Opinion
No. A06-777.
Filed March 13, 2007.
Appeal from the District Court, Hennepin County, File No. 27-CV-04-012018.
Paul J. Robbennolt, Dorsey Whitney, LLP, Minneapolis, MN 55402 (for respondent).
David K. Snyder, Joshua D. Christensen, Eckberg, Lammers, Briggs, Wolff Vierling, PLLP, Stillwater, MN 55082 (for appellant).
Considered and decided by KALITOWSKI, Presiding Judge; HALBROOKS, Judge; and ROSS, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2006).
UNPUBLISHED OPINION
Appellant challenges the district court's denial of its motion for summary judgment and the district court's granting of respondent's summary-judgment motion on the ground that the district court erred by concluding that the lease provisions require appellant to pay the fixed minimum rent during the first three years of the renewal option periods. Because we conclude that the district court did not err, we affirm.
FACTS
Appellant RadioShack Corporation signed a lease with respondent Bradley Operating Limited Partnership's (Bradley) predecessor to rent retail space at the Marketplace at 42 shopping center in Savage. The five-year lease, which commenced on March 1, 1999, provided for two additional five-year renewal periods. Bradley acquired the shopping center in October 1999. The lease terms set a fixed minimum rent during each term; the fixed minimum rent as reflected in the amended agreement for the primary five-year term was $34,234.75 per year. The first renewal option period, which commenced on March 1, 2004, and ends February 29, 2009, has a fixed minimum rent of $36,555.75 per year. The second renewal option period runs from March 1, 2009, through February 28, 2014, with a fixed minimum rent of $38,876.75 per year.
The district court order indicated rent of $34,338.75 for the primary term, $36,666 for the first renewal option period, and $38,999 for the second renewal option period.
The lease contains the following provision that allows RadioShack, under certain circumstances, to pay rent based on its minimum gross sales rather than the fixed minimum amount:
39. MINIMUM GROSS SALES:
If [RadioShack's] Gross Sales after the third Fiscal Year of the Primary Term or after the third Fiscal Year of each of the option periods provided pursuant to Section 7 hereof, are less than Six Hundred Thousand and 00/100 Dollars ($600,000.00), [RadioShack] shall have the option to: (1) terminate the Lease and all rights and obligations of both parties upon sixty (60) days prior notice to [Bradley]; or (2) pay [Bradley] three percent (3%) of Gross Sales monthly, in arrears, within twenty (20) days after the end of each calendar month, in lieu of [RadioShack's] obligation to pay Fixed Minimum Rent and all additional charges under the Lease. If [RadioShack] elects as a remedy the right to pay a percentage of Gross Sales as specified above, [RadioShack] shall retain the right to terminate this Lease.
The term "gross sales" is defined as "all merchandise sales made by [RadioShack] in any Fiscal Year."
On April 10, 2003, RadioShack exercised its right under paragraph 39 of the lease to pay 3% of its monthly gross sales because its gross sales for 2002, the fourth fiscal year of the primary lease, were $455,336.73. For the remainder of the primary lease term, RadioShack made rental payments based on its monthly gross sales.
On November 3, 2003, RadioShack exercised its first option to renew the lease, effective March 1, 2004. Rather than reverting to the fixed minimum rent, RadioShack continued to pay rent based on 3% of its monthly gross sales during the new lease term. Upon receiving the first payment in the new term, Bradley informed RadioShack that RadioShack was required by the terms of the lease to resume payment of the fixed minimum rent until after the third fiscal year of the renewal period, when the monthly gross-sales rent provision could again take effect if gross sales were less than $600,000.
When RadioShack refused to pay the fixed minimum rent, Bradley brought a declaratory-judgment action, seeking unpaid rent and specific performance. RadioShack counterclaimed, requesting declaratory judgment as to its interpretation of the lease. Both parties sought summary judgment. The district court granted Bradley's partial summary-judgment motion on liability, concluding that under the terms of the lease, RadioShack must pay the fixed minimum rent for the first three years of the option periods and that remeasuring of the rent is permitted in the fourth and fifth years. On Bradley's subsequent motion for summary judgment on damages, the district court awarded Bradley $55,314.13 for past rent and $19,510.75 in attorney fees and costs. This appeal follows.
