Opinion
C.A. No. 02C-06-027 HDR.
Submitted: March 12, 2004.
Decided: July 20, 2004.
Melvin E. Soll, Esq., Dover, Delaware, for Plaintiff.
William M. Chasanov, Esq., of Brown, Shiels, Beauregard Chasanov, Georgetown, Delaware, for Defendant.
OPINION Defendant's Motion for Summary Judgment DENIED
Before the Court is a motion for summary judgment filed by Defendant Carolyn S. Roberts ("Roberts"), the owner of a commercial property leased by Plaintiff Ray Red Enterprises of Delaware, Inc. ("Ray Red"). Ray Red filed suit, aiming to enforce a right-of-first-refusal clause in the lease. Roberts seeks judgment as a matter of law, contending that, because it breached the lease by failing to pay rent, Ray Red currently has no rights under it. Based on the present state of the record in this case, further development of the factual circumstances surrounding the alleged breach is warranted. Accordingly, the motion for summary judgment is denied.
I.
Roberts owns property located in the Brenford Plaza Business Center in Dover, Delaware. Located there is the Classic Restaurant and Lounge, formerly known as the Rumors Restaurant and Lounge, which is owned and operated by Ray Red under a lease first executed in August 1992. The parties agreed to a five-year lease, with an additional five-year period at Ray Red's option. The lease also granted to Ray Red a right of first refusal over any future sale of the premises by Roberts. Although the company was delinquent in paying rent at various unstated times, Ray Red apparently continued operating throughout the first and second five-year periods. In 2000, Ray Red entered into a Purchase Agreement with several third-party buyers. The buyers agreed to purchase Rumors and its assets, excepting only the real property on which it is situated. The name of the restaurant was then changed to its current appellation. The present involvement of these third-party buyers is unclear, and is the subject of a dispute over the characterization of Ray Red's ongoing operations of the restaurant.
Pl. Answ. to Def. Mot., D.I. 21, Ex. A, ¶ 3 ("All parties acknowledge the building in which the business is located is not part of this Agreement.").
Thereafter, Roberts sold the premises to Maddalena Rental LLC. Because the property initially was not offered to Ray Red, the company filed suit against Roberts, seeking to enforce its right of first refusal under the lease. Claiming Ray Red was operating as a holdover tenant without a lease, Roberts maintains that it is entitled to sell the property free of any right of first refusal. On this point, Roberts seeks summary judgment.
II.
On a motion for summary judgment, the Court's function is to examine the record to determine whether there are any genuine issues of material fact. If, after viewing the record in a light most favorable to the nonmoving party, the Court finds there are no genuine issues of material fact, summary judgment is appropriate. Summary judgment, however, will not be granted under any circumstances when the record reasonably indicates a material fact is in dispute or if it seems desirable to inquire more thoroughly into the facts in order to clarify the application of law to the circumstances.
Moore v. Sizemore, 405 A.2d 679 (Del. 1979); Oliver B. Cannon Sons, Inc. v. Dorr-Oliver, Inc., 312 A.2d 322 (Del. 1973).
Moore, 405 A.2d 679; Pullman, Inc. v. Phoenix Steel Corp., 304 A.2d 334 (Del.Super.Ct. 1973).
Ebersole v. Lowengrub, 180 A.2d 467 (Del. 1962).
III.
Among other provisions of the agreement, the lease provides Ray Red with a right of first refusal:
Should the Lessor consider accepting the offer to sell the Brenford Plaza complex, Lessee will be given the right of first refusal to purchase premises at the offered price. . . . Any sale will be subject to the provisions of this lease.
The lease further provides remedies for nonpayment of rent:
If Lessee does default in the payment of the rent, the Lessor shall give written notice of such default . . . and if within ten days . . . Lessee has not paid . . . then Lessor may consider Lessee in default of rent and in breach of this contract.
It also controls the procedures governing subleases:
Lessee may not sublet the leased premises unless Lessee first obtains written consent to same from Lessor. Lessor must give such consent upon a reasonable basis.
