Opinion
No. A03-507.
Filed April 27, 2004.
Appeal from the District Court, Hennepin County, File No. CT02005761.
Stephen M. Harris, Steven A. Linder, Meyer Njus, P.A., (for respondent).
Thomas L. Fabel, Lindquist Vennum, P.L.L.P., (for appellant).
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
Appellant Supervalu, Inc. challenges the district court's grant of summary judgment to respondent Chalet Liquors, Inc., in respondent's action to enjoin appellant from selling certain 3.2-percent alcoholic beverages from appellant's Cub Foods store in Crystal. The property on which the Cub Foods store is located is burdened by a restrictive covenant prohibiting the sale of alcoholic beverages other than "beer with an alcohol concentration of 3.2 percent." Appellant asserts that respondent, lessee of the benefited property, lacks standing to enforce the covenant, and the covenant was not violated by the sale of 3.2-percent alcoholic malt beverages, all of which, appellant argues, fit within the definition of "beer." Because we conclude that there are no genuine issues of material fact that preclude summary judgment on the issue of standing or the definition of 3.2 beer, we affirm.
FACTS
In 1991, appellant Supervalu, Inc. sought to construct a new Cub Foods grocery store in Crystal, on a parcel of land owned and occupied as a strip mall by Anthony's Shopping Center Partnership (Anthony's). Respondent, Chalet Liquors, Inc. operated a liquor store in leased space in the strip mall.
Appellant wanted to buy the parcel of land from Anthony's, terminate respondent's leasehold interest in the property, demolish the strip mall, and build a Cub Foods store. Negotiations between appellant and respondent over respondent's leasehold interest were difficult, and initially unsuccessful.
Eventually, in 1994, after extensive negotiations, appellant purchased respondent's leasehold interest in the strip mall, purchased the parcel of land occupied by the strip mall, and sold Anthony's adjacent property on a contract for deed, for construction of a new retail center. Anthony's entered a new 25-year lease with respondent, so that respondent's liquor business could be continued in the new retail center. Appellant entered a license agreement with respondent, authorizing respondent to continue occupancy in its former premises during construction of the new retail center.
At the same time appellant entered into these agreements, it executed restrictive covenants applicable to the property on which it intended to construct the Cub Foods store and restrictive covenants applicable to the property to be conveyed to Anthony's. The restrictions placed on the parcel conveyed to Anthony's, not at issue in this case, prohibited uses that could be incompatible with a neighboring supermarket including use as a bar, adult bookstore, grocery store, or car dealership.
The "Declaration of Restrictions" (covenant) at issue in this case identifies appellant as the fee owner of both the "benefited parcel" and the "restricted parcel" and provides:
Whereas [appellant] has agreed to sell . . . the Benefited Parcel to Anthony's . . . subject to, and conditioned upon the existence of, the covenants and restrictions set forth herein; and
Whereas, the covenants and restrictions set forth herein are intended to run with the land and bind the owners, lessees, occupants and users of the Restricted Parcel for the benefit [of] the Benefited Parcel.
Now, Therefore, for good and valuable consideration and intending to be legally bound thereby, Declarant, for itself and its successors and assigns, does hereby declare that the Restricted Parcel shall be subject to, and shall be used in conformance with the following covenants and agreements:
1. For a period of (i) 25 years from and after the date hereof or (ii) during the term of that certain Lease between Anthony's . . . as landlord, and [respondent], and any extensions or renewals of the same as tenant, whichever is lesser, the following restriction shall apply to the Restricted Parcel:
No part of the Restricted Parcel shall be used or leased for the purpose of sale of liquor or alcoholic beverages, except for beer with an alcohol content of 3.2 percent.
2. The agreements, restrictions and covenants hereinmade shall be deemed restrictive covenants running with the land and shall be binding upon the Restricted Parcel and any person who may from time to time own, lease or otherwise have an interest in the Restricted Parcel.
3. In the event of any breach or threatened breach of any of the agreements, terms, covenants or conditions contained in this Declaration, the owner of the Benefited Parcel shall be entitled to enjoin such breach or threatened breach and shall have the right to invoke any right and remedy allowed at law or in equity or by statute or otherwise.
. . . .
The Cub Foods store on the restricted parcel has a "3.2% off-sale" license for the sale of 3.2 percent malt liquor. Beginning in 2001, the products sold under this license have included beverages typically labeled as "flavored malt beverages" and carrying brand names such as Bartles Jaymes, Bacardi Silver, Zima, and Skyy Blue (offending products). None of the offending products is flavored with hops.
"Off-sale" is the sale of alcoholic beverages for consumption off the licensed premises only. Minn. Stat. § 340A.101, subd. 20 (2002).
"3.2 percent malt liquor" is malt liquor containing not less than one-half of one percent alcohol by volume nor more than 3.2 percent alcohol by weight. Minn. Stat. § 340A.101, subd. 19 (2002).
Respondent sued appellant under the covenant, to enjoin the sale of all 3.2-percent alcohol beverages other than "beer" as was sold by Cub Foods in 1994. It is undisputed that the offending products did not exist in 1994.
