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MICHAELS STORES v. CASTLE RIDGE PLAZA ASSOCS.

May 7, 1998

MICHAELS STORES, INC., Plaintiff,
v.
CASTLE RIDGE PLAZA ASSOCIATES and CASTLE RIDGE L.T., INC., Defendants.



The opinion of the court was delivered by: CHESLER

OPINION

 CHESLER, MAGISTRATE JUDGE

 I. INTRODUCTION

 This matter comes before the Court on the motion of Rag Shop Wayne, Inc. ("Rag Shop"), for leave to intervene as a Defendant in the above captioned matter pursuant to Fed.R.Civ.P. 24(a)(2) or 24(b)(2). Rag Shop's motion was referred to the undersigned by the Honorable Maryanne Trump Barry, U.S.D.J. No oral argument was heard pursuant to Fed.R.Civ.P. 78. For the reasons set forth below, Rag Shop's motion will be granted.

 II. BACKGROUND

 Plaintiff, Michaels Stores, Inc. ("Michaels"), brought this action for declaratory judgment regarding the construction of the terms of a commercial lease. The defendants in the action are Castle Ridge Plaza Associates ("Castle Ridge Plaza") and Castle Ridge L.T., Inc. ("Castle Ridge L.T.").

 Michaels is a Delaware corporation with its principal place of business at 8000 Bent Branch Drive, Irving, Texas. Frost Cert. P 1. Michaels owns a chain of retail stores throughout the United States, trading under the name "Michaels." Michaels stores are typical arts and crafts stores. Its sales predominantly consist of frames and framing services, silk florals, crafts and craft supplies, art and art supplies, and seasonal decorations for the home. Id. P 12.

 On December 18, 1997, Michaels and the Defendant Castle Ridge L.T. entered into a written Asset Purchase Agreement. Id. P 5, Ex. 2. Under the Agreement, Michaels agreed to purchase substantially all of Castle Ridge L.T.'s assets and assume substantially all of Castle Ridge L.T.'s liabilities. Id. P 6, Ex. 2. The principal asset to be conveyed under the Agreement was the assignment of a certain lease in a shopping center located at the intersection of Route 10 and River Road in East Hanover, New Jersey. Id. P 3, Ex. 1.

 The lease was originally entered into on September 25, 1991, between Castle Ridge L.T., as tenant, and Castle Ridge Plaza, as landlord (the "Lease"). Id. P 3, Ex. 1. It covered a commercial retail store in the shopping center of approximately 115 feet of store frontage by approximately 226 feet, containing approximately 26,000 square feet of ground floor area. Id. P 4, Ex. 1. The Lease had an initial term expiring on December 31, 1998, but was subject to three (3) options exercisable by the tenant to renew and extend the term for separate renewal periods of five (5) years each. The Lease therefore has a potential final expiration date of December 31, 2013. Id. The original tenant, Castle Ridge L. T., did business at the site under the name "Linens 'n Things," selling linens and other domestic goods. Id. P 4.

 The transfer of the Lease was embodied in an Assignment and Assumption of Lease Agreement from Castle Ridge L.T. to Michaels. Id., P 7, Ex. 3. Under the terms of the Assignment and Assumption of Lease Agreement, Castle Ridge L.T. assigned and transferred to Michaels "all of its right, title and interest in, to and under that certain Lease dated as of September 25, 1991, between Castle Ridge Plaza Associates, as Landlord, and Assignor, as Tenant, as amended by any amendments, modifications, extensions, or additional agreements relating to or executed in connection with the Lease." Id., P 8, Ex. 3. Michaels, in turn, "assumed and agreed to indemnify and hold Assignor harmless from and against the obligations of the Tenant under the Lease to be performed by Assignor on and after the date hereof." Id.

 The portion of the Lease governing assignments was Article XIV, "Assignment and Subletting." It stated in relevant part that

 
Tenant shall not, either voluntarily or involuntarily, by operation of law or otherwise, assign, transfer mortgage or otherwise encumber this Lease, or sublet the whole or any part of the Demised Premises, or permit the Demised Premises or any part thereof to be occupied by others except in accordance with this Article XIV.

 Section 14.1(a) (emphasis added); Frost Cert. Ex. 1. one of the exceptions contained in Article XIV was Section 14.1(g). That section states that

 
Tenant shall have the right, subject to the terms and conditions hereinafter set forth, without the consent of Landlord, to assign its interest in this Lease or sublease the Demised Premises . . . to a purchaser of all or substantially all of Tenant's assets (Provided such ...

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