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Berkeley Development Co. v. Great Atlantic & Pacific Tea Co.

Decided: September 5, 1986.

BERKELEY DEVELOPMENT CO., PLAINTIFF,
v.
THE GREAT ATLANTIC & PACIFIC TEA COMPANY AND COMMUNITY DISTRIBUTORS, INC. (INCORRECTLY IMPLEADED AS DRUG FAIR, INC.), DEFENDANTS



Boyle, J.s.c.

Boyle

The issue in this case is: does a tenant-assignee, a modern chain drug store, selling general merchandise including food, have the right to enforce a covenant against competition contained in an original lease between the landlord, a shopping center owner, and the original tenant-assignor, a supermarket, where the tenant-assignor has ceased its operations within the shopping center?

This court has decided that it does not under the circumstances.

Plaintiff, Berkeley Development Co. (Berkeley), filed a complaint for declaratory judgment pursuant to N.J.S.A. 2A:16-50 et seq. against defendants, Great Atlantic & Pacific Tea Co., Inc. (A & P) and Community Distributors, Inc., t/a Drug Fair (Drug Fair). Answers were filed by A & P and Drug Fair and, thereafter, Drug Fair counterclaimed against Berkeley and cross-claimed against A & P.

Berkeley has now moved for summary judgment. Both Berkeley and Drug Fair request that this court construe the terms of a lease and an "Agreement of Sublease" and make certain determinations and declarations. Counsel for A & P has submitted a letter stating that it would take no position on the motion.

The parties have stipulated that all discovery has been concluded in this case. Since there are no disputes as to any material facts, the case is ripe for summary judgment. This court has, therefore, proceeded to render its decision. Judson v. Peoples Bank and Trust Company of Westfield, 17 N.J. 67, 73-75 (1954).

Berkeley, the landlord, is the owner of a small shopping center commonly known as Berkeley Heights Shopping Center (shopping center). On February 1, 1965, A & P became a tenant within the shopping center at 400 Springfield Avenue, Berkeley Heights, occupying one store consisting of 11,514 square feet of retail space.*fn1 A & P, which intended to operate a supermarket, included within the lease agreement a covenant against competition. Addendum "F" to the lease stated as follows:

The lessor [Berkeley] obligates itself not to lease, rent or permit to be occupied a store now owned by it or wherein it is interested for the sale of food or food products within the Shopping Center now owned by the lessor so long as lessee [A & P] handles food or food products at retail. This is not intended to exclude such stores as a restaurant, luncheonette, confectionery store, drug store or bakery. This restriction is also not intended to apply to a chain, variety or department store provided, however, that any food department operated by said chain or department store does not exceed 2,000 square feet total area.

It has been established that food or food products for retail sale were displayed in the entire retail area of the A & P store, except for a small area in which beauty aids and other non-food items were sold.

Although the initial lease term ended January 31, 1976, the lease, which provided for four renewal extensions of five years each, was duly renewed and extended and continues in full force and effect. On April 16, 1977, however, A & P informed Berkeley that it was closing the store and that it intended to lease the premises to Drug Fair. Accordingly, A & P ceased to operate its food retail store shortly thereafter.

A document entitled "Agreement of Sublease" was entered into on May 4, 1977 between A & P as "sublessor" and Drug Fair as "sublessee." In the agreement between A & P and Drug Fair, A & P purported to sublet its lease to Drug Fair. Paragraph 26 of the lease provides in part that:

Each and every provision of this lease shall bind and shall inure for the benefit of the parties hereto, their legal representatives, heirs, successors and assigns . . .

and under paragraph 5A of the "Agreement to Sublease" it was provided that:

All of the rights and obligations contained in the overlease conferred and imposed upon the Sublessor (as Tenant therein) except as modified and amended by this Sublease, are hereby conferred and imposed upon Sublessee. . . .

Drug Fair commenced business at the premises in July 1977.

It has been contended by Drug Fair that the primary business of the store at the premises is ...


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