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PLUM TREE, INC. v. N.K. WINSTON CORP.

November 1, 1972

Plum Tree, Inc., Plaintiff
v.
N.K. Winston Corp., Moorestown Management, Inc., Walt Whitman Management, Inc., Thomas Management, Inc., Winston Mall, Inc., Livy Development Co., Inc., Arlen Realty & Development Corp., and Shopping Center at Smithhaven, Inc., Defendants


Gurfein, D. J.


The opinion of the court was delivered by: GURFEIN

GURFEIN, D. J.:

This is a motion to dismiss the complaint under Fed. R. Civ. P. 12(b)(1), 12(b)(6) and 56. *fn1" The amended complaint is in two counts. Jurisdiction is based on diversity of citizenship; and on the Sherman Act, the Clayton Act and the Robinson-Patman Act, 15 U.S.C. §§ 1, 13, 15, 22 and 28 U.S.C. § 1391. Declaratory judgment is sought under § 1391.

 I

 The first count alleges that the plaintiff, a franchisor of retail gift shops and a shopping center tenant selling giftware in four shopping centers owned by the defendants entered into leases with the several defendants which are parents, subsidiaries, affiliates or alter egos. It is alleged that in connection with or prior to the execution of such leases, the defendants expressly and impliedly, orally and in writing, wilfully and maliciously promised the plaintiff "many things" including (a) that the defendants had a high degree of expertise in planning and operating shopping centers; (b) that the shopping centers were in prime locations; (c) that the defendants were rendering and would continue to render meaningful and effective assistance to the tenants for the purpose of increasing their business; (d) that the defendants were using sound business judgment in selecting tenants and mixing the various types of businesses; (e) that the defendants had expended and were continuing to expend money for advertising to make the tenants known to the public; (f) that the defendants would give voice to the wishes of the tenants in the operation of the shopping center; (g) that the defendants provided and would continue to provide adequate security measures to protect the tenants from thefts and the like; and (h) that the defendants provided and would continue to provide for maintenance and cleaning services sufficient to keep the shopping centers in good repair, lighted and clean. It is alleged that when the defendants made these "representations, warranties and promises," the defendants intended reliance on them and "knew or should have known" they were "false, misleading and fraudulent." The plaintiff, relying on them, entered into the leases. It is then alleged that the defendants have "breached their aforesaid representations, warranties and promises and the said leases." Count I concludes with the allegation that as a proximate consequence of the "aforesaid conduct, breaches, acts and omissions" the plaintiff has suffered large losses of sales and profits and will continue to do so in the future. *fn2"

 The theory of the action is primarily for breach of express oral warranties and oral contractual promises relating to the operation of the shopping center during the term of the lease. Patently, the parol evidence rule is the first hurdle for the plaintiff. Since the parol evidence rule is a rule of substantive law (Higgs v. De Maziroff, 263 N.Y. 473, 477, 189 N.E. 555 (1934)), a Federal District Court must apply that State law which the forum State, New York, would apply, Erie R. Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938), including any applicable conflicts of law rules. Klaxon v. Stentor Electric Mfg. Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941).

 The leases involved relate to real property in New Jersey, New York and Arizona. The State courts in New York would apply the law of the situs of the real estate even under the "principal contacts" theory. (Cf. Auten v. Auten, 308 N.Y. 155, 124 N.E. 2d 99 (1954). See Chester Airport, Inc. v. Aeroflex Corp., 37 Misc. 2d 145, 237 N.Y.S. 2d 752 (Sup. Ct. N.Y. Co. 1952); Restatement, Second, Conflict of Laws § 332(b)). The application of the parol evidence rule is essentially the same in New Jersey and Arizona as in New York. *fn3" We, accordingly, will use New York law as the model to determine whether the oral agreements alleged may be proved in the face of the written leases.

 The New York Court of Appeals has consistently recognized the policy implicit in the parol evidence rule -- the prevention of false oral claims and the finality of integrated transactions -- "on the whole it works for good." Mitchill v. Lath, 247 N.Y. 377, 380, 160 N.E. 646 (1928).

