Lucky Jacks Entertainment Center, LLC, and New Gaming Systems, Inc. v. Jopat Building Corporation et al.

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REL: 07/10/2009 Notice: T h i s o p i n i o n i s s u b j e c t t o formal r e v i s i o n b e f o r e p u b l i c a t i o n i n t h e advance s h e e t s o f Southern R e p o r t e r . R e a d e r s a r e r e q u e s t e d t o n o t i f y t h e R e p o r t e r o f D e c i s i o n s , Alabama A p p e l l a t e C o u r t s , 300 D e x t e r A v e n u e , M o n t g o m e r y , A l a b a m a 3 6 1 0 4 - 3 7 4 1 ((334) 2 2 9 - 0 6 4 9 ) , o f a n y t y p o g r a p h i c a l o r o t h e r e r r o r s , i n o r d e r t h a t c o r r e c t i o n s may b e made b e f o r e t h e o p i n i o n i s p r i n t e d i n Southern R e p o r t e r . SUPREME COURT OF ALABAMA SPECIAL TERM, 2009 1071648 Lucky Jacks E n t e r t a i n m e n t C e n t e r , LLC, and New Gaming Systems, I n c . v. Jopat B u i l d i n g Corporation e t a l . Appeal LYONS, from Jefferson Circuit (CV-07-1093) Justice. Lucky Jacks Entertainment"), Entertainment Center, LLC ("Lucky a n d New G a m i n g S y s t e m s , I n c . ("NGS"), from a judgment awarding a p p r o x i m a t e l y Jopat Court Building Corporation, Jacks appeal $216,000 i n damages t o Pajia Realty Corporation, Natural 1071648 Bridge Development Corporation, and Birges ( h e r e i n a f t e r r e f e r r e d to c o l l e c t i v e l y and Jopat operates April part gaming 2006, of Background owns a n d as " J o p a t " ) . the We reverse an an shall operating a video On independent be NGS used 7, company guaranteed lease 2006, Jopat Lucky Jacks by The prior added.) Lucky Jacks an By on NGS separate behalf l e a s e agreement p r o v i d e d : and written lease in from owned the occupied for s w e e p s t a k e s c e n t e r and the consent Entertainment video-sweepstakes to the June to NGS Beginning t h e l e a s e a g r e e m e n t as l e s s e e . without pursuant agreement center. Jopat, Premises the c e n t e r i n Roebuck. negotiated Lucky Jacks Entertainment. operate History in several states. shopping with Procedural manages a s h o p p i n g employee, executed agreement and businesses NGS Entertainment, center l e a s e ; i t d i d not f o r no of was the "The purpose other Lessor." of purpose (Emphasis formed s p e c i f i c a l l y i n the of to leased engage i n any premises other business Alabama. It was Corporation remand. Factual in Land i s undisputed negotiated and that, signed, at the the 2 time the parties lease were agreement aware that 1071648 litigation regarding the one pending "hoped" such The the that operations lease provided: after twelve (12) gives Lessor ninety a equal the the lease. this Jefferson were to "Lessee full would eventually may a termination terminate the months of p a y i n g Lease months notice." required declared Nathan NGS's use--for illegal. Freels, inserted at of the sweepstakes the could operation Pursuant Lucky Jacks The to the the provision, at then monthly Jopat's agent, any request because owner of that lease the NGS lease not the paid rent with knew Renner, the that the center--could be Jacks so Lessee and Matt Entertainment, termination agreement terminate was Lucky time inserted into video-sweepstakes testified into Entertainment a as determine rent, provided t e s t i f i e d t h a t t h e t e r m i n a t i o n p r o v i s i o n was agreement such that days advance w r i t t e n n o t i c e (4) Court legal. included (90) four termination lease Circuit It i s also undisputed Court agreement which sum in the l e g a l i t y of v i d e o - s w e e p s t a k e s o p e r a t i o n s r e q u i r e d by parties that was provision that lease i f was Lucky Jacks the video- profitable. agreement as E n t e r t a i n m e n t began o p e r a t i n g 3 ultimately amended, a video-sweepstakes 1071648 center on the property in September 2006. Lucky Jacks E n t e r t a i n m e n t p a i d r e n t as r e q u i r e d by t h e l e a s e a g r e e m e n t f o r each On month i t occupied the premises, December 1, 2006, this sweepstakes o p e r a t i o n s were Code 1 9 7 5 . See B a r b e r So. 2d 1 599 December On vacated u n l a w f u l under § the premises January 3, 2007, 13A-12-27, A l a . that Lucky 960 Jacks and d i d n o t pay r e n t through in letter, Barber; lease 1 video- after 2006. Jopat's agent letter, that 2006. County Racing Ass'n, I t i s undisputed Entertainment wrote the determined v. J e f f e r s o n ( A l a . 