Applebee's Northeast, Inc. v. Methuen Investors, Inc.

709 N.E.2d 1143, 46 Mass. App. Ct. 777, 1999 Mass. App. LEXIS 523
CourtMassachusetts Appeals Court
DecidedMay 17, 1999
DocketNo. 98-P-1833
StatusPublished
Cited by5 cases

This text of 709 N.E.2d 1143 (Applebee's Northeast, Inc. v. Methuen Investors, Inc.) is published on Counsel Stack Legal Research, covering Massachusetts Appeals Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Applebee's Northeast, Inc. v. Methuen Investors, Inc., 709 N.E.2d 1143, 46 Mass. App. Ct. 777, 1999 Mass. App. LEXIS 523 (Mass. Ct. App. 1999).

Opinion

Kaplan, J.

The question on appeal is the effect, in particular circumstances, of the termination of a prime lease upon the continued existence of a sublease. The question arises in the course of a refinancing and redevelopment of the Methuen Mall. To simplify the narrative, we use the name “Developers” to signify one or more of the three affiliated companies used to carry out the redevelopment plan.

To begin as of May, 1996. The fee title of the Methuen Mall site was held by Gilbert. G. Campbell and Charles T. Matses. [778]*778Metropolitan Life Insurance Co. (MetLife) was lessee of a ground lease of the site under the fee owners. This lease was long term, running to 2038, and had a purchase option. MetLife was lessor and Applebee’s Northeast, Inc. (Applebee’s), a national restaurant chain, lessee of one of the stores in the Mall (No. 103); this sublease had six years still to run, with two five-year renewal options. MetLife was fee owner of a parcel of some seven acres adjacent to the Mall, of which a portion was used for additional parking for the Mall and another portion was occupied by a Caldor store under lease from MetLife. The Teachers Insurance & Annuity Association of America (TIAA) had a mortgage of $14,000,000 in face amount encumbering the ground lease and the parking lot parcel. However, MetLife’s obligations under the mortgage were “non-recourse,” that is, MetLife’s obligations were limited to the property mortgaged and the mortgagee could not reach any other MetLife assets. Such also was MetLife’s situation regarding rent under the ground lease.

As of May, 1996, or thereabouts, the Mall was in sad array. The Sears department store, considered an “anchor” of the Mall, had vacated the property as early as 1992. Another anchor, Jordan Marsh, quit in 1994. Other stores followed. In fall, 1995, Ann & Hope, the remaining anchor, gave notice that it would leave by the end of the year. What had contributed steadily to the decline of the Mall was, no doubt, its proximity to the New Hampshire border, which beckoned to customers with the lure of freedom from sales tax.

It appears from the record that by spring, 1996, MetLife saw no profit or hope of future profit that could attract it to remain in the Mall or its environs; it wanted to shed itself of all involvement with the place. After May, 1996, MetLife, although as a corporation it was quite solvent, fell into default with respect to real estate taxes ($654,509) and mortgage payments ($671,384). It was also almost a year behind in ground rent. On June 14, 1996, Campbell and Matses gave formal notice of default to MetLife under the ground lease.

In this scene the Developers saw a prospect of eventual profit by dismantling the Mall and rebuilding it as an entertainment center with multiple features, to be called “The Loop.” This meant, first, revising the legal structure.

Under agreement dating from October 23, 1996, the Developers, for a price of $4,412,921, bought TIAA’s interest in the [779]*779mortgage above mentioned. About January 24, 1997, the Developers acquired the fee of the Mall site from Campbell and Matses for a price stated to be $100,000. An agreement dated March 20, 1997, between the Developers and MetLife, set out, with much elaboration, alternative options that the Developers might exercise in relation to MetLife. The Developers elected under the agreement, in substance, to take the step of foreclosing on the parking lot parcel. MetLife undertook to give a deed in lieu of foreclosure, and a quitclaim deed stating a consideration of $100,000 was duly delivered.

