999, to be followed by options to renew for five-year terms. Kroger was to pay a monthly rental of $12,907.92, plus a percentage of its annual sales above a designated level of gross receipts. Pursuant to the terms of the lease agreements, Sunflower constructed an approximately 30,000 square foot grocery store facility according to Kroger's plans and specifications. Construction of the facility was financed by a loan of $915,000 from Jefferson Standard Life Insurance Company, the predecessor in interest of Jefferson-Pilot Life Insurance Company (Jefferson-Pilot). The loan was evidenced by an April 1, 1980 promissory note and secured by a deed of trust in favor of Jefferson Standard covering the land and property, and was further secured by an assignment of leases to Jefferson-Pilot, also dated April 1, 1980. On October 24, 1979, the lease agreements were assigned by Sunflower to Chimneyville Properties, Ltd. (Chimneyville) and Chimneyville assumed the debt to Jefferson-Pilot.

Kroger operated a retail grocery establishment on the property beginning in 1980, but sales were not as anticipated and the store became unprofitable which culminated in Kroger's vacating the facility in December 1986. The parties had envisioned at the outset of their relationship the commercial development of a shopping center on the premises, for which the Kroger store was to be an anchor facility. However, the parties' hopes and expectations did not materialize. Despite Chimneyville's efforts to secure satellite tenants, Kroger was the sole tenant at the time it vacated the premises. Further contributing to the unprofitability of the Kroger store was the expansion of a nearby Jitney Jungle grocery store and the opening of a County Market grocery store about a mile from the Kroger location.

After Kroger left the premises in December 1986, the property remained vacant for a period of years. Throughout this time, Kroger and Chimneyville endeavored to locate a subtenant for the facility,¹ and Kroger continued to pay its monthly rental to Chimneyville. The first solid prospect, an individual by the name of J.L. Holloway, was found in the early part of 1990. However, during late 1989 and early 1990, a dispute arose between Kroger and Chimneyville with regard to certain maintenance and repairs which Kroger alleged that Chimneyville, in derogation of its contractual obligations, had not performed. As a result of this dispute, Kroger filed this lawsuit on July 31, 1990 against Chimneyville and Jefferson-Pilot. Kroger seeks in this action a declaratory judgment that as a result of Chimneyville's breach of the lease agreements, the leased premises has become untenantable, uninhabitable and unfit for the purpose for which it was leased, resulting in a constructive eviction and impairment of the consideration for the lease agreements. Kroger further seeks a declaratory judgment that the lease agreements are terminated and cancelled without any further liability on the part of Kroger, and a judgment awarding damages for defendants' alleged breach or, alternatively, a judgment enjoining defendants to complete all reasonable and necessary repairs and improvements to the leased premises. Since the filing of this action, Kroger has paid the monthly rental payments into the registry of the court.

Chimneyville has filed a counterclaim against Kroger charging that as a result of Kroger's having vacated the premises and having thereafter failed to take reasonable steps to protect and care for the premises, which remained within Kroger's exclusive legal possession and control, Chimneyville was caused to incur increased casualty insurance costs, and administrative and repair costs which should be borne by Kroger. Chimneyville further charges that permanent structural damage to the premises was caused by Kroger's negligence for which it should respond in monetary damages. Chimneyville seeks a return of all monthly rental payments which have been paid into the registry of the court following Kroger's filing of this action. Finally, Chimneyville requests an adjudication that the lease agreements remain in effect and that Kroger is hereafter responsible to take steps to protect the vacant leased structure from permanent waste during the remaining lease term.

The evidence adduced at trial showed that within six months of the time Kroger vacated the leased premises, the property became the target of vandals. Robert Baumgartner, Kroger Marketing Area Real Estate Manager, wrote to Ray Blake, Chimneyville's director of properties, on June 11, 1987 that the building had been defaced by a large amount of grafitti. He stated that Kroger had been trying without success to find a user for the building and requested Chimneyville's cooperation in having the grafitti removed, explaining the need to keep the premises attractive and clean so that it would be appealing to prospective tenants. There was no further communication concerning the premises until over a year later when Keith Rudemiller, who had assumed Baumgartner's responsibilities over the property, on July 25, 1988, wrote to Blake describing the findings of Charles Lunsford, an employee of Kroger's facility engineering department, upon an inspection of the property:

Several items have been removed (apparently stolen) from the roof of the building. Among these items were six penthouse covers, four fiberglass exhaust fan butterfly lids, and one vent exhaust assembly over the restrooms. As a courtesty to you, we wanted to inform you of the types of things that are happening to this property. We want to suggest that it may be a good idea for you to personally inspect this property to see first-hand what is happening to it. The graffitti sic on the wall is uncontrollable. Fires have been started against the rear wall of the building. Bricks and blocks have been torn from the walls where holes now exist. We have had to install sheet metal on parts of the roof to keep the vandals and thieves from entering the building. We felt you should be aware of the latest destruction to this facility, so that you can do whatever is necessary to protect your investment.

Rudemiller explained in his testimony that though Kroger viewed the vandalism damage as Chimneyville's responsibility under the lease, Kroger did not know how long it might take Chimneyville to respond with repairs, so Kroger, because it still had equipment in the building, covered the entry points to protect its property and equipment. Chimneyville, in accordance with Kroger's request, painted over the grafitti and additionally, erected an eight-foot chain link fence around the perimeter of the building to dissuade further acts of vandalism.

Approximately a year later, in the spring of 1989, Kroger wrote to Chimneyville concerning damage to the parking lot of the premises as well as to a light pole caused by a driving school which had used the parking lot for driving instruction, without consent or permission. Chimneyville repaired the light pole and patched the parking lot. Additionally in the summer of 1989, Charles Lunsford reported that vandals had knocked another hole in the structural wall which, Lunsford said, was "large enough for a man to walk through."

Several months later, on November 22, 1989, Rudemiller again wrote to Chimneyville concerning the premises. He insisted that Chimneyville perform repairs to the parking lot, and further advised that the chain link fence around the building had been knocked down, and the rear of the building had become a dumping ground for automobile tires, with several hundred having been accumulated. He stated, however, that the most serious problem involving the premises were large cracks and separations occurring along two places in the front wall, which seemed to be growing wider by the month. He requested that Chimneyville immediately investigate the situation "before the damage to the building became irreversible." Rudemiller's letter was followed a week later by photographs depicting the conditions described in his letter. Chimneyville responded by caulking the cracks in the face of the building.

On January 11, 1990, Wesley Wall, then Superintendent of the City of Jackson's Water Maintenance and Distribution Department, was notified that water was flowing down Robinson Road near the location of the vacant Kroger store. When he arrived at the premises, he saw water flowing out of the building, across the parking lot and down Robinson Road. Johnny Phillips, the department's commercial meter service man, was dispatched to the building to turn off the water at the meter. Phillips also saw water flowing out of the building and across the parking lot. When Phillips turned the meter off, the water flow stopped. The water department's dispatcher notified someone with Kroger of this...