Winrock Inn Co. v. Prudential Insurance Co. of America

928 P.2d 947, 122 N.M. 562
CourtNew Mexico Court of Appeals
DecidedSeptember 17, 1996
Docket16325
StatusPublished
Cited by25 cases

This text of 928 P.2d 947 (Winrock Inn Co. v. Prudential Insurance Co. of America) is published on Counsel Stack Legal Research, covering New Mexico Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Winrock Inn Co. v. Prudential Insurance Co. of America, 928 P.2d 947, 122 N.M. 562 (N.M. Ct. App. 1996).

Opinion

OPINION

PICKARD, Judge.

1. We take the opportunity presented by this case to examine New Mexico law regarding implied easements and forfeiture of leasehold interests. Defendant-Appellants/Cross-Appellees, The Prudential Insurance Company and its agent and property manager, Terranomics Retail Services (collectively “Prudential”), own the Winrock Mall (the Mall) in Albuquerque. Plaintiff-Appellee/Cross-Appellant, the Winrock Inn (Win-rock), is a tenant of the Mall. Litigation between the parties in district court ended in a decision by the district court which granted some relief to each party. Neither party was satisfied by the judgment. Prudential appealed and Winrock cross-appealed. We reverse and remand for further proceedings.

FACTS

2. Winrock has been a tenant of the Mall since 1961. It has lease options extending to the year 2059. Prudential purchased the Mall in 1979. Under an amended lease agreement signed in 1987, Winrock leased space for a lobby and meeting rooms (the lobby lease) on property subjacent to the Mall. The hotel rooms are covered by a separate lease (the ground lease) and are located in a separate building from the lobby. The ground lease has an express covenant for quiet enjoyment. The lobby lease does not. This case concerns only the lobby lease as amended in 1987.

3. The lease agreement between Prudential and Winrock was an arms-length transaction between parties of relatively equal bargaining power. As part of the lease agreement, Winrock was to pay common area maintenance (CAM) charges, proportionate insurance, and ad valorem taxes to Prudential in addition to and as part of its rent. The amount was to be determined on a monthly basis by Prudential. The CAM charges were intended to reimburse Prudential for expenditures associated with administering, maintaining, and operating those areas in the Mall that were accessible to and used by all Mall patrons. The lease specified that these common areas could be “expanded, contracted or changed by [Prudential] ... as required, or deemed desirable.” The lease further stated that any exercise by Prudential of its rights under the lease would not constitute an eviction or disturbance of Winroek’s use of the leased premises.

4. In the lease, the parties agreed to subject any dispute to binding arbitration. Winrock was to pay the full amount of rent owed each month with no set-off. Upon a default in payment of rent, Prudential could elect, after giving Winrock an opportunity to cure, to terminate the lease and evict Win-rock from the premises. Winrock agreed to peaceably surrender the premises upon termination of the lease.

5. The main entrance to Winrock’s hotel lobby was through doors leading south out of the lobby toward the ground lease (the south entrance). Guests were directed to this entrance by signs. To the north of the lobby was a courtyard, accessible from the lobby through glass doors (the north entrance). A flight of stairs led from the courtyard to the west entrance of the Mall. The courtyard was not leased by Winrock, nor did Winrock have exclusive use of the courtyard.

6. Prior to the amendment of the lease, the north end of the lobby was subdivided and leased by various small businesses which provided services and operated retail shops in the lobby area. Winrock presented testimony at trial that the attractiveness and convenience of the courtyard were a major reason why Winrock decided to amend the lobby lease in 1987 to lease the entire lobby area. Winrock also presented testimony that, in reliance on the access to the Mall through the north doors, Winrock undertook a lobby renovation project which cost approximately $800,000. Winrock conceded at trial that Prudential never represented to Win-rock that the courtyard was permanent.

7. In 1990, Winrock noticed that the CAM charges had begun to escalate steeply. The timing of the escalation in charges roughly coincided with the loss of the J.C. Penney department store, which had been the “anchor tenant” at the west end of the Mall. Winrock wrote to Prudential twice, requesting a decrease in the CAM charges, and also requested that Winrock be excused from participation in the Merchant’s Association. Prudential declined to decrease the CAM amounts.

8. On April 1,1991, Winrock stopped paying CAM charges, and on May 31, 1991, it requested an explanation of the CAM charges over the previous ten years. Prudential responded that it was unable to find records dated before 1987, but was forwarding invoices as available. Winrock took action in stopping payment of CAM charges unilaterally, without the permission or approval of a court or arbitrator. Winrock did not pay the undisputed portion of the CAM charges, nor did it put any amount of the CAM charges into an escrow account or court registry. In July 1991, Prudential notified Winrock that the failure to pay the CAM charges was a default under the lease. Win-rock did not cure the default. In August and September 1991, Winrock failed to pay the ad valorem taxes or trash removal charges, and it continued to withhold the CAM charges. In August 1991, Winrock filed an arbitration action against Prudential over the disputed CAM charges. In October 1991, Prudential notified Winrock that it was exercising its option to terminate the lobby lease because of Winrock’s uneured default of CAM payments. Prudential requested that Winrock peaceably surrender the premises as mandated by the lease agreement. Win-rock did not vacate the lobby. In November 1991, Prudential refused payment of rent on the lobby lease. Prudential subsequently requested a separate check for payment of the ground lease rent. In March 1992, Winrock set up an escrow account and began to deposit the rent amounts for the lobby lease in that account.

9. Matters proceeded in this manner for some time. Winrock did not vacate the lobby, and Prudential did not take action to have Winrock evicted. Some time after terminating the lease, Prudential notified Win-rock that the CAM charges were being raised again. Winrock did not pay the increased amount. Winrock continued to withhold all CAM charges and to place the rent for the lobby lease in escrow.

10. Then, in January 1993, Prudential began a major renovation project (the project) on the west entrance of the Mall to accommodate Dillard’s department store, which was to be the new anchor tenant in the space vacated by J.C. Penney. Though the project had been discussed in meetings with tenants of the Mall, Winrock was not shown plans for the specific changes to be made. The project called for the courtyard outside the lobby area to be eliminated, blocking that route to the Mall and the natural light which had filtered in through the windows and glass doors. The south entrance to the lobby was unaffected by Prudential’s reconfiguration of the west end of the Mall.

11. Winrock filed suit in the district court for a preliminary injunction in February 1993 to stop the remodeling project. The injunction requested that the judge issue a declaratory judgment stating that Winrock had easements for natural light and access through the courtyard. Prudential claimed that Winrock was not entitled to injunctive relief because the lobby lease had been terminated in October 1991. Prudential counterclaimed to have Winrock evicted.

12.

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Bluebook (online)
928 P.2d 947, 122 N.M. 562, Counsel Stack Legal Research, https://law.counselstack.com/opinion/winrock-inn-co-v-prudential-insurance-co-of-america-nmctapp-1996.