Case Law Summaries

Westmont Plaza-Arlington Plaza Joint Venture v. Wakefern Food Corp.

• Opinion Date: June 15, 2001
• Real Property Law
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LEASES; INTERPRETATION; EXCLUSIVES—The clear intent of parties to a lease that certain rights be reserved only to the “original named tenant” will be enforced, but once a tenant no longer has a legitimate interest in enforcing a restrictive use covenant against its landlord, the exclusive use provision will lapse.

A supermarket leased space at a shopping center. Its lease provided that the landlord could not lease other space in the shopping center for use as a food supermarket so long as the supermarket’s leased premises were used for a food supermarket. The lease provided broad and reasonably unfettered rights to further assign the lease or to sublet the premises. The original supermarket then sublet the premises to another supermarket. That sublease gave certain rights to the “original named Tenant,” meaning the replacement supermarket operator. Essentially, “the original named Tenant,” i.e., the successor supermarket, could sublet or assign the leased premises for non-food supermarket use without the consent of the original supermarket. The successor supermarket, as “tenant,” also had the right to assign the lease as part of a corporate transaction or to an entity related to the principal owner of the successor supermarket. Any of those assignees were to be considered the “original named Tenant” for the purposes of the assignment and subletting provision of the sublease. The successor supermarket then sub-sublet the premises to yet another (ultimate) supermarket operator. This gave rise to the question as to whether the ultimate supermarket operator could further sublet the premises in accordance with the relatively liberal rights granted to the “original named Tenant.” Absent restrictions in the lease, an assignee effectively steps into the shoes of the original tenant. Here, the sublease between the original supermarket operator and its successor also defined the term “Tenant” as meaning, “the party (or parties) named originally in this lease as Tenant. ... The term ‘Tenant’ shall also mean, where the context admits or requires it, the party or parties succeeding at any time to the interest of the party originally named as Tenant, either by assignment or subletting, but only in the case of an assignment or subletting which has been expressly approved by Landlord in accordance with the provisions of this lease.” Reading this language, the Court held that the category of a “Tenant” who might exercise the assignment rights reserved to the “original named Tenant” was intended to be restricted to the first successor supermarket. This was reflected not only by the use of the phrase “original named Tenant,” and the distinguishing language in the definition of “Tenant,” but also the distinction made in the particular paragraph within the original sublease between the rights granted to the “original named Tenant,” and the more limited rights, in the same paragraph, granted to the “Tenant” to assign the lease as part of a corporate transaction. Further, the Court reviewed the original sublease to find that the parties had been careful in distinguishing between the use of the word “Tenant” and the use of “original named Tenant.” The Appellate Division found that the lower court did not understand that the original sublease had carefully made this distinction and therefore wrongfully concluded that the ultimate supermarket operator stood in the shoes of the original successor supermarket. That is why the Appellate Division thought the lower court had ruled that the ultimate supermarket operator had all the rights of the “original named Tenant.” When the lower court was faced with a motion for reconsideration, it refused to budge, holding that the original successor supermarket had the right “as” the original named Tenant to assign the sublease. The Appellate Division’s difficulty with that rationale was that the lease did not contain the word “as.” Further, the Appellate Division was of the firm belief that it was the “unmistakable intent of the parties” that the “original named Tenant” was only the original successor supermarket. Therefore, the ultimate supermarket operator, although an assignee of the original sublease, could not have any greater rights than were granted by the original sublease. By the time the matter reached the Appellate Division, the original supermarket tenant and the landlord had reached an agreement that permitted the ultimate supermarket operator to operate a supermarket at the shopping center. Nonetheless, the Appellate Division held that the original supermarket operator could hardly “claim a legitimate business interest in the restrictive covenant because not only has it consented to the new, neighboring [supermarket at the shopping center], but it ha[d] not operated a food store at the location for years.” Therefore, to the Court found that “under the presence circumstances ... since the restrictive covenant no longer serves the legitimate interest of [the original supermarket tenant] that existed [thirty years earlier], the trial judge properly declared it unenforceable.”

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