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Nth250e, L.L.C v. Global Toys Acquisition LLC

March 3, 2011


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-9470-06.

Per curiam.


Argued October 5, 2010 - Decided Before Judges Carchman, Graves and Messano.

Plaintiff, NTH250E L.L.C., appeals from the grant of summary judgment dismissing its complaint against defendants Toys "R" Us Holdings, Inc. (Toys/Holdings), Toys "R" Us Inc. (Toys), and Toys "R" Us Delaware Inc. (Toys/Delaware) (collectively, defendants). We have considered the arguments raised in light of the record and applicable legal standards. We affirm.


We need not set forth at length much of the factual history which is largely undisputed and marginally relevant to the issues raised. It suffices to say that in 1972, plaintiff's predecessor, N.T. Hegeman & Co., owner of certain property on Route 4 in Paramus, entered into a ground lease with T.R.U. Realty Corp. (TRU) that provided for the tenant to construct a building "for operation of a toy store."*fn1 The term of the ground lease was forty-five years, with an option to renew for an additional ten years. TRU's obligations were guaranteed by Interstate Stores, Inc., predecessor of Toys.

TRU assigned the lease to an independent investment partnership, Paramus Properties, which in turn subleased the property to Children's Bargain Town USA, Inc. (CBT). The sublease between Paramus Properties and CBT was for an initial twenty-five year term, with three additional renewal terms of ten years each. CBT merged into Toys.

Paramus Properties defaulted on its construction mortgage and the ground lease, compelling TRU and Toys to assume its obligations. As a result, TRU became tenant on the ground lease, and, in turn, Toys became TRU's tenant under the sublease.

In subsequent negotiations, TRU agreed to assign plaintiff its interests in both the ground lease and sublease, effectively eliminating the ground lease and making Toys plaintiff's tenant under the terms of the sublease. Although plaintiff would assume the balance due under the construction mortgage, plaintiff's managing member, M. John Germain, certified there were potential advantages to plaintiff. In particular, Germain noted that the sublease contained provisions for the payment of "additional rent" if Toys assigned its interests under the agreement during any renewal term.

These provisions of the sublease are the crux of the dispute in this case. Article 19, entitled "Assignments, Subletting and Encumbrances," provides in pertinent part:

Tenant shall have the right, without the Landlord's consent, to assign this Lease . . . at any time . . . provided, however, that if any assignment . . . shall occur during any Renewal Term or shall be effective during . . . any Renewal Term, then Tenant shall pay to Landlord, as additional rent, an amount determined as follows:

(a) With respect to any assignment . . . of this Lease, Tenant shall pay to the Landlord a portion of the net proceeds of any fee, payment or other consideration, howsoever denominated, but specifically excluding any fee, payment or other consideration howsoever denominated attributable to a bona fide sale of Tenant's inventory, trade fixtures, alterations or improvements which shall not be in excess of book value (hereinafter called "Lease Consideration") paid, directly or indirectly, to Tenant, or to any parent, subsidiary or affiliate of Tenant after deduction of all reasonable expenses, including but not limited to brokerage fees and real estate transfer taxes, if any, specifically as consideration for such assignment . . . .

Any dissolution, merger, consolidation or other reorganization of or any pledge of the corporate stock or any sale or transfer of a controlling percentage of the corporate stock of Tenant shall constitute an assignment of this lease for the purposes of this Section. The term "controlling percentage" as used herein shall mean the ownership of stock possessing, and the right to exercise, at least fifty-one per cent (51%) of the total combined voting power of all classes of stock, issued and outstanding.*fn2

Section 19.3 of the same article provided:

Notwithstanding the foregoing provisions, Tenant may at any time during the term of this Lease, without Landlord's consent, assign this Lease . . . to any parent, affiliate or wholly-owned subsidiary of Tenant . . . or to any corporation which succeeds to all or substantially all of the assets and business of Tenant; provided however, that the net worth of such corporation, following such assignment, equals or exceeds the net worth of Tenant at the date hereof or immediately prior to such assignment, whichever is greater. . . .

In October 1983, plaintiff, TRU and Toys executed an assignment and assumption agreement, as well as a collateral assignment of the sublease. Plaintiff provided TRU and Toys with a general release of all claims, except as to any claims arising under the sublease and the guaranty. In the years following 1983, Toys assigned its interest in the sublease to an affiliated entity, and, thereafter, subsequent mergers, followed by assignments of the sublease, occurred. Germain certified that "[t]o the best of [his] knowledge, none of the assignments and mergers . . . were for anything other than nominal consideration . . . and came about as a result of decisions made by Toys . . . for internal reasons." By the end of 2002, Toys/Delaware was plaintiff's tenant having become the ...

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