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Wards Co. v. Stamford Ridgeway Associates and Trim Fashions Inc.

May 3, 1985

WARDS COMPANY, INC., PLAINTIFF-APPELLEE,
v.
STAMFORD RIDGEWAY ASSOCIATES AND TRIM FASHIONS, INC., DEFENDANTS, STAMFORD RIDGEWAY ASSOCIATES, DEFENDANT-APPELLANT



Appeal from a judgment of the United States District Court for the District of Connecticut (Ellen B. Burns, Judge), granting plaintiff's motion for summary judgment finding that the terms of a lease provision were "wholly unambiguous" within the meaning of Heyman v. Commerce & Industry Ins. Co., 524 F.2d 1317, 1320 (2d Cir. 1975).

Kaufman and Cardamone, Circuit Judges, and Tenney, District Judge.*fn*

Author: Kaufman

KAUFMAN, Circuit Judge.

At its best, the written word provides an excellent means of communicating information. At its worst, language can obfuscate the very meaning sought to be conveyed. In the hands of some lawyers, it seems, words tend more often to confuse than clarify simple thoughts. Alas, this is nothing new. The insightful (if fictitious) Lemuel Gulliver, in describing the professon [profession] of law, explained: "There was a society of men among us, bred up from their youth in the act of proving, by words multiplied for the purpose, that white is black and black is white." J. Swift, Gullivers Travels: Houghnhnms, ch. 5.

Today, we are again called upon to dissect the work of an unknown draftsman, and to decide whether a certain contractual term is "wholly unambiguous" within the meaning of Heyman v. Commerce & Industry Ins. Co., 524 F.2d 1317, 1320 (2d Cir. 1975). Because that task requires some familiarity with the broader transaction, we set forth the relevant facts before turning to the ultimate legal issue.

I. BACKGROUND

The Ridgeway Shopping Center, located in Stamford, Connecticut, is owned by appellant Stamford Ridgeway Associates ("Ridgeway"), a partnership organized under the laws of the State of New York. In 1972, Ridgeway's predecessor leased premises in the shopping center to Lafayette Radio Electronics of Stamford, Inc. ("Lafayette") for use as a retail electronics store. The lease covered an initial sixteen-year term, together with two five-year option periods. Pursuant to its terms, Lafayette was obligated to pay Ridgeway $26,900 annually in fixed rent until June 1988. Thereafter, it was to pay annual fixed rent of $29,235 and $31.400, respectively, during each of the two five-year option periods.

In January 1980, Lafayette filed a petition with the United States Bankruptcy Court for reorganization pursuant to Chapter 11 of the Bankruptcy Code. Under the court's supervision, Lafayette continued to operate as debtor-in-possession. In April, John Winter, Ridgeway's General Manager, approached Robert Crimmins, Lafayette's director of real estate. He inquired whether Lafayette would be willing to assign its interest in the lease to Trim Fashions, Inc., another tenant in the shopping center that had expressed a desire to occupy Lafayette's premises. Rather than sell its interest outright, Lafayette proposed to sublet the space to Trim Fashions. After a period of negotiation between the two retailers, a sublease was conditionally executed in June 1980. Immediately thereafter, the document, which was conditioned upon the consent of the lessor, was delivered to Ridgeway, and on July 9, 1980, Ridgeway executed its consent.

Under the terms of the sublease, Lafayette was to receive fixed minimum rent of $55,680 annually during the base term of the prime lease, increasing to $78,880 annually and $102,080, respectively, during each of the two five-year option periods. Accordingly, Lafayette, as lessee under the prime lease and lessor under the sublease, was to profit in the amount of the differential between the fixed minimum rents provided by those documents, i.e., $26,926 annually through July 1988, and $45,950 annually and $68,990 annually, respectively, during the two five-year option periods.

In August 1980, the Bankruptcy Court authorized Lafayette to assume the prime lease and approved the executed sublease. On September 1, 1980, the sublease term commenced and Trim Fashions began payment to Lafayette of fixed minimum rent at the rate of $55,680 annually. Lafayette continued to pay Ridgeway the rent due under the prime lease, i.e., $26,900 annually.

In June 1981, Lafayette was merged into Wards Company, Inc. ("Wards"), which assumed possession of Lafayette's assets and liabilities -- including its interests in the prime lease and sublease. Subsequent to the merger Trim Fashions continued to pay Wards the rent due under the sublease, and Wards continued to pay Ridgeway the rent due under the prime lease. Wards, of course, retained the rent differential of $26,926 per year.

On August 13, 1982, Ridgeway first made demand upon Wards for one-half of the accrued rent differential for the period from September 1980 (when the sublease term commenced). Ridgeway's demand, which forms the basis of the instant dispute, was premised upon paragraph 52(c) of the prime lease ("paragraph 52(c)"). That provision, reprinted infra at pp. 3647-48, sets forth the rights of the parties in the event the premises are sublet.

After making its demand, Ridgeway threatened legal action to terminate the lease for nonpayment of one-half of the differential. To avoid a possible forfeiture of the lease, Wards agreed -- conditionally and under protest -- to pay Ridgeway the sum of $32,377.59 (representing the arrearages since September 1980 as calculated by Ridgeway) plus one-half of the differential each month. Wards then commenced this action in the United States District Court for the District of Connecticut, seeking a declaratory judgment determining whether one-half of the differential each month. Wards then commenced this action in the United States District Court for the District of Connecticut, seeking a declaratory judgment determining whether one-half of the rent differential is indeed owed to Ridgeway pursuant to paragraph 52(c).*fn1 After Ridgeway filed its answer, Wards moved for summary judgment pursuant to Fed. R. Civ. P. 56. Following the filing of pleadings and completion of limited discovery, the motion was argued before Judge Burns. In August 1984, the district court granted the motion, finding that the terms of ...


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