"Similarly Obligated" Language
No. 03CA1577. Dinnerware Plus
Holdings, Inc. v. Silverthorne
Factory Stores, LLC.
Commercial Lease
Agreement—Definition of “Provided
That”—Promise-Condition Precedent.
In
this commercial lease dispute,
plaintiff ("tenant") appeals the
trial court judgment in favor of
defendant ("landlord"). In 1993, the
parties’ predecessors entered into a
ten-year lease agreement for retail
space. The lease required the tenant
to pay fixed monthly rent and
pass-through charges, provided that
all other tenants in the shopping
center were similarly obligated. In
1996, the lease was modified to
state that as long as the tenant was
not in default, the tenant’s rent
would be a percentage of its gross
monthly sales. A dispute arose
between the parties regarding
tenant’s obligation to pay
pass-through charges. In 2000,
tenant began withholding payment of
the pass-through charges until
landlord demonstrated that other
tenants were similarly obligated.
Landlord then demanded payment of
unpaid pass-through charges, and
fixed monthly rent in accordance
with the original lease.
Tenant filed this action, seeking
a declaration that its monthly rent
was the percentage rent and that it
was not obligated to pay
pass-through charges until other
lessees occupying space within the
shopping center became similarly
obligated. Landlord counterclaimed
and filed a forcible entry and
detainer ("FED") action. The two
cases were consolidated. Following a
bench trial, the trial court
concluded that the lease provisions
requiring that other tenants be
similarly obligated were promises,
not "conditions precedent," whose
nonoccurrence would relieve tenant
of its obligation to pay
pass-through charges.
The trial court erred in
construing the "provided that"
language of the lease as a promise
instead of a condition precedent.
The Court of Appeals interprets the
"provided that all other tenants are
similarly obligated" language as
unambiguously creating a condition
precedent to tenant’s obligation to
pay pass-through charges. The
determination whether an event is
condition precedent may depend on
whether its occurrence or
nonoccurrence is a matter within the
obligee’s control. Here, whether
other tenants in the shopping center
would be "similarly obligated" for
pass-through charges was within the
landlord’s control. Because it is
undisputed that the condition
precedent did not occur, tenant was
not obligated to pay pass-through
charges. Because tenant was not in
default under the lease for failure
to pay pass-through charges, there
was no factual basis for an FED
action, and dismissal of the FED
action was proper. The judgment is
affirmed in part and reversed in
part.