Opinion
C.A. No. 06C-06-039.
Date submitted: April 16, 2007.
July 19, 2007.
Paul Cottrell, Esquire, Melissa L. Rhoads, Esquire, Tighe Cottrell, P.A., Wilmington, Delaware.
John A. Sergovic, Esquire, Sergovic Ellis, P.A., Georgetown, Delaware.
Dear Counsel:
Pending before the Court are the Parties' Cross-Motions for Summary Judgment. The Court denies Defendant's Motion for Summary Judgment and grants Plaintiff's Motion for Summary Judgment for the reasons set forth herein.
Statement of the Case
NPC International, Inc. ("NPC") filed the Complaint in this matter on June 6, 2006, seeking declaratory judgment against Defendant Rehoboth Mall Limited Partnership ("RMLP"). NPC originally requested the case be heard on an expedited basis due to the impending ejectment of NPC from the leased premises on July 15, 2006. However, RMLP agreed to maintain the status quo pending a decision of the case on the merits. RMLP filed its Answer on July 21, 2006. The parties have exchanged written discovery. On January 29, 2007, NPC filed a Motion for Summary Judgment. On February 26, 2007, NPC filed its Opening Brief in Support of its Motion for Summary Judgment. On February 28, 2007, RMLP filed its Opening Brief in Support of its Motion for Summary Judgment and in opposition to NPC's Motion for Summary Judgment. NPC timely filed an Answering Brief and, subsequently, RMLP filed a Motion to Strike portions of that brief. NPC both responded to the Motion to Strike and filed a Motion to Amend its Complaint. The Motion to Strike and the Motion to amend were taken under advisement pending the resolution of the Motions for Summary Judgment. Because I conclude NPC is entitled to summary judgment on its request for declaratory judgment without taking into consideration any allegations of fraud, I do not reach the issues raised by RMLP's Motion to Strike or NPC's Motion to Amend.
Statement of the Facts
On December 19, 1984, RMLP and Pizza Hut of Kirkwood Highway, Inc. ("Pizza Hut") entered into a Ground Lease Agreement ("the Lease") whereby Pizza Hut was granted a leasehold interest in a certain portion of the Rehoboth Mall Shopping Center ("Rehoboth Mall"). The Lease was for a term of fifteen years ("Original Lease Term") and contains seven successive options to extend the term of the Lease. Specifically, the Lease provides, in relevant part:
53. RENEWAL PERIODS: Provided Lessee is not in default at any time during the term of this lease, Lessee shall have the right and option to extend the term of this Lease from the date upon which it would otherwise expire for Seven (7) successive renewal periods of Five (5) years each (such periods being hereinafter called a Renewal Period) upon the same terms and conditions as are herein set forth, except as hereinafter modified. If Lessee elects to exercise said option to renew, it shall do so by giving written notice of such election to lessor on or before the date which is one hundred eighty (180) days before the beginning of the Renewal Period for which the term hereof is to be renewed by the exercise of such option. If Lessee elects to exercise said option to renew, the term of this Lease shall be automatically extended for the Renewal Period covered by the option so exercised without execution of an extension of renewal lease.
Lease (attached as Exhibit A to Defendant's Opening/Answering Brief on the parties' Cross Motions for Summary Judgment), ¶ 53.
In August of 1997, Pizza Hut assigned its interest in the Lease to NPC. NPC made four late rental payments for the months of January 1998, February 1998, March 1998, and August 1998. Additionally, in June 2000, a propane leak occurred at the Rehoboth Mall Shopping Cen ter pro pert y. NPC acknowledges this leak was a violation of 7 Del. C. § 6028. The Lease provides that the Tenant must "comply with all governmental laws, ordinances, orders and regulations affecting the Leased Premises". Lease, ¶ 17.
By way of letter dated December 20, 20 00 ("t he 200 0 Renewal Letter"), NPC notified R MLP of its intent to renew the Lease for the first five year option term that was scheduled to commence on July 15, 2001. RMLP permitted NPC to exercise this first renewal option. During the five-year period of the renewal term, NPC has not defaulted under the Lease.
