Circle K Stores, Inc. v. Zillman
Filing
69
Order denying Defendants' Motion for Summary Judgment 47 and Plaintiff's Cross-Motion for Partial Summary Judgment 56 is granted in part and denied in part. Ordered by Chief Judge Ann L. Aiken. (lg)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
CIRCLE K STORES, INC.,
a Texas corporation,
Plaintiff,
Civ. No. lO-6389-AA
v.
OPINION AND ORDER
RICHARD L. ZILLMAN, trustee of
the RICHARD L. ZILLMAN FAMILY
TRUST; RICHARD L. ZILLMAN and
CHERYL ZILLMAN,trustees of the
RICHARD AND CHERYL ZILLMAN
REVOCABLE TRUST,
Defendants.
AIKEN, Chief Judge:
Plaintiff Circle K Stores, Inc.
(Circle K) filed this
diversity action against defendants seeking declaratory and
injunctive relief and specific performance based on defendants'
breach of contract.
In the alternative, Circle K seeks damages
for breach of the duty of good faith and fair dealing.
Defendants now move for summary judgment on all of Circle K's
claims, and Circle K moves for partial summary judgment against
1 -
OPINION AND ORDER
defendants with respect to Circle K's claim for breach of
contract. Defendants' motion is DENIED.
Circle K's motion is
GRANTED in part and DENIED in part.
BACKGROUND
Circle K is in the business of operating convenience stores
and fuel stations throughout the United States.
On November 27,
1970, Circle K and defendants' predecessors in interest entered
into lease agreements (the "Lease") for two separate properties
in Salem, Oregon.
Under the Lease, Circle K became a tenant at
the two properties, which are located at 4781 Liberty Road SE and
2904 12th Street SE in Salem, Oregon (the "Leased Premises").
Circle K operates store number 2701278 at the 4781 Liberty Road
location ("Store 1278") and operated store number 2700411 at the
2904 12th Street location ("Store 411").
The original term under the Lease was 20 years, with the
original lease term ending on November 26, 1990.
The Lease also
provided Circle K with a renewal/extension option at the end of
the lease terms.
Further, the Lease granted Circle K the "right
of first refusal" with respect to renewing or extending the lease
terms and with respect to leasing or purchasing the property if
defendants received a higher offer from a third party.
Lease,
~~
See
3, 17 and Addendum.
On March 21, 1991, Circle K and defendants entered into two
agreements (one for each of the properties), each entitled Lease
2 -
OPINION AND ORDER
Amendment and Extension Agreement ("First Extensions").
Among
other items, the First Extensions changed the rent payable to the
landlord and extended the terms of the Lease an additional ten
years, through November 26, 2000.
The First Extensions also
granted Circle K options to renew the Lease for a period of five
years each.
On January 20, 2000 and February 7, 2000, Circle K provided
defendants written notification of its intent to exercise the
first options under the First Extensions, which extended the
Lease through November 26, 2005.
On March 8, 2001, Circle K and defendants entered into two
agreements entitled Second Lease Amendment and Extension
Agreement (collectively, the "Second Extensions").
The Second
Extensions further modified the Lease.
On October 15, 2004 and October 27, 2004, Circle K provided
defendants written notification of its intent to exercise the
second options under the First Extensions, which extended the
Lease through November 26, 2010.
No additional extension option
remained for Circle K to renew at the end of this lease term.
On February 3, 2010, Circle K sent defendants a letter
requesting a five-year extension of the Lease, with two
additional options to renew the Lease for five years after
expiration of the new lease extension.
At the time, Circle K was
not aware of any effort by defendants to market or otherwise
3 -
OPINION AND ORDER
replace Circle K as a tenant at the end of the lease term.
Defendants never responded to Circle K's letters.
On July 20, 2010, Circle K again sent its February 3, 2010
letters to defendants.
Around the same time, defendants retained
a broker to market the Leased Premises.
Circle K representatives spoke with defendant Richard L.
Zillman on or around August 20, 2010 and reiterated Circle K's
intent
~to
exercise its right of first refusal on the Leases."
