Lamonts Apparel, Inc. v. SI-Lloyd Associates

967 P.2d 905, 157 Or. App. 44, 1998 Ore. App. LEXIS 1979
Court of Appeals of Oregon·Decided November 4, 1998·No. 9411-07588; CA A91907·Published·Cited by 2 cases

Opinion

WARREN, P. J.

This case involves a dispute arising from plaintiffs attempts to assign or sublet retail space that it leased from defendant in the Lloyd Center in Portland. The jury found that defendant breached the lease by unreasonably refusing to consent to plaintiffs proposed arrangements and awarded plaintiff damages. The court thereafter granted defendant’s motion for judgment notwithstanding the verdict on the ground that the proposed arrangements did not substantially comply with the existing lease and, thus, defendant had no obligation to be reasonable in deciding whether to accept them. Plaintiff appeals, and we affirm.

In 1990, plaintiff, a clothing store chain, and defendant entered into a 20-year lease of 47,000 square feet, spread over two floors, in the Lloyd Center. The lease required plaintiff to operate “a department store-type business.” It imposed the following restrictions on assigning the lease or subletting the space:

“Tenant shall not assign this Lease, nor sublet in excess of twenty percent (20%) of the selling area of the leased premises without the written consent of Landlord, which consent shall not be unreasonably withheld; and in case of any such assignment or subletting, Tenant shall nevertheless remain fully liable as surety to Landlord for the full payment of the minimum rent, taxes, assessments, insurance premiums, and other additional rent according to the terms hereof!.]”

By spring 1994, plaintiff was experiencing financial difficulties and decided to close its Lloyd Center store. Because the lease did not contain a termination provision, plaintiff faced a significant liability unless it could assign the lease or sublet the space. Plaintiff notified M. S. Simon, defendant’s general partner, of its decision to close the store and sought its assistance in locating subtenants.1 Beginning [47]*47in April, they negotiated with Future Shop, a consumer electronics business, and Pacific Linen, which sold bedding, mattresses, white goods, and similar items. Each business proposed to take over one of the floors of plaintiffs existing store. In July, plaintiff and Simon agreed on what they described as proposed subleases with the two businesses. The terms of the proposed subleases differed from the lease between plaintiff and defendant in a number of respects, including that each new tenant would be responsible for rent only on the floor that it leased, the lease requirement of “department store-type” use would be modified, the percentage rent provision for Future Shop would be changed for that store’s benefit, and plaintiff would be released from any further liability under the lease.

All parties understood that Heitmann, the representative of defendant’s limited partners, had to approve any assignment or sublease. Heitmann first raised some questions and sought additional information. Heitmann then, in September 1994, refused to approve, and the proposed transaction fell apart. Plaintiff filed this action in November; it closed the Lloyd Center store in January 1995.2

The heart of plaintiffs claim is that it was commercially unreasonable, and thus a violation of the lease, for defendant to reject the proposed subleases. Defendant moved for a directed verdict on the ground that the “subleases” actually involved the creation of new leases rather than substituting one party for another in an existing lease. Defendant, therefore, had no duty to act reasonably in deciding whether to approve them. The trial court denied the motion. After the verdict, defendant moved for a judgment notwithstanding the verdict on the same ground. In the interim, the trial judge had become ill; a different judge heard the motion and granted it. Plaintiff appeals from the resulting judgment.

We first consider whether the motion for judgment notwithstanding the verdict (JNOV) was timely filed; if it was not, plaintiff is entitled to reinstatement of the judgment on the jury verdict. The motion was due on December 4,1995; [48]*48the certificate of service is dated that day, but the clerk’s office stamp indicates that the motion was received on December 5,1995. When it learned of the discrepancy, defendant filed a motion under ORCP 71A to correct the record to show that the true filing date was December 4. The trial court, after a hearing, granted the motion. In a previous opinion, we determined that the judge who heard the motion should have recused himself because of his ex parte contacts with an employee of the clerk’s office. We therefore vacated the decision and remanded for a new decision by a different judge. Lamonts Apparel, Inc. v. SI-Lloyd Associates, 153 Or App 227, 956 P2d 1024 (1998).

On remand, the new judge held a new evidentiary hearing that included material that went significantly beyond what the parties had presented at the first hearing. Based on that evidence, the court found that defendant filed the motion on or about 5:00 p.m. on December 4, 1995, that the doors to the clerk’s office are open and the lights on after 5:00 p.m., and that documents left after 5:00 p.m. but not retrieved until the next morning will be stamped with the next da/s date.3 It therefore granted the motion to correct the record. The evidence also shows that the supervisor in the clerk’s office does not consider the office to be closed precisely at 5:00 p.m. and will at times pick up and date filings received after that time. We have carefully examined the record but do not believe it necessary to discuss it in detail. We affirm the order granting the motion to correct the record. The JNOV motion was timely.

We turn to the merits of the motion. Plaintiffs arguments focus on whether it was reasonable for defendant to refuse the proposed subleases. As the trial court recognized when ruling on the JNOV motion, however, the crucial issue comes before one even reaches the issue of reasonableness:

“[T]he Court is going to conclude that in the assigning of a master lease, if the assignment does not substantially comply with the master lease, the person with the right to consent to the assignment does not have to consent if it does [49]*49not substantially comply, and therefore you don’t get to the question of whether the withholding of the consent was unreasonable[.]”

The essential difficulty with plaintiff’s position is that plaintiff did not present defendant with either a sublease or an assignment. Rather, it presented defendant with new leases with substantially different terms from the one between it and defendant. Nothing in the original lease required defendant to act reasonably in deciding whether to accept new leases with new tenants when new material terms were proposed.

An “assignment” of a lease is a conveyance of the lessee’s entire interest in the demised premises, while a “sublease” conveys only a part of the term, with the original lessee retaining some reversionary interest. See, e.g., Neal v. Craig Brown, Inc., 86 NC App 157, 356 SE2d 912, 915 (1987); see also 49 Am Jur 2d 846-49, Landlord and Tenant § 1077. An assignment is the outright transfer of all or part of an existing lease, so that the assignee steps into the shoes of the assignor; a sublease involves the creation of a new tenancy between the sublessor (the original lessee) and the sublessee. See Jaber v. Miller, 219 Ark 59, 239 SW2d 760, 761 (1951).

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Lamonts Apparel, Inc. v. SI-Lloyd Associates, 967 P.2d 905, 157 Or. App. 44, 1998 Ore. App. LEXIS 1979 (Or. Ct. App. 1998).

967 P.2d 905 (Lamonts Apparel, Inc. v. SI-Lloyd Associates) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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