Venator Group Specialty v. Matthew/Muniot Family

• Decision Date: 20 February 2003
• Docket Number: No. 02-30023.,02-30023.
• Citation: 322 F.3d 835
• Parties: VENATOR GROUP SPECIALTY, INC., Plaintiff-Appellant, v. MATTHEW/MUNIOT FAMILY, LLC, et al., Defendants, Matthew/Muniot Family, LLC, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

322 F.3d 835

VENATOR GROUP SPECIALTY, INC., Plaintiff-Appellant, v. MATTHEW/MUNIOT FAMILY, LLC, et al., Defendants Matthew/Muniot Family, LLC, Defendant-Appellee.

No. 02-30023.

United States Court of Appeals, Fifth Circuit.

February 20, 2003.

Mitchell J. Hoffman (argued), Stan D. Broome, Kermit Louis Roux, Lowe, Stein, Hoffman, Allweiss & Hauver, New Orleans, LA, for Plaintiff-Appellant.

Charlton Beattie Ogden, III, John Joseph Zvonek, James Russell Morton (argued), Taggart, Morton, Ogden, Staub, Rougelot & O'Brien, New Orleans, LA, for Defendant-Appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before DAVIS, BENAVIDES and DENNIS, Circuit Judges.

BENAVIDES, Circuit Judge:

This commercial leasehold case presents a ripeness question. Appellant Venator Group Speciality, Inc. (Venator) initiated this declaratory judgement action against Appellee Matthew /Muniot Family seeking an order declaring Venator's legal obligations pursuant to a commercial lease executed in 1938 by the parties' predecessors in interest. The terms of the 1938 lease potentially require Venator to make substantial alterations to the property upon the termination of the lease in January 2004. Venator sought a declaration prior to the termination of the lease, asserting that the terms of the lease are impossible to perform, commercially impractical, and would require Venator to violate the law. Appellee filed a motion to dismiss, asserting the action was premature as Venator's obligations under the lease remain executory until the lease term expires. The district court granted Appellee's motion to dismiss finding the potential dispute between the parties concerning Venator's obligations to alter the property lacked sufficient immediacy to constitute an actual controversy. Appellant appeals from this ruling.

I.

In 1938 the Woolworth Company (Woolworth) sought to build a Woolworth store on several lots of commercial property located along the intersection of Canal and North Rampart Streets in New Orleans. Towards that end, Woolworth executed multiple leases with the various owners of the lots Woolworth desired to occupy. Of these leases, the lease which is primarily at issue here is the lease to which the Matthew/Muniot Family is the successor in interest (MMF lease). The MMF lease stipulates the terms of occupancy for the lot located at 106 North Rampart Street. At the time of the execution of the lease a three-story building stood on the leasehold property, and a three-foot alley extended behind the building. The alley was commonly owned for the use and privilege of those property owners whose lots fronted North Rampart Street. The terms of the MMF lease permitted Woolworth to demolish the existing building and enclose the alley, so as to construct a much larger building that was contemplated to extend, and indeed does extend, beyond the property line of 106 North Rampart. Thus, the resulting Woolworth Building connects the 106 North Rampart lot with other separately owned lots and encompasses the property which was once the common alley. However, the lease also provides in pertinent part that:

[1] Tenant shall, at the expiration or termination of this lease ... at its own cost and expense, construct new dividing walls on the interior property lines separating the demised premises from adjoining property, provided Landlord requests Tenant in writing to do so within sixty days of the expiration or termination of this lease ...

[2] Tenant agrees at the expiration of this lease ... to re-establish at its own cost and expense, the common alley-way now existing and adjacent to the premises herein demised and adjoining properties to the southwest ...

[3] Any and all improvements or alterations made in or constructed upon the said premises and /or any new building or buildings erected thereon ... shall be constructed in conformity with all requirements of the State of Louisiana, City of New Orleans, or other public authority.

Thus, the lease on its face would seem to require that, upon the termination of the lease, the lessee must re-establish a common alleyway along the parameter of the lots. Also, if the lessor so requests, the lessee is required to restore the interior walls delineating the property boundaries. Both of these obligations are explicitly limited by any applicable legal restrictions in place at the time of the termination of the lease. The MMF lease term expires January 31, 2004.¹

Contemporaneous with the inception of the MMF lease, Woolworth executed a similar lease concerning additional parcels of commercial property owned by the Simon U. Rosenthal Company (Rosenthal lease). The Rosenthal lease also contained language concerning the restoration of the property to its free-standing and alley-endowed pre-lease condition at the termination of the lease.

