United States Court of Appeals
For the First Circuit
No. 04-1611
J.G.M.C.J. CORPORATION,
Plaintiff, Appellant,
v.
SEARS, ROEBUCK & COMPANY,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. James R. Muirhead, U.S. Magistrate Judge]
Before
Lynch, Circuit Judge,
Stahl, Senior Circuit Judge,
and Lipez, Circuit Judge.
William S. Gannon, on brief, for appellant.
Martha Van Oot and Orr & Reno, P.A., on brief, for appellee.
December 10, 2004
STAHL, Senior Circuit Judge. Plaintiff-Appellant J.G.M.C.J.
Corporation ("J.G.M.C.J.") purchased commercial property that was
subject to a lease entered into by the original owner of the
property and Defendant-Appellee Sears, Roebuck & Co. ("Sears").
Sears eventually assigned its interest in the lease to HomeLife
Corporation ("HomeLife"). Before the lease term ended, HomeLife
exercised two extension options contained in the lease. HomeLife
subsequently filed for bankruptcy protection, and J.G.M.C.J. now
seeks declaratory judgment that Sears is obligated to pay rent
pursuant to the extension of the lease. J.G.M.C.J. also raises a
variety of common law and statutory claims in an attempt to recover
lost rent from Sears. The district court granted summary judgment
to Sears on all counts, and we affirm.
I. BACKGROUND
On February 1, 1990, Sears entered into a lease (the "Lease"),
as tenant, with Cohas Brook Associates ("Cohas"), as landlord, for
part of a to-be-constructed shopping plaza located at 1875 South
Willow Street in Manchester, New Hampshire (the "Premises").
Apparently, J.G.M.C.J. then purchased the Premises from Cohas and
constructed the plaza, largely in reliance on Sears' anchor tenancy
and its creditworthiness as a tenant. Upon completion of the
construction, Sears used the leased space to open a "HOMELIFE"
store, which at the time of the signing of the Lease was a division
of Sears.
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J.G.M.C.J. became the successor in interest to the Lease,
which had been negotiated by Cohas. The Lease had an original term
of ten (10) years, with an option for Sears to extend the term for
two (2) additional five (5) year terms upon 180 days notice to the
landlord. The Lease contained an Assignment and Sublease Clause,
which read:
19. Assignment and Sublease
[Sears] shall have the right to assign this lease
. . . subject to [J.G.M.C.J.]'s approval . . . .
In the event of . . . assignment, [Sears] shall
remain responsible for the payment of rent and
the performance of its other obligations, but not
beyond the term to which [Sears] has agreed in
writing.
Paragraph 3 of the Lease defined "term" as "commenc[ing] on the
Commencement Date and terminat[ing] ten (10) years thereafter
("Term")."
Sears subsequently decided to sell off its HOMELIFE division
to HomeLife Corp., retaining a nineteen percent ownership interest
in the new corporation. By letter dated November 24, 1998 (the
"November 24, 1998 Letter"), Sears sought the consent of
J.G.M.C.J., pursuant to Paragraph 19 of the Lease, to assign the
Lease to HomeLife. In this letter, Sears represented:
Please be assured that HomeLife will
continue to operate the store as a HOMELIFE
store. The rights, duties and obligations of
landlord and tenant under the Lease will not
change. Sears will continue to be responsible
for the tenant's obligations under the Lease.
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The assignment to HomeLife was approved in writing by J.G.M.C.J. on
December 15, 1998. In conjunction with the assignment, J.G.M.C.J.
provided HomeLife with an estoppel certificate dated December 15,
1998, which read in pertinent part:
1. The Lease is in full force and effect and
has not been modified or amended except by [an
amendment not relevant to this appeal]. There
are no other agreements between Landlord and
Tenant with respect to the Premises.
2. The term of the Lease commenced on August
1, 1990 and will continue until 11:59 p.m.
July 31, 2000, subject to two five-year
renewal options as provided for in the Lease.
Pursuant to J.G.M.C.J.'s consent, Sears, on February 1, 1999,
assigned its "right, title and interest" in the Lease to HomeLife,
which in turn assumed "all rights, obligations and duties" under
the Lease.
In a letter dated October 5, 1999, J.G.M.C.J. advised Sears,
pursuant to Paragraph 3A of the Lease, which obligated J.G.M.C.J.
to provide Sears with "written notice of the imminent expiration of
the Term," that the Lease would expire on July 31, 2000. The
letter requested that Sears provide J.G.M.C.J. "notice of [its]
intention to exercise [its] option to extend the term of the Lease
for an additional five (5) years." Sears did not respond.
