Norville v. Carr-Gottstein Foods Co.

84 P.3d 996, 2004 Alas. LEXIS 18, 2004 WL 226160
CourtAlaska Supreme Court
DecidedFebruary 6, 2004
DocketS-10643, S-10684
StatusPublished
Cited by60 cases

This text of 84 P.3d 996 (Norville v. Carr-Gottstein Foods Co.) is published on Counsel Stack Legal Research, covering Alaska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Norville v. Carr-Gottstein Foods Co., 84 P.3d 996, 2004 Alas. LEXIS 18, 2004 WL 226160 (Ala. 2004).

Opinion

OPINION

MATTHEWS, Justice.

INTRODUCTION

The question presented is whether a landlord’s refusal to consent to a sublease was unreasonable. The superior court granted summary judgment in favor of the tenant on this issue. We conclude that this was error because there were genuine issues of material fact and the tenant was not entitled to judgment as a matter of law.

FACTS AND PROCEEDINGS

Allan Norville owns a shopping center in Kenai. Beginning in 1991, Carr-Gottstein Foods Co. (Carrs), leased space in the center under a twenty-five year lease. In 1995 Carrs asked Norville to consent to a sublease for a Bank of America branch. Article 13 of the lease required Carrs to seek Norville’s consent prior to subletting and provided that consent was not to be withheld unreasonably. Norville initially did not consent to the sublease. He explained:

I have not granted permission to proceed for currently I am discussing the possibility of locating a bank branch on one of the pads at the center. I have agreed with the prospective tenant that if a bank is located on the pad, the balance of the center would be restricted and no other bank will be located in the shopping center. The covenant would be similar to the covenant in our lease, wherein I am not allowed to place another food store on the site.

But a week later, after receiving a call from John Cairns, Carrs president, Norville consented. He stated that he did so for two reasons: “[Fjirst because [Cairns] is a personal friend ... and, second, the fact that Carrs had a large amount of long-term debt and the added cash flow would help the company.” In his letter granting consent Norville wrote that “the consent to allow the Bank of America branch shall in no way be construed as a waiver of our rights under the lease.”

Bank of America operated a branch bank in the center as a subtenant of Carrs until April of 1999. In early 1999 Safeway, Inc., purchased all the shares of Carrs and Carrs became a subsidiary of Safeway. Since all post-acquisition dealings between the parties involved Safeway employees, we refer to Carrs after the acquisition as “Safeway.”

In July 1999 Safeway wrote Norville requesting that he consent to a sublease to Alaska USA Federal Credit Union. The proposed area was the same space that had been previously occupied by Bank of America. Safeway’s property manager, Jeanese Riggs, contacted Norville to follow up on the request. According to Riggs, Norville “advised me that he would not consent to the sublease unless he was given a percentage of the sublease rent. He claimed he was entitled to this because his ability to negotiate with another bank to locate in his shopping plaza would be adversely impacted.”

In subsequent communications, Norville indicated that he would approve the sublease for seventy-five percent of the rent paid by Alaska USA, an amount just under $3,000 per month. According to Norville, he conditioned his consent upon receiving a portion of Alaska USA’s rent because he “was still planning to develop a bank on the bank pad of the center,” and he had “continued concerns that any other bank would be put off by an Alaska USA in-store bank ... competing with it in the same shopping center.” He stated that he “feared that the prior existence of the BofA branch office was one of the reasons why [he] still had no bank tenant, and that if [he] could find such a tenant the market rate [he] could charge would be diminished by the Alaska USA branch within Carrs.” He also stated that he was motivated in part by concerns that this was the first step in a series of subleases to which Safe *999 way would “demand consent” in order to reduce its own operations in the center.

In September 1999 Safeway accepted Nor-ville’s terms under protest. Safeway made it clear that it believed that Norville did not have reasonable grounds for conditioning his approval of the sublease and stated, “we ... intend to pursue this matter....” Alaska USA began operating in the subleased space in August of 1999 and continues to do so.

In June 2001 Safeway sued Norville, alleging that his withholding of consent for the Alaska USA sublease was unreasonable and in violation of the lease. Safeway sought a declaration that Norville was required to consent to the sublease unconditionally and asked for judgment for the amount of the sublease rental paid to Norville.

After Norville answered and some discovery was conducted, Safeway moved for summary judgment. Safeway’s theory was that Norville had withheld consent to the sublease solely on the basis of the intended use of the space for banking. Safeway argued that under the lease it had the right to use its store for any services offered in similar stores, and that banking is one such service. Since that use was permitted under the lease, Safeway argued that it was unreasonable for Norville to withhold consent to the sublease.

In response, Norville argued that the reasonableness of his conditional consent was a question of fact. Norville also took issue with the contention that the lease permitted banking as a use. Finally, Norville argued that use was not the sole basis for his refusal.

After oral argument, the superior court granted summary judgment for Safeway. The final judgment entered required Norville to refund thirty-one monthly payments from the Alaska USA sublease, amounting to $91,930.50, plus interest, costs, and attorney’s fees.

Relevant lease provisions

As already indicated, the term of the Nor-ville-Carrs lease was twenty-five years. Approximately 70,992 square feet were leased. A minimum annual rent of $851,904 was specified, and a percentage rent was to be charged to the extent that it exceeded the minimum. The percentage rate was two percent for gross sales exceeding $40,000,000 to be reduced to one-and-a-half percent on gross sales exceeding $50,000,000. “Gross sales” do not encompass “minimum and base rents from subtenants.” The -tenant is required to “use, occupy, operate and conduct its business in the entire Demised Premises in such manner as to produce the maximum volume of Gross Sales.... ”

The two most important clauses to the resolution of this dispute are the “Tenant’s Use Clause” and the “Assignment or Subletting Clause.”

The Tenant’s Use Clause, section l.l(i) provides:

Tenant shall use the Demised Premises for the principal purpose of conducting thereon a general food supermarket including sales of deli-type foods for on-premises consumption, with the privilege of including in the Demised Premises a drugs and toiletries department, a notions department, a variety and soft goods department, a housewares and hardware department, a ready-to-wear clothing and accessory department, a prescription pharmacy, an automotive accessory and supply department, a floral department, a photo/sound/video department and a department or departments selling other items or offering such services compatible with the items or services offered by Tenant for sale in the foregoing enumerated departments and items sold and services offered from time to time in other general food supermarkets operated by Tenant or others.

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Cite This Page — Counsel Stack

Bluebook (online)
84 P.3d 996, 2004 Alas. LEXIS 18, 2004 WL 226160, Counsel Stack Legal Research, https://law.counselstack.com/opinion/norville-v-carr-gottstein-foods-co-alaska-2004.