Opinion
CASE NO. 04-CV-1176 IEG (BLM), [Doc. Nos. 33, 41.].
September 8, 2005
Presently before the Court is plaintiff DDR Oceanside, L.L.C.'s ("DDR") and defendant Regal Cinemas, Inc.'s ("Regal") cross-motions for summary judgment. For the reasons stated below, the Court denies DDR's cross-motion for summary judgment, and grants in part and denies in part Regal's cross-motion for summary judgment.
BACKGROUND
A. Factual Background
DDR's suit arises out of an agreement whereby DDR's predecessor-in-interest agreed to build out and lease (the "Lease") commercial property, located at Oceanside Entertainment Center, Oceanside, California, to Regal for the operation of a 16-plex movie house (the "premises" or "theater"). (Pretrial Order at 1:27-2:2:6.) DDR is the current owner and landlord of the theater. Regal is the current lessee of the theater. Id.
Defendant entered into the agreement with plaintiff's predecessor-in-interest, Oliver McMillan Development, LLC. Plaintiff is the current owner and landlord of the Oceanside Entertainment Center.
On December 12, 1997, DDR's predecessor-in-interest (sometimes "DDR's predecessor") and Regal entered into a written fifteen year lease agreement. Regal and DDR's predecessor agreed the base rent would be determined by multiplying the gross leasable area ("GLA") by a predetermined dollar amount. (Pretrial Order at 15-24.) The GLA is "the number of square feet of area on all floors available for the exclusive use by the tenants" and "is measured from the exterior face of the exterior walls and the exterior face of service corridor walls." (Regal's Notice of Lodgement ("NOL") ISO Motion Ex. A p. 7.) The Lease estimated the GLA at 60,000 square feet. However, section 1.05 of the Lease provides, "[o]n or before the Rent Commencement Date, Landlord and Tenant shall determine the actual GLA of the floor area of the Theatre in the manner described in Section 1.03(e). Tenant and Landlord shall include the actual GLA of the Premises in the Completion Certificate . . . and the parties agree that the Minimum Rent . . . shall be determined based upon the actual GLA of the Premises as measured." Id. at 8 (sic). The "Rent Commencement Date" is defined as, "[t]he earlier of the Actual Opening Date or the date which is the 91st day from and after the Contingencies Date." Id. at 6.
Regal opened for business on December 10, 1999. On December 22, 1999, Oliver McMillan, DDR's predecessor's property management company, sent a letter congratulating Regal on its December 10, 1999 opening, and notifying Regal that a monthly minimum rent of $841,078.00 was then due. Oliver McMillan calculated the base rent after concluding that the GLA of the theater was 60,077 square feet. (Regal's NOL Ex. C.) The parties did not complete a "Completion Certificate," as required by section 1.05 of the Lease.
On May 25, 2000, DDR, now the owner of the theater, notified Regal that its base rent and common area maintenance ("CAM") fees were to be based on 60,856 square feet of GLA, and not 60,077 square feet, as indicated by DDR's predecessor. (Regal's NOL Ex. D.) DDR stated that its predecessor's December 12, 1999 statement of GLA was merely an estimate, and was not intended to be used as "the actual gross leasable area of the premises as calculated in accordance with" the Lease. (Regal's NOL Ex. H.)
DDR now claims that the theater's actual GLA is 63, 721 square feet.
On October 2001, Regal filed for bankruptcy in the Middle District of Tennessee. During the course of Regal's bankruptcy proceedings, DDR submitted Claim Numbers 1097 and 1100 in anticipation that Regal would reject the Lease, and for rent and CAM fees based on the larger GLA calculation. (Regal's NOL Ex. E.) Regal objected to DDR's claim on the grounds that it had not rejected the lease and that it had met its rent obligations to DDR. In response, DDR withdrew its claims, but "with the specific reservation of all rights with regard to any outstanding cure amounts." (Regal's NOL Exs. L and M.) Accordingly, on May 7, 2002, the bankruptcy court ordered DDR's claim expunged. (Regal's NOL Ex. N.) The bankruptcy court approved Regal's reorganization plan on December 7, 2001, effective January 29, 2002. (Regal's NOL Ex. K.)