Appellant moved for summary judgment, arguing that the covenant identifies only the "owner" of the benefited parcel as the party authorized to seek enforcement of the covenant, and that Anthony's, not respondent is the owner. Appellant also argued that, as a matter of law, the term "beer," includes the offending products.
Respondent also moved for summary judgment, arguing that the covenant is for the benefit of respondent, and therefore is enforceable by respondent, and that, as a matter of law, the covenant restricts sales to 3.2-percent alcohol products being sold at Cub stores in 1994, those being beer products characterized by the flavor of hops.
The district court denied appellant's motion for summary judgment and granted respondent's motion for summary judgment after concluding that the term "owner" in the enforcement clause is ambiguous, and that the ambiguity should be resolved as a matter of law to include respondent as a party entitled to enforce the covenant. With respect to the term "beer," the court determined that "`beer' as the parties understood it at the execution of the [covenant] could only be a hops-based alcoholic beverage. . . . Neither party could have contemplated the kind of `evolution' or `progress' in alcoholic beverages now proffered as `beer' by [appellant]." This appeal followed.
DECISION
"On an appeal from summary judgment we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the [district court] erred in [its] application of the law." State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).
A motion for summary judgment shall be granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that either party is entitled to a judgment as a matter of law. On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted.
Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted).
In Minnesota, restrictive covenants are subject to standard rules of contract interpretation. Snyder's Drug Stores, Inc. v. Sheehy Props., Inc., 266 N.W.2d 882, 884-85 (Minn. 1978). "The interpretation of a contract is a question of law if no ambiguity exists, but if ambiguous, it is a question of fact and extrinsic evidence may be considered." City of Virginia v. Northland Office Props. Ltd. P'ship, 465 N.W.2d 424, 427 (Minn. App. 1991), review denied (Minn. Apr. 18, 1991). Where resort to extrinsic evidence is necessary, construction then becomes a question of fact for the jury unless such evidence is conclusive. Blackburn, Nickels Smith, Inc. v. Erickson, 366 N.W.2d 640, 643 (Minn. App. 1985), review denied (Minn. June 24, 1985); Deutz Crow Co., Inc. v. Anderson, 354 N.W.2d 482, 486 (Minn. App. 1984) (determining summary judgment is appropriate to construe ambiguous language in a contract where the extrinsic evidence of the parties' intent is undisputed and conclusive). Whether a contract is ambiguous is a question of law, on which the reviewing court owes no deference to the district court's determination. Blackburn, 366 N.W.2d at 644.
I. Standing
Appellant argues that the district court erred by granting summary judgment on the meaning of the term "owner," after finding that term ambiguous as used in the enforcement clause of the covenant.
The parties agree that, under traditional property law principles, this covenant that, by its terms, runs with the land, may be enforced by anyone holding an interest in the benefited parcel, including a lessee, like respondent. But appellant relies on Section 5.3 of the Restatement, Property (Third) Severances (2000), to argue that the covenant specifically restricts enforcement to Anthony's and prevents the covenant from running to respondent-lessee. The restatement provides: "[e] xcept as otherwise provided by its terms, the benefit . . . of an affirmative covenant created prior to a lease of the property to which the benefit . . . is appurtenant runs to the lessee. . . ." Id. (emphasis added).
Appellant argues that Anthony's, not respondent, is the "owner" of the benefited parcel, and that due to the language of the covenant providing for enforcement by the "owner," respondent lacks standing to enforce the covenant. Appellant argues that respondent is a stranger to the "contract," was not the intended beneficiary of the covenant, and is not an "owner" of the benefited parcel.
Respondent counters that it is entitled to enforce the restrictive covenant because the covenant only came about due to appellant's negotiations with respondent in its attempt to terminate respondent's leasehold interest in the restricted parcel. Respondent argues that this is clear evidence that respondent was intended as the beneficiary of the restrictive covenant. Respondent argues that it qualifies as an "owner" of the property through ownership of the leasehold interest, and that the enforcement clause does not prevent the covenant from running to respondent.
After concluding that "owner" as used in the enforcement clause is ambiguous, the district court examined the undisputed extrinsic evidence of the circumstances that gave rise to the restrictive covenant, as well as traditional property law principles. The district court concluded that respondent is the beneficiary of the covenant and, under traditional property law, could be deemed an "owner" of the property, and so has standing to enforce the covenant. We agree.
The district court first considered the intent of the parties as reflected in the language of the covenant in arriving at its conclusion that respondent has a sufficient interest in the benefited parcel to have standing to enforce the restrictive covenant. The district court also looked to the intent of the parties as evidenced in the 1994 negotiations, and the incorporation of standard black-letter property law principles into the covenant, to support its determination that respondent can enforce the covenant.
As the district court noted, appellant remains the fee owner of the benefited property. Anthony's is a purchaser under a contract for deed. Respondent holds an option to purchase should Anthony's default on the contract, and respondent owns a leasehold interest in the benefited property.