In 1997, Woolworth ceased its retail operations nation-wide, and Venator became the successor to Woolworth's interest in the leases executed in connection to the 1938 construction of the Woolworth Building. In 1999, the Rosenthal lease expired and the lessor's successor in interest subsequently brought suit against Venator seeking to invoke the provisions of the lease requiring Venator to restore the property to its pre-lease conditions. The suit was eventually resolved by a settlement in which Venator purchased the Rosenthal leasehold property.

In March 2001, Venator initiated this action seeking a declaratory judgement with respect to its obligation to make alterations to its leasehold properties pursuant the MMF lease. In its complaint Venator alleged that the interior walls and alleyway provisions of the MMF lease were impossible to perform, commercially impractical, and would require Venator to violate the law. Appellee filed a Rule 12(b) Motion to Dismiss, arguing that the controversy at hand was not ripe for adjudication. The district court granted the motion to dismiss and Appellant appeals from that ruling.

II.

The question before this Court is whether the district court properly dismissed Appellant's declaratory judgement action, and we review that decision for abuse of discretion. Wilton v. Seven Falls Co., 515 U.S. 277, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995), Gabriel v. City of Plano, 202 F.3d 741, 744 (5th Cir.2000). Generally, the decision to grant declaratory relief is statutorily committed to the district court's discretion, even where the suit would otherwise meet the requirements of subject matter jurisdiction. Wilton, 515 U.S. at 286, 115 S.Ct. 2137.

However, in the case at bar, the district court dismissed Appellant's complaint solely on justiciability grounds, finding that the complaint failed to "present a substantial controversy of such immediacy that a declaratory judgement is warranted," and this court reviews de novo the question of whether a controversy is ripe for adjudication. Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir.2000)(holding that the issue of ripeness in a declaratory action is a question of law which the Court of Appeals reviews de novo); see Shields v. Norton, 289 F.3d 832 (5th Cir.2002) (applying de novo review to a district court determination that an action for declaratory judgement was ripe for adjudication).

In the declaratory judgement context, whether a particular dispute is ripe for adjudication turns on whether a substantial controversy of sufficient immediacy and reality exists between parties having adverse legal interests. Orix Credit Alliance, 212 F.3d at 896; see also, Chevron U.S.A., Inc. v. Traillour Oil Co., 987 F.2d 1138, 1153(5th Cir.1993). Here, the district court determined that the case at bar was unripe for two reasons.² First, the district court found that a suspensive condition barred justiciability. Also, the district court found that the controversy could not be evaluated because the lease at issue was to be construed in accord with the law in place in January 2004. We disagree on both counts.

A. Suspensive Condition

In evaluating the controversy now before us, the district court determined that a contingency exists which is prerequisite to Appellant's potential obligation under the MMF lease, and that the suspensive condition had not yet been met.³ Specifically, the district court found that the potential dispute involving the interior wall provision of the MMF lease was unjusticiably premature because, "Venator's obligation to construct and rebuild walls and other portions of the building is conditional upon Matthew/Muniot making a request of it to do so [and] Venator does not allege that any such request has been made." Thus, the district court found the absence of a request by MMF determinative as to whether the interior wall controversy was ripe.

However, while the district court is correct that MMF must first invoke the interior wall provision of the lease before Venator's obligation will be triggered, it is important to remember that the very nature of relief in a declaratory context is ex ante. Shields, 289 F.3d at 835. The Declaratory Judgement Act offers the court an opportunity to afford a plaintiff equitable relief when legal relief is not yet available to him, so as to avoid inequities which might result from a delay in assessing the parties' legal obligations. See 28 U.S.C. § 2201. Consequently, in deciding whether to grant declaratory relief, the court must necessarily assess the likelihood that future events will occur, but the court ought not require that those contingencies to have occurred at the time relief is sought, such as it would were it evaluating the availability of legal as opposed to equitable relief. As the court explained in Orix Credit Alliance, the fact that certain contingencies pertaining to plaintiff's potential liability remain executory at the time of the declaratory suit does not defeat jurisdiction. Orix Credit Alliance, 212 F.3d at 897. Instead, the court must assess the likelihood that the...