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Global Mall Partnership v. Shelmar Retail Partners, LLC

Court of Appeals of Tennessee, Nashville

July 3, 2017

GLOBAL MALL PARTNERSHIP
v.
SHELMAR RETAIL PARTNERS, LLC, ET AL.

          Session April 13, 2017

         Appeal from the Chancery Court for Davidson County No. 14-0384-II Carol L. McCoy, Chancellor

         The landlord of a shopping mall commenced this action against a commercial tenant for breach of a lease. The tenant claimed it had an enforceable oral agreement to terminate the lease with the former landlord. The landlord contended that the original lease contained a "no oral modification" clause; thus, the oral agreement to terminate the lease was unenforceable. After the landlord presented its proof at trial, the court dismissed the case pursuant to Tenn. R. Civ. P. 41.02(2), ruling that the oral termination agreement between the tenant and the former landlord was enforceable despite the "no oral modification" clause in the lease. This appeal followed. When a defendant files a Tenn. R. Civ. P. 41.02(2) motion for involuntary dismissal at the conclusion of the plaintiff's proof at trial, the only evidence the trial court may consider in determining whether the proof was sufficient to demonstrate a right to the relief is "the plaintiff's proof" at trial. Tenn. R. Civ. P. 41.02(2). We have determined that the trial court erroneously considered facts and documents not found in the plaintiff's proof. Excluding the extraneous facts and documents, the evidence presented at trial preponderates against the trial court's factual findings and its conclusion that the landlord's predecessor in interest and the tenant entered into a binding lease termination agreement. Accordingly, we reverse and remand for further proceedings.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed and Remanded

          James W. White, Nashville, Tennessee, for the appellant, Global Mall Partnership d/b/a Global Mall at the Crossings.

          Randall J. Fishman and Richard S. Townley, Memphis, Tennessee, for the appellee, Shelmar Retail Partners, LLC d/b/a City Gear, LLC.

          Frank G. Clement, Jr., P.J., M.S., delivered the opinion of the Court, in which Richard H. Dinkins and W. Neal McBrayer, JJ., joined.

          OPINION

          FRANK G. CLEMENT JR., P.J., M.S.

         The plaintiff, Global Mall Partnership ("Global Mall"), owns and operates Global Mall at the Crossings ("the Mall"), which was formerly known as Hickory Hollow Mall. CBL & Associates Management, Inc. ("CBL") managed Hickory Hollow Mall, LP ("Hickory Hollow") and acted as its agent at all times material to this action. Global Mall purchased the Mall from Hickory Hollow. The closing occurred on October 30, 2012, at which time Hickory Hollow assigned six commercial leases to Global Mall. The defendant, Shelmar Retail Partners, LLC d/b/a City Gear, LLC ("City Gear"), was a tenant at the time of the closing, and its lease was assigned to Global Mall.

         City Gear entered into a five-year lease agreement with Hickory Hollow in March 2005 for the purpose of operating a retail clothing store at the Mall. In August 2010, City Gear and Hickory Hollow executed an agreement extending the lease through June of 2015. In addition to paying a minimum annual rent, City Gear agreed to pay 5% of any gross sales exceeding $1.3 million per year. If less than two anchor tenants remained, and the non-anchor tenants occupied less than 65% of the square footage in the Mall, the rent would be reduced to 5% of City Gear's gross sales. The lease prohibited City Gear from operating another store within a three-mile radius of the Mall during the lease term. It also stated that the lease could not be modified "in any manner other than by agreement in writing signed by all the parties hereto or their successors in interest."

         By May 2012, all of the anchor tenants had departed from the Mall, and CBL presented City Gear with a proposed lease termination agreement. The effective date of termination was left blank on the proposal. Moreover, the proposal included a disclaimer in bold type, "This transmittal is not an offer to enter into the Agreement, and until the Agreement has been approved and fully executed by [Hickory Hollow], the Agreement is not an enforceable contract." For reasons not explained in the proof presented at trial, City Gear did not sign the May termination agreement.[1]

         Although City Gear did not have a duly executed written termination agreement with Hickory Hollow, City Gear entered into a lease agreement in June of 2012 with another of CBL's clients, The Courtyard at Hickory Hollow Limited Partnership. City Gear intended to relocate to The Courtyard at Hickory Hollow ("the Courtyard") as soon as construction at the Courtyard was completed. Even though the Courtyard lease, like the Hickory Hollow lease, prohibited City Gear from operating another store within a three-mile radius, the Courtyard lease was not contingent upon City Gear obtaining a contemporaneous termination of its lease with Hickory Hollow.

         On September 13, 2012, CBL provided City Gear with an unsigned, second draft of a proposed termination agreement. This proposal also stated in bold type, "This transmittal is not an offer to enter into the Agreement, and until the Agreement has been approved and fully executed by [Hickory Hollow], the Agreement is not an enforceable contract." As was the case with the May proposal, City Gear did not sign or respond to the September proposal even though CBL sent two follow-up emails urging City Gear to sign and return the proposed termination agreement.

