This lawsuit involves a written ground lease agreement between plaintiffs who are owners and lessors of the University Mall (Mall) in Little Rock, Arkansas, and defendants, who are ground lessees. The parties or their predecessors signed the lease agreement in 1965, and have amended it in writing six times. Plaintiffs filed this action, asserting two claims. On May 16, 2005, the Court entered an Order dismissing the second claim for relief, that is, plaintiffs' claim that defendants had an implied obligation under the lease agreement to locate and maintain viable retail tenants at the University Mall, so that percentage rental income would be generated.
In the remaining claim, plaintiffs contend that defendants breached an express covenant of the lease agreement requiring defendants to maintain the property in good and tenantable repair. Plaintiffs seek an injunction requiring defendants to restore the Mall to good and tenantable repair, order and condition as required by the lease agreement.
Motion for Summary Judgment
Defendants have filed a motion for summary judgment on the remaining claim, asserting that plaintiffs are not entitled to the remedy they seek-specific performance-as a matter of law.
On October 1, 1965, the predecessors of the parties in this action entered into a ground lease agreement (Agreement) which permitted defendants to develop the grounds into the Mall at defendants' own expense, known as a ground lease. The Agreement is to remain in effect until December 31, 2026. The Agreement has been amended six times between 1965 and 1988.
Section 5.3 of the Agreement provides that:
Lessee shall throughout the Term, at no expense to Lessors, maintain, or cause to be maintained in good and tenantable repair, order and condition, reasonable wear and tear excepted, the Leasehold Improvements, and promptly, at no expense to Lessors, make or cause to be made all necessary repairs, interior and exterior, structural and nonstructural, foreseen and unforeseen, to the Leasehold Improvements.
Section 14.3 of the Agreement provides:
This Agreement shall be construed and enforced in accordance with the laws of the State of Arkansas. Wherever in this Agreement it is provided that any party shall or will make any payment or perform or refrain from performing any act or obligation, each such provisions shall, even though not so expressed, be construed as an express covenant to make such payment or to perform or not to perform as the case may be, such act or obligation.
Section 17.1, under Article XVII Entitled Remedies Are Cumulative - No Implied Waiver provides:
Lessors and Lessee shall each be entitled to specific performance, and injunction or other appropriate equitable relief for any breach or threatened breach of any of the provisions of this Agreement, notwithstanding the availability of an adequate remedy at law, and each party hereby waives the right to raise such defense in any proceeding in equity. The specific remedies provided for in this Agreement are cumulative and are not exclusive of any other remedy. The failure of either party to insist in any one or more cases upon strict performance shall not be construed as a waiver or relinquishment for the future. No acceptance of rentals with knowledge of any default shall be deemed a waiver of such default.
Plaintiffs argue that defendants have waived the right to raise the adequacy of remedy at law defense pursuant to Section 17.1 of the Agreement. Defendants counter that the fact that the parties agreed to specific performance is not dispositive.
Franklin Point, Inc. v. Harris Trust and Sav. Bank, 660 N.E. 2d 204, 208 (Ill. Ct. App. 1995) (court has independent duty to determine whether specific performance warranted notwithstanding that parties agreed to appropriateness of the remedy). The equitable remedy of specific performance is not a matter of right, but rests in the sound judicial discretion of the court to grant or to reject an application upon consideration of the circumstances of each case. Savage v. Shields, 293 F. 863, 868 (8th Cir. 1923)
Under Arkansas law, specific performance is not an available remedy if there is an adequate remedy at law, City of Shannon Hills v.Sparks, 52 Ark. App. 188 (1996), the hardship to defendant outweighs plaintiff's legitimate interest in specific performance, Dorsey v. Hanover, Inc., 48 Ark. App. 108, 112 (1995), or it would require too much supervision by the Court, Nakdimen v. Atkinson Improvement Co., 149 Ark. 448 (1921). In general, Arkansas courts have found that whether specific performance should be awarded in a particular case is a question of fact for the fact finder. See Dossey ...