Since December 1999, Regal has paid rent and CAM fees based on 60,077 square feet of GLA. (Regal's NOL. Ex. I.) DDR now seeks more than $86,081.76, plus nine percent interest, for DDR's alleged short payment of rents from February 1, 2002 through the date of the filing of this civil action.
Plaintiff seeks damages from February 1, 2002 forward because plaintiff's reorganization plan became effective on January 29, 2002. (NOL Ex. 9.)
B. Procedural Background
DDR filed suit against Regal in San Diego Superior Court on May 7, 2004. Regal answered and removed to the United States District Court for the Southern District of California pursuant to diversity jurisdiction under 28 U.S.C. § 1441(a) and bankruptcy jurisdiction pursuant to 28 U.S.C. § 1452(a). On October 29, 2004, Regal moved this Court for an order transferring this action to the United States District Court for the Middle District of Tennessee. (Doc. No. 9.) This Court denied Regal's motion to transfer on December 20, 2004. (Doc. No. 20.)
The Court held a pre-trial conference on July 11, 2005. (Doc. No. 30.) The parties indicated that the issues involved had been winnowed down, and that those that were left could be disposed of on summary judgment. While the parties' motion cut-off date was May 6, 2005, the Court granted the parties leave to file cross-motions for summary judgment. (Doc. No. 32.) On August 1, 2005, the parties filed their respective cross-motions for summary judgment. (Doc. Nos. 33 and 41.) The parties have fully briefed the issues, and, pursuant to Civil Local Rule 7.1(d)(1), the Court finds their cross-motions for summary judgment appropriate for disposition without oral argument.
DISCUSSION
A. Legal Standards 1. Res Judicata
The doctrine of res judicata bars relitigation of claims that were or could have been asserted in an earlier proceeding.Levinson v. United States, 969 F.2d 260, 262 (7th Cir. 1992). A defendant relying on res judicata as a defense must plead it as an affirmative defense in his or her answer to the complaint.Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 212, 350 (1971).
A federal action may be barred by res judicata where an earlier lawsuit (1) involved the same claim sued upon in the instant civil action; (2) involved the same parties or persons in privity of interest with them; and (3) resulted in a final judgment on the merits. Nordhorn v. Ladish, 9 F.3d 1402, 1404 (9th Cir. 1993). However, res judicata does not apply when a cause of action has been expressly reserved for later adjudication. "Under a generally accepted exception to the res judicata doctrine, a litigant's claims are not precluded if the court in an earlier action expressly reserves the litigant's right to bring those claims in a later action." Apparel Art Intern. v. Amertex Enters., 48 F.3d 576, 586 (1st Cir. 1995); see also In re Matter of Energy Co-op., Inc., 814 F.2d 1226 at 1233 (7th Cir. 1987) ("If a court reserves for later resolution an issue that might otherwise have been adjudicated in the initial proceeding, res judicata will not operate to bar the subsequent suit.").
Bankruptcy judgments may have a res judicata effect. Donegal Steel Foundry Co. v. Accurate Prod. Co., 516 F.2d 583, 588 n 12 (citing Stoll v. Gottlieb, 305 U.S. 165 (1938)); In re Justice Oaks II. Ltd., 898 F.2d 1544, 1550 (11th Cir. 1990) ("This issue has been settled for some time: a bankruptcy court's order confirming a plan of reorganization is given the same effect as any district court's final judgment on the merits."). 2. Contract Interpretation and Modification
Contracts are to be interpreted so as to give effect to the mutual intention of the parties at the time of contracting, to the extent the mutual intent is ascertainable and lawful. Cal. Civ. Code § 1636. The mutual intent of the parties is to be ascertained solely from the contract that is reduced to writing, if possible. Cal. Civ. Code § 1639. The contract language controls if clear and explicit. Cal. Civ. Code § 1638. Words are to be given their ordinary and popular meaning, unless used in a special or technical way by the parties. Cal. Civ. Code § 1644. Technical words are interpreted as used by persons in the profession or business to which they relate, unless clearly used differently. Cal. Civ. Code § 1644. The contract is to be interpreted as a whole so as to give effect to every part, if practicable. Cal. Civ. Code 1641. A contract may be interpreted by reference to the circumstances under which it was made, and the matter to which it relates. Cal. Civ. Code § 1647.
