Court Opinion

ID: 38319
Source: CourtListenerOpinion
Date Created: 2010-04-25 20:06:13+00
Date Added: 2024-06-11T08:17:37.779917
License: Public Domain

United States Court of Appeals
                                                               Fifth Circuit
                                                            F I L E D
                 UNITED STATES COURT OF APPEALS
                      FOR THE FIFTH CIRCUIT                   May 3, 2005

                     _______________________            Charles R. Fulbruge III
                                                                Clerk
                        Cause No. 04-60518,
                       cons. w/No. 04-60804
                     _______________________

                        RAPHAEL SKRMETTA,

                                               Plaintiff-Appellant,

                             versus

                           BTN, INC.,

                                               Defendant-Appellee.

          Appeals from the United States District Court
             for the Southern District of Mississippi
                     USDC No. 1:02-CV-745-GRo

Before REAVLEY, JONES, and GARZA Circuit Judges.

EDITH H. JONES, Circuit Judge:*

          This appeal concerns the interpretation of a lease for

premises used as a parking lot for a Biloxi casino vessel.          The

district court ruled against the landlord.   Except for the court’s

interpretation of the rent provision, we AFFIRM.

          On October 19, 1993, Raphael Skrmetta (“Skrmetta”), as

landlord, and Mississippi-I Gaming, L.P. (“Mississippi-I”), as

predecessor in interest to BTN, Inc. (“BTN”), entered into a

ninety-nine-year “Ground Lease” (“GL, § _”) of certain premises,

     *
      Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
specifying that they could be used for the purposes of, inter alia,

operating   a     dockside   gaming    vessel,   conducting    gaming-related

activities, and any other lawful activity or use.              See GL, § 5.1.

            The    Ground    Lease    also   provides   for   variable   rents:

Annual Base Rent, see GL, § 3.1, Adjustment of Annual Base Rent,

see GL, § 3.2, and Percentage Rent, see GL, § 3.4.             The Annual Base

Rent was initially fixed at $500,000, subject to a cost-of-living

adjustment every five years.           The Adjustment of Annual Base Rent

and Percentage Rent are additional rents based on BTN’s gaming

profits, i.e., its Adjusted Gaming Win1 and Gross Gaming Win.2

Under the Ground Lease, if the tenant’s gaming profits fall below

a certain amount during a specified lease term, it remits only the

Annual Base Rent.      See GL, § 3.1.        If the tenant’s gaming profits

     1
      GL, § 1.1 defines “Adjusted Gaming Win” as:

     . . . for the period in question, the positive
     difference, if any, derived from subtracting (i) all
     federal, state and local gaming taxes and fees related
     to Tenant’s gaming operations at the Premises from (ii)
     the Gross Gaming win.

(emphasis added).
     2
      GL, § 1.6 defines “Gross Gaming Win” as:

     . . . for the period in question, the sum of (a) all
     cash received by Tenant as winnings from gaming
     transactions at the Premises (including gaming
     transactions occurring on any gaming vessel permanently
     moored at the Premises or which takes on passengers at
     the Premises). . . . Gross Gaming Win shall not
     include (i) any revenues from the sale of . . . parking
     . . . .

(emphasis added).

                                        2
exceed a certain amount during a specified lease term, it must

remit the Annual Base Rent plus the Adjusted Gaming Win (minus the

Gross Gaming Win and taxes and fees) and Percentage Rent.                    See GL,

§§ 3.2, 3.4.

            In August of 2000, Boomtown, Inc., parent company of

Mississippi-I, assigned the Ground Lease to BTN.                    Skrmetta gave

written consent to the assignment on the condition that “BTN . . .

maintain the character of the Boomtown Biloxi Casino operations in

substantially the same manner.”               To date, BTN operates a per-

manently moored casino vessel on the tidelands immediately fronting

Skrmetta’s   premises      and   uses   the    premises     for     casino-related

parking.     BTN’s recent annual rent payments to Skrmetta have

averaged approximately $4,500,000.

            In 2002, BTN publicly announced its intent to relocate

its gaming operations to the Del-Seaway site, a parcel of land

adjacent to the leased premises.              BTN informed Skrmetta that it

intended to continue its use of Skrmetta’s premises for casino-

related    parking.        BTN   also   informed         Skrmetta    that,    after

relocation, it would pay only the Annual Base Rent.

            Skrmetta then filed a declaratory judgment action for

relief    including    a   declaration        of   the    parties’      rights   and

obligations under the Ground Lease.            Reviewing competing motions,

the district court entered summary judgment for BTN, finding that

the Ground Lease does not prevent BTN from relocating its gaming

operations   to   an   adjacent    lot,     continuing      to    use   Skrmetta’s

                                        3
premises for gaming-related parking, and remitting only Annual Base

Rent as a result of its move.3   The court also concluded that the

Ground Lease did not contain an implied covenant of continuous use

under Mississippi law and that BTN’s proposed actions would not

breach the duty of good faith and fair dealing it owed to Skrmetta

because its actions are consistent with its rights under the Ground

Lease.   Skrmetta timely appealed.

