NOTE: Pursuant to Fed. Cir. R. 47.6, this disposition
is not citable as precedent. It is a public record.
United States Court of Appeals for the Federal Circuit
05-5181
KIMCO REALTY CORPORATION
and
CENTEREACH MALL ASSOCIATES, L.P.,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
___________________________
DECIDED: June 30, 2006
___________________________
Before MICHEL, Chief Judge, PLAGER, Senior Circuit Judge, and BRYSON, Circuit
Judge.
BRYSON, Circuit Judge.
Kimco Realty Corporation and Centereach Mall Associates, L.P., (collectively
“Kimco”) appeal from a decision of the United States Court of Federal Claims in a case
involving the government’s obligations under a lease agreement. Kimco Realty Corp. v.
United States, No. 98-736C. Kimco, the landlord, alleged that the government, the
tenant, owed additional funds under two provisions of the lease—one for common area
maintenance (“CAM”) charges and the other for reimbursement of building-value taxes.
The Court of Federal Claims granted the government’s motion for summary judgment
on the CAM charges issue. On the tax reimbursement issue, the court ruled for the
government after a trial on the documentary record. Because we conclude that the
court properly interpreted the provisions of the lease pertaining to tax reimbursement
and did not commit clear error in the findings it made based on the evidence relating to
that issue, we affirm that portion of the court’s judgment. However, because we
conclude that the lease is ambiguous with regard to the issue of the CAM charges, we
vacate the summary judgment on the CAM charges issue and remand for further
proceedings on that portion of the trial court’s judgment.
I
Kimco owns and manages a shopping center in the Town of Brookhaven, New
York. The United States Postal Service is a tenant in the shopping center, pursuant to a
ground lease that the Postal Service entered into in 1984 with the original fee owner,
Firstcent Shopping Center, Inc. In 1993, Centereach Mall Associates, L.P., acquired
the shopping center through foreclosure and is now the successor-landlord to the lease.
Kimco Realty Corporation operates and manages the shopping center on behalf of
Centereach Mall Associates.
The Postal Service’s leased parcel consists of 38,618 square feet. Although it
originally intended to transfer and assign the ground lease to a non-governmental entity
for construction of a post office, the Postal Service ultimately constructed the building
itself. The post office building covers 9,790 square feet of the leased space.
Two disputes have arisen between Kimco and the government. First, the parties
disagree about the scope of the government’s payment obligations for CAM charges.
The government contends that its responsibility is limited to three percent of the CAM
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charges for the shopping center’s general parking area. Kimco, on the other hand,
asserts that the government is responsible for three percent of the CAM charges
attributable to the entire shopping center. Second, the parties disagree about whether
the government is required, under the terms of the lease, to reimburse Kimco for a
portion of the building-value taxes Kimco has paid.
With regard to the CAM charges, the lease provides:
It is mutually understood that the U.S. Postal Service will be responsible
for their proportionate share of all applicable common area maintenance
charges . . . . That amount begin [sic] agreed as three (3%) percent of all
costs. Said costs shall include, but not limited to the following: general
cleaning including maintenance personnel; snow removal, maintenance of
lighting and cost of electricity; parking lot maintenance & stripping;
maintenance of signs; landscaping & maintenance thereof; repair of
curbing.
Lease, ¶ 33 (emphasis added). In addition, the lease states:
Tenant will be responsible for any and all general maintenance for the
common area maintenance for his 38,618 [square feet], which shall
include, but is not limited to general cleaning including maintenance
personnel; snow removal, maintenance of lighting and cost of electricity;
parking lot maintenance & stripping; maintenance of signs; landscaping &
maintenance thereof; repair of curbing.
Id., ¶ 43 (emphasis added).