2006). Entertainment Court i n c l u d i n g December i n that term Lucky Section expired on counsel, noting this Court's counsel January Jacks decision m i s t a k e n l y presumed 4, 2007. Jacks Entertainment proposed 13A-12-27 Lucky In that provides, i n part: A slot machine; or "(2) Any o t h e r g a m b l i n g d e v i c e , w i t h the intention that i t be used i n the advancement of u n l a w f u l gambling a c t i v i t y . " 4 same to extend the lease "(a) A person commits the crime of p o s s e s s i o n of a gambling d e v i c e i f w i t h knowledge of the c h a r a c t e r t h e r e o f he m a n u f a c t u r e s , sells, transports, places or possesses, or conducts or negotiates any transaction affecting or designed to affect ownership, c u s t o d y or use o f : "(1) that 1071648 on a month-to-month b a s i s "final." In response, until this Renner wrote Court's Lucky decision Jacks Entertainment e x p l a i n i n g t h a t t h e e x p i r a t i o n d a t e o f t h e l e a s e was 30, 2009; rent of demanding owed f o r J a n u a r y the lease vacate does the not responded On a n d NGS, "Lucky assign t o use 23, Jacks"), a damages the At that Entertainment five days offering the the Lucky the premises to lease expiration Jacks f o r another Jopat o r be help sued Lucky the default Lucky Jacks i f i t wished date. The of i n the J e f f e r s o n C i r c u i t the lease agreement. claim on for the record or that i t rent. Jacks Entertainment the attorney fees and a trial, had recovery amended and bench and later breach-of-lease the breached Jopat the 5 to claim. amended as C o u r t s e e k i n g damages Jopat complaint Entertainment agreement to requested purpose of pay in Entertainment demand f o r p a y m e n t 2007, September as g u a r a n t o r ( h e r e i n a f t e r r e f e r r e d t o c o l l e c t i v e l y guaranty both or before to Jopat's breach state 2007 w i t h i n sublet premises March Jacks and show permission Lucky agreement; Entertainment for that became the complaint demand Lucky under $82,000 Jacks to in answered complaint. argued lease that Lucky a g r e e m e n t by Jacks failing to 1071648 c o m p l y w i t h t h e t e r m i n a t i o n p r o v i s i o n i n t h e a g r e e m e n t when i t vacated argued void the premises t h a t the and 219 So. provision. i n W a l k e r v. 2d 379 Entertainment single l e a s e was ceased use was for in Lucky Lucky citing therefore, this T r u c k i n g Corp., Jacks contended 283 to perform premises required Ala. by the to that Barber rendered perform, not Entertainment provision On Jopat void, was lease and required this agreement that, to 13, 2008, i t s findings the of f a c t and with the court Jacks the lease determined decision in impossible merely comply trial Court's to therefore, i f i t d e s i r e d to terminate May detailing the argued 551, because o p e r a t i o n - - h a d been unlawful. the Court's t h a t Lucky agreement--a video-sweepstakes be Jacks entirety--including of i t s duty leased rent. t h a t i t was, Specifically, relieved the and i t s Southern (1969), paying illegal unenforceable termination decision and Lucky the lease. Jacks termination 2 entered a judgment c o n c l u s i o n s of law. Based J o p a t ' s a r g u m e n t t h a t t h e l e a s e a g r e e m e n t was i m p o s s i b l e to p e r f o r m i s i n c o n s i s t e n t w i t h i t s argument b e f o r e the t r i a l c o u r t t h a t L u c k y J a c k s E n t e r t a i n m e n t c o u l d h a v e o b t a i n e d an a l t e r n a t e use of the premises under t h a t p o r t i o n of the l i m i t e d - u s e p r o v i s i o n p r o h i b i t i n g o t h e r uses "without the p r i o r w r i t t e n c o n s e n t o f L e s s o r . " T h e r e f o r e , we w i l l c o n s i d e r t h e i s s u e s p r e s e n t e d t o us w i t h o u t r e g a r d t o t h e e f f e c t , i f any, of t h a t l a n g u a g e . 