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58 Swansea Mall Drive LLC v. Gator Swansea Property LLC

United States District Court, D. Massachusetts

December 12, 2018




         Based on the credible testimony and exhibits offered at trial, and the stipulations of the parties, I make the following findings of fact.


         A. Parties and Structure of the Lease

         1. This matter came before the court in an extended bench trial held on February 1, 2, 12, 13, 14, and 15, and April 23, 24, and 25, 2018. It involves a dispute between plaintiff 58 Swansea Mall Drive, LLC (58 Swansea), and defendant Gator Swansea Property, LLC (Gator), that arose under a Ground Lease (the Ground Lease) to certain demised premises (Premises) in Swansea, Massachusetts.

         2. The Ground Lease was executed in 1984 by both parties' predecessors in interest. 58 Swansea became the Tenant by way of an assignment on June 13, 2013. Gator became the Landlord by way of an assignment on November 14, 2013. Stipulation of Facts (SOF), Dkt #248, ¶ 1. The Premises consist principally of a shopping center located at 58 Swansea Mall Drive, Swansea, Massachusetts (Shopping Center).

         3. 58 Swansea is a single-purpose entity created by Jack Corwin to hold the leasehold interest in the Premises. 58 Swansea acquired the leasehold interest from Huntington Holdings, Inc., another entity owned and controlled by Corwin. Tr. 6 at 51-53; Ex. 117.

         4. Gator is a Florida-based limited liability corporation. Gator's managing member is James Goldsmith. Tr. 3 at 6-7.

         5. Portions of the Premises are subleased by 58 Swansea to Dollar Tree Stores, Inc. (Dollar Tree) and Wakefern Food Corp., d/b/a PriceRite (PriceRite). Neither Gator nor its predecessors are parties to the subleases. Tr. 1 at 46; Exs. 1, 116; SOF ¶ 2.

         B. The Early Relationship & Maintenance Disputes

         6. In December 0f 2013, shortly after acquiring the premises, Gator erected a pylon sign advertising an outparcel for rent in the Shopping Center. Ex. 15.

         7. Marjorie Hession, an employee of Northstar Centers LLC, is 58 Swansea's Property Manager. Hession and Corwin discussed the pylon sign when it was erected and agreed that 58 Swansea would not object. Tr. 1 at 105; Ex. 74.

         8. Shortly after the parties acquired their respective interests in the Premises, a dispute arose over 58 Swansea's obligation to maintain the grounds of the Shopping Center. Tr. 1 at 57.

         9. Article 10 of the Ground Lease provided as follows:

Throughout the term of this Lease, Tenant agrees that all buildings and improvements that may be erected on the demised premises by Tenant, including, but not limited to all plumbing, electrical, heating, air conditioning and ventilation equipment and systems and all other equipment, will be installed, operated and maintained in good order and condition, wear and tear excepted . . . .
Throughout the term of this Lease and in accordance with all applicable provisions of this Lease, Tenant, at its sole cost and expense, will take good care of the demised premises and the sidewalks, curbs, and vaults (if any) adjoining the demised premises (including, without limitation, landscaping, paving and lighting), and will make all necessary repairs thereto, interior and exterior, structural and nonstructural, in a good and workmanlike manner. When used in this Article 10, the term repairs shall include all necessary replacements, remedies, alterations, additions and betterments.

Ex. 1 at 14.

         10. In the months after becoming Landlord, Gator issued a series of maintenance demands to 58 Swansea complaining about the condition of the parking lot, the sidewalks, the parking lot lighting, and the roof and façade of the Shopping Center. Demand letters were sent on the following dates.

a. May 24, 2014: Gator requested action concerning trash, landscaping, and fencing, stating that a failure to address the issues within 30 days would “leave the Landlord no alternative but to rectify at your [Tenant's] sole cost and expense.” Ex. 88.
b. June 20, 2014: Gator noted that “there has been an improvement from the last inspection in May, ” referring however to weeds that created an “unsightly appearance, ” that it would “rectify at your sole cost” if not timely addressed. Ex. 89.
c. June 23, 2014: Gator informed 58 Swansea of a missing electrical box cover behind the Price Rite and the Dollar Tree stores. Ex. 121.
d. August 4, 2014: Gator stated that a “couple of photos” taken on a recent “site visit” showed cracks in the parking lot near a delivery dock and a weed growing on a wall. Ex. 122. That Gator notice also raised a concern that it had not received a copy of 58 Swansea's “current standard extended coverage insurance naming Gator Swansea Property, LLC as an additional named insured as outlined in Article 4 of the Ground Lease.” Ex. 122.
e. February 11, 2015: Gator wrote a letter referring to the state of maintenance of the Shopping Center grounds in general, without referencing any specific issues, but concluding that “the tenant has not been maintaining the property and common areas in a reasonable manner” and demanding a “first class, clean and presentable” condition. Ex. 30

         11. None of these notices used the words “breach” or “default.”

         12. In early 2015, Boston experienced a record level of snowfall, with almost nine feet of snow accumulating in a matter of weeks. Snow removal resulted in further wear and tear to the surface of the parking lot. Because of the intense cold, resurfacing of the parking lot with asphalt before the spring was impractical. See Tr. 1 at 49-50, 90.