Circle K maintains that defendants refused to engage in any
meaningful negotiations with Circle K regarding extension of the
Lease or a new lease of the Leased Premises.
Defendants dispute
that characterization.
In response to a demand from defendants' broker, Circle K
obtained independent broker price options for the Leased
Premises, which it provided to defendants' broker on October 20,
2010.
On November 10, 2010, defendants' broker rejected Circle K's
offers and stated:
[Defendants have] received offers that are
significantly higher than that made by Circle K and at
this time, [defendants feel] a counter-proposal would
be unproductive.
Wilson Decl., Ex. P, p. 3.
Later that same day, the defendants' broker rejected Circle
K's offers and stated:
4 -
OPINION AND ORDER
The [Defendants are] not interested in discussing any
continuation of your occupancy at either location, and
expect that you will be vacating the spaces on November
26 th , 2010 per the terms of your existing lease. There
is a new Lessee who may be interested in discussing
acquisition of the FF&E within the stores to save you
the expense and hassle of removing those items prior to
you vacating.
Wilson Decl., Ex. P, p. 2.
In response to defendants' disclosure that they had both
received other offers and entered leases with a new tenant, on
November 10, 2010, Circle K made a demand on its right of first
refusal and requested that defendants produce the third-party
leases for evaluation:
first right of refusal.
~As
per the terms of our lease, we have a
Once this [offer from a third party] is
presented to us for evaluation we will either elect to exercise
or vacate."
Circle K's Memo. in Support of Circle K's Cross-
Motion, p.10 (doc. 57).
On Tuesday, November 16, 2010, defendants disclosed to
Circle K two letters of intent, one for each of the properties.
Each letter of intent is dated November 8, 2010, and each letter
of intent appears to be signed by a third-party lessee.
However,
when disclosing these letters of intent to Circle K, defendants
denied that Circle K had a right of first refusal:
These documents are being sent as an accommodation.
Lessor does not acknowledge that Circle K has a valid
First Right of Refusal. Any First Right that existed,
expired 6 months prior to the expiration of the
original lease term, in 1990.
Wilson Decl., Ex. Q, p. 1.
5 -
OPINION AND ORDER
On November 17, 2010, Circle K attempted to exercise its
alleged rights of first refusal by accepting the terms in the
November 8, 2010 letters of intent offered by the third-party
lessee.
On November 18, 2010, Circle K filed this action and sought
a preliminary injunction and temporary restraining order,
claiming it accepted the letters of intent and that defendants
refused to negotiate in good faith.
On November 22, 2010, the
court granted the temporary restraining order.
Also on November
22, 2010, defendants disclosed two partially-executed leases for
the Leased Premises (the "Third-Party Leases") .
On December 1, 2010, the court held a hearing on Circle K's
motion for preliminary injunction.
At the hearing, defendants
produced fully-executed copies of the Third-Party Leases, which
showed the leases were entered on November 9, 2010.
On December 6, 2010, the court found a likelihood of success
regarding Circle K's rights of first refusal and granted the
preliminary injunction, thereby allowing Circle K to continue
renting the Leased Premises so long as it pays defendants the
rental amounts offered under the Third-Party lease. Circle K was
also granted until a certain date to accept or reject the ThirdParty Leases. The parties were required to submit a joint status
report by January 13, 2011 stating whether Circle accepted or
rejected the Third-Party Leases.
6 -
OPINION AND ORDER
On December 10, 2010, Circle K sent a letter to defendants
purporting to accept the Third-Party Lease as it related to Store
1278 located at the Liberty Road location, and rejecting the
Third-Party Lease as it related to the lease for Store 411
located at the 12th Street location. Specifically, Circle K
wrote, in relevant part:
Circle K accepts the general terms [sic] the lease
dated November 9, 2010 for the property located at 4781
Liberty Road, SE, Salem, OR (Circle K store #2701278).