An owner is not necessarily one owning the fee simple, or one having in the property the highest estate it will admit of. One having a lesser estate may be an owner, and indeed, there may be different estates in the same property vested in different persons and each be an owner thereof.
Judd v. Landin, 211 Minn. 465, 472-73, 1 N.W.2d 861, 865 (1942) (quotation omitted). We agree that "owner" as used in the enforcement clause does not sufficiently restrict enforcement to Anthony's, so as to overcome the rule that the benefit here, which is appurtenant, runs to respondent-lessee.
We also agree that an examination of the extrinsic evidence of the facts and circumstances that led to the execution of the covenant conclusively demonstrates that respondent was the intended beneficiary, and as such is entitled to enforce the covenant. All negotiations for restriction were between appellant and respondent. The covenant runs with the land and is co-extensive with the terms of respondent's lease. The district court did not err in determining, on summary judgment, that respondent has standing to enforce the covenant.
II. Breach of the covenant
Appellant argues that by resolving the question of whether the offending products are included in the term "beer," the district court again entered the realm of fact-finding and mistakenly imposed its own interpretation of that term rather than reserving the issue for trial before a finder of fact.
The district court stated: "[W]hen interpreting the terms of a contract, the Court is to give effect to the parties' intentions at the time the contract was drafted," citing Karim v. Werner, 333 N.W.2d 877, 879 (Minn. 1983); Sheehy, 266 N.W.2d at 884. Appellant argues that the district court erred by ignoring the rule of contract construction that "the intent of the parties becomes relevant only when the contract language is ambiguous." Fena v. Wickstrom, 348 N.W.2d 389, 390 (Minn. App. 1984). And, appellant states, once a contract term has been deemed to be uncertain or ambiguous, the court must deny a motion for summary judgment and submit the question of contract interpretation to a finder of fact. Matter of Turners Crossroad Dev. Co., 277 N.W.2d 364, 368-69 (Minn. 1979).
But the district court did not specifically conclude that the term "beer," as used in the covenant, is ambiguous. The court determined the meaning of the word "beer" based on the ordinary understanding of the term as used in the covenant. In construing statutes or contracts, courts should consider the language used in its context and with common sense. Mut. Serv. Cas. Ins. Co. v. Wilson Township, 603 N.W.2d 151, 153 (Minn. App. 1999). Terms or words should be construed in the sense of their plain, ordinary, fair, usual, and popular sense meaning rather than philosophical, literal, or technical sense. Id. The district court determined that the plain, ordinary, fair, usual, and popular sense of "beer" means a "hops-based alcoholic beverage." We agree that hops flavoring is essential to the ordinary definition of beer.
Appellant contends that the unambiguous definition of beer should include the offending products because they are included in the regulatory definition of beer, specifically Minn. Rule 7515.0100, subp. 4, which states that, "`Beer' as defined in the Code of Federal Regulations and parts 7515.1000 to 7515.1120 means malt beverages or malt liquors." Appellant encourages the court to adopt the following syllogism:
Beer is a malt beverage.
All of the offending products are malt beverages.
Therefore, the offending products are beer.
But the conclusion that all malt beverages are beer does not follow from the premises. Therefore appellant's argument is not persuasive.
Appellant also offered a dictionary definition of beer from Merriam-Webster's Collegiate Dictionary, to argue that the term includes beverages other than those flavored with hops. The first definition of the word "beer" from that dictionary is "an alcoholic beverage usually made from malted cereal grain (as barley), flavored with hops, and brewed by slow fermentation." The second definition in this dictionary, as in several other dictionaries, defines a nonalcoholic beverage flavored with roots or other plant parts, a definition clearly not implicated in the definition of "beer with a 3.2 alcohol content." The common definition of alcoholic beer includes the requirement of flavoring with hops. And, applying a common sense approach to the definition of beer, we agree with respondent that an ordinary consumer ordering or looking to purchase a "beer" would never expect to receive a Bartles James cooler, or any of the other offending products.
We note that the definition quoted in appellant's brief appears to be from the Merriam-Webster Online Dictionary (2004), found at http://www.m-w.com/cgi-bin/ dictionary?book=Dictionaryva=beer.
The American Heritage Dictionary, Second College Edition (1982) defines beer as: "1. A fermented alcoholic beverage brewed from malt and flavored with hops. 2. Any of various drinks made from extracts of roots and plants: birch beer." Webster's Third International Dictionary (1993) defines "beer" as: "1: a malted and hopped somewhat bitter alcoholic beverage . . . 2: a carbonated nonalcoholic or a fermented slightly alcoholic beverage with flavoring derived from roots and other plant parts — used chiefly in compounds; see birch beer, ginger beer, root beer, spruce beer."
A third definition contained in two of the dictionaries we examined is "fermented mash." There is no evidence in the record that any of the offending products is "fermented mash."
There is ample support in the record to show that the common meaning of beer, as used in the covenant, is an alcoholic beverage flavored with hops, and does not include the offending products. The district court did not err by applying the common, ordinary meaning of "beer" rather than an industry-specific or regulation definition urged by appellant. Summary judgment on the meaning of the term "beer," as used in the covenant, was appropriate.