2 6 1071648 on the Court 546 of C i v i l So. 2d was v o i d a b l e , and damages, to pay (2001), the Appeals' the trial The vacate trial Lucky judgment Lucky pursuant c o u r t denied Lucky Jacks ore evidence, correct." Hensley "Nevertheless, evidence is established 887 So. 2d 848 So. 2d the 702 v. that the would have J a c k s moved t o a l t e r , to Rule 59, A l a . R. on July 807 lease been t e r m i n a t e d p u r s u a n t 230, 234 942, on and So. or undisputed in had to amend, Civ. 24, P. 2008. Review presumes 910 So. is not this of law Court's 1215, 96, 7 findings 100 (Ala. to on be 2005). the material facts are v. Hamiter, a l s o Kershaw v. see Salter Kershaw, Furthermore, carries (Ala. based where the review 1221 fact applicable evidence." ( A l a . 2002). of those 2d where ( A l a . 2004); question 2d Court principle 949 a of court's findings Poole, undisputed, the correctness, this this by ruling Graham, Lyle, appealed. reviewing a t r i a l tenus v. a p p r o x i m a t e l y $216,000 Jacks's motion Standard "In concluded Jopat l e a s e agreement had the i n Lucas Jacks Entertainment the t e r m i n a t i o n p r o v i s i o n . or court i t awarded amount L u c k y i f the decision i s de 1997). no "on appeal, presumption novo." Ex of parte 1071648 Analysis On erred not appeal, in concluding illegal Jacks no other So. 2d As the 380. d i d not zoning lease on this were use time know t h a t the Upon trial trial court, decision in the leased 283 lease required use was discovering the lessees uncollected After useless then vacated for 552, 219 executed, the prohibited restriction, the by the rezoned. l e s s o r sued for rent. noting because property," t h e p r e m i s e s , and to "'and p a r t i e s u n s u c c e s s f u l l y a t t e m p t e d to have the p r o p e r t y The Walker, agreement A l a . at was and Lucky premises trucking terminal the court voidable into a lease or p u r p o s e . ' " the laws. the Court's to the a g r e e m e n t was i t did before w a r e h o u s e , and At that p a r t i e s entered lessees office, contends the d i f f e r e n t object at parties that i t s argument the o p e r a t e an Jacks void. In Walker, which local and bases supra. by Lucky this of that the Court "the entire lease's terms property and the was zoning rendered of explained: "The g e n e r a l r u l e i n a c a s e s u c h as we h a v e h e r e i s s t a t e d m o s t c l e a r l y i n 32 Am. Jur., Landlord & T e n a n t , s 2 2 9 , p. 212: "'...Where, h o w e v e r , t h e l e a s e p e r m i t s the lessee t o use the premises for only a 8 the 1071648 single purpose, a prohibition of law a g a i n s t such use w i l l , a c c o r d i n g to the weight of a u t h o r i t y , annul or t e r m i n a t e the contract and relieve the tenant of obligation thereunder. ...'" 283 A l a . a t 553, on to quote 219 2d a t 3 8 1 . v. This Court McKleroy, ( 1 9 2 1 ) , o v e r r u l e d on o t h e r g r o u n d s b y C r o s s v . R u d d e r , 380 So. 2d of the (quoting Wilson, 206 property of a minor. which involved This Court Ala. the 342 , improper 89 went 584 ( A l a . 