Saugus Auto Theatre Corp. v. Munroe Realty Corp.

366 Mass. 310 (1974)

318 N.E.2d 615

SAUGUS AUTO THEATRE CORPORATION vs. MUNROE REALTY CORP.

Supreme Judicial Court of Massachusetts, Norfolk.

September 18, 1974.

November 7, 1974.

Present: TAURO, C.J., REARDON, BRAUCHER, HENNESSEY, & WILKINS, JJ.,

Joseph E. Iovino for the plaintiff.

John J. Jennings for the defendant.

REARDON, J.

The plaintiff lessee brought a bill in the Superior Court seeking an interpretation and construction of certain language in a lease of land in Saugus dated March 12, 1938. A Superior Court judge found that the area leased comprised about thirteen acres which were employed in the operation of a drive-in theatre with a capacity of 650 to 700 cars; that the lease was renewed in 1963 in accordance with its terms; and that in May, 1970, the Commonwealth took by eminent domain 2.15 acres of the leased land belonging to the defendant lessor. The taking reduced the number of cars which could be accommodated in the theatre by some thirty.[1] The lease provided that the lessor might terminate it "if the premises or any substantial portion thereof are taken by public authority." The *311 judge found "in relation to the total land leased and its use in the operation of a drive-in theater that the taking of somewhat less than two acres was not a taking of a substantial portion of the leased premises," and entered a final decree recognizing the renewal of the lease for the period of twenty-five years from May 1, 1963. On appeal the Appeals Court, alluding to the provision for the taking as "commonly inserted in a lease for the purpose of affording the landlord the rights to terminate the lease, evict the tenant, and deprive the tenant of an opportunity to share in the damages, ... rights the landlord would not have in the absence of such a provision," held that "the taking of some fifteen percent of the leased premises must be regarded as substantial as that term is used in the lease." Saugus Auto Theatre Corp. v. Munroe Realty Corp. 1 Mass. App. Ct. 869 (1974). The Appeals Court reversed the final decree and ordered the entry of a new decree declaring that the defendant is entitled to enter the premises and to expel the plaintiff.

The sole issue before us is whether a "substantial portion" of the leased land was taken.

We are mindful that the words of a lease must be interpreted in light of the facts to which they apply and the circumstances that attended their use. Wunsch v. Donnelly, 302 Mass. 286, 289 (1939). Crystal Concrete Corp. v. Braintree, 309 Mass. 463, 468 (1941). Richard Clothing Mfg. Co. v. Gutstein-Tuck, Inc. 328 Mass. 386, 389 (1952). Robert Indus. Inc. v. Spence, 362 Mass. 751, 755 (1973). This is particularly true in construing the word "substantial," which is a relative term and must be examined in its context to gauge its meaning. Atchison, Topeka & Santa Fe R.R. v. Kings County Water Dist. 47 Cal. 2d 140, 144 (1956). State v. Pahl, 254 Minn. 349, 353-354 (1959). Smith v. City of Fort Dodge, 160 N.W.2d 492, 498 (Iowa 1968). We note initially that the lease provisions in the cases referred to by the Appeals Court were broader than this one, permitting the lessor to terminate the lease *312 on a taking of the premises or any part thereof. Munigle v. Boston, 3 Allen 230, 232 (1861). Goodyear Shoe Mach. Co. v. Boston Terminal Co. 176 Mass. 115, 117 (1900). Sparrow Chisholm Co. v. Boston, 327 Mass. 64, 65 (1951). Newman v. Commonwealth, 336 Mass. 444, 445 (1957). Such a provision cuts off the tenant's right to share in the damages and is obviously for the benefit of the lessor alone. By contrast, insertion of the term "substantial portion" into the lease provision must be taken to represent an accommodation to the interests of the tenant who may improve the land and build up good will over the years and thus suffer a loss if the lease were to terminate on the condemnation of any portion of the land. At the same time the interests of the lessor remain protected, for termination of the lease is economically justifiable only where the extent of land taken is such that the rental value of the remaining land is seriously affected, for example where the gross income of a tenant paying a percentage rent will be seriously diminished by the taking. See Nichols, Eminent Domain (Rev.3d ed.) § 11.06 at 11-14 (1974); Schwartz, Lease Drafting in Massachusetts, § 7.8 at 272-274 (1961); Hall, Landlord and Tenant (Adams and Wadsworth's 4th ed.) § 153 (1949). In these circumstances it is plain that simply comparing the proportion of land taken to that remaining will not suffice. Cf. Cary v. Whiting, 118 Mass. 363, 368 (1875). Rather, we look to the nature and character of the land actually taken. State v. Pahl, 254 Minn. 349, 354 (1959).

Here, although some fifteen per cent of the land area under the lease was taken, there was a loss of but thirty car spaces of the total 650 to 700 car capacity of the theatre, spaces for which there was little need since the theatre was very rarely full. The theatre, as argued by the plaintiff, remained largely intact, its effective use having been diminished by a mere four per cent. In light of the interests of the parties, we conclude that this was not a taking of a substantial portion of the premises within the meaning of the lease provision.

*313 The case is remanded to the Superior Court for the reentry as final of the decree of the Superior Court judge.

So ordered.

[1] There was evidence that the theatre while operating was filled to capacity only on Memorial Day and Labor Day.