With regard to tax reimbursement, the lease provides that “the tenant
agrees to pay . . . all municipal, county, and state taxes . . . that may be properly
levied or assessed against the demised premises or the buildings or
improvements thereon. Id., ¶ 15. Specifically the lease provides:
From January 1, 1984 to the date of occupancy of the demised premises
by the U.S. Postal Service, the Postal Service shall reimburse the
Landlord three (3%) percent of the total General Real Estate Taxes
attributed to land value, then from the date of the U.S. Postal Service’s
occupancy of the demised premises for the balance of this lease, . . .
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Postal Service shall reimburse the Landlord three (3%) percent of the total
General Real Estate taxes attributed to land, buildings, and improvements.
Percentage Reimbursement of Paid Taxes Rider, ¶ 1. The lease qualifies that
obligation, however, by providing as follows:
In the event the improvements constructed on the leased property are
government owned rather than leased,* the U.S. Postal Service shall
continue to be responsible for 3% of the total General Real Estate Taxes
attributed to land value only after beneficial occupancy of the newly
constructed Postal facility. (*and all improvements are tax exempt)
Id., ¶ 5.
On the issue of CAM charges, the trial court granted summary judgment in favor
of the government. The court explained that Kimco’s interpretation of the lease “fail[ed]
to take into account use of the word ‘applicable’ . . . [and] . . . fail[ed] to account for
lease paragraph 43’s reference to [the government’s] CAM responsibility and its relation
to [the government’s] 38,618 [square feet] of leased space.” According to the court,
“the use of the word ‘applicable’ limits the term ‘all’ such that [the government] is only
responsible for 3% of those CAM charges pertaining to it.” The court added that its
conclusion was “bolstered by lease paragraph 43, which states that [the tenant] is
responsible for the CAM ‘for his 38,618.’” In addition, the court noted that the examples
of CAM costs listed in paragraph 33 “appear[ ] to refer to performance of those
maintenance services relating to the parking lot only.” The court therefore concluded
that the government is responsible only for three percent of the CAM charges relating to
the shopping center’s parking lot.
On the issue of tax reimbursement, the court observed that the parties were “in
disagreement over whether the building is tax exempt” but concluded that the “issue is
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in fact much simpler.”1 The court explained that James Ryan, the assessor for the
Town of Brookhaven, stated in his deposition that the post office building had been
exempted from tax assessment. The court therefore reasoned that “[b]ecause the
building was not taxed, [Kimco] made no payments on the building’s value for which it
should be reimbursed by the [government].” Accordingly, the court concluded that the
government “is responsible for reimbursing [Kimco] for 3% of the land value taxes only.”
The court further found that the government had overpaid $27,080 to Kimco and that
the government was entitled to recover the payments it had made for taxes it did not
owe. Kimco appealed from both aspects of the court’s judgment.
II
On the tax reimbursement issue, Kimco rests its argument on its assertion that
under New York law the post office building is not tax exempt. For that reason,
according to Kimco, the government is required to pay three percent of the total tax
obligation for the entire shopping center. The trial court, however, concluded that the
evidence showed that the post office building was not in fact taxed and therefore must
be treated as tax exempt for purposes of calculating the government’s tax obligations
under the lease.
Two provisions of the lease are particularly pertinent. First, paragraph 15 of the
lease provides that the government must pay only those taxes “properly levied or
assessed against the demised premises or the buildings or improvements thereon.”
1
The court determined that the tax reimbursement issue was not appropriate
for summary judgment, but it noted that “the parties stipulated that the Court decide the
issues based on the parties’ proposed findings of fact and other pleadings in lieu of an
evidentiary hearing.”
05-5181 5
Second, although paragraph 1 of the “Percentage Reimbursement of Paid Taxes Rider”
to the lease states that the government will be obligated to reimburse the landlord for
three percent of “the total General Real Estate taxes attributed to land, buildings, and
improvements,” paragraph 5 of that rider provides that, if the improvements constructed
on the leased property are government owned and tax exempt, the Postal Service is
responsible for only “3% of the total General Real Estate Taxes attributable to land
value only.” Thus, if the government-owned post office building is tax exempt, the
government’s lease obligation is limited to a percentage of the taxes on the shopping
center land only, not a percentage of all the taxes on the land, buildings, and
improvements at the shopping center.
