Thompson Development, Inc. v. Kroger Co.
| Decision Date | 18 December 1991 |
| Docket Number | No. 20052,20052 |
| Citation | 186 W.Va. 482,413 S.E.2d 137 |
| Court | West Virginia Supreme Court |
| Parties | THOMPSON DEVELOPMENT, INC., Plaintiff Below, Appellant, v. The KROGER COMPANY, Defendant Below, Appellee. |
Diana M. Savit, Silver, Freedman & Taff, Washington, D.C., Charles G. Johnson, Allen, Johnson & Simmerman, Clarksburg, for appellant.
John O. Kizer, Kay, Casto, Chaney, Love & Wise, Charleston, for appellee.
1. Syl. Pt. 2, Collia v. McJunkin, 178 W.Va. 158, 358 S.E.2d 242, cert. denied, 484 U.S. 944, 108 S.Ct. 330, 98 L.Ed.2d 357 (1987).
2. In determining whether an implied covenant of continuous operation exists in a lease, the following factors should be taken into consideration: 1) whether the lease contains an inconsistent express term or a provision for a substantial fixed base rent; 2) whether the lease contains a provision giving the tenant free assignability of the lease; 3) whether the lease was actively negotiated by all parties involved; and 4) whether the lease contains a noncompetitive provision.
3. "An action for conversion of personal property cannot be maintained by one without title or right of possession." Syllabus, Kisner v. Commercial Credit Co., 114 W.Va. 811, 174 S.E. 330 (1934).
This case is before the Court upon the appeal of Thompson Development, Inc. (hereinafter referred to as Thompson) from final orders dated January 9, 1989, 1 and August 6, 1990, entered in the Circuit Court of Harrison County which granted summary judgment in favor of the appellee, The Kroger Company (hereinafter referred to as Kroger). The appellant maintains that the trial court erred 1) in granting summary judgment for the appellee/tenant in an action in which interpreting an ambiguous lease required the trier of fact to weigh conflicting evidence and to draw inferences regarding the parties' intentions at the time they entered into their agreements; and, 2) in entering summary judgment in favor of the appellee which essentially allowed the appellee to appropriate for its own use and benefit property which belonged to its landlord, the appellant. Upon a review of all matters of record in this case, we find no errors were committed by the lower court and we therefore affirm.
Holiday Plaza, Inc., the predecessor to the lessor, Thompson, and Kroger entered into a written lease agreement on March 15, 1972, whereby Kroger leased a storeroom in the Holiday Plaza Shopping Center in Bridgeport, Harrison County, West Virginia. The lease began on October 1, 1972, 2 and was for a term of twenty years with the option to renew for five additional terms of five years each.
The appellant constructed a storeroom for the appellee according to the appellee's design and specifications, the cost of which was factored into the base rent. In addition to the base rent, the lease obligated the appellee to pay a "percentage rent" equal to one percent of annual sales over $7,023,480.00. The appellee paid the appellant percentage rent every year from 1976 to 1985. Further, the lease contained a covenant not to compete which barred the appellant from operating or leasing space to any retail food store within a five-mile radius of Holiday Plaza.
The appellee operated a retail food supermarket in the leased premises until June 18, 1985, when the appellee closed the store, vacated the premises and opened a new retail food supermarket in the East Pointe Shopping Center also located in Bridgeport, West Virginia. The appellee did not surrender the leased premises to the appellant but exercised its right to sublet the premises under the lease. The appellee first sublet the premises to Contracting Materials Inc., d/b/a Creative Building Supplies, for a short period of time. Then, in December 1986, the appellee sublet the premises to Consolidated Stores Corporation, d/b/a Big Lots (hereinafter referred to as Big Lots), which is presently operating a discount retail outlet in the leased premises, according to the appellees. Additionally, upon the closing of the appellee's store, the appellee released Thompson from the covenant not to compete.