As the Court noted during the December 1, 2010 hearing,
the leases presented to Circle K under its right of
first refusal do not account for the fact that Circle K
is a national, public-traded company. Therefore, Circle
K requests the following minor modifications and
clarifications prior to signing the lease:
1.
2.
Trade Equipment. Various sections of the lease
address possession of equipment located on the
premises, including, but not limited to section
16.2. These sections provide that specified
equipment may revert to the owner under certain
circumstances with an exclusion for specified
"Trade Equipment." Prior to signing the lease,
Circle K will prepare a list of designated "Trade
Equipment" for the location and requests that the
list be attached to and incorporated in the lease
document.
3.
7 -
Personal Guaranty. Given the fact that Circle K
is a publicly traded company, provision of a
personal guaranty would be inappropriate.
Nevertheless, in order to provide the owner with
the necessary security for the lease, Circle K is
willing to provide a corporate guaranty, in the
form attached hereto as Exhibit A.
Percentage Rent. Typically, Circle K negotiates
with landowners regarding the method for
computation and payment of percentage rent. As
such, Circle K has established computer protocols
and accounting practices to accommodate payment of
percentage rent. In order to facilitate Circle
OPINION AND ORDER
K's prompt and accurate payment of percentage rent
under lease sections 3.1.2, 3.1.2.1, 3.1.3, 3.1.4
and 3.1.5, Circle K requests that the owner accept
payment according to the format set forth in the
spreadsheet attached hereto as Exhibit B.
Circle
K believes that this format accurately captures
the percentage rents required under the lease and
use of the format will not materially alter the
lease terms.
4.
Lease Term and Commencement. The November 9, 2010
lease does not require the tenant's possession
until 2011. Given the fact that Circle K will
continue as tenant from November 27, 2011 forward,
Circle K requests that the parties modify the
lease term referred to in sections 2.1 and 2.2 to
coincide with the expiration of Circle K's
previous lease (November 26, 2010) with a
corresponding end to the lease term.
Circle K thus abandoned any interest in Store 411, and that lease
is no longer at issue.
On December 13, 2010, defendants sent Circle K a letter
stating that Circle K's purported acceptance was ineffective
because it contained additional and modified terms and,
therefore, did not comply with defendants' offer.
Consequently,
defendants rejected Circle K's purported acceptance of the ThirdParty Lease's terms.
In that same letter, defendants suggested
that all parties engage a qualified mediator to assist the
parties in resolving their issues.
Shortly thereafter, on December 21, 2010, defendants
received a new proposal from a new tenant offering to lease the
Liberty Road store for more money.
Defendants were unable to
pursue the offer due to the injunction entered by the court.
8 -
OPINION AND ORDER
On December 29, 2010, Circle K sent defendants another
letter expressing its disagreement with defendants' assertion
that Circle K's acceptance was ineffective.
Circle K stated:
To eliminate any further confusion, Circle K reiterates
that it accepted the terms of the November 9, 2010
lease for the Liberty Road location. Please forward a
complete copy of the lease for Circle K's signature.
Circle K will sign the lease, provide the required list
of Trade Equipment and sign a personal guaranty in tte
form attached to the November 9, 2010 lease.
On April 21, 2011, Circle K filed an Amended and
Supplemental Complaint seeking a declaration that:
(1) the Lease
grants Circle K a right of first refusal; (2) defendants breached
the Lease by entering into the Third-Party Leases and failing to
present the Third-Party Leases to Circle K absent Court order;
(3) Circle K executed a timely, unconditional, valid acceptance
of the Third-Party Leases under Circle K's right of first
refusal; and (4) defendants breached the Circle K Lease by
failing to acknowledge Circle K's acceptance of the Third-Party
Lease terms.
Circle K continues to occupy the Liberty Road location as a
paying tenant under the terms of the Third-Party Lease in
accordance with the preliminary injunction.
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate "if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.H
9 -
OPINION AND ORDER
Fed. R. Civ.
P. 56(a).
Motions for partial summary judgment are evaluated
using the same standard .
.Is;L.