1979), 20 6 i n Walker So. 766 Wilson So. sale stated: "'When b o t h p a r t i e s , a c t i n g u n d e r a m i s t a k e o f l a w , make a c o n t r a c t w h i c h t h e law f o r b i d s , then the p r i n c i p a l s are not l i a b l e thereunder I t i s a mistake of l a w , known i n l a w , y e t p r o b a b l y u n k n o w n i n f a c t , to the p a r t i e s to the c o n t r a c t at the time of i t s e x e c u t i o n . ' " 283 A l a . at Ala. Court at 553-54, 348, 89 i n Walker So. 219 at So. affirmed the concluding that recover the Consistent this C o u r t has principle purpose that of lease with enabling 381 Based trial on these rules, c o u r t ' s judgment the p l a i n t i f f was not this for entitled the to agreement. the rules stated also explained: when at 588-89). defendant, on 2d premises the "We believe are lessee 9 i n Walker to leased and Wilson, t h a t i t i s a sound for accomplish the an express unlawful 1071648 purpose, the the suit 258 Ala. Court of either party 132, 136, determined action that seeking the this had case, premises be used center. It is § 13A-12-27, of Ala. the 2d this not there 9 (1952). was unlawful however, t h i s sufficiently the that Code lease that operation such that a never recovery Ex parte In 3 restraint this to the the an agreement of trade. Court concluded that defense. lease agreement required a in Barber, statute Rice, a lease at Rice, defense of operations 1975, and of Entertainment undisputed no valid pleaded i t i s undisputed for a performance Lucky Jacks be other." 7, an can the rule specific also determined execution So. furthered b e t w e e n J o p a t and Court against facts presented, defendant In 61 that allegedly Under the the a g r e e m e n t i s v o i d and that the video-sweepstakes were supra, unlawful enacted construed in this under before light of the the C f . T h o m p s o n v . W i i k , R e i m e r & S w e e t , 391 So. 2d 1016, 1020 ( A l a . 1 9 8 0 ) ( " A s a g e n e r a l p r i n c i p l e , a p a r t y may not enforce a v o i d or illegal contract e i t h e r at law or in equity."); Bankers & Shippers Ins. Co. of New York v. Blackwell, 255 A l a . 360 , 3 6 6 , 51 So. 2d 4 98 , 502 (1 951 ) ( " ' [ C ] o n t r a c t s s p e c i a l l y p r o h i b i t e d by l a w , o r t h e e n f o r c e m e n t of w h i c h v i o l a t e d a law, or the making of w h i c h v i o l a t e d the l a w ... [ a r e ] v o i d a n d n o n e n f o r c e a b l e ... (and) W h e n e v e r a p a r t y r e q u i r e s t h e a i d o f an i l l e g a l t r a n s a c t i o n t o s u p p o r t his c a s e , he c a n n o t r e c o v e r . ' " ( q u o t i n g E l l i s v. B a t s o n , 177 Ala. 3 1 3 , 3 1 8 , 58 So. 1 9 3 , 194 (1912))). 3 10 1071648 facts applicable Entertainment. to the operations At the time of the parties Lucky executed Jacks the agreement, t h i s Court had not y e t d e c i d e d t h e q u e s t i o n video-sweepstakes o p e r a t i o n s were u n l a w f u l under However, Court this long ago explained lease whether § 13A-12-27. that such circumstance--the r e s o l u t i o n of a question of f i r s t impression as t o t h e meaning from compliance contracts (1880), of a s t a t u t e - - d o e s not excuse with the enforceable. under determined the that constitutional In statute Prince so v. circumstances a and mortgage statutory as to Prince, void provisions parties effected, such this t o be of doubt a t 569. that, "at the time void, and among m e m b e r s This Court that prohibiting this compromise was holding a profession." explained: "The f a c t s , h o w e v e r , w e r e u n d i s p u t e d , a n d t h e o n l y doubt was a s t o t h e l a w . The s t a t u t e s on this s u b j e c t w e r e t h e n a s f u l l y p r o m u l g a t e d a s now. E v e r y one was r e q u i r e d t o know t h e i r p r o p e r c o n s t r u c t i o n , a n d n e i t h e r i g n o r a n c e n o r d o u b t was a n y e x c u s e . - Ignorantia facti excusat; ignorantia juris non 11 the of her husband. i t presented of the l e g a l Court violating c o u r t had not announced i t s c o n c l u s i o n mortgages matter Ala. contended void A l a . 565 this as encumbrance of a w i f e ' s p r o p e r t y f o r t h e debt The render 67 presented, was the parties grave 67 1071648 excusat." S i m i l a r l y , h e r e , t h e f a c t s were u n d i s p u t e d , t h e o n l y doubt was as t o t h e l a w . and Lucky they Jacks were Entertainment required recently, (Ala. S e c t i o n 1 3 A - 1 2 - 2 7 was to in Griffin 2008), standard, this Unocal Court quoted ( A l a . 