We reach the meat of this appeal, the disposition of the ground lease of the Mall site. The Developers, now lessors in their right under the acquisition of the fee from Campbell and Matses, gave notice on April 29, 1997, to MetLife of the termination of the ground lease because of MetLife’s continued defaults. There was no resistance by MetLife; it had no interest in postponing the termination of the lease by invoking any cure periods, and waived these cures as it had previously waived the exercise of any option to purchase the fee. The termination of the ground lease was expected to have the effect of terminating Applebee’s sublease, as the sublease was by its terms subordinate to the ground lease. The Developers sent Applebee’s a notice to quit on May 7, 1997, demanding that it vacate the premises. At this point Applebee’s evidently was the only remaining occupant in the Mall.

(We need not render in detail the further financing of the development by the introduction, or promised introduction, of more new money to extinguish the mortgage and to provide the capital for creating The Loop.)

Applebee’s refused to comply with the notice to quit and on June 27, 1997, commenced an action in Superior Court against the Developers and MetLife seeking (among other things) a declaration that it had a valid lease (with the Developers as lessors). On December 1, 1997, the Developers brought summary process in Lawrence District Court to evict Applebee’s. Upon motion by Applebee’s, a judge of the Superior Court consolidated the summary process action with the declaratory action. The Developers moved for summary judgment on their claim for possession and on Applebee’s declaratory claim. The court allowed the motion in the Developers’ favor as prayed, and, on the Developers’ further motion, unopposed, the court entered a [780]*780separate judgment under Mass.R.Civ.P. 54(b), 365 Mass. 820 (1974), accordingly on June 23, 1998. Applebee’s appeals.3

The judge below wrote a marginal note: “Motion allowed for reasons articulated in its [presumably, Developers’] memorandum; voluntary surrender is not an issue” (emphasis in original). This laconic statement about voluntary surrender is correct in light of the record, but it requires explication.

1. We have first to shear away from the case Applebee’s voluminous attempt to show a “conspiracy” of the actors — Developers and MetLife — somehow intended unjustly to eliminate the sublease. The attempt can be characterized by Applebee’s assertion that MetLife represented to Applebee’s that MetLife held the fee title to the site and the lease to Apple-bee’s was a prime lease. Applebee’s further suggests that it was kept in ignorance by MetLife of the fact that there was a mortgage encumbering MetLife’s interest. The ground lease and the mortgage were matters of record, so the implication of deception would seem at least odd; but if such deception occurred, presumably it would not affect the Developers who could rely on the record.4 Further, Applebee’s proceeds to ignore, by its silence on the point, that MetLife was in a non-recourse position and, indeed, it seems to argue on an assumption that MetLife was personally liable. All this has the effect of distorting the motives and behavior of the Developers and MetLife in the transactions between them. It is true that the Developers and MetLife were not separated from each other by a hermetic seal. The parties exchanged information and cooperated in the sense in which creditors and debtors customarily cooperate: so, for example, in the agreement to give and to accept a deed in lieu of foreclosure of the parking lot parcel. But adjectival abuse of the parties does not make conspirators of them.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Trace Construction, Inc. v. Dana Barros Sports Complex, LLC
945 N.E.2d 833 (Massachusetts Supreme Judicial Court, 2011)
Trenz v. Family Dollar Stores of Massachusetts, Inc.
900 N.E.2d 97 (Massachusetts Appeals Court, 2009)
Information Mapping, Inc. v. Duffy Properties, LLC
17 Mass. L. Rptr. 544 (Massachusetts Superior Court, 2004)
Center 48 Ltd. v. May Dept. Stores
810 A.2d 610 (New Jersey Superior Court App Division, 2002)
United Co. v. Meehan
712 N.E.2d 636 (Massachusetts Appeals Court, 1999)

Cite This Page — Counsel Stack

Bluebook (online)
709 N.E.2d 1143, 46 Mass. App. Ct. 777, 1999 Mass. App. LEXIS 523, Counsel Stack Legal Research, https://law.counselstack.com/opinion/applebees-northeast-inc-v-methuen-investors-inc-massappct-1999.