The trial court found that the post office building was tax exempt. In making that
finding, the court relied on the deposition of the town tax assessor, who testified that the
post office building was not included in his tax assessment. The trial court reasoned
that “because the town did not tax plaintiffs on the Post Office building, there are no
taxes paid by [Kimco] for which [the government] needs to reimburse [Kimco].” That is,
because the court found that the post office building was tax exempt, it held that the
government’s tax obligation was limited to the amount set forth in paragraph 5 of the tax
rider to the lease.
The trial court’s decision on the tax reimbursement issue rested on the evidence
submitted to it. Although Kimco challenged that evidence at trial and continues to do so
on appeal, the evidence came from a competent source and could properly be credited
by the court. Because the court did not commit clear error in relying on that evidence,
we affirm the court’s decision that the post office building was tax exempt and that the
05-5181 6
government therefore owed Kimco three percent of the tax obligation for the shopping
center land only, and not three percent of the total tax obligation for the shopping center
land, buildings, and improvements. Accordingly, we uphold the trial court’s ruling with
regard to the tax reimbursement issue.
III
With respect to the CAM charges issue, the lease does not define the terms
“common area” or “common area maintenance.” In particular, it does not expressly
restrict those terms to refer to the shopping center parking lot. Thus, as the trial court
acknowledged, “[a]t first glance, it seems that the [CAM] charges would include, as
[Kimco] claim[s], the cost of maintaining all common areas within the entire shopping
center.”
Despite the apparent breadth of the term “common area maintenance,” the trial
court concluded that the lease unambiguously limits the government’s CAM charge
obligation to paying three percent of the common area maintenance charges for the
shopping center parking lot. In reaching that conclusion, the court relied, first, on the
use of the word “applicable” in paragraph 33 of the lease. That paragraph provides that
the Postal Service “will be responsible for their proportionate share [three percent] of all
applicable common area maintenance charges.” The court concluded that the term
“applicable” defines a subset of all common area maintenance charges, and that the
Postal Service’s three percent share must relate to less than all the common area
maintenance charges for the entire shopping center. While that is a plausible
interpretation of the term “applicable,” it is not the only possible interpretation. The term
could be interpreted to refer to the particular types of charges set forth in the lease,
05-5181 7
without specific limitation to the common area maintenance charges pertaining to the
parking lot. Under that interpretation, paragraph 33 of the lease would require the
government to pay three percent of the CAM costs for all non-leased portions of the
shopping center.
The trial court also found that the clause in paragraph 43 of the lease providing
that the tenant “will be responsible for any and all general maintenance for the common
area maintenance for his 38,618 [square feet]” supports a narrow interpretation of the
phrase “all applicable common area maintenance charges” in paragraph 33. The court
viewed that language as indicating that the tenant would be responsible for the CAM
charges “related to the [tenant’s] leased space.” Because the court concluded that the
“only space used by the [tenant] in relation to its leased plot is the parking lot,” the court
considered paragraph 43 as providing support for the government’s submission that its
CAM charge obligation was limited to charges associated with the parking lot.
We disagree with the trial court’s interpretation of the language from paragraph
43. We interpret that language as meaning simply that the government is responsible
for all the common area maintenance services for its 38,618 square foot plot. Under our
interpretation of paragraphs 33 and 43, when read together, the government is
responsible for all CAM charges pertinent to its leased area and, in addition, for three
percent of “all applicable common area maintenance charges” pertaining to common
areas outside of its leased space. That interpretation would appear to support Kimco’s
argument that the term “common area maintenance charges” refers to the charges for
all areas within the shopping center that are not leased to particular tenants.
05-5181 8
In further support of its restrictive interpretation of the disputed lease language,
the trial court held that the specific examples of CAM costs listed in paragraphs 33 and
43 “appear[ ] to refer to performance of those maintenance services relating to the
parking lot only.” That is, the court invoked the rule of ejusdem generis and concluded
that the CAM charges relate only to parking lot maintenance.