The Court's role is not "to weigh
the evidence and determine the truth of the matter, but to
determine whether there is a genuine issue for trial."
v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
Anderson
A dispute
involving a material fact is "genuine" where "the evidence is
such that a reasonable jury could return a verdict for the
nonmoving party." Anderson 477 U.S. at 248. A "material fact" is
one that has "the potential to affect the outcome of the suit
under the applicable law." Nereida-Gonza1ez v. Tirado-Delaado,
990 F.2d 701, 703 (1st Cir. 1993).
The materiality of a fact is
determined by the substantive law governing the claim.
T.W.
Elec. Serv .. Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626,
630 (9th Cir. 1987).
The moving party has the burden of informing the court of
the basis for its motion and demonstrating the absence of a
genuine issue of material fact.
U.S. 317, 323 (1986).
Celotex Corp. v. Catrett, 477
Upon the moving party's meeting that
burden, the nonmoving party must then go beyond the pleadings and
identify facts which show a genuine issue of fact for trial.
Celotex, 477 U.S. at 324.
Special rules of construction apply to evaluating summary
judgment motions:
(1) all reasonable doubts as to the existence
of genuine issues of material fact should be resolved against the
10 -
OPINION AND ORDER
moving party; and (2) all inferences to be drawn from the
underlying facts must be viewed in the light most favorable to
the nonmoving party.
T.W., 809 F.2d at 630.
A cross-motion for summary judgment requires the court to
apply the same standard as it does for an individual summary
judgment motion.
Creech v. N.D.T. Indus., Inc., 815 F. Supp.
165, 166 (D. S.C. 1993).
motion independently.
The court must therefore rule on each
Creech, 815 F. Supp at 166-67.
"The
granting of one motion does not necessarily warrant the denial of
the other motion, unless the parties base their motions or. the
same legal theories and same set of material facts."
Dollar Federal Sav. and Loan Ass'n, 523 F. Supp. 218, 220. (S.D.
Ohio 1981)
(citing Schlytter v. Baker, 580 F.2d 848, 849 (5th
Cir. 1978)).
DISCUSSION
Defendants move for summary judgment on Circle K's claims for
breach of contract and breach of the covenant of good faith and
fair dealing.
Circle K moves for partial summary judgment against
defendants with respect to Circle K's claim for breach of contract.
Because both Circle K and defendants move for summary judgment on
Circle K's claim for breach of contract, the court treats both
motions
for
summary
judgment
as
arising
from the
theories and the same set of undisputed facts.
same
legal
The granting of one
party's motion, therefore, warrants the denial of the other party's
11 -
OPINION AND ORDER
motion.
I.
Breach of Contract
Circle K's breach of contract claim has two parts.
First,
Circle K insists that the Lease obligates defendants to disclose to
Circle
K any offers
to
lease
the properties
that
defendants
received during the term of the Lease and to allow Circle K the
right of first refusal.
Circle K argues that defendants failed to
honor this right, thereby breaching the Lease.
Second, Circle K insists it accepted the third-party offer and
that
defendants'
refusal
to
acknowledge
this
acceptance
also
constitutes a breach of the Lease.
A. The Lease Grants Circle K a Right of First Refusal and
Defendants' Failure to Honor this Right Constitutes a Breach
of the Lease
Courts
normally
follow
contractual provision.
P.2d 1019 (1997).
three
steps
when
interpreting
a
Yogman v. Parrott, 325 Or. 358, 361, 937
However, at the summary judgment stage, the
court need only complete step one: determine what the words of the
contract say and whether the disputed provision is ambiguous.
Yogman 325 Or. at 361; Milne v. Milne, 207 Or. App. 382, 388, 142
P.3d 475 (2006).
If the provision at issue is unambiguous, its
construction is a matter of law for the court and summary judgment
is appropriate.
May v. Chicago Ins. Co., 260 Or. 285, 292, 490
P.2d 150 (1971); Milne, 207 Or. at 388.
But, if the provision at
issue is ambiguous, summary judgment must be denied.
12 -
OPINION AND ORDER
Milne, 207
Or. at 388.
