Opinion
No. 98CA0126
August 5, 1999
Appeal from the District Court of Pitkin County, Honorable T. Peter Craven, Judge, No. 95CV232
JUDGMENT REVERSED AND CAUSE REMANDED WITH DIRECTIONS
Austin, Pierce Smith, P.C., Thomas Fenton Smith, John M. Lassalette, Aspen, Colorado, for Plaintiff-Appellee.
Paul J. Taddune, P.C., Paul J. Taddune, Aspen, Colorado, for Defendant-Appellant.
Division V
Rothenberg and Taubman, JJ., concur
In this action for breach of a lease agreement, defendant, Trueman Aspen Co. (landlord) appeals the award of damages, costs, and attorney fees entered in favor of plaintiff, J. Thomas Clark Associates, Inc. (tenant). We reverse and remand for entry of judgment for landlord and for an award of costs and reasonable attorney fees in accordance with the lease agreement.
On June 1, 1986, landlord and tenant entered into a ten-year commercial lease agreement. The lease specified the tenant's use as:
Tenant shall occupy and use the Premises only as a modern, competitive grocery store or supermarket, as defined in more detail below . . . .
The lease went on to define the term "modern, competitive grocery store or supermarket," as follows:
As used herein, use as a modern, competitive grocery store or supermarket ('Permitted Uses') shall mean use for the purpose of making retail sales (and baking, cutting, packaging and/or otherwise cooking or preparing such items for sale) of groceries, meats, fish, bakery goods, fruits, vegetables, food products and food supplies of all kinds (none of which shall be intended for consumption upon the Premises), household cleaning supplies and materials, food preparation and food consumption related housewares, paper products and non-prescription health and beauty aids.
The lease also detailed "Special Items" that could be sold or leased by tenant:
Permitted Uses shall include the retail sale and/or leasing of other types of items ('Special Items') commonly sold or leased in other modern, major grocery stores or supermarkets; provided that, Tenant may not sell or lease any such Special Items if . . . the Landlord has granted an exclusive right of sale or lease of such Special Items to another tenant in the Shopping Center.
In addition to establishing the tenant's permitted use, the lease also contained a provision that restricted the landlord's ability to lease space in the shopping center to other tenants (exclusive use provision). That provision stated:
Landlord shall not . . . lease, use or permit to be used any other stores . . . within the Shopping Center for any of the Primary Permitted Uses. . . . Provided, however, that this provision shall not apply to prevent Landlord or other tenants from using stores . . . within the Shopping Center for operations as a . . . health food store . . . or restaurant or other facility serving prepared food intended for consumption on or off the Premises.
On September 29, 1995, landlord entered into a ten-year lease agreement for space adjacent to tenant for use as a delicatessen. In addition to selling prepared delicatessen food, the delicatessen sold sauces, pasta, oils, and condiments.
On December 7, 1995, tenant filed this action against landlord, alleging that landlord's lease to the delicatessen violated the exclusive use provision because the delicatessen sold groceries. Tenant further asserted that the sale of groceries by the delicatessen was not incidental to its business. Tenant also named the delicatessen as a party and sought injunctive relief against it.
Landlord countered that the delicatessen's operations constituted a restaurant or facility serving prepared food, a use which was specifically permitted under the exclusive use provision or, in the alternative, that the exclusive use provision pertained to tenant's right to be the only grocery store or supermarket in the shopping center and that the delicatessen was not such a store.
Prior to trial, landlord entered into an agreement with the delicatessen by which that business agreed not to sell any of the products tenant alleged violated the exclusive use provision. The effect of this settlement was to limit any future damages claimed by tenant. The delicatessen was subsequently dismissed from the action upon a finding that it was not aware of tenant's exclusive use provision, and tenant has not appealed that order.
After trial, the trial court concluded that landlord had breached the exclusive use provision of the lease and awarded damages in the amount of $4,000, together with costs and attorney fees totaling $146,480.82.
Landlord contends that the trial court erred in concluding that the lease to the delicatessen violated the exclusive use provision of tenant's lease. More particularly, landlord contends that the trial court mischaracterized the exclusive use provision as giving tenant the exclusive right to sell certain products rather than the exclusive right to operate a modern and competitive grocery store or supermarket. We agree.
The trial court found that tenant's lease was ambiguous as to whether the exclusive use provision granted an exclusive right to operate a grocery store or supermarket or an exclusive right to sell or lease certain products. The trial court concluded that the exclusive use provision granted the latter.