 In that famous ice house case the Court held unenforceable an oral promise to remove an ice house across the road which the buyer of the land opposite found objectionable. It was assumed that the oral promise induced the contract of purchase. Yet it was held unenforceable because the promise did not meet the three following conditions: "(1) the agreement must in form be a collateral one; (2) it must not contradict express or implied provisions of the written contract; (3) it must be one that parties would not ordinarily be expected to embody in the writing." Mitchill v. Lath, supra, 247 N.Y. at 381. In other words, "it must not be so clearly connected with the principal transaction as to be part and parcel of it." Id. at 381.

 Here we do not even have a collateral agreement in form. The promises said to have been broken are promises that are an integral part of the obligations ascribed to the landlord in the operation of the lease. That the landlord would aid the tenants' businesses, advertise on their behalf, pick good tenants as their neighbors, let them have some say in the management of the shopping center, provide security against theft and keep the place clean are the kinds of promises which directly affect the lease as much as the supply of fuel and hot water or snow removal. One would expect the promise if made to be written down along with the other written promises.

 The New York Court of Appeals reiterated the familiar doctrine of Mitchill v. Lath, supra, in Fogelson v. Rackfay Construction Co., 300 N.Y. 334, 90 N.E. 2d 881 (1950). There tenants of two apartment houses alleged that the landlord orally promised that they would be furnished free bus service to the public school and to the subway. The Court held the oral promise by the landlord unenforceable because of the parol evidence rule. It said again that "where landlord and tenant enter into a lease, it is reasonable to expect that it 'contain the engagements of the parties, and . . . define the object and measure the extent of such engagement '. Eighmie v. Taylor, 98 N.Y. 288, 294-95."

 Two important considerations emerge from the New York authorities: (1) even if the oral promise was an inducement for the execution of the written lease, that circumstance does not exempt it from the parol evidence rule (Mitchill v. Lath, supra); and (2) whether the oral matter touches so closely on the landlord-tenant relationship that one would normally expect it to be written in the lease is a matter of law for the Court, not the jury.

 Given these rules of law, the Court on a motion to dismiss must determine whether the parol evidence rule applies as a matter of law. There is no point to awaiting trial if that be the case. Boro Hall Corp. v. General Motors Corp., 164 F.2d 770 (2 Cir. 1947); American Cyanamid Co. v. Elizabeth Arden Sales Corp., 331 F. Supp. 597, 603 (S.D.N.Y. 1971). While it is true that on occasion, as Professor Corbin has suggested, oral evidence may be taken to determine whether oral evidence should be received (3 Corbin, Contracts § 573 (1960)), see also Eskimo Pie Corp. v. Whitelawn Dairies, Inc., 284 F. Supp. 987 (S.D.N.Y. 1968), there seems to be no preliminary question of fact here that requires the taking of testimony. Every one of the claimed promises is a proper and expectable term of a shopping center lease. Their omission is fatal to the contract claim.

 Similarly, that the defendants represented that they were experts in shopping centers, and that the shopping centers were in prime locations does not make the representations actionable. It would create havoc in the reasonable negotiation of leases between landlords and prospective tenants if this kind of representation were held to have absolved the tenants from making their own prudent inquiries into the advantages or disadvantages of the particular shopping center.

 Since the parol evidence rule is a bar to adding the alleged terms to the leases, the first count, so far as it sounds in contract, must be dismissed. The question remains whether a defeated plaintiff in contract by using the language of tort may nevertheless sustain the complaint. The complaint should not be dismissed if the plaintiff can prevail on any theory. Conley v. Gibson, 355 U.S. 41, 45, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1947); Norwalk Core v. Norwalk Redevelopment Agency, 395 F.2d 920, 925 (2 Cir. 1968). See also Radovich v. National Football League, 352 U.S. 445, 453, 1 L. Ed. 2d 456, 77 S. Ct. 390 (1957). Here the issue is one of substantive law. Does the mere allegation that the defendants never intended to keep the oral promise, which has just been declared unenforceable, save the complaint from dismissal? ...


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