         The very next day, on September 14, Hickory Hollow entered into a contract to sell the Mall to the plaintiff, Global Mall. Prior to the closing, CBL sent an email to Global Mall's attorney on September 28 informing Global Mall that City Gear would be relocating to the Courtyard. The parties closed on the purchase of the Mall on October 30. As part of the closing, Hickory Hollow assigned six commercial leases to Global Mall, including its lease with City Gear. As of the date of closing, City Gear still had not executed a written lease termination agreement, and Global Mall had not seen any draft of a proposed termination agreement with City Gear. The day after the closing, Hickory Hollow notified City Gear that its lease had been assigned to Global Mall and that all future rent payments should be made to Global Mall.

         Six weeks later, on December 20, 2012, City Gear signed and delivered to CBL the proposed lease termination agreement. On the same day, CBL delivered the agreement to Global Mall's attorney, Mark Nobles, with instructions for Global Mall to sign the agreement. Acting on behalf of Global Mall, Mr. Nobles promptly notified CBL and City Gear that Global Mall would not sign the agreement and that it would enforce City Gear's lease. Shortly thereafter, City Gear moved out of the Mall and relocated its retail store to the Courtyard. It also stopped paying any rent to the Mall.

         Global Mall commenced this action by filing a complaint against City Gear for breach of contract. City Gear responded by filing an answer and a third-party claim against Hickory Hollow, CBL, and the Courtyard for indemnification should the court rule that City Gear breached its lease with Global Mall. It based its defense to the complaint and its claims against the third-party defendants on the theory of promissory estoppel. City Gear alleged that Hickory Hollow and CBL promised City Gear that they would terminate its lease contemporaneous with its relocation to the Courtyard. City Gear further alleged that it reasonably relied on that promise to its detriment by signing the new lease with the Courtyard and by building the new space at that location. City Gear also contended that its lease with the Courtyard contained an implied contractual term that the Hickory Hollow lease would terminate when the Courtyard lease became effective.

         The third-party defendants filed answers denying any liability. Following discovery, they filed a joint motion for summary judgment arguing, inter alia, that the oral agreement between Hickory Hollow and City Gear was unenforceable. The trial court agreed and summarily dismissed City Gear's claims against them.

         In its memorandum and order granting summary judgment, the court found that City Gear's lease with Hickory Hollow contained a "no oral modification" clause and did not terminate until June 30, 2015. It found that CBL attempted to obtain City Gear's signature on a lease termination agreement in May 2012 and then, again, in September 2012 to no avail. It also found that each of the proposed lease termination agreements provided that neither proposal served as an offer to terminate the lease unless Hickory Hollow signed it, and Hickory Hollow failed to sign either agreement.

         Further, despite having no duly executed written termination agreement with Hickory Hollow, City Gear signed a lease with the Courtyard in June 2012, expecting to relocate in late 2012 or early 2013. The court also found that the Courtyard lease was not contingent upon the execution of a lease termination agreement with Hickory Hollow. Moreover, the court noted that Hickory Hollow sold the Mall and assigned City Gear's lease to Global Mall on October 30, 2012. Finally, Global Mall never signed the lease termination agreement with City Gear; nevertheless, City Gear vacated the Mall premises and stopped paying rent.

         Considering the "no oral modification" clause in the Hickory Hollow lease and the disclaimers in the written proposals, the trial court held that it could not enforce an oral agreement to terminate the lease, and that the Hickory Hollow lease "remained valid and binding after it was assigned" to Global Mall. Based on these undisputed facts, the trial court summarily dismissed City Gear's claim against Hickory Hollow, CBL and the Courtyard. Thereafter, the only remaining parties to this action were Global Mall and City Gear.

         The case was tried without a jury on January 25, 2016. The only witness to testify at trial was Dr. Rajesh Aggarwal. He stated that he and his wife own Global Mall Partnership d/b/a Global Mall at the Crossings, and he was the manager of Global Mall. The most relevant evidence elicited from Dr. Aggarwal during direct examination is summarized as follows:

         Global Mall entered into a contract to purchase the Mall from Hickory Hollow on September 14, 2012. The purchase of the Mall closed on October 30, at which time Hickory Hollow assigned six commercial leases to Global Mall, including Hickory Hollow's lease with City Gear. The term of City Gear's lease went through June 30, 2015. At no time prior to the closing did Hickory Hollow or CBL inform Dr. Aggarwal of the agreement to terminate City Gear's lease, nor did they ask him to agree to an early termination of City Gear's lease. Moreover, at no time prior to the closing did Dr. Aggarwal see a proposed lease termination agreement with City Gear.

         On December 20, 2012, almost two months after Hickory Hollow assigned City Gear's lease to Global Mall, CBL forwarded a proposed termination agreement to Global Mall signed by City Gear on the same date, with a request that Global Mall sign and return it to CBL. On behalf of Global Mall, Mr. Nobles promptly informed CBL it would not sign the agreement. Shortly after Dr. Aggarwal received the December 20 letter, City Gear moved out of the Mall and relocated to the Courtyard and ceased paying rent under the Hickory Hollow lease. Dr. Aggarwal testified that neither he nor his attorney communicated with City Gear prior to receiving the December 20 letter. In response, counsel for Global Mall sent a letter informing City Gear that its lease at the Mall was in full force and effect, and Global Mall expected City Gear to fulfill its obligations under the lease.

         On cross examination Dr. Aggarwal acknowledged that he saw the September 2012 email CBL sent to Mr. Nobles, which was thirty-two days before the closing, in which CBL indicated that City Gear would be leaving the Mall. Other relevant evidence ...


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