1996), Huson, 404 States Supreme eligibility whether either may the U.S. 97, 106-07 i n turn, reaffirmed 2d More 291, 313 of this opinion i n McCullar Co., quoted (1971). So. as a r e l a x a t i o n Insurance 687 S o . 2 d 1 5 6 , Chevron In O i l Co. Huson, principles the v. United establishing the f o r n o n r e t r o a c t i v i t y o f a d e c i s i o n by r e f e r r i n g t o decision by o v e r r u l i n g resolution (citations establishes clear "a retroactivity. new past precedent o r b y d e c i d i n g an i s s u e was not c l e a r l y o m i t t e d ) . We principle on w h i c h of f i r s t foreshadowed." do not view B a r b e r a s e s t a b l i s h i n g a new p r i n c i p l e Jacks 990 the p l u r a l i t y 106-07 Court have r e l i e d , whose which, agreement, and construction. Corp., c o u l d be v i e w e d v. U n i v e r s a l U n d e r w r i t e r s L i f e 165 the lease know i t s p r o p e r v. i n what executed i n f o r c e when J o p a t were impression 404 U.S. at the d e c i s i o n in l e a s e d by "leased f o r the express 12 law, litigants of law, j u s t i f y i n g A c c o r d i n g l y , the premises Entertainment of nonLucky purpose of 1071648 enabling the the lease based See On In premises be use was occupied later, the as laws. the unenforceable statutory on L u c a s v. the premises and from its of this 2d 546, law lease agreement salon, e v i d e n c e d i d not p a r t i e s canceled a on had the required a use lease the the prohibited property and trial that d i s c l o s e the hairstyling the So. by lessee mistakenly lessee as L y l e , 807 case r e l i e d a hairstyling The purpose," and 2001), the The unlawful 4 showed t h a t the legal. an existing then Jopat r e l i e s used knowledge, but the the void supra. Lucas, zoning accomplish was ( A l a . C i v . App. court. local on Rice, appeal, 548-49 to agreement inception state. lessee by lessor's believed rezoned salon. Some executed a that and time release Before the t r i a l c o u r t , Lucky Jacks's counsel s t a t e d t h a t t h e l e a s e a g r e e m e n t " s u b s e q u e n t l y became i l l e g a l " a f t e r t h e a g r e e m e n t was signed. However, J o p a t does not argue t h a t Lucky Jacks i s precluded by i t s statement from a s s e r t i n g otherwise on appeal, as i t has i n f a c t done by arguing illegality from i n c e p t i o n . Moreover, Lucky Jacks is not e s t o p p e d f r o m t a k i n g a d i f f e r e n t v i e w on a p p e a l b e c a u s e i t d i d not o b t a i n a f a v o r a b l e r u l i n g i n the t r i a l c o u r t . See Ex p a r t e F i r s t A l a b a m a B a n k , 883 So. 2d 1 2 3 6 , 1 2 4 4 - 4 5 ( A l a . 2 0 0 3 ) ( e m b r a c i n g t h e e l e m e n t s o f j u d i c i a l e s t o p p e l as s t a t e d i n New H a m p s h i r e v . M a i n e , 532 U.S. 7 4 2 , 7 5 0 - 5 1 ( 2 0 0 1 ) , i n c l u d i n g " ( 2 ) the p a r t y must have been s u c c e s s f u l i n the p r i o r proceeding ..."). Jopat, i n f a c t , c o r r e c t l y argued to the t r i a l court t h a t t h i s C o u r t i n B a r b e r d i d n o t " d e c l a r e a n y new r u l e of law." 4 13 1071648 discharging The each other lessee covenant paid before the argued of the the that of opinion the lessee court Court enjoyment property premises trial sued quiet of because, Civil the was as a mistaken as to summary based effect mutual a concluded: "the voidable the at Based on option the Jopat contends void, and required that, to decision the that as the a the lease result, the Court Civil 14 use The for the The lessor. That court's in t h a t b o t h p a r t i e s were the lease law agreement. regarding parties, is that 807 Jacks the the So. Walker termination of the prohibited. agreement Lucky apply that, u n l i k e Walker, lessee." of not the was the Walker of rent Walker, did judgment. of of breach void while contract construction comply w i t h of of of the indicating mistake holding