In California, modification of written contracts is also controlled by statute. Pursuant to California Civil Code § 1698:
(a) A contract in writing may be modified by a contract in writing.
(b) A contract in writing may be modified by an oral agreement to the extent that the oral agreement is executed by the parties.
(c) Unless the contract otherwise expressly provides, a contract in writing may be modified by an oral agreement supported by new consideration. The statute of frauds (Section 1624) is required to be satisfied if the contract as modified is within its provisions.
Section 1698(b) allows modification of a written contract by an oral agreement to the extent the oral agreement is executed. "Executed" in section 1698(b) has the normal meaning of that term in contract law. That is, the agreement must have been fully performed. Lockheed Missiles Space Co. v. Gilmore Indus., 135 Cal. App. 3d 556, 559 (Ct.App. 1982) (relying on Black's Law Dictionary to define "executed" as "completed; carried into full effect.") (internal quotations omitted).
Section 1698(c) allows oral modification of a written contract only if the written contract does not provide otherwise. See also Marani v. Jackson, 183 Cal. App. 3d 695, 704 (Ct.App. 1986) (noting that oral modification of a written contract is allowed only if "the written contract does not contain an express provision requiring that modification be in writing.").
"An agreement to modify a written contract will be implied if the conduct of the parties is inconsistent with the written contract so as to warrant the conclusion that the parties intended to modify it." Daugherty Co. v. Kimberly-Clark Corp., 14 Cal. App. 3d 151, 158 (Cal. Ct. Appl. 1971); Garrison v. Edward Brown Sons, 25 Cal. 2d 473, 479 (Cal. Ct. Appl. 1944) ("Before a contract modifying a written contract can be implied, the conduct of the parties according to the findings of the trial court must be inconsistent with the written contract so as to warrant the conclusion that the parties intended to modify the written contract.").
3. Summary Judgment
Summary judgment is proper where "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A material issue of fact is a question that a jury must answer to determine the rights of the parties under the applicable substantive law.Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Act Up!/Portland v. Bagley, 988 F.2d 868, 873 (9th Cir. 1993). A dispute is "genuine" only if "a jury applying [the substantive law's] evidentiary standard could reasonably find for either the plaintiff or the defendant." Anderson, 477 U.S. at 255.
In considering a motion for summary judgment, the Court must examine all the evidence in the light most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). The moving party bears "the initial responsibility of informing the district court of the basis for its motion."Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To satisfy this burden, the moving party must demonstrate that no genuine issue of material fact exists for trial. Id. at 322. However, the moving party is not required to negate those portions of the non-moving party's claim on which the non-moving party bears the burden of proof. Id. at 323.
On cross motions for summary judgment, the burdens faced by the opposing parties vary with the burden of proof they will face at trial. When the moving party will have the burden of proof at trial, "his showing must be sufficient for the court to hold that no reasonable trier of fact could find other than for the moving party." William W. Schwarzer, Summary Judgment Under the Federal Rules: Defining Genuine Issues of Material Fact, 99 F.R.D. 465, 487-488 (1984).
In contrast, a moving party who will not have the burden of proof at trial need only point to the insufficiency of the other side's evidence, thereby shifting to the nonmoving party the burden of raising genuine issues of fact by substantial evidence. T.W. Elect. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (citing Celotex Corp v. Catrett, 477 U.S. 317, 323 (1986);Kaiser Cement Corp. v. Fischbach Moore, Inc., 793 F.2d 1100, 1103-04 (9th Cir. 1986).