The parties, however, before the trial court and on appeal, have argued that the lease is unambiguous. We agree with the parties that the lease is unambiguous and agree with the landlord that the exclusive use provision grants tenant the exclusive right to operate a modern and competitive grocery store or supermarket.
The issue of whether a lease provision is ambiguous is a question of law to be decided by the court. United Fire Casualty Co. v. Armantrout, 904 P.2d 1375 (Colo.App. 1995).
A reviewing court need not defer to a trial court's interpretation of a written lease. Fibreglas Fabricators, Inc. v. Kylberg, 799 P.2d 371 (Colo. 1990). Thus, we review de novo the trial court's conclusions regarding ambiguity in the exclusive use provision of the lease. See Cheyenne Mountain School District No. 12 v. Thompson, 861 P.2d 711 (Colo. 1993).
Language in a lease provision is ambiguous when it is reasonably susceptible to more than one meaning. To determine if a lease is ambiguous, the language employed must be given its plain meaning in harmony with the other provisions of the lease. Fibreglas Fabricators, Inc. v. Kylberg, supra.
We conclude that the exclusive use provision is not ambiguous because the term "Primary Permitted Uses" used in the lease is not susceptible to multiple interpretations. While the specific phrase "primary permitted uses" is not defined or used elsewhere in the lease, the term "permitted use" is so used and defined. Tenant's "permitted use" is to operate a modern and competitive grocery store or supermarket. That use is defined in the lease as the right to sell a wide variety of food and household products described in broad and open-ended terms, e.g., groceries. In addition, the definition includes "special items" defined in broad terms as including items commonly sold or leased in other modern, major grocery stores or supermarkets. Further, the exceptions to the exclusive use provision are phrased in terms of business types, e.g., restaurants, not products.
One noted treatise, M. Friedman, Friedman on Leases 1599-1600 (4th ed. 1997), states:
It has been suggested that exclusives can be divided into two general classes: (1) an exclusive right to conduct a specified business, which is not literally directed against specific products, and; (2) an exclusive right to sell specified products.
These have also been [respectively] called `limited exclusives' and `true exclusives.' A right to conduct the only grocery store is a limited exclusive because a department store in the same complex may, nevertheless, conduct a grocery department, and there could be any number of stores in the complex selling food without being grocery stores.
In our view, the listing of general categories of merchandise in defining the permitted use as a modern, major grocery store or supermarket does not create a product exclusive. Tenant did not assert in the trial court, and does not argue on appeal, that the delicatessen is a modern, competitive grocery store or supermarket. Absent that assertion with evidentiary support in the record, there has been no breach of the lease as a matter of law.
Modern and competitive grocery stores or supermarkets, like department or large drug stores, carry a wide variety of products and merchandise. In addition to groceries and food, the product lines sold or leased by modern grocery stores or supermarkets include automotive parts and supplies, greeting cards, plants and flowers, hardware, drugs and pharmaceuticals, photographic supplies and processing, small appliances, electrical and plumbing supplies, lawn and garden supplies, stationery, and office supplies.
Tenant would have us hold, in effect, that if it sold greeting cards, then any other shop selling greeting cards would be prohibited. Similarly, its handling of automotive supplies would preclude an auto parts store, and its sale of drugs and pharmaceuticals would preclude a drug store or pharmacy. Furthermore, because the products sold or leased by tenant could change from time to time, tenant's construction of the lease would leave landlord uncertain as to what other businesses could lease space in the shopping center without risking a breach of tenant's lease.
Tenant argues that, when one takes into account the prior course of dealing, the lease grants tenant an exclusive right to sell the products specified. However, even if that is true, evidence of course of dealing may not be used to negate or contradict the unambiguous terms of a lease. Bennett Bear Creek Farm Water Sanitation District v. City County of Denver, 907 P.2d 648 (Colo.App. 1995). We hold that the exclusive use provision contained in tenant's lease is unambiguous and grants tenant the exclusive right to operate a modern, major grocery store or supermarket in the shopping center and does not create an exclusive right to sell particular products, and it, therefore, constitutes a limited exclusive.
Accordingly, the judgment awarding damages, costs, and attorney fees to tenant is reversed, and the cause is remanded with directions to enter judgment in favor of landlord and for an award of costs and reasonable attorney fees in accordance with the applicable provisions of the lease.
JUDGE ROTHENBERG and JUDGE TAUBMAN concur.