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Safeway Stores 46, Inc. v. WY Plaza, L.C.

Nos. 20-8064 & 20-8066. 4/7/2023. D.Wyo. Judge Bacharach. Contracts—Unilateral Mistake—Declaratory Judgment—Restitution—Summary Judgment—Laches—Attorney Fees.

April 7, 2023

Safeway Stores 46, Inc. (Safeway) leased a store from City View Partners. Under the lease, Safeway owed fixed monthly payments and yearly payments based on a percentage of its sales revenue. In exchange, Safeway was allowed to expand the store, and if it did so, it could deduct its construction costs from the yearly payments. Safeway expanded the store, and City View Partners then sold the property to WY Plaza, L.C. (WY Plaza). Safeway and WY Plaza then modified the lease, memorializing the expansion costs and keeping the terms for Safeway’s yearly payments. For the first three years, Safeway didn’t owe WY Plaza yearly payments because the sales were too low. Accordingly, Safeway didn’t need to deduct construction costs. But in 2005 Safeway’s sales increased sufficiently to trigger the yearly payments, which Safeway made from 2005 until 2017 without deducting the construction costs. In 2018, Safeway realized that it could have been deducting its construction costs, and it demanded reimbursement for the overpayments from 2005 to 2017. WY Plaza refused the demand, so Safeway made the 2018 and 2019 yearly payments under protest, and it sued for restitution and a declaration of the right to deduct the balance of the amortization account from the yearly payments. Both parties moved for summary judgment. The district court granted summary judgment to WY Plaza, holding that (1) the doctrine of laches prevented relief because Safeway’s delay had prejudiced WY Plaza; and (2) restitution wasn’t available because Safeway’s mistake was unilateral and the parties had a written contract. The court denied Safeway’s motion and denied WY Plaza’s attorney fees motion.

On appeal, Safeway argued that the district court erred in granting summary judgment to WY Plaza. Here, WY Plaza didn’t seek summary judgment based on laches, but for both claims, the district court sua sponte raised the laches defense without providing Safeway with notice and a reasonable opportunity to respond to the laches theory. And laches constitutes an affirmative defense, so WY Plaza had to prove prejudice from Safeway’s delay, which it failed to do. The district court also relied on arguments that WY Plaza hadn’t made when responding to Safeway’s motion for summary judgment. Additionally, on the restitution claim, the district court determined that Safeway couldn’t obtain equitable relief because a contract existed and WY Plaza didn’t share in the mistake. The Tenth Circuit determined that in Wyoming, restitution may be available when a party overperforms based on a unilateral mistake of fact even when the parties have a contract. Therefore, the district court erred by granting summary judgment to WY Plaza on both claims.

Safeway also argued that the district court erred by not granting its summary judgment motion. In objecting to Safeway’s motion for summary judgment on the declaratory judgment claim, WY Plaza asserted an affirmative defense of laches. Unless the defendant creates a material dispute of fact on an affirmative defense, the district court must grant summary judgment to the plaintiff. Here, WY Plaza failed to create a material dispute of fact on laches, so Safeway established its claim. Further, because WY Plaza chose to forgo other defenses that it raised in district court but not on appeal, the Tenth Circuit chose not to sua sponte remand for the district court to consider other defenses. As to the restitution claim, WY Plaza objected on grounds that restitution wasn’t available because a valid contract existed and the mistake was unilateral. But restitution is available as a matter of law despite the existence of a contract and unilateral mistake. Therefore, Safeway was entitled to summary judgment, and the district court erred.

WY Plaza cross-appealed the attorney fees denial. Here, the lease contained a fee-shifting clause, which the parties agreed entitles the prevailing party to attorney fees. But because the Tenth Circuit vacated the summary judgment award to WY Plaza, its argument for attorney fees is moot.

The judgment was vacated and the case was remanded for further proceedings. WY Plaza’s cross-appeal was dismissed as moot.

Official US Court of Appeals for the Tenth Circuit proceedings can be found at the US Court of Appeals for the Tenth Circuit website.

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