On July 24, 2000, J.G.M.C.J. and HomeLife executed an
Extension and Amendment to the Lease ("Extension Agreement"), in
which J.G.M.C.J. granted HomeLife's request to exercise both five-
year extension options contained in the Lease. In addition, the
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Extension Agreement materially altered several provisions of the
Lease. For example, the Extension Agreement: (1) increased the
rent for the extended terms to higher than what had been provided
for in the original Lease and (2) amended a provision of the Lease,
which originally stated that Sears did not have to operate a
business on the Premises, to grant J.G.M.C.J. the right to
terminate the Lease in the event HomeLife failed to operate a
business on the premises for a period of ninety (90) consecutive
days or longer.
Furthermore, the Extension Agreement provided that to the
extent J.G.M.C.J. and HomeLife had the authority to so acknowledge,
they acknowledged that "the execution of this Extension shall in no
way be considered a waiver of Landlord's rights against Sears
Roebuck and Co. under the Lease." Sears, however, was not a party
to, and did not sign, the Extension Agreement.
On July 16, 2001, HomeLife filed for bankruptcy in the United
States Bankruptcy Court for the District of Delaware. HomeLife
continued to pay rent under the terms of the Extension Agreement
until November 23, 2001, when the trustee rejected the Lease.
On August 5, 2003, J.G.M.C.J. filed its Amended and Restated
Complaint against Sears, seeking declaratory judgment that Sears is
obligated to perform under the terms of the Extension Agreement,
and also alleging that Sears: (1) breached the implied covenant of
good faith and fair dealing; (2) committed the tort of negligent
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representation; (3) would be unjustly enriched if excused from
performance under the Extension Agreement; and (4) engaged in
unfair or deceptive acts in violation of the New Hampshire Consumer
Protection Act. On March 3, 2004, the district court1 granted
Sears' Motion for Summary Judgment on all counts. J.G.M.C.J. filed
this timely appeal.
II. DISCUSSION
Summary judgment is proper when "the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as
a matter of law." Fed. R. Civ. P. 56(c). In ruling on the motion,
the district court must "view the facts in the light most favorable
to the non-moving party, drawing all reasonable inferences in that
party's favor." Barbour v. Dynamics Research Corp., 63 F.3d 32, 36
(1st Cir. 1995).
We note at the outset that the Lease, pursuant to Paragraph
23, is governed by New Hampshire law. Under New Hampshire law,
"[a] lease is a form of contract that is construed in accordance
1
Pursuant to District of New Hampshire Local Rule 73.1(b)(2),
this case was randomly assigned to a United States Magistrate
Judge, an assignment to which the parties did not object. In
accordance with 28 U.S.C. § 636(c) and New Hampshire Local Rule
73.1(a), the Magistrate Judge was designated to conduct any and all
proceedings. An appeal from a judgment entered by a Magistrate
Judge pursuant to this procedure is treated in the same manner as
an appeal from any other judgment of a district court.
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with the standard rules of contract interpretation." Echo
Consulting Servs., Inc. v. N. Conway Bank, 669 A.2d 227, 230 (N.H.
1995). "[T]he proper interpretation of a lease is ultimately a
question of law for [the] court to determine." N.A.P.P. Realty
Trust v. CC Enters., 784 A.2d 1166, 1168 (N.H. 2001) (citation
omitted). Moreover, "[i]n the absence of ambiguity, the intent of
the parties to a lease is to be determined from the plain meaning
of the language used." Echo Consulting Servs., 669 A.2d at 230.
And, the "determination whether a contract term is ambiguous" is a
question of law. Id.
With these background contract principles in mind, we engage
in plenary review of the district court's grant of summary
judgment. Burns v. State Police Ass'n of Mass., 230 F.3d 8, 10
(1st Cir. 2000). J.G.M.C.J. raises the variety of claims listed
above in an attempt to bind Sears to the Extension Agreement. We,
like the district court below, find them all without merit.
A. Declaratory Judgment on Sears' Obligations Under the Extension
Agreement
First, J.G.M.C.J. claims that Sears remained liable under the
Extension Agreement by virtue of the common law contract principle
that an original lessee, after assignment, remains liable for the
payment of rent during the assignee's extension of the lease. See
Maybury Shoe Co. v. Rochester Factory Holding Co., 185 A. 654, 655
(N.H. 1936) (noting that "[t]he lessees' personal covenant to pay
the rent applied to the extended term [of the lease]"). Although
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this is an accurate statement of the common law, just as parties to
a contract may negotiate terms that vary from the common law,
parties to a lease may limit their respective obligations in the
event of an assignment. Cf. S. S. Kresge Co. v. Sears, 87 F.2d
135, 138 (1st Cir. 1936) (stating that under Massachusetts common
law, parties can contract, "in case of assignment . . .[,] that
lessee shall not be further liable"). Here, Sears did just that:
it limited its obligation in the event of assignment through
Paragraph 19 of the Lease. In that Paragraph, Sears and J.G.M.C.J.
expressly agreed that, in the event of assignment of the Lease,
Sears would not be responsible for the payment of rent and the
performance of other obligations "beyond the term to which [Sears]
ha[d] agreed in writing." (Emphasis added.)