On November 29, 2005, NPC sent a letter ("the 2005 Renewal Letter") to RMLP, notifying RMLP of its intent to enter into the second five-year renewal term that was scheduled to commence on July 15, 2006. The letter was addressed to RMLP c/o The Cordish Company and references Pizza Hut #2815, 3P Rehoboth Mall, Rehoboth Beach, DE. The letter reads:
Dear Lessor,
In accordance with the Lease Agreement dated December 19, 1984, NPC International, Inc. hereby notifies you of their intention to extend the lease for five (5) years, through July 14, 2011.
Per the Lease, the fixed monthly rent for the five-year option shall be $4,051.83 plus the CPI increase from July of 2001 to July of 2006 and will commence on July 15, 2006.
Any questions or comments concerning the above, please do not hesitate to contact me at (620) 231-3390.
Sincerely, NPC MANAGEMENT, INC. Beth Neville Property Manager
This letter was, in all material respects excluding the amount of rent and the dates of the Lease term, identical to the December 20, 2000, letter NPC sent RMLP that notified RMLP of its intention to extend the Lease for the first five-year period.
In response to the November 29, 2005, letter, RMLP replied that it did not intend to renew the Lease because (1) NPC MANAGEMENT, Inc. is not the Lessee and, thus, may not exercise the option to renew; (2) the notice contained merely the "intention" to exercise the option but did not, in fact, exercise the option; and (3) NPC was in default of the Lease in as much as there had been a release of hazardous material on the Premises in violation of applicable laws in July of 2000 and four late rent payments in 1998. This lawsuit ensued.
This argument was abandoned before the Court.
Motions for Summary Judgment Standard of Review
This Court will grant summary judgment only when no material issues of fact exist, and the moving party bears the burden of establishing the non-existence of material issues of fact. Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979). Once the moving party has met its burden, the burden shifts to the non-moving party to establish the existence of material issues of fact. Id. at 681. Where the moving party produces an affidavit or other evidence sufficient under Superior Court Civil Rule 56 in support of its motion and the burden shifts, the non-moving party may not rest on its own pleadings, but must provide evidence showing a genuine issue of material fact for trial. Super. Ct. Civ. R. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 322-323 (1986). If, after discovery, the non-moving party cannot make a sufficient showing of the existence of an essential element of his or her case, summary judgment must be granted. Burkhart v. Davies, 602 A.2d 56, 59 (Del. 1991), cert. denied, 504 U.S. 912 (1992); Celotex Corp., supra. If, however, material issues of fact exist, or if the Court determines that it does not have sufficient facts to enable it to apply the law to the facts before it, summary judgment is inappropriate. Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962).
In the event that parties file cross-motions for summary judgment, "the parties implicitly concede the absence of material factual disputes and acknowledge the sufficiency of the record to support their respective motions." Browning-Ferris v. Rockford Enters., 642 A.2d 820, 823 (Del.Super. 1993); see also Super. Ct. Civ. R. 56(h).
Discussion
NPC argues it is entitled to a declaratory judgment as a matter of law because (a) the only alleged breach of the Lease occurred prior to NPC's exercise of the first renewal option and was therefore waived by RMLP when it accepted NPC's request to renew; accordingly, such breach may not now be used as grounds for refusing NPC's request to exercise the second option to renew; or, alternatively, (b) NPC and RMLP have modified the Lease through their course of conduct such that RMLP does not have a legal basis for refusing to renew the Lease. RMLP counters that it is entitled to summary judgment because NPC's breaches during the Original Lease Term were sufficient grounds for RMLP to reject NPC's request for a second renewal. Moreover, RMLP contends it did not waive any right to deny the second renewal by its consent to the first renewal term n or did RMLP and NPC modify the terms of the Lease.
NPC essentially argues that any breach that took place during the Original Lease Term may have been basis for refusal to permit NPC's first request to renew the Lease but any such breaches are insufficient grounds upon which to deny a second request to renew or, for that matter, any future renewal requests. Notably, there has been no allegation of breach during the first renewal period — that is, from July 2001, when the first renewal term commenced, until November 2005, when NPC sent notice of its intent to exercise the second renewal option.