         C. 58 Swansea Seeks to Mortgage Its Leasehold Interest

         13. In March of 2015, 58 Swansea hired Michael Marcone to broker a mortgage loan from United Bank. SOF ¶ 3.

         14. The Ground Lease permitted 58 Swansea to mortgage its leasehold interest under certain conditions, including that 58 Swansea not be “in default . . . beyond the applicable grace periods.” Ex. 1, Art. 6 § 3. At the time that it applied for the mortgage, 58 Swansea did not disclose the maintenance dispute with Gator to United Bank. Tr. 5 at 94-96; Ex. 108.

         15. As collateral for the mortgage, 58 Swansea offered its leasehold interest in the Premises. Ex. 3.

         16. Nicholas Helides represented United Bank in the mortgage negotiations. United Bank retained attorney Leonard Simons to prepare the closing.

         17. On March 16, 2015, Corwin presented a $25, 000 check to United Bank and accepted a conditional offer of a seven-year non-recourse loan. Exs. 3, 109. To satisfy United Bank that it was not in default under the Ground Lease, 58 Swansea invoked Article 14, Section 4 of the Lease. Section 4 obligated Gator as Landlord (subject to certain conditions) to deliver an “estoppel certificate” within ten days of a request. Ex. 1. Article 14 of the Ground Lease required that the estoppel certificate verify that the lease remained “in full force and effect” and describe “any setoffs or defenses against the enforcement of any of the agreements, terms, covenants or conditions of this Lease and any modifications of this Lease upon the part of Tenant to be performed or complied with, and if so, specifying the same.” Ex. 1, Art. 14 § 2.

         18. Article 6, Section 6 of the Ground Lease further provided that:

Landlord shall, without charge, at any time and from time to time, within ten (10) days after request by Tenant, certify by written instrument, in form submitted by Tenant, duly executed, acknowledged and delivered by Landlord, whether or not this Lease is in full force and effect; that this Lease is unmodified (or, if it has been modified, that the same is in full force and effect as modified and what modifications there have been); whether Tenant has or has not, as the case may be, faithfully and fully made all payments then and theretofore due to Landlord; whether there has been any change in ownership of title of the demised premises affecting the right of Landlord to receive or continue to receive payments of rent due under this Lease; the dates to which rent payable has been paid; and whether Landlord knows or does not know, as the case may be, of any default by Tenant in the performance by Tenant of any of the covenants, conditions and agreements on Tenant's part to be performed, such instrument to include reasonable detail as to each such default.

Ex. 1 at 11.

         19. After some misdirection, Gator received the request for the estoppel certificate on June 22 or 23, 2015. Ex. 9.

         20. On June 26, 2015, Gator provided 58 Swansea with an estoppel certificate. However, the certificate stated: “Tenant is in breach of the lease for maintenance including, but not limited to, lighting, parking lot replacement, landscaping and curbing.” Ex. 10. The certificate also did not recite that the Ground Lease was “in full force or effect.” 21. On July 2, 2015, Marc Shandler, Gator's General Counsel, wrote an email to Lowell Salesin, 58 Swansea's real estate counsel. The email stated, in pertinent part:

Lowell - The principal of the firm has advised us as follows:
The landscaping needs to be completed [sic] redone. Including the rear, repaving the entire parking lot with 2 inches over lay, replace all lighting that is not working, repair the pylon sign, paint the building, fix the sidewalk and repair all curbs. The place is in complete disrepair.

Ex. 90.

         22. On July 30, 2015, Gator signed a new Landlord Estoppel Certificate with the recitation that the Ground Lease was then “in full force and effect.” However, the certificate also included the following language with respect to the percolating issues of default and maintenance:

Tenant is not in default under the Lease beyond the applicable grace, notice and/or cure periods and, except for the repairs and maintenance as evidenced by the construction documents attached hereto as Exhibit B, Landlord does not know of any other defaults, except for the below-stated, by Tenant in the performance by Tenant of any of the covenants, conditions and agreements on Tenant's part to be performed other than the repairs and maintenance to be performed described in the preceding sentence; provided, however, that Landlord reserves the right to declare a default by Tenant under the Lease in the event Tenant does not complete the repair and maintenance work identified on the construction documents attached hereto as Exhibit “B” within ninety (90) days after the date of this Estoppel Certificate. Other than the foregoing ...

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