Courts may grant summary judgment motions touching upon contract interpretation when the agreement is unambiguous. See San Diego Gas Elec. Co. v. Canadian Hunter Mktg. Ltd., 132 F.3d 1303, 1307 (9th Cir. 1997). Ambiguity is a question of law for the court. Maffei v. N. Ins. Co. of N.Y., 12 F.3d 892, 898 (9th Cir. 1993). While courts ordinarily hesitate to grant summary judgment when a contract is ambiguous, there is no "rigid rule prohibiting reference to extrinsic evidence in resolving a contractual ambiguity on a summary judgment motion." San Diego Gas Elec. Co., 132 F.3d at 1307. Courts may still consider whether, construing the evidence in the nonmovant's favor, the ambiguity can be resolved consistent with the nonmovant's position. Id.
B. Analysis
1. Res Judicata
Regal argues that DDR's claim for increased rent and CAM fees is barred by res judicata. (Memo. ISO Motion at 11:4.) In Regal's bankruptcy proceedings before the United States Bankruptcy Court for the Middle District of Tennessee, DDR submitted claims for the underpayment of monthly rent and CAM fees and for lease rejection damages. (Regal's NOL Exs. E and F.) Regal objected to DDR's claim on the bases that "[t]he lease was not rejected and rent was paid." (Regal's NOL Ex. L pg. 24.) In response, DDR agreed that the lease had not been rejected, however, asserted that there were "still various cure items. Accordingly, while [DDR] consent[ed] to the expungement of [its] claims [it did] so with the specific reservation of all rights with regard to any outstanding cure amounts." (Regal's NOL Ex. M pg. 2.) On May 7, 2002, the Honorable Marian Harrison, United States Bankruptcy Judge, ordered that DDR's claims be disallowed because: (1) DDR agreed to the expungement of its claims; and (2) the Court was satisfied that, under the circumstances, that such relief was appropriate. (Regal's NOL Ex. N pg. 1.)
Regal asserted the doctrine of res judicata as an affirmative defense in its answer, and therefore, it can assert it on summary judgment. (Answer at 2:16-17.) The first two elements of the doctrine of res judicata are also satisfied. First, DDR makes the same claim in the instant civil action as it did in Regal's bankruptcy proceeding. There, as here, DDR sought increased rent and CAM fees based upon a GLA greater than 60,077 square feet. Second, there is an identity of parties. DDR and Regal were both parties to Regal's bankruptcy proceeding.
However, Regal's argument ultimately fails because the bankruptcy court did not adjudicate DDR's claims on the merits, and even if it did, DDR reserved its rights "with regard to any outstanding cure amounts." (Regal's NOL Ex. M pg. 2.) DDR "consented to the expungement of its claims." Id. A party's consent to the expungement of its claims before the bankruptcy court is the equivalent of a voluntary dismissal without prejudice before a district court. A dismissal without prejudice indicates that judgment is not on the merits and will have no preclusive effect. See Cooter Gell v. Hartmarx Corp., 496 U.S. 384, 396 (1990). Accordingly, the bankruptcy court's disallowance of DDR's claims, pursuant to DDR's consent to the expungement of its claims, was not on the merits and has no preclusive effect.
Even if the bankruptcy court's disallowance of DDR's claims could be construed as on the merits, DDR expressly reserved its right to bring its claims in a later action. DDR consented to the expungement of its claims with the "specific reservation of all rights as to any outstanding cure amount." (Regal's NOL Ex. M.) When the bankruptcy court disallowed DDR's claims, it did so in part because DDR consented to their expungement. (Regal's NOL Ex. N.) Since the bankruptcy court relied on DDR's consent to the expungement of its claims, it incorporated by implication DDR's express reservation of its rights to litigate these claims in a later action. Thus, DDR's claims are not barred by the principle of res judicata because the bankruptcy court expressly reserved DDR's right to bring these claims in a later action. See Apparel Art Intern. v. Amertex Enters., 48 F.3d at 586.