When the appellee vacated the premises, the appellee removed all its fixtures and equipment which had been installed on the premises. The record reflects that these items were carried by the appellee on its property accounting system as assets of Store E-706. The fixtures and equipment were sold at a public auction held on the leased premises by Garth Semple & Associates, an auctioneering company. Pursuant to the lease provisions, the appellee had the right to remove these fixtures and equipment at any time. The appellant alleges in Count III of the complaint, that the appellee sold property belonging to the appellant, "including but not limited to safes, light fixtures, sinks, cafe doors, decorations and other special fixtures installed in the demised premises by Thompson." However, the record reflects that these items were removed as part of the remodeling necessary for the subtenants to occupy the premises. Further, the lease provides that the appellee could perform such remodeling at its own expense, and that the appellee was not obligated to restore the changes made to the premises at the expiration of the lease.
Moreover, the subtenant, Big Lots, removed all the false ceilings, as well as shelving and checkout counters used by Kroger. All meat and refrigerated cases and some equipment were also removed. Big Lots provided its own shelving, display counters, checkout counters and other equipment. According to the appellee, all the items it removed from the premises were of a cosmetic or decorative nature and not structural. Moreover, the lease expressly provides that the tenant shall be under no obligation to restore or remove any changes at the expiration of the lease.
Finally, the record indicates that the appellee has not surrendered the leased premises to the appellant. The appellee continues to pay the monthly base rent even though the subtenants which have occupied the leased premises since Kroger left have not been able to earn revenues sufficient to generate percentage rent.
The first issue centers upon whether the terms of the lease give rise to a covenant of continuous operation which obligated the appellee to occupy and to continue to operate its supermarket and precluded the appellee from subletting to a non-supermarket entity. The appellant argues that certain provisions of the lease create a covenant, express or implied, on the tenant's part to continuously operate a supermarket in the leased premises; a) the tenant will pay percentage rent only if the tenant enjoys a sales volume which can only be generated by the particular type of business, a supermarket, which occupied the leased space for the first thirteen years of the tenancy; b) the landlord will not compete with the tenant by operating its own supermarket; c) the landlord will construct the leased premises in a manner which can only be utilized by a supermarket; d) the grant to the tenant of an unusually long lease term without providing for increases in the base rent along the way; and, e) the recognition that shopping centers have strong economic needs to provide a particular tenant mix (including a strong anchor store). The appellee, on the other hand asserts that the written lease is clear and unambiguous, and extrinsic evidence of prior or contemporaneous oral negotiations or understandings may not be used to vary, contradict, add to, or explain the terms of the lease. Further, the express provisions of the lease are inconsistent with and preclude the implication of any covenant which would restrict the appellee's right to sublet or assign the lease.
It is undisputed that the lease entered into between Kroger and Thompson contains the following express provisions pertinent to the resolution of this issue:
Landlord covenants and agrees, from and after the date hereof and so long as this lease shall be in effect, not to lease, rent, occupy, or suffer or permit to be occupied, any part of the Shopping Center premises or any other premises owned or controlled, directly or indirectly, either by Landlord, its successors, heirs, or assigns, or Landlord's principal owners, stockholders, directors, or officers, or their assignees (hereinafter called Owners), which are within five miles of the Shopping Center premises for the purpose of conducting therein or for use as, a food store or a food department or for the storage or sale for off-premises consumption of groceries, meats, produce, dairy products, or bakery products, or any of them, ...
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... [T]he monthly rental shall ... be ... Six Thousand Four Hundred Thirty-eight and 17/100 ($6,438.17) Dollars.
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25. Tenant may sublet or assign the demised premises at any time provided the business which such subtenant or assignee proposes to conduct does not conflict with exclusive rights granted by Landlord in leases to other tenants. Tenant may notify Landlord of its intent to sublet or assign and the nature of the business proposed to be conducted by the subtenant or assignee. If such notice is given and Landlord does not object within ten days, it shall be conclusively presumed that the proposed business does not conflict with any exclusive rights.
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Tenant's right to sublet or assign the demised premises does not release Tenant from the liability for the payment of the monthly rents.
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... No obligation not stated herein shall be imposed on either party hereto.
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31. Tenant agrees to pay to Landlord a sum of money equal...
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