To get around this express limitation, J.G.M.C.J. argues that
the "term" referenced in Paragraph 19 is the original ten-year term
plus the two five-year extension options. This argument fails
because the Lease "term" is defined in Paragraph 3 of the Lease as
that period of time "commenc[ing] on the Commencement Date and
terminat[ing] ten (10) years thereafter."2
2
We note that J.G.M.C.J. itself called the original ten-year
lease term the "term" in its letter of October 5, 1999, notifying
Sears of the expiration of the Lease. In that letter, J.G.M.C.J.,
through its President John B. Sullivan, stated, "please accept this
notice of the 'imminent expiration of the term of the Sears'
Lease.'"
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Alternatively, J.G.M.C.J. argues that Paragraph 19 was amended
by the parties pursuant to Paragraph 22, which provided that the
Lease may be amended "by an instrument in writing signed by the
parties." Under this theory, J.G.M.C.J. proposes that Sears'
November 24, 1998 Letter, read together with J.G.M.C.J.'s letter
approving Sears' assignment of the Lease to HomeLife and an
estoppel certificate provided to Sears by J.G.M.C.J., amended
Paragraph 19 to make Sears liable in the event HomeLife exercised
the extension options contained in the Lease, even without Sears'
written consent. Although it is true that a writing requirement
can be satisfied by a series of documents, see Ashuelot Paper Co.
v. Ryll, 259 A.2d 657, 658 (N.H. 1969), these documents, read as a
whole, did not amend Paragraph 19.3
Furthermore, J.G.M.C.J.'s own actions at the time HomeLife
exercised the extension options would have acted to terminate
Sears' obligations under the Lease by operation of law because the
Extension Agreement materially altered the terms of the original
Lease. Under common law principles, upon assignment of a lease,
the original "lessee becomes a surety for the performance of the
covenants of the lease by the assignee." Cf. S. S. Kresge, 87 F.2d
at 138 (discussing the obligations of an assignor under
3
Interestingly, on December 15, 1998, J.G.M.C.J. provided
HomeLife with an estoppel certificate which read, in pertinent
part, that the Lease "[had] not been modified or amended except by
[an amendment not relevant to this appeal]." Thus, J.G.M.C.J.
represented to HomeLife that Paragraph 19 had not been amended.
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Massachusetts common law). However, just as a surety is discharged
by material changes in a contract, an original lessee can be
discharged by material changes in the lease negotiated between the
assignee and the lessor. See McCabe v. Arcidy, 635 A.2d 446, 453
(N.H. 1993) (noting that material alteration in principal contract
without consent of guarantor discharges guarantor if the material
alteration injures the interest of the guarantor).
B. J.G.M.C.J.'s Remaining Common Law and Statutory Claims
J.G.M.C.J. next alleges a series of common law and statutory
claims in an attempt to hold Sears responsible for the rent
incurred by HomeLife as a result of HomeLife's exercise of the
extension options. It claims that Sears: (1) breached the implied
covenant of good faith and fair dealing; (2) committed the tort of
negligent representation; (3) would be unjustly enriched if excused
from performance under the Extension Agreement; and (4) engaged in
unfair or deceptive acts in violation of the New Hampshire Consumer
Protection Act. Each of these claims, however, fails because Sears
acted in full compliance with a valid, express contract, did not
misrepresent its obligations under that contract, and did not act
in an unfair or deceptive manner. See Centronics Corp. v. Genicom
Corp., 562 A.2d 187, 190, 193 (N.H. 1989) (A breach of the common
law obligation of good faith, when not related to an employment
contract or contract formation, requires a showing that the
defendant's "exercise of discretion exceeded the limits of
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reasonableness."); Snierson v. Scruton, 761 A.2d 1046, 1049-50
(N.H. 2000) (The tort of negligent misrepresentation requires a
showing that the defendant made a negligent misrepresentation of a
material fact, and that the plaintiff justifiably relied on it.);
Tentindo v. Locke Lake Colony Ass'n, 419 A.2d 1097, 1100 (N.H.
1980) (A claim of unjust enrichment will not lie "[w]here there is
a valid express contract between the parties . . . [because] the
law will not imply a quasi-contract."); Barrows v. Boles, 687 A.2d
979, 986 (N.H. 1996) (To state a claim under the New Hampshire
Consumer Protection Act, "[t]he objectionable conduct must attain
a level of rascality that would raise an eyebrow of someone inured
to the rough and tumble of the world of commerce." (citation
omitted)). Thus, Sears is not liable for any of the rent due under
the Extension Agreement.
Affirmed.
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