"Words
or
terms
reasonably can,
Yogman,
of
a
in context,
325 Or.
contract
are
ambiguous
when
they
be given more than one meaning. H
at 363-64.
In order to determine whether a
provision is ambiguous, the court looks to the text to determine
what the contract itself says.
Id. at 361.
Stated differently,
the court "looks at the four corners of [the] written contract, and
considers the contract as a whole with emphasis on the provision or
.hL. (citing New Zealand Ins. v. Griffith
provisions in question. H
Rubber,
270
Cockerline,
Or.
71,
179 Or.
75,
229,
526
P.2d
240,
567
(1974);
170 P.2d 727
Devereaux
(1946);
Yamhill Cnty., 28 Or. 474, 479, 43 P. 653 (1896)).
v.
Arment v.
In addition to
examination of the text and context, the court may consider "the
circumstances underlying the formation of a contract to determine
whether a particular contractual provision is ambiguous. H
Batzer
Const., Inc. v. Boyer, 204 Or. App. 309, 317, 129 P.3d 773 (2006).
The crux of the parties'
dispute is the meaning of three
paragraphs contained in the original 1970 Lease and an accompanying
Addendum.
grants
Circle K maintains that
Circ:e
K the
exclusive
~
17 of the Lease unequivocally
"first
option H
to
lease
the
properties on the same terms as those contained in a bona fide
offer that defendants wish to accept.
Based on the language of the
Lease, I agree.
In
13 -
~
17,
the
Lease
OPINION AND ORDER
specifically
grants
Circle
K the
"exclusive H right to accept the terms of lease or purchase offers
received by defendants:
17. OPTIONS TO PURCHASE OR LEASE: If the Lessor, at any
time during the term of this Lease or any renewal or
extension thereof receives a bona fide offer to
lease (for a term to begin subsequent to the
present term or any extension or renewal thereof) the
demised premises and/or equipment and Lessor desires to
accept said offer, Lessor agrees to give Lessee immediate
notice in writing of such offer, setting forth name and
address of the proposed purchaser or Lessee who has made
the offer with a full disclosure of all terms and options
thereof. Lessee shall have the exclusive first option to
purchase or lease the demised premises and/or equipment
within fifteen (15) days after receipt of said notice on
the same terms of any such proposal. No sale, lease or
transfer of title to said premises and/or equipment shall
be binding on Lessee unless and until these requirements
are fully complied with by Lessor.
Wilson Decl., Ex. A, p. 2 (emphasis added).
Notwithstanding the express language of
argue
that
an
Addendum
essentially replaced
~
to
the
1970
~
Lease
17, defendants
modified
and
17, and thus any right of first refusal
held by Circle K expired six months before the end of the
first lease term in 1990.
However, defendants' argument is
belied by the plain language of the Lease and the Addendum and
by the parties' subsequent extension of the Leases.
The Addendum relied on by defendants is incorporated by
reference into
~
3 of the Lease, a paragraph which discusses
renewal options at the end of the original lease term:
3. TERM AND RENEWAL OPTION:
. Lessee shall have and
successive
is hereby granted a total of
option to extend the term of this lease for any period of
time not exceeding five (5) years for each such option
14 -
OPINION AND ORDER
upon the same covenants and conditions as are herein
provided
Rather than identify the number of successive renewal or extension
options available to Circle K, the Addendum granted Circle K a
-right of first refusal" to negotiate the renewal or extension of
lease terms:
3.
RENEWAL OPTIONS:
Lessee shall have the right of
first refusal in any future negotiating on the renting of
the lease premises at the end of the original term of
this lease, said right of first refusal to expire six
months prior to the end of the lease term.
Wilson Decl., Ex. A, p. 4.
Notably,
the Addendum.
~
17 of the Lease does not reference or incorporate
Further, the Addendum is numbered -3" and labeled
-RENEWAL OPTIONS," thus corresponding with 'II 3, -TERM AND RENEWAL
OPTION."