salon stating general on liability was a damages f o r Based judgment legality on seeking lease affirmed the Furthermore, of of the evidence alleging rezoned. d i s t i n g u i s h e d Walker, no and a hairstyling Appeals was lessor, release argued, entered Lucas there the liability. later the lessee from 2d stated was the opinion lease was at 549. in Lucas, voidable, not Entertainment was provision. Appeals in Lucas However, is not 1071648 binding on this Court. Court's decision Furthermore, i n Walker in plain language states: "'Where, h o w e v e r , t h e l e a s e p e r m i t s the tenant use the premises for only a s i n g l e purpose, prohibition against that use will ... annul terminate t h e c o n t r a c t and r e l i e v e the tenant obligation thereunder.'" 283 Ala. at Landlord 553, 219 & Tenant So. § 229), this 2d at 381 (quoting 32 to a or of Am. Jur. and "'When b o t h p a r t i e s , a c t i n g u n d e r a m i s t a k e o f l a w , make a c o n t r a c t w h i c h t h e l a w f o r b i d s , t h e n t h e p r i n c i p a l s are not l i a b l e t h e r e u n d e r It is a m i s t a k e o f l a w , known i n l a w , y e t p r o b a b l y unknown i n f a c t , to the p a r t i e s to the c o n t r a c t at the time of i t s e x e c u t i o n . ' " 283 Ala. Ala. is at 553-54, a t 348, 89 So. consistent with 219 other we r e j e c t the Walker in Lucas. leased that for accomplish there can an be As i t is a the at of 381 Civil sound principle recovery purpose, at the 15 stated of the suit in that language, e.g., 206 which Rice, construction Rice, of supra: "We when p r e m i s e s are enabling the agreement of Wilson, Court, Appeals' Court purpose this of t h i s this express (quoting B a s e d on decisions Court unlawful no 2d at 588-89). supra, believe So. lessee to void and is either party against 1071648 the other." Rice, Accordingly, 258 A l a . the a t 1 3 6 , 61 S o . 2 d a t 9. lease agreement between 5 Lucky Jacks E n t e r t a i n m e n t and Jopat i s v o i d i n i t s e n t i r e t y , i n c l u d i n g t h e termination entering provision. a judgment Entertainment terminating that judgment consistent and have the lease and therefore, remand with the cause this Murdock, with court that that Lucky for Jacks provision i n damages t o J o p a t reverse erred i n the t r i a l further based on court's opinion. proceedings REMANDED. C . J . , and W o o d a l l , Shaw, J J . , the t r i a l holding complied and a w a r d i n g We, R E V E R S E D AND Cobb, f o r Jopat should provision. As a r e s u l t , Stuart, Smith, Bolin, Parker, concur. J . , concurs i n the r e s u l t . J o p a t a l s o argues t h a t , a t t h e time Jopat and Lucky Jacks E n t e r t a i n m e n t entered i n t o the lease agreement, the p a r t i e s knew t h a t t h i s C o u r t c o u l d d e t e r m i n e t h a t v i d e o - s w e e p s t a k e s o p e r a t i o n s were u n l a w f u l and t h a t t h e y , t h e r e f o r e , a g r e e d t o a l l o c a t e t h e r i s k o f s u c h an o u t c o m e a s s t a t e d i n t h e l e a s e a g r e e m e n t . However, b e c a u s e t h e p u r p o s e t o be a c c o m p l i s h e d b y the l e a s e agreement i s i l l e g a l , t h e e n t i r e l e a s e agreement i s void, a n d we c a n n o t h o n o r a p r o v i s i o n i n t h a t agreement attempting to allocate risks stemming from the illegal conduct. I n t h e t r i a l c o u r t , J o p a t a l s o r e l i e d on a f o r c e majeure p r o v i s i o n i n the l e a s e agreement, but the t r i a l court did n o t r e l y on t h a t p r o v i s i o n i n i t s j u d g m e n t . Although J o p a t r e f e r s t o t h e p r o v i s i o n i n i t s summary o f t h e a r g u m e n t b e f o r e t h i s C o u r t , on t h e same r e a s o n i n g , i . e . , t h e i n v a l i d i t y o f t h e e n t i r e l e a s e a g r e e m e n t , we d e c l i n e t o r e a c h t h e i s s u e of i t s a p p l i c a b i l i t y . 5 16

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