Professional Building of Eureka, Inc. v. Anita Frocks, Inc., No. 6

California Court of Appeal Feb 23, 1960 No. Civ. 9770Published

Before: Warne

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Holding. The court held that a complaint alleging a breach of an implied covenant to remain in business under a percentage lease states a cause of action, as the adequacy of the minimum rent and the parties' intent present factual questions that cannot be decided on demurrer.

Issues

Whether a complaint alleging a breach of an implied covenant to remain in business on leased premises states a cause of action under a percentage lease.
Whether the adequacy of minimum guaranteed rent and the intent of the parties regarding business operations are factual questions precluding dismissal on demurrer.

Disposition. reversed

Quotations verified verbatim against the opinion

“Appellant contends that the complaint states a cause of action for an accounting to determine the amount of rent due by reason of lessee’s breach of an implied covenant to remain in business on the demised premises”

“These are matters which present a factual question which cannot be decided as a matter of law, when as in the instant ease the lease makes no provision covering such circumstances and the intent of the parties is uncertain.”

[277]

WARNE, J. pro tem.

This is an appeal from a judgment of dismissal entered after the sustaining of a demurrer without leave to amend in an action for an accounting of rents.

The pertinent allegations of the complaint are in substance as follows: That on December 26, 1947, Lloyd V. Bridges, then owner of a certain commercial building located at the southeast corner of 5th and “F” Streets, in the city of Eureka, as lessor, entered into a lease agreement with the defendant, Anita Frocks, Inc., Number 6, a corporation, a retail ladies ready-to-wear business, as lessee.

That defendant Margot Colby Bowen unconditionally guaranteed performance by lessee of said lease, including without limitation the payment of the rentals at the times and in the amounts therein specified.

That on October 31, 1953, Lloyd V. Bridges conveyed said building and premises to plaintiff and assigned to plaintiff all his rights under said lease.

That the term of said lease was 10 years, commencing on April 1, 1948, and ending on March 31, 1958. Said lease provided for $700 “guaranteed rent” to be paid monthly in advance and payments of a sum equal to 6 per cent of the amount of gross sales of merchandise designated as “percentage rent,” less the “guaranteed rent” for each yearly period, payable on May 1st of each year, commencing May 1, 1949. “Gross sales” were defined in the lease as “all sales made by Lessee, both cash and credit; all charges for services and alterations and repair work in the gross amount received from any and all other sources of income derived from business conducted on the premises. ’ ’

On March 29, 1957, defendant Anita Frocks, Inc., Number 6, a corporation, opened and established a ladies ready-to-wear business at the southwest corner of 5th and “F” Streets, in said city of Eureka, and diverted its business from the aforesaid leased premises at the southeast corner of 5th and “F” Streets to the new premises at the southwest corner of 5th and “F” Streets; and after the diversion of said business the rentals paid by Anita Frocks, Inc., Number 6, to plaintiff amounted to the minimum payment of $700 per month.

It is alleged that the diversion of said business by said defendant Anita Frocks, Inc., Number 6, was willful, deliberate and with the intent of depriving plaintiff of the percentage

Professional Building of Eureka, Inc. v. Anita Frocks, Inc., No. 6

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