Oakwood Village LLC v. Albertsons, Inc.

104 P.3d 1226 (2004)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

On May 23, 1978, D, a retail supermarket, entered into a ground lease with P. On April 1, 1979, D assigned its leasehold interest in Oakwood Village Shopping Center (Oakwood Village) to One Hamilton Associates Limited Partnership (One Hamilton), also a defendant in this suit. Under the original lease between P and D, D remains liable for One Hamilton's 'full performance of Tenant's obligations.' Oakwood Village consists of twenty-six stores located on the center's property, and D was to function as the center's anchor tenant. The initial term of the ground lease was twenty-five years, with the option of eight five-year renewal terms, for a total of sixty-five years if D so desired. Under the lease and three subsequent amendments to it, D was to pay a monthly rental fee of $1667 ($20,000 per year) with no escalations in price, and all taxes, assessments, and utility charges on the leased premises for the duration of the lease. The lease contained an exclusive business provision precluding P from leasing space in the center to other supermarket tenants. The parties recorded the terms of their agreement in three documents: a ground lease (the lease), a development agreement (the agreement), and a declaration of restrictions and rights of easement (the declaration). D constructed and paid for a building on the leased premises. Upon completion of the building in January 1980, D occupied the space where it had operated a grocery store for more than twenty-one years. In May 2001, after perceiving a better opportunity in a new shopping center across the street, D ceased operating on the leased premises and moved one block south to become the anchor tenant in the Marketplace on Ninth shopping center (Marketplace on Ninth). D closed operations in the Village but paid the monthly rent on the now vacant building. D intentionally kept the old building unoccupied in order to restrict competition with its new store. The sales at P's remaining stores declined and there was a current vacancy of four stores, the occupants of three of which followed D to the new center. D refused to acknowledge a breach of the lease or to take any curative action. P filed suit for breach of the aforementioned covenants. P sought declaratory relief allowing it to terminate the lease and to re-enter and re-let the premises, and damages in excess of $1,000,000. the trial court dismissed the suit for 'failure to state a claim upon which relief can be granted.' Utah R. Civ. P. 12(b)(6). P appealed. P argues that an implied covenant of continuous operation requires D to remain open throughout the entire term of the lease. P contends that D is prohibited from ceasing its grocery store operation at any time during the lease term. Pargues that even assuming that D has the discretion to cease operation the covenant of good faith and fair dealing inherent in the lease prohibits D from paying rent on a vacant building to restrict competition with its new store. P argues that such an act demonstrates bad faith under the circumstances and violates an implied covenant.