Remedies-BVT Lebanon Shopping Center, Ltd. V. Wal-Mart Stores, Inc.: Diminution in Fair Market Value-Compensation or Confusion?

By Scott, Clint H. | The University of Memphis Law Review, Fall 2002 | Go to article overview

Remedies-BVT Lebanon Shopping Center, Ltd. V. Wal-Mart Stores, Inc.: Diminution in Fair Market Value-Compensation or Confusion?


Scott, Clint H., The University of Memphis Law Review


In 1968, Kuhn Brothers, Inc. entered into a lease for rental space promising to pay its landlord, a shopping center known as The Center of Lebanon, a minimum rent with additional payment to be calculated on gross receipts (percentage rent).1 Wal-Mart Stores, Inc. (Wal-Mart) acquired Kuhn Brothers in 1981 and stepped in as tenant in The Center of Lebanon.2 Meanwhile, WalMart and The Center of Lebanon amended the 1968 lease to increase the base rent and reduce the percentage rent.3 In 1985, BVT Lebanon Shopping Center (BVT) bought out The Center of Lebanon, and BVT revised the lease at Wal-Mart's request, expanding the leased premises to 84,000 square feet.4 To make the expansion possible, BVT spent approximately $1,500,000.5

In early October of 1994, believing that Wal-Mart intended to replace its Lebanon store with Bud's Discount City (Bud's), BVT sued Wal-Mart for $4,689,526 in compensatory damages alleging

an anticipatory breach of an implied covenant of continuous occupancy.6 Bud's replaced Wal-Mart on October 5, 1995.7 Although Wal-Mart continued to pay base rent, BVT collected no percentage rent because Bud's never generated sufficient gross receipts under the lease agreement to allow for any such collection!

At trial, the Tennessee state court found that Wal-Mart breached the implied covenant of continuous occupancy and the express permitted use clause contained in the lease agreement.9 The two measures of damages BVT presented to the trial court were: "1) the present value of the lost future percentage rent alone, or 2) the diminution in the fair market value of the shopping center caused by Wal-Mart's withdrawal as the anchor tenant."10 The trial court chose to base the award on the lost future percentage rent under the lease agreement and granted BVT $2,507,674 in compensatory damages for breach of contract.11 Wal-Mart appealed, and BVT, seeking compensatory damages based on the diminution in value theory, cross-appealed.12 The court of appeals affirmed the trial court's judgment in favor of BVT, but it held that the proper measure of damages was the "diminution in value of the entire shopping center."13 As a result, the court modified the compensatory damages to $4,695,000.14 The Tennessee Supreme Court held, affirmed.15 On this issue of first impression in

Tennessee, the court concluded that the "appropriate measure of damages in a breach of covenant of continuous occupancy is the diminution in fair market value." BVT Lebanon Shopping Ctr., Ltd. v. Wal-Mart Stores, Inc., 48 S.W.3d 132, 136 (Tenn. 2001).

Generally, damages are available to the non-breaching party in a breach of contract case.16 The basic theory of recovery for a breach of contract is that the non-breaching party is entitled to the benefits he or she would have received had the contract been fully performed by the breaching party.17 Therefore, the non-breaching party is entitled to recover his or her "expectation interest" or benefit of the bargain.18 Under no circumstances, however, is the non-breaching party to be placed in a better position than he or she would have found him or herself had the breaching party fully performed.19 Another equally important theory is that damages will only be awarded if "sustained as a proximate result of the breach [and] so long as such damages are reasonably shown and capable of reasonably [sic] and accurate ascertainment. …

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