In Re the Circle K Corporation, Debtor. The Circle K Corporation v. Frank F. Collins

Circle K Corporation leased property from landowner Frank Collins, agreeing to pay rent calculated at two percent of “gross sales” on the premises, with certain specified exceptions. After the lease was in effect, Arizona authorized a state lottery and Circle K became one of its sales agents. The lease made no mention of lottery receipts. The question for decision here is whether Collins is entitled to two percent of total lottery ticket sales, or only two percent of Circle K’s commission on those sales. We conclude that Collins is entitled only to two percent of Circle K’s commissions.

BACKGROUND

This case arose in bankruptcy court, where Circle K is a Chapter 11 debtor. In 1975, Circle K leased property from Collins for twenty years, for the operation of a convenience store located in Phoenix, Arizona. The lease provided for a minimum base rent. In addition, it provided for a “percentage rent” in the following terms:

The lease defined “gross sales” as follows:

When Circle K and Collins entered into their lease, lotteries were illegal in Arizona. In July 1991, Arizona passed the Arizona State Lottery Act, Ariz.Rev.Stat.Ann. §§ 5-502 to -525 (1995), instituting the Arizona…

dissenting:

I respectfully dissent. I would not attempt to guess what the parties might have done had the possibility of a new good or service (for example a new drink or the Arizona Lottery) been brought to their attention in 1975 when they entered into their lease. I see no reason to do so.

Circle K drew the lease, which specifically and clearly provides that Collins is entitled to rent based upon two percent of gross sales, if that exceeds the minimum. “Gross sales” in turn means “gross receipts of every kind and nature originating from sales and services on the demised premises ... in every department operating on the demised premises, whether operated by the Lessee, or by a Sublessee, or concessionaire....”

I see nothing which makes that language hard to fathom, and if I did think it was ambiguous, I would be inclined to construe the ambiguity against the draftsman of the document, Circle K. See Cardon v. Cotton Lane Holdings, Inc., 173 Ariz. 203 , 841 P.2d 198, 202 (1992); Polk v. Koerner, 111 Ariz. 493 , 533 P.2d 660, 662 (1975). Certainly, when a customer buys a lottery ticket Circle K has supplied a sale or a service. Certainly, that has taken place on the demised…

98 F.3d 484 29 Bankr.Ct.Dec. 1142 , 96 Cal. Daily Op. Serv. 7683 , 96 Daily Journal D.A.R. 12 ,647 In re The CIRCLE K CORPORATION, Debtor. The CIRCLE K CORPORATION, Appellant, v. Frank F. COLLINS, Appellee. No. 95-15789. United States Court of Appeals, Ninth Circuit. Argued and Submitted Sept. 18, 1996. Decided Oct. 17, 1996. Lawrence G. Scarborough, Kelly A. O'Connor, and Chad H. Kolodisner, Brown & Bain, P.A., Phoenix, AZ, for appellant. Joseph M. Huey, Huey & Winski, Phoenix, AZ, for appellee. David D. Dodge, Lieberman, Dodge, Sendrow & Gerding, Phoenix, AZ, for amicus. Appeal from the Ninth Circuit Bankruptcy Appellate Panel, Russell, Meyers and Jones, Judges, Presiding. BAP No. AZ-94-01271-MeRJ. Before: CHOY, CANBY and FERNANDEZ, Circuit Judges. CANBY, Circuit Judge: 1 Circle K Corporation leased property from landowner Frank Collins, agreeing to pay rent calculated at two percent of "gross sales" on the premises, with certain specified exceptions. After the lease was in effect, Arizona authorized a state lottery and Circle K became one of its sales agents. The lease made no mention of lottery receipts. The question for decision here is whether Collins is entitled…