Moreover, while the Addendum uses the language -right of
first refusal" when referencing future renewal negotiations, 'II 17
describes an "exclusive first option to purchase or lease" when and
if defendants receive a bona fide offer from a third party.
Thus,
under the language of the Lease and the Addendum, the "right of
first refusal" identified in the Addendum refers to Circle K's
right to first negotiate and/or refuse a renewal or extension of
the Lease,
not the "first option" to purchase or lease should
defendants receive an offer from a third party.
Therefore, regardless of Circle K's rights under
Addendum
to
negotiate
and/or
refuse
extension
~
3 and the
terms
before
defendants marketed the properties, the language of the Addendum
15 -
OPINION AND ORDER
does not extinguish Circle K's rights and defendants' obligations
under gr 17.
Defendants'
competing interpretation -
that the
Addendum modified and superseded gr 17 - would require Circle K to
exercise its -exclusive first option to lease or purchase" even if
defendants did not receive a bona fide offer from a third party.
Such an interpretation is contrary to the language of gr 17 and
would render the entirety of gr 17 meaningless.
See N. Pac. Ins.
Co. v. Hamilton, 332 Or. 20, 22 P.3d 739 (2001)
(a contract Mmust
be viewed by its four corners and considered as a whole" and
provisions "must be construed to determine if and how far one
clause is modified,
limited or controlled by others")
Denton v. Int'l Health
(1974))
&
(quoting
Life, 270 Or. 444, 449-50, 528 P.2d 546
.1
Furthermore, the provisions of the Lease, including gr 17, were
extended when the parties subsequently modified and extended the
lease terms.
The first extension agreements explicitly provided
that Mall other conditions and covenants of said primary Lease
dated July 27, 1970, shall remain in full force and effect and are
hereby ratified and confirmed."
Wilson Decl., Ex. C, p. 2.
The
parties also executed and recorded a Memorandum of Lease Extension
in connection with the first extension agreements which stated:
MThe purpose of this Memorandum of Lease Extension is
:;0
Defendants also argue that ~ 17 applies to only purchase
offers; however, this argument is contradicted by the plain
language of gr 17.
1
16 -
OPINION AND ORDER
give
record notice to the Lease Extension and of the rights created
thereby, all of which are hereby confirmed."
p. 1.
Wilson Decl., Ex. E,
Similarly, the second modification agreements provided that
" [e] xcept as
specifically amended hereby by
[sic],
all
other
conditions and covenants of the Lease shall remain in full force
and effect and are hereby ratified and confirmed."
Ex. K, p. 2.
Thus, Circle K's rights under
~
Wilson Decl.,
17 did not expire at
the end of the original lease term. 2
Accordingly, when defendants received a bona fide lease offer
from a third-party lessee on November 9, 2010 and was inclined to
accept it, defendants were required to notify Circle K of the offer
and allow Circle K fifteen days to decide whether to lease the
properties on the same terms or vacate the premises.
failure to comply with
~
Defendants'
17 of the Lease constitutes a breach of
the Lease, therefore Circle K's motion for partial summary judgment
on this issue is granted.
B. Whether Circle K Effectively Accepted the Terms of the
Third-Party Lease is a Genuine Issue of Material Fact
The next issue is whether Circle K effectively accepted the
Third-Party Lease as to the Liberty Road location.
this dispute again involves
~
The crux of
17 of the Lease, which specifically
2 Further, the Memorandum of Lease Extension specifically
acknowledged that Circle K retained a "right of first refusal
option." Wilson Decl., Ex. E, p. 1. Thus, even if Circle K's
rights under ~ 17 were modified by the Addendum, those rights
were extended and Circle K exercised such rights by stating its
intent to enter into renewal negotiations in February 2010.
17 -
OPINION AND ORDER
grants Circle K the "exclusive first option" to accept the terms of
lease or purchase offers received by defendants "within fifteen
(15) days after receipt of said notice on the same terms of any
such proposal."
Wilson Decl., Ex. A,
p.
2.
Circle K further
maintains that its acceptance of the Third-Party Lease was timely,
unequivocal, and binding.