2. Lease Modification
Regal argues that Oliver McMillan modified the Lease, and therefore, DDR is estopped from seeking increased rent based on a greater GLA. Specifically, Regal contends that Oliver McMillan agreed to a GLA of 60,077 square feet and that DDR is bound by that determination. (Memo. ISO Motion at 6:4-6.)
As stated above, under California law, written contracts can only be modified in writing or by oral agreement where the agreement is executed. However, a contract's term can limit the ability of the parties to orally modify its terms. Cal. Civ. Code § 1698. Thus, where a written agreement requires written modifications, oral amendments are precluded. Conley v. Matthes, 56 Cal. App. 4th 1453, 1465 (Cal.Ct.App. 1997).
Here, section 23.13(b) of the Lease states, "[n]o alteration, amendment, change or addition to this Lease shall be binding upon LANDLORD or TENANT unless reduced to writing, signed by them and mutually delivered between them." (Regal's NOL Ex. A p. 54.) Further, "[n]o covenant, term, agreement or condition of this Lease shall be deemed to have been waived by LANDLORD or TENANT, unless such waiver be in writing." Id. at 51. Accordingly, the Lease cannot be orally modified, and any written modification must conform with the Lease's terms in order to be valid.
Regal argues that Oliver McMillan's December 22, 1999 letter, in which it stated that the minimum rent was based on a GLA of 60,077 square feet, was a valid and binding Lease amendment. Accordingly, it argues, the parties were not required to (1) jointly determine the actual GLA of the premises in a manner set forth by the lease; or (2) to complete out the "Completion Certificate." (See Regal's NOL Ex. A p. 8.)
Oliver McMillan's December 22, 1999 letter (the "letter") did not modify the Lease or waive any of its conditions. First, while subscribed by Oliver McMillan, the letter was never signed by Regal.
Second, and more importantly, the letter in no way indicates that Oliver McMillan intended it to take the place of the Lease mandated "Completion Certificate." (See Regal's NOL Ex. A) ("LANDLORD and TENANT shall determine the actual GLA . . . [and] shall include the actual GLA . . . in the "Completion Certificate."). The letter states, "I am sending you this information so that we may start the billing process and other related billing items on the right foot." (Regal's NOL Ex. A.) Regal argues that the "Completion Certificate" can be dispensed with because it is a "ministerial act." (Regals' Memo. ISO Motion at 8:3-5.) The lease's terms do not support Regal's characterization. Rather than a ministerial act, the "Completion Certificate" requires the parties come together and agree on the theater's actual GLA, and accordingly, Regal's minimum base rent. Thus, it is an integral and final part of the Lease agreement. In order to waive a contract provision, especially when it is vital to the contract terms, the intent to do so must be clear as evidenced by objective evidence. See Biren v. Equality Emergency Med. Group, Inc., 102 Cal. App.4th 125, 141 (Cal. Ct. Appl. 2002) (quoting Frank T. Hickey, Inc. v. Los Angeles Jewish Cmty. Council, 128 Cal. App. 2d 676, 682-683 (Cal. Ct. Appl. 1954) ("`The parties may, by their conduct, waive . . . a provision' where evidence shows that was their intent."). Here, the letter does not indicate that Oliver McMillan intended to amend the Lease to obviate the need for the "Completion Certificate." Therefore, the December 22, 1999 letter did not modify the Lease.
Since the Lease's terms survive in their original form, Regal and Oliver McMillan were required to collectively determine the theater's actual GLA and record the actual in the "Completion Certificate." This did not occur. Therefore, DDR is not bound by Oliver McMillan's preliminary determination that Regal owed rent based on a GLA of 60,077 square feet.
