1112 Charles, L.P. v. Fornel Entertainment, Inc.
159 A.3d 619
| R.I. | 2017Background
- Fornel Entertainment leased part of 1112 Charles Street in 1999 from Simone as a parking lot; the original lease mistakenly listed the term to 12/31/2114 and included the building.
- An amended lease in 2002 corrected the term to 12/31/2014 and excluded the building. In 2005, Eltahan (a purchaser) and Fornel executed a Second Lease Extension extending the lease to 12/31/2024 and adding a release clause stating lessor and lessee have no defenses or counterclaims against each other.
- As part of Eltahan’s financing, Fornel executed a Non-Disturbance, Attornment and Subordination Agreement; the attornment bound the tenant to recognize a purchaser or lender as lessor if the property changed hands.
- The property was later sold at auction and ultimately became owned by 1112 Charles, L.P. (plaintiff), which sued Fornel and Lancellotta in 2011 seeking declarations (including that the original lease was void), fraud, and related claims.
- Lower courts granted partial summary judgment to plaintiff on certain contract-interpretation points (term, premises, exclusivity), but a later justice granted defendants’ summary judgment, holding plaintiff lacked standing because it was not in privity of contract and the attornment did not create contractual privity; final judgment for defendants was entered and appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge the Second Lease Extension | 1112 Charles contends the attornment/non-disturbance agreement created privity of contract allowing it to challenge the lease | Defendants argue plaintiff is not a party to the lease or amendments and thus lacks standing; buyer knew of lease at purchase | Court held plaintiff lacked standing—attornment did not create privity of contract between plaintiff and defendants |
| Validity / enforceability of lease defenses | 1112 Charles sought to void or challenge lease terms (as purchaser/assignee) | Defendants relied on release clause in the Second Lease Extension barring defenses, setoffs, counterclaims | Court held release provision would bar plaintiff's asserted claims even if it had standing |
| Whether attornment creates contractual privity | Plaintiff argued attornment binds purchaser and thus creates privity permitting challenges | Defendants: attornment only binds tenant to new landlord relationship; it does not create privity between purchaser and original lessor’s claims | Held attornment does not create privity of contract sufficient to confer standing on plaintiff |
| Incorporation of earlier partial summary judgment into final judgment | Plaintiff argued the earlier declarations should be part of the final judgment | Defendants and court treated later summary judgment as disposing of the case; court did not need to address further because of standing/release rulings | Court affirmed final judgment for defendants; earlier partial rulings were not re-opened given standing/release outcome |
Key Cases Cited
- Tri-Town Construction Co. v. Commerce Park Associates 12, LLC, 139 A.3d 467 (R.I. 2016) (standard of review for summary judgment)
- High Steel Structures, Inc. v. Cardi Corp., 152 A.3d 429 (R.I. 2017) (summary judgment standard and nonmoving party burden)
- Boucher v. Sweet, 147 A.3d 71 (R.I. 2016) (allocation of burden on summary judgment)
- Genao v. Litton Loan Servicing, L.P., 108 A.3d 1017 (R.I. 2015) (standing threshold inquiry)
- Cruz v. Mortgage Electronic Registration Systems, Inc., 108 A.3d 992 (R.I. 2015) (focus on claimant in standing analysis)
- Mruk v. Mortgage Electronic Registration Systems, Inc., 82 A.3d 527 (R.I. 2013) (third parties to contracts generally lack standing)
- Pontbriand v. Sundlun, 699 A.2d 856 (R.I. 1997) (injury-in-fact requirement for standing)
- Haxton’s of Riverside, Inc. v. Windmill Realty, Inc., 488 A.2d 723 (R.I. 1985) (summary judgment is inappropriate after trial has commenced)