To support this assertion, Circle K
relies on its letter of December 10, 2010, which stated that Circle
K accepted the "general terms" of the Third-Party Lease.
Circle K insists it affirmatively and unequivocally accepted
the terms of the Third-Party Lease, and the remaining paragraph of
its letter seeks only to clarify four discrete issues relating to
the Third-Pa=ty Lease.
Circle K characterizes its clarifications
as follows:
First, Circle K sought to clarify acceptable security in
lieu of a personal guaranty, due to its corporate
structure .... Second, Circle K confirmed that it would
provide a list of Trade Equipment as required by Section
16.2 of the Third-Party Lease. . .. Third, Circle K sought
to clarify whether its corporate forms for reporting
sales data used to calculate percentage rent would be
acceptable to defendants .... Finally, Circle K sought to
confirm the start date of the Third-Party Lease.
Circle K's Memo. in Support of Circle K's Cross-Motion, pp. 24-25
(doc. 57).
Circle K maintains that these clarifications do not
represent changes and that its acceptance of the new lease was
not conditioned on defendants' acceptance of Circle K's requests.
To prove this, Circle K points to its letter of December 29,
18 -
OPINION AND ORDER
2010, wherein it ultimately accepted the original terms of the
Third-Party Lease.
Defendants, however, characterize the December 10, 2010 letter
as a counter-offer to the terms of the Third-Party Lease, or as an
attempt to renegotiate its terms.
Defendants argue that Circle K
qualified its acceptance by carefully limiting it to the "general
terms" of the lease when it
terms" of the lease.
"was required to accept all of the
Dfs.' Reply to Circle K's Memo. in Opp., p.
3 (doc. 58) (citing
1008 (1998)).
154 Or. App. 52, 57, 959 P.2d
Defendants also emphasize Circle K's request that
the "minor modifications and clarifications" be made "prior to
signing the lease."
Moreover, defendants argue, nothing in the
letter states that Circle K will agree to the lease,
even if
defendants do not agree to the changes.
Beyond the form of the requests in the December 10,
letter,
defendants
also
take
issue
with
their
2010
substance.
Defendants insist that Circle K's modifications address terms that,
if accepted by defendants, would not match the original terms of
the Third-Party Lease and would therefore not comply with
requirement that Circle K accept "the
proposal" (emphasis added).
same
~
l7's
terms of any such
According to defendants, an acceptance
"must be in the precise terms of the offer and if a new provision
is suggested, it is considered a counteroffer."
Circle K's Memo. in Opp., p. 10 (doc. 58)
19 -
OPINION AND ORDER
Dfs.' Reply to
(citing Ellingsworth v.
Shannon,
161 Or.
106,
110,
88 P.2d 293
(1939)).
For example,
defendants argue that Circle K's desire to substitute a corporate
guaranty
for
a
personal
guaranty
consti tutes
a
guaranty
fundamentally different from the guaranty attached to the ThirdParty Lease.
Defendants also maintain that Circle K's request for
a change in the percentage rent reporting format was a major change
rather than a mere request for clarification.
Defendants further
argue that Circle K's request for clarification regarding the start
date of the Third-Party Lease changed the lease terms.
Defendants acknowledge Circle K's eventual acceptance of the
new lease in its December 29, 2010 letter, but maintains that the
right's
fifteen
day period had passed,
acceptance untimely.
thereby rendering the
Therefore, according to defendants, Circle
K's letter of December 10, 2010 did not affirmatively accept all of
the terms of the new lease and therefore constituted a counteroffer.
As such, defendants insist that Circle K never properly
accepted the terms of the Third-Party Lease.
In order for Circle K to have properly accepted the ThirdParty Lease,
its "acceptance must be positive,
unequi vocal and unambiguous,
and must not change,
qualify the terms of the offer."
Or. 531, 538, 371 P.2d 74 (1962);
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OPINION AND ORDER
add to,
or
Wagner v. Rainier Mfg. Co., 230
~
Or. App. 9, 15, 633 P.2d 857 (1981)
exercise of options).
unconditional,
also Blakeslee v. Davoudi, 54
(applying the Wagner rule to
I find that whether Circle K's acceptance
meets these requirements ultimately is a genuine issue of material
fact.