3. The Theater's Actual GLA
The heart of the dispute between Regal and DDR is the question of the theater's actual GLA. DDR asserts that the theater's actual GLA is 63,721 square feet. DDR arrives at this figure by totaling the square footage of the following distinct areas: (1) the theater's primary building, 60,332 square feet; (2) the ticket booth canopy, 2,170 square feet; (3) two recessed exits, 285 square feet; and (4) two enclosed exits, 934 square feet. (See Exhibit A attached to this Order for a diagram of the theater.) Regal claims that theater's actual GLA is only 59,983 square feet. Regal contends that only the theater's primary building should be included in the GLA, and thus, excludes the three other distinct areas.
The "theater's footprint" refers to the space within the theater's four walls. The ticket booth canopy, recessed exits, and outdoor exit corridors are outside the theater's walls, but all abut the theater.
Exhibit A to this Order is Exhibit P to Regal's NOL ISO its cross-motion for summary judgment.
a. The Theater's Primary Building
The sole dispute with regard to the theater's primary building is its actual GLA. DDR claims that the theater's actual GLA is 60,332 square feet. (Declaration of Mark Swenson ISO DDR's Motion ¶ 3.) Regal claims that the theater's actual GLA is 59,983.17 square feet. (Declaration of Robert Perry ISO Regal's Motion ¶ 4.) Thus, there is a genuine issue of material fact as to the theater's primary building's actual GLA. Accordingly, DDR's motion for summary judgment on this issue is denied.
b. The Three Disputed Areas
There is no genuine issue of material fact as to the location and square footage of the ticket booth canopy, the recessed exits, and the enclosed exits. The only dispute as to these three areas is whether the Lease's language permits each to be included in the theater's actual GLA; Regal argues that it does not, while DDR argues that it does.
The Lease states, "TENANT and LANDLORD shall determine the actual GLA of the premises by measurement of the floor area of the Theatre in the manner described in Section 1.03(e)." (Regal's NOL Ex. A p. 8.) Section 1.03(e) of the Lease states, "GLA . . . shall be measured for purposes of this Lease from the exterior face of exterior walls and the exterior face of service corridor walls (or fences in the case of leasable areas enclosed by fence or similar barricade)." Id. at 7. The lease defines GLA as:
the number of square feet of an area on all floors available for the exclusive use by the tenants or other occupants thereof and their customers, clients or other invitees, but not including mezzanines and balconies so long as such areas are used to display stock for sale and not otherwise open to clients and customers, and not including other areas and space defined herein as part of Common Areas.Id. (emphasis added). Section 1.03(d) of the Lease defines "common areas" as:
all areas, facilities and improvements operated or provided at or in connection with the Center from time to time for the non-exclusive common use of LANDLORD and the lessees or occupants of the Center (including TENANT), and shall include, but not be limited to, the Parking Retention Areas, delivery areas, sidewalks, stairways, service corridors, exit corridors, seating areas, buffer areas, screening facilities, retaining walls, landscaped areas, open space areas, utility systems, sanitary and other waste handling systems, holding tanks, force mains, fire detection and/or suppression systems, lifesafety systems, security systems, drainage systems and lighting systems.Id. Accordingly, an area is considered common, and not included in Regal's GLA, if (1) it is an area not exclusive to Regal, or (2) it is specifically denoted as a "common area" in the Lease. i. Recessed Exits
The recessed exits sit on the east and west sides of the theater. Both exit doors sit at the end of a small alcove. Thus, the disputed areas are outside the theater's walls, but are covered by an overhang. (See Swenson Decla. at Ex. H; Declaration of Edwin Schwing ISO Regal's Motion ¶ 6; Regal's NOL Ex. P.) The disputed areas total 285 square feet; 212 feet at the theater's west exit and seventy-three feet at the theater's east exit.
