Opinion
AP-21-01
08-02-2021
55 OAK STREET Appellant v. RDR ENTERPRISES, INC., Appellee
SUPPLEMENTAL ORDER
DANIEL I. BILLINGS, JUSTICE
On May 28, 2021, this court issued an order affirming the District Court (Wisscasset, Martin, J.) on all aspects of its ruling on the matter presently on appeal except one: whether the force majeure clause in the commercial lease between Plaintiff 55 Oak Street ("Oak Street") and Defendant RDR Enterprises, Inc. ("RDR") precludes a finding of default for the months of June, August, September, October and November. Specifically, the court found that there was no record on which to decide whether a failure to mitigate the effects of a force majeure event would abrogate the force majeure clause's protection from default and termination of the lease. The court invited supplemental briefing from the parties on two questions:
1.) what effect, if any, does the failure to mitigate a force majeure event have on the force majeure clause's protection from default for failure to pay rent under this lease agreement?; and
2.) does the resolution of this question involve an ambiguity in the contract requiring the presentation of extrinsic evidence and further findings of fact?
The parties have submitted their supplemental briefs and the court is now prepared to rule on these questions and enter its final judgment.
Oak Street argues that the force majeure clause requires RDR to mitigate damages to excuse its nonperformance. In other words, Oak Street argues that unless RDR demonstrates that it has mitigated damages from the force majeure event, in this case by opening at 40% capacity, the force majeure clause provides no protection from default. Oak Street cites two cases in support of its reading of the contract: Gulf Oil Corp. v. F.E.R.C., 706 F.2d 444 (3d Cir. 1983) and Chemetron Corp. v. McLouth Steel Corp., 381 F.Supp. 245 (N.D. Ill. 1974). Both cases state that a party wishing to use a force majeure clause to excuse its nonperformance must show that it has taken steps to avoid the event's occurrence or minimize its effects on the party's performance. Gulf Oil, 706 F.2d at 454; Chemetron, 381 F.Supp. at 257. However, both cases concern contracts for the delivery of a regular supply of commodities, not commercial leases. The obligation to pay rent under a commercial lease is sufficiently distinct that the court does not find these cases persuasive.
Oak Street also raises an argument that the force majeure clause does not apply to the time period at issue because RDR failed to satisfy a "reasonable control" requirement Oak Street reads into the force majeure clause. The court has already ruled that the force majeure clause applies to the time period in question, so it will disregard Oak Street's extraneous argument.
Oak Street and RDR both argue that the contract is unambiguous and no extrinsic evidence is necessary to interpret it. The court disagrees. The force majeure clause states:
The court notes that neither party expressed a desire to submit extrinsic evidence to suggest how the parties intended the force majeure clause to operate under these circumstances. This is unsurprising, given the unprecedented nature of the COVID-19 pandemic and related government-ordered shutdowns.
FORCE MAJEURE. Neither party hereto will be liable for any failure to comply or delay in complying with its obligations hereunder if such failure or delay is, including but not limited not to, due to acts of God, inability to obtain labor, strikes, lockouts, lack of materials, governmental restrictions,
enemy actions, civil commotion, fire, unavoidable casualty or other similar causes beyond such party's reasonable control (all of which events are herein referred to as "Force Majeure Events"). It is expressly agreed that neither party will be obliged to settle any strike to avoid a Force Majeure Event from continuing.(A. 19.) The clause states in one part that neither party will be "liable" for failure to perform due to force majeure events, but seems to contemplate a general duty to mitigate damages for all force majeure events except a strike. The clause is silent on whether failure to mitigate damages means that a party is once again "liable" for failure to perform. Therefore, the contract is ambiguous on this point.
If a contract is ambiguous, then its interpretation is a question of fact. Am. Prot. Ins. Co. v. Acadia Ins. Co., 2003 ME 6, ¶ 11, 814 A.2d 989. Absent a request for specific findings of fact, this court must assume that the District Court made all necessary findings that could be gleaned from the evidence before it. Associated Builders, Inc. v. Oczkowski, 2002 ME 115, ¶ 11, 801 A.2d 1008.
Therefore, this court must assume that the District Court found that the force majeure clause provides protection from default under these factual circumstances, even though RDR failed to mitigate damages. To find that RDR is not protected from a default under these circumstances would subject it to a bizarre contractual obligation: RDR would be entitled to use the force majeure clause as an excuse to pay decreased rent, but only if it paid at least the amount the court later determined it owes. Such a result would require an unreasonable reading of the contract that this court will not make.
The District Court's order is hereby AFFIRMED.