Berg v. Hudesman

The landlord (plaintiff) and the tenant (defendant) entered into a 99-year ground lease. The lease provided for rent payments of $5,000 per year “each year during the term of this lease.” The lease stated that this $5,000 was the “minimum rent payment hereunder.” The lease further provided that after the third year, rent would include the $5,000, plus 10 percent of “net rentals,” calculated by taking the commercial rent the tenant received from its sublessees (gross rentals), and deducting an amount based on a predetermined formula to divide the income between the landlord and tenant. Finally, the lease provided that, beginning in year 16, rent would be “as computed above” (i.e., $5,000 plus 10 percent) or 50 percent of net rentals, whichever was greater. It was unclear whether the “minimum” rent of $5,000 was to be added to the 50 percent of net rentals under this calculation. Further, the lease did not define “gross rentals,” rendering it unclear whether the term included rent payments only, or reimbursement for common maintenance expenses as well. Finally, it was unclear how, exactly, net rentals were to be calculated, including which costs would be included in such calculations. The tenant subleased the property to Safeway Stores under a 15-year sublease. This sublease, similar to the original lease, allowed for an alternative rent calculation beginning in year 16. The trial court, however, did not consider this sublease in the proceedings below. Upon the expiration of the Safeway lease, the tenant transformed the property into a shopping center with multiple subtenants. The landlord sued the tenant for rents owed. The trial court considered the case under the plain-meaning rule, and declined to consider the original Safeway sublease and other extrinsic evidence. The trial court granted the landlord summary judgment. The tenant appealed.