The recessed exits are "common areas" for the purposes of calculating the theater's actual GLA. Section 1.03(d) of the Lease states that "exit corridors" are "common areas." (Regal's NOL Ex. A p. 7.) Webster's International Dictionary defines a corridor as, "a usually covered passageway." Webster's Third New International Dictionary, Unabridged, Merriam Webster, Inc. The spaces between the exit doors and the theater's exterior wall are just that, covered passageways which lead from the exit doors to the outside. Since the recessed exits are "exit corridors," and the Lease defines "exit corridors" as common areas, the recessed exits are common areas under the terms of the Lease. Thus, the recessed exits' 285 square feet are properly excluded from the theater's actual GLA.
ii. Enclosed Exits
At the east side and the southeast corner of the theater there are two separate exits from the theater. (Schwing Decla. ¶¶ 4, 5; Regal's NOL Ex. P.) The exits open into two areas that are enclosed by a fence; a locked gate prevents access to each. Id. The fenced in area off the east exit totals 600 square feet, and the fenced in area off the southeast exit totals 334 square feet. (Swenson Decla. ¶ 4.)
DDR argues that both areas are for Regal's exclusive use, and therefore, should be included in the GLA. (DDR's Memo. ISO Motion at 10.) Regal claims that neither area is exclusive to it, and accordingly, must be excluded from the GLA. (Regal's Memo. ISO Motion at 14-15.)
a. East Exit
As stated above, outside the east exit is a fenced in area totaling 600 square feet. The gated area encompasses a small stairwell and a small concrete landing. Also within the gated area outside the east exit are four to six pipes which flow to the building adjacent to the theater. (Schwing Decla. ¶ 5; Regal's NOL Ex. T.)
The Lease specifically identifies "utility systems" as common areas. (Regal's NOL Ex. A p. 7.) Regal argues that the east exit enclosure is a "common area' because it contains a "utility system." Regal also asserts that the east exit is not under its exclusive control because DDR maintains a key to the locked gate. DDR claims that it does not have a key to the area, and therefore, it is under Regal's exclusive control.
There is a genuine issue of material fact as to whether or not the area outside the east exit is a "common area.". Regal is not entitled to summary judgment on its claim that the east exit is a "common area" because it encloses a "utility system." While the Lease states that "utility systems" are common areas, the Lease is ambiguous as to the definition of a utility system. Here, what Regal characterizes as a "utility system" is a fire system composed of a few pipes which sit flush against the theater's exterior wall and rise from the ground up. (Regal's NOL Ex. T.) When a contract is ambiguous, and a court cannot resolve the ambiguity, court's should refrain from granting summary judgment.See San Diego Gas Elec. Co., 132 F.3d at 1307. Because of the ambiguity in the lease regarding the "utility system," Regal's motion for summary judgment on this ground is denied.
Second, DDR is not entitled to summary judgment on its claim that the east exit should be included in the GLA. DDR argues that the area must be included in the GLA because it is exclusive to Regal. The parties have presented conflicting evidence on whether or not DDR has a key to the area; DDR presents evidence that it does not, while Regal presents evidence that DDR does. (Ballard Decla. ¶ 3; Schwing Decla. ¶ 8.) If DDR has a key to the area then it is not exclusive to Regal because an access key would permit DDR to enter the area at any time, even in nonemergencies, without seeking Regal's approval. Thus, there is a genuine issue of material fact regarding whether or not the east exit area is exclusive to Regal. Accordingly, the parties' respective cross-motions for summary judgment on this issue are denied.
b. Southeast Exit
The southeast exit area totals 334 square feet. The fenced area encloses a locked ladder that provides roof access to the adjacent tenant space. (Schwing Decla. ¶ 4.) DDR has a key to this area and to the locked ladder. Id. The area also houses a utility shed which Regal maintains for its exclusive use. (Ballard Decla. ¶ 4.) Thus, the fenced-in area encloses one element that is clearly common, the ladder, and one that is clearly exclusive to Regal, the utility shed.