For example, it would not be unreasonable for a jury to find
that Circle K's December 10, 2010 letter constituted an affirmative
acceptance with minor requests for clarification,
argues.
as Circle K
A reasonable jury might also give weight to the fact that
Circle K never refused to perform under the terms of the ThirdParty Lease
In
for example, the Oregon Court of Appeals
held that the optionee's acceptance of a third-party contract was
not valid,
and was in fact a rej ection,
refused to complete
because the cptionee
a requirement specifically included in the
terms of the offer, and the optionee was required to "match all
terms of the offer."
reasonable
Stevens,
154 Or.
App.
at 60.
Here,
a
jury could find that nothing in Circle K's letter
constitutes an outright refusal. Furthermore, the first paragraph,
stating, "Circle K accepts ... ," could be construed to mean that the
four paragraphs at issue are more like indicia of performance demonstrating Circle K's willingness to perform - rather than an
acceptance conditioned on defendants' acceptance of the requested
changes.
On the other hand, it would also be reasonable for a jury to
find that Circle K's letter ultimately constitutes a counter-offer
or an acceptance conditioned on defendants'
requested changes.
acceptance of the
Circle K accepted "the general terms" of the
Third-Party Lease and requested "modifications and clarifications
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OPINION AND ORDER
prior to signing the lea.se... ," potentially casting doubt on Circle
K's
purported unconditional acceptance of all of the terms.
Finally,
a
jury
may
reasonably
find
that
the
requested
clarifications and modifications were not minor, given the evidence
presented by defendants.
pp. 6-10 (doc. 58).
Dfs.' Reply to Circle K's Memo. in Opp.,
If Circle K's requested changes qualify the
offer, then the requested changes must be considered a counteroffer -
not an
acceptance.
~
C.R.
Shaw Wholesale Co.
v.
Hackbarth, 102 Or. 80, 96, 201 P. 1066 (1921) ("The only condition
to the offer which can be added in the acceptance is one which does
not qualify the offer in legal effect.").
However,
these are
factual issues not appropriately resolved by the court on summary
judgment.
In sum, the effectiveness of Circle K's purported acceptance
of the terms of the Third-Party Lease is a genuine issue of
material fact and both parties' motions for summary judgment are
denied as to this specific issue.
II. Breach of Covenant of Good Faith and Fair Dealing
Defendants also move for summary judgment on Circle K's
claim for breach of the covenant of good faith and fair dealing.
All contracts contain an implied covenant of good faith and fair
dealing.
Uptown Heights Assoc. Ltd. P'ship v. Seafirst Corp.,
320 Or. 638, 645, 891 P.2d 639 (1995).
The covenant of good
faith and fair dealing ensures that each party receives the
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OPINION AND ORDER
anticipated benefits of their bargain.
See Best v. U.S. Nat'l
Bank, 303 Or. 557, 563, 739 P.2d 554 (1987).
In determining
whether there has been a breach of this covenant, the court
evaluates a party's conduct in light of the reasonable
expectations of the parties.
Id.
The success of defendants' motion depends on the court
finding that there is no right of first refusal to accept the
Third-Party Lease terms.
Because this court finds a valid right
of first refusal, defendants have not met their burden of
demonstrating the absence of a genuine issue of material fact.
Indeed, as Circle K notes, there are fact issues surrounding this
claim and the parties' reasonable expectations.
As Circle K has
shown that a genuine issue of material fact exists, defendants'
motion as to this claim is denied.
CONCLUSION
For these reasons, defendants' Motion for Summary Judgment
(doc. 47) is DENIED, and Circle K's Cross-Motion for Partial
Summary Judgment (doc. 56) is GRANTED in part and DENIED in part.
IT IS SO ORDERED.
Dated this
~day
of October, 2011.
Ann Aiken
United States District Judge
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OPINION AND ORDER
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