The central dispute concerns whether the lease remained in effect at the time Roberts sought to sell the property. Roberts contends it notified Ray Red that it was cancelling the lease. Specifically, Roberts contends that it expressly terminated the lease through a February 2000 letter: "Acceptance of these [late] payments in no way extends your lease for an additional year as you have continually been in . . . arrears." The letter further informed Ray Red that, "at this time," the company was "considered a holdover tenant." Roberts also argues that Ray Red admitted the lease had been rescinded by acknowledging that negotiations for a new lease had commenced. Ray Red denies these allegations, pointing to a May 2000 letter from Roberts's counsel advising the former that, under the terms of the lease, the company's "current attempt to sublet" must be negotiated with Roberts in advance. Ray Red also submits an April 2003 letter authored by Maddalena Rental, which states in full: "The Classic Restaurant and Dance Club has a lease with us untill [sic] December 31, 2003."
Def. Mem. of Law, D.I. 25, at 2 (no page numbers in original) ("The subject lease was expressly terminated by the letter written to [Ray Red owner] Mr. Bruner. . . .").
Id. Ex. B. Save for various tax records, see id. Ex. D., and a reproduced check and letter, Pl. Answ. Br., D.I. 26, Ex. A, Roberts does not provide any specific information regarding missing payments, acceptance of the same, or other dealing between the parties.
Def. Mem. of Law., D.I. 25, Ex. B.
Def. Reply, D.I. 27, ¶ 4 ("If Plaintiff had thought that the old lease still existed, he would never had entered into discussions for a new lease.").
Pl. Answ. Br., D.I. 26, Ex. B (reproducing letter from Roberts's counsel). See also id. at 2 (no page numbers in original) ("[D]iscussions did take place concerning a new lease, but Plaintiff refused to agree to cancel the old lease, and it remained in place."). The sublet issue centers on Ray Red's purchase agreement. The parties disagree over the nature and extent of the third-party buyers' involvement in the restaurant. See, e.g., id. Ex. A (Letter of Bernard Bruner to Charles Rodriguez) ("There are disputed charges and payments which individuals who managed the business may or may not have paid.").
Id. Ex. D.
Although the construction of a contract's terms is a legal question appropriately reserved to the Court, there are outstanding factual issues, necessary to such a determination, that cannot be properly decided at this stage of litigation. In their briefs, the parties dispute the circumstances surrounding the alleged breach of the lease. Roberts points to counsel's February 2000 letter indicating Ray Red will be considered a holdover tenant. Ray Red counters this assertion with the April 2003 letter from Maddalena Rental, which acknowledges that the Classic Restaurant "has a lease" with the company through December 2003.
See, e.g., Richard Paul, Inc. v. Union Improv. Co., 91 A.2d 49, 54 (Del. 1952); Grotto Pizza, Inc. v. Ocean Bay Mart, 1998 Del. Ch. LEXIS 128, at *21.
Both letters are ambiguous. Although the February 2000 correspondence refers to Ray Red's status as a holdover tenant, there is no evidence of how, or even if, Ray Red continued paying rent through 2003, nor any indication of how Roberts characterized the parties' relationship. Furthermore, in objecting to the alleged sublease, the letter expressly refers to Roberts's own rights under the lease. There is also language by the parties touching on continuing negotiations, with no mention of whether the old lease was still in effect. Finally, it is unclear whether Ray Red renewed the lease in 1998 for an additional five-year term, and if so, what its current status is.
Similarly, the April 2003 letter, allegedly proving that the lease was still in effect at the time of sale, is incomplete. Addressed in the generic "To whom it may concern," the letter fails to indicate its recipient. In addition, left unstated is whether the letter refers to the 1998 renewal lease or an independently-negotiated lease with Maddalena. The record is not developed sufficiently to allow the Court to construe adequately the provisions of the lease. It is instead appropriate to inquire more thoroughly into the facts in order to clarify the application of the law to the circumstances.
IV.
Because further development of the events surrounding the alleged breach of the commercial lease is warranted under the current state of the record, Roberts's motion for summary judgment is DENIED.