In Delaware, the rights and remedies of landlords and tenants are governed by contract law principles. Brown v. Robyn Realty Co., 367 A.2d 183 (Del.Super. 1976). When a contract is clear on its face, the Court will afford the language of the contract its plain and ordinary meaning. Universal Studios, Inc. v. Viacom, Inc., 705 A.2d 579 (Del.Ch. 1997). When construing a lease, the Court must give effect, if possible, to all of its terms. Roffman v. Wilmington Hous. Auth., 179 A.2d 99, 102 (Del. 1962). All of a lease's provisions must be read together and not in isolation. Grissom v. Nationwide Mut. Ins. Co., 599 A.2d 1086, 1088 (Del.Ch. 1991), overruled on other grounds by Jones v. State Farm Mut. Auto. Ins. Co., 610 A.2d 1352 (Del. 1992).
A. The alleged breaches 1. The assignment
At the outset, RMLP asserts that the Lease was not properly assigned to NPC pursuant to paragraph 19 of the Lease. This argument is clearly without merit. The Lease provides that Pizza Hut, during t he term of an y Franchise Agreement, could assign the Lease to another party at any time, without the consent of RMLP, provided Pizza Hut had prior written consent of the franchisor.
Lease, ¶ 19. The Lease does not require that Pizza Hut provide documentation to RMLP of such assignment.
The assignment of franchise rights in Delaware from Pizza Hut to NPC was signed by the Vice President of the Franchise on June 24, 1997. The Lease was assigned to NPC by an "Assignment and Assumption of Lease" on August 25, 1997. The Court finds that the assignment from Pizza Hut to NPC was in accord with all applicable provisions of the Lease.
2. Late Payment of Rent and Environmental Violations
RMLP contends the fact that NPC made four late rent payments in 1998 together with the presence of an environmental pollutant on the Leased Premises in 2000 constitute defaults under the Lease and, acc ord ingl y, entitle RMLP to reject NPC's attempt to exercise the second renewal period.
RMLP acknowledges that the option to renew is dependent upon NPC not being in default of the lease but contends it did not waive its right to hold NPC's defaults against NPC in the future by permitting the first Lease renewal. In support of its argument that the defaults that occurred during the Original Lease Term may still be relied upon, RMLP points to the non-waiver provision of the Lease, which provides, in relevant part:
Failure of the Landlord to insist upon the strict performance of any provision of this Lease or to exercise any option or any rules and regulations herein contained shall not be construed as a waiver for the future of any such provision, rule, or option.
Lease, ¶ 41. RMLP also relies upon the case Seaford Associates Limited Partnership v. Subway Real Estate Corp., 2003 WL 21254847 (Del.Ch. May 21, 2003), reargument denied, 2003 WL 21309117 (Del.Ch. May 29, 2003), to support its argument that the non-waiver provision of the Lease precludes NPC's position.
I find Seaford Associates actually supports NPC's position before this Court. In Seaford Associates, the Court found that the renewed lease at issue was a "new lease" and "any defaults that might have occurred before the execution of the [renewed lease] have no bearing on whether [Defendant] can satisfy the condition in the right of renewal that it `has not been in default'". Seaford Associates, 2003 WL 21254847, at *7. Likewise, I find NPC's exercise of the first renewal option resulted in a five year lease, albeit subject to the conditions of the original lease. The five year term commenced on July 15, 2001, and expired on July 14, 2006. RMLP is limited to this time frame when considering whether NPC is in default and, therefore, not entitled to exercise the second option to renew. As the parties agree, NPC has not breached the Lease during the renewal Lease term.
To the extent RMLP relies upon the non-waiver provision, I find this argument unpersuasive. The purpose of a non-waiver provision is to permit a landlord to enforce subsequent breaches, despite having chosen to forego enforcement of past breaches. The purpose is not to permit the landlord to resurrect past breaches. Under RMLP's theory, RMLP could permit NPC to exercise several more renewal options and then reject any subsequent renewal request based upon the 1998 late payments. Common sense and business practices render it desirous to remove uncertainties from the landlord/tenant relationship. Thus, the need for lease agreements. Parties make investments in reliance upon such agreements. To allow a "sleeper" breach occurring before the first renewal period began to run five years ago to be a viable breach for the purposes of considering the second renewal option throws the world of contracting parties into chaos. I find NPC properly exercised its second renewal term option as set forth in the Lease Agreement. Accordingly, NPC is entitled to declaratory judgment as a matter of law.
Conclusion
For the above-stated reasons, NPC's Motion for Summary Judgment is granted and RMLP's Motion for Summary Judgment is denied.IT IS SO ORDERED.