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). We "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).
In this case, the parties brought cross-motions for summary judgment. They agree that there are no genuine issues of material fact and that resolution of this matter rests upon the interpretation of the lease terms. Summary judgment is appropriate in deciding disputes arising out of unambiguous contract language. In re Turners Crossroad Dev. Co., 277 N.W.2d 364, 368-69 (Minn. 1979). The parties further agree that the lease terms are unambiguous. We, therefore, review this matter de novo. Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn. 2004).
"A lease is a contract which should be construed according to ordinary rules of interpretation." Amoco Oil Co. v. Jones, 467 N.W.2d 357, 360 (Minn.App. 1991). "[W]hen a contract is unambiguous, a court gives effect to the parties' intentions as expressed in the four corners of the instrument, and clear, plain, and unambiguous terms are conclusive of that intent." Knudsen v. Transp. Leasing/Contract, Inc., 672 N.W.2d 221, 223 (Minn.App. 2003), review denied (Minn. Feb. 25, 2004). We apply "the cardinal rule of construction that any interpretation which would render a provision meaningless should be avoided on the assumption that the parties intended the language used by them to have some effect." Indep. Sch. Dist. No. 877 v. Loberg Plumbing Heating Co., 266 Minn. 426, 436, 123 N.W.2d 793, 799-800 (1963).
Therefore, the entire contract is to be considered, and "[a]s far as is reasonably possible it is to be construed so as to harmonize all of its parts." Country Club Oil Co. v. Lee, 239 Minn. 148, 151-52, 58 N.W.2d 247, 249 (1953). "[T]erms will not be so strictly construed as to lead to a harsh and absurd result." Employers Mut. Liab. Ins. Co. of Wis. v. Eagles Lodge of Hallock, Minn., 282 Minn. 477, 479-80, 165 N.W.2d 554, 556 (1969). But the unambiguous language "shall be enforced by courts even if the result is harsh." Denelsbeck v. Wells Fargo Co., 666 N.W.2d 339, 346-47 (Minn. 2003) (quotation omitted).
Here, the key language of paragraph 39 permits RadioShack to terminate the lease with 60 days' notice or to exercise its right to pay rent based on its monthly gross sales when its "Gross Sales after the third Fiscal Year of the Primary Term or after the third Fiscal Year of each of the option periods provided pursuant to Section 7 hereof, are less than Six Hundred Thousand and 00/100 Dollars ($600,000.00)." (Emphasis added.) RadioShack contends that the district court ignored the unambiguous language of the lease and that the correct interpretation is that, once exercised, RadioShack's option to pay rent based on monthly gross sales continues until its sales performance is remeasured after the third fiscal year of the first renewal option period. If RadioShack's gross sales exceed $600,000 at that time, RadioShack contends that the rent reverts to the fixed minimum; if gross sales are below $600,000, RadioShack claims that it is entitled to continue paying rent based on monthly gross sales.
The district court concluded that RadioShack's option of paying rent based on monthly gross sales was available after the third fiscal year of the primary lease term and then again after the third fiscal year of each renewal period. The district court stated that this interpretation was necessary "to give meaning to the term, `or after the third Fiscal Year of each of the option periods.'" We agree.
The plain language of paragraph 39 provides that RadioShack has the right to pay rent on a reduced basis if its income, as measured after the third fiscal year of "the Primary Term or after the third Fiscal Year of each of the option periods" is less than $600,000. If RadioShack exercises its right, the rent based on monthly gross sales is "in lieu of" its obligation to pay the fixed minimum rent. We find no support in the provision for RadioShack's argument that its rent obligation, once reduced, remains at the monthly gross-sales amount until and unless its annual gross sales returns to $600,000 or more as measured after the third fiscal year of a subsequent lease period. We, therefore, conclude that the district court did not err.