Gabrellian Associates v. Friendly Ice Cream Corp.

A-3794-97T1 (N.J. Super. App. Div. 1999) (Unpublished)
  • Opinion Date: July 6, 1999

LEASES; EXCLUSIVE USE—Exclusive use lease provisions are to be strictly construed because public policy is against restrictions on the use and enjoyment of land.

A restaurant featuring ice cream leased a tax lot within a shopping center for the purpose of erecting a free standing building to house its “Friendly Ice Cream Shop.” About 20 years later, the landlord began to negotiate with Burger King Corp. to lease an adjacent tax lot for a free standing fast-food facility. The ice cream restaurant’s lease contained a provision reading: “no premises in the Shopping Center (other than the Leased Premises) shall, during the term of this lease and any extensions thereof, be primarily or exclusively leased, used or occupied as a limited menu restaurant, drive-in or walk-up eating facility, ice cream shop or for a restaurant similar to a Friendly Ice Cream Shop.” The landlord sought the ice cream shop’s consent to the Burger King facility, but that consent was refused. The landlord then filed a declaratory judgment action, seeking construction of the “scope of the restriction” in the lease. After determining that both tax lots were contained within the Shopping Center, the lower court held that the restriction did not bar construction of a Burger King fast-food restaurant. The Appellate Division upheld that decision. “It is firmly established that the policy of the law is against the imposition of restrictions upon use and enjoyment of land and such restrictions are to be strictly construed.” In addition, the Court held that the language of such a covenant “must not be vague or uncertain.” The lease was prepared on the tenant’s standard form and the landlord was not represented by an attorney in the transaction. The lower court held that any ambiguity in the restrictive covenant would have to be resolved against the tenant because the tenant was the scrivener of the document. The Appellant Division agreed with the lower court that the Burger King restaurant was clearly not an ice cream parlor. In addition, the proposed Burger King did not offer service thru a drive-thru window only nor was it a walk-up facility. The ice cream restaurant’s own expert gave the opinion that the Burger King was not a “limited menu restaurant” in that, while Burger King is primarily engaged in selling hamburgers, it offers a full menu, including breakfast foods, salads, chicken, beef, side dishes, and desserts. Lastly, the Burger King restaurant was found to be dissimilar to a Friendly Ice Cream Shop, not only as it was constituted in 1974 when the lease was executed, but also at the time of the action. Finally, testimony adduced that the ice cream restaurant considered a Burger King to be a fast-food or a fast-serve establishment as those designations were used in standard industry terminology in 1974 (and today), but that the 1974 lease did not restrict “fast-food” or so called fast-serve” eating establishments although the ice cream restaurant had insisted on such expressed exclusions in its other leases at the time. Unfortunately for the ice cream restaurant, its argument that the clause in question gave it greater protection than use of the well-established descriptions of a “fast-food” or fast-serve” restaurant, was found to be unpersuasive. In summary, the proposed Burger King restaurant did not violate the restrictive covenant in the ice cream restaurant’s lease.