We do not agree that the principle of ejusdem generis applies here. It is not clear
that services such as “general cleaning,” “maintenance of lighting and cost of
electricity,” and “maintenance of signs” are pertinent only to a parking lot; any one of
those services is likely to be needed in other common areas of the shopping center.
Consequently, that language does not resolve the ambiguity of the lease, because it
does not establish that the government’s responsibility to Kimco is limited to three
percent of the CAM charges that relate to the parking area.
It is well established that “if more than one meaning is reasonably consistent with
the contract language it can not be deemed unambiguous.” C. Sanchez & Son, Inc. v.
United States, 6 F.3d 1539, 1544 (Fed. Cir. 1993). Moreover, “[t]o the extent that the
contract terms are ambiguous, requiring weighing of external evidence, the matter is not
amenable to summary resolution.” Beta Sys. v. United States, 838 F.2d 1179, 1183
(Fed. Cir. 1988) (citing Samuel Williston, A Treatise on the Law of Contracts § 616, at
649, 652 (3d ed. 1961)). Based on its analysis of the contract language, the trial court
concluded that the contract unambiguously obligated the government to pay three
percent of the CAM charges relating to the parking lot only, and on that ground the court
granted the government’s motion for summary judgment. Because we are unable to
agree with the court’s conclusion that the contract unambiguously supports that
05-5181 9
interpretation, we reverse the grant of summary judgment for the government on the
CAM charge issue.
Kimco urges us not only to reverse the district court’s grant of summary judgment
to the government on the CAM charge issue, but to go further and direct the entry of
summary judgment for Kimco. We decline to do so. The only question before us on the
appeal of the CAM charges issue is the propriety of the summary judgment granted to
the government. While an appellate court, in an appeal from the grant of summary
judgment for the appellee, may direct the entry of summary judgment for the appellant,
such a step is an unusual one that is reserved for circumstances in which the outcome
is not in doubt and no useful purpose would be served by further proceedings on
remand. See Lighting World, Inc. v. Birchwood Lighting, Inc., 382 F.3d 1354, 1366
(Fed. Cir. 2004); Conoco, Inc. v. Dep’t of Energy, 99 F.3d 387, 394-95 (Fed. Cir. 1996);
Jewelers Vigilance Comm., Inc. v. Ullenberg Corp., 853 F.2d 888, 890 n.2 (Fed. Cir.
1988); 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice &
Procedure § 2720, at 355 (1998).
In this case, the proper resolution of the lease interpretation issue is not so clear
as to justify our taking the unusual step of deciding the case on the merits without
remanding it for the trial court to decide in the first instance. For one thing, it is not clear
from the record before us just what portions of the shopping center constitute non-
leased, common areas that are not included within the parking lot, and what sorts of
maintenance services are required for those areas. That factual question may affect the
way the trial court construes the lease. A further reason counseling against our
directing the entry of judgment for Kimco without further proceedings in the trial court is
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that the record below contains at least some parol evidence supporting the
government’s interpretation of the CAM charge provisions of the lease. In its summary
judgment papers, the government proffered an affidavit from a Postal Service employee
who asserted that he negotiated the lease and that “[i]t was the Postal Service’s
understanding when it accepted the lease that it would only have to pay 3% of the CAM
attributable to the parking lot areas only, not for the entire mall property.” Declaration of
Nicholas J. Menchise in Support of Defendant’s Motion for Summary Judgment, ¶ 12.
Because the trial court found the lease language to be unambiguous, it had no occasion
to consider that evidence. On remand, however, the trial court may determine that such
parol evidence is pertinent to the proper interpretation of the contract language. We
therefore decline Kimco’s invitation to direct the entry of judgment in its favor on the
CAM charges issue. Instead, we vacate the trial court’s grant of summary judgment
with regard to the question of CAM charges and remand for further proceedings on that
issue.
Each party shall bear its own costs for this appeal.
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