           This court reviews de novo a district court’s summary

judgment disposition, applying the same standards as the district

court. BP Oil Int’l., Ltd. v. Empresa Estatal Petoleos de Ecuador,

332 F.3d 333, 336 (5th Cir. 2003).

           First, we agree with the district court that the Ground

Lease does not contain, as Mississippi law does not permit, an

implied covenant of continuous use that requires BTN to operate a

casino at Skrmetta’s premises. See Senatobia Plaza Investors, Ltd.

v. Wal-Mart Stores, Inc., 1995 WL 1945501, *3 (N.D. Miss. 1995)

(stating that “[i]n Mississippi, there is no implied covenant of

continuous use”).   Further, GL, § 5.1, governing “Permitted Uses,”

is expressly permissive as to use.    See Kinchen v. Layton, 457 So.

2d 343, 345 (Miss. 1984) (holding that Mississippi law disfavors

restrictive use covenants and “favors free and unobstructed use of

real property”).    Consequently, courts may not read a restrictive

covenant into an open-use contract that does not contain an express

     3
      The district court found that BTN owed Skrmetta adjusted
base rent for the year preceding its relocation.

                                  4
covenant of   continuous    use.        See    Security     Builders,    Inc.    v.

Southwest Drug Co., 147 So. 2d 635, 637 (Miss. 1962) (holding that

in the absence of an express clause for continuous operation, a

tenant is not obliged to continue to use leased premises in a

particular manner, even where the executing parties contemplated

and/or intended that the premises would be used for a specific

purpose for the duration of the lease agreement).

          Second, not only is BTN’s proposed relocation within its

rights under the Ground Lease, but it is also consistent with the

duty of good faith and fair dealing that it owes to Skrmetta.                   See

Gen. Motors Acceptance Corp. v. Baymon, 732 So. 2d 262, 269 (Miss.

1999) (holding that a party may act in its own economic interest

without violating   the    duty    of       good   faith   and   fair   dealing).

Relatedly, the written consent to assignment between Skrmetta and

Mississippi-I, contemplating that BTN would use the premises in

substantially the same manner as Mississippi-I, does not estop BTN

from moving its vessel while using the premises only for parking.

BTN’s proposed use, gaming-related parking, is substantially the

same as Mississippi-I’s prior use, gaming-related parking. Because

the parties agree that the written consent to assignment neither

expands nor contracts their respective rights under the Ground

Lease, there is no basis for estoppel.                     See Sentinel Indus.

Contracting Corp. v. Kimmins Indus. Serv. Corp., 743 So. 2d 954,

964 (Miss. 1999) (finding that under Mississippi law, equitable

estoppel arises when one party makes a representation and the other

                                        5
party relies on that representation and changes its position based

on that reliance).      In all these rulings, we agree with the

district court.

          Contrary to the trial court, however, we conclude that

the issue of prospective rent, i.e., the type of rent due if BTN

relocates its gaming vessel to the adjacent lot, is not amenable to

summary judgment.    Under the Ground Lease, revenue-based rents are

calculated from winnings generated by gaming operations that occur

“at the premises.”    See GL, §§ 1.1, 1.4, 1.6.   Thus, the type of

rent BTN will owe Skrmetta turns on whether BTN’s relocated vessel

is considered to be “at the premises.”        As it stands, BTN’s

proposed relocation to the adjacent Del-Seaway site would place the

vessel within feet of its current location.        Post-relocation,

customers may still pass across Skrmetta’s premises to board and

disembark the moored casino vessel, and the driveway entry to the

casino vessel still passes through Skrmetta’s property.     Whether

BTN will owe revenue-based rent to Skrmetta post-relocation depends

on whether “at the premises” means “contiguous to” or simply “very

close to” the premises and whether “at the premises” is a term of

limitation (i.e., a condition of payment) or a term of description

(i.e., serving a utilitarian function in the Ground Lease but

having no effect on the      parties’ rights as a matter of law

thereunder).   Because interpretation of this term raises disputed

issues, we REVERSE and REMAND to the trial court for determination

by a fact-finder.

                                  6
          For the aforementioned reasons, the district court’s

judgment is AFFIRMED IN PART and REVERSED IN PART and REMANDED IN

PART.

                                7
REAVLEY, Circuit Judge, dissenting.

     I would affirm the judgment of the district court for the

reasons given by its opinion dated March 15, 2004.         This is a

contract construction question and I see no factual ambiguity.      I

fail to understand what issue the majority would put to the fact

finder.   Will the fact finder be asked what “at the premises”

means? And what evidence will contribute to the finding – that the

lessor intended to get gaming percentages for 99 years, despite

certain terms that permitted the lessee to use the land for any

lawful purpose?    Or may a witness – an expert perhaps – be

permitted to testify that “at” means “near” and that the lessor

would have to pay the owner of the adjacent land, if leased on the

same terms, double gaming percentages because moored near both

tracts means moored at both tracts?

     I see nothing but a legal decision required.           And that

decision seems to me to be an easy one.    Three precisely described

parcels of land were leased and the base rent is to be raised only

if gaming winnings are received by the lessee from operations on a

gaming vessel moored at the premises.     The lessee proposes to move

the vessel and moor it at a different parcel of land.    The lease is

clear and unambiguous, and it allows the lessee to do that without

paying more than the annual base rent.