Regal relies heavily on the deposition testimony of Mark Swenson. DDR retained Mark Swenson, a certified architect, to measure the theater's GLA. (Swenson Decla. ¶¶ 1-2.) At Swenson's deposition he testified that if the ladder provided access to other tenants then the southeast exit area would not be exclusive to Regal. (Regal's NOL Ex. V p. 62.) However, DDR objects to Swenson's testimony on the grounds that it is irrelevant and inadmissible because Swenson is not an expert on contract law or interpretation of written leases. (DDR's Reply at 5:16-21.) The Court grants DDR's objection as to Swenson's legal conclusions, and does not consider them in ruling on the parties' cross-motions for summary judgment.
Not withstanding the Court's evidentiary ruling, the area outside the southeast exit is a "common area" under the terms of the Lease. While Regal maintains a utility shed in it, DDR maintains a key to the area "for the purposes of maintaining access to the roof ladder" which provides access to other tenants' buildings. (Ballard Decla. ¶ 4.) DDR does not need or seek Regal's permission to enter this area. (Schwing Decla. ¶ 4.) Thus, the area is not exclusive to Regal because DDR's access is not restricted Accordingly, the southeast exit area is properly excluded from the theater's actual GLA calculation.
iii. Ticket Booth Canopy
The ticket booth canopy is a 2,170 square foot semi-circular area that extends off the front of the theater's facade. (See Regal's NOL Exs. P and Q.) The canopy covers the theater's ticket booth windows. There are three large arches in the canopy for ingress and egress. Id. Regal's name is on the front of the canopy, and Regal decorates the inside of it with movie posters and advertisements.
The theater sits in the center of the Oceanside Entertainment Center, and the Center's patrons routinely walk through the ticket booth area to get from one side of the Center to the other. (Schwing Decla. ¶ 3.) Up until Regal filed its cross-motion for summary judgment, DDR maintained garbage cans and cigarette receptacles underneath the canopy. Id. Lastly, Regal claims that DDR cleans the area, while DDR claims that Regal employs its own agents to clean it. (Id; Lyle Ballard's Decla. ISO Regal's Opp. ¶ 4.)
Since Regal filed its cross-motion for summary judgment DDR has removed the trash and cigarette receptacles. (Declaration of Edwin Schwing ISO Regal's Opp. ¶ 6.)
The ticket booth canopy area is a "common area," and therefore, is not included in the theater's GLA. The terms of the Lease define sidewalks and open space areas as "common areas." (Regal's NOL Ex. A.) The ticket canopy is both a sidewalk and an open space area. First, it serves as a walkway from one side of the Oceanside Entertainment Center to the other. While it may not be the exclusive passage or walkway, DDR admits that it is one. (Ballard Decla. ISO DDR's Opp. ¶ 3.) ("Although one can get from one tenant to another by walking through Regal's ticketbooth canopy area, this is by no means the exclusive nor common means of ingress or egress.") (sic) It is also an open space area because Regal allows non-paying customers to congregate, stand, or walk in the ticket booth canopy. (Schwing Decla. ¶ 3.) Since the ticket booth canopy is a "common area," it is excluded from the GLA.
CONCLUSION
For the foregoing reasons, the Court finds the following:
1. DDR's instant civil action is not barred by the doctrine of res judicata.
2. DDR's predecessor-in-interest's actions did not amend the lease, and therefore, DDR is not estopped from seeking an increase in Regal's base rent.
3. There is a genuine issue of material fact as to the theater's primary building's GLA.
4. The recessed exits are "common areas," and therefore, excluded from the GLA.
5. There is a genuine issue of material fact as to whether or not the east exit enclosure is a "common area" or should be included in the GLA.
6. The southeast exit enclosure is a "common area," and therefore, excluded from the GLA.
7. The ticket booth canopy is a "common area," and therefore, excluded from the GLA.
Accordingly, Regal's cross-motion for summary judgment is hereby DENIED in part and GRANTED in part. DDR's cross-motion for summary judgment is hereby DENIED.
The parties shall contact the Court forthwith in order to schedule a pretrial conference, or otherwise advise the Court of their respective intended courses of action.
IT IS SO ORDERED.