BRUNE, C.J., delivered the opinion of the Court.
This case involves the interpretation of a lease of a shopping center and a modification thereof. The lease provides for a fixed rental and for "additional rent" to be paid by the lessee based upon a scale of percentages of "net sales" above a minimum figure. The controversy is whether or not the net sales of the sub-tenants of four shops are to be included in computing the additional rent. The Chancellor held that they were not, and the lessors appeal.
Negotiations extended over several years prior to the execution of the original lease (referred to below as "the lease"),
Other agreements having some bearing on the controversy include: an agreement dated September 24, 1953, between the Walkers and Associated as parties of the first part and a group of neighborhood or improvement associations, incorporating as a part thereof a revised site plat attached thereto; and an agreement modifying the lease, dated April 13, 1954, between the Walkers, Associated and Stewart & Co. Limited. (There was a further modification of provisions of the lease with regard to a restaurant and other property retained by the Walkers on which there was a restaurant, but it has no direct relevance here.) The appellee also offered in evidence two other documents which were admitted over the objection of the appellants. The first of these was a letter dated April 17, 1952, from Mr. Lewis P. Seiler, then President of Stewart & Co., to Mr. James W. Rouse, of Moss-Rouse Company, real estate agents for the Walkers. This letter outlined proposed terms of a lease. The second was a letter in reply, dated April 21, 1952, from Mr. Rouse to Mr. Seiler, agreeing to some of the suggested terms and proposing changes with regard to others.
Article Three is entitled "Construction of Store Building." Section 3.01 provides in part:
Then follow provisions as to how selling area is to be determined. Section 3.02 provided that this building be completed by April 1, 1955. The building went into operation on February 8, 1955.
Article Four deals with rent. Section 4.01 establishes fixed rentals for certain periods, and there is no controversy with regard thereto. Section 4.02 provides for the payment of "additional annual rent" measured by the amount, if any, by which a percentage rental computed on a basis therein stated exceeds the fixed rental for the same period. The basis is 5/10ths of 1% on the first $6,000,000 of annual net sales, 4/10ths of 1% on the next $1,000,000 of such sales, 3/10ths of 1% on the next $1,000,000 and 2/10ths of 1% on all annual net sales in excess of $8,000,000.
Section 4.03 first provides that "[f]or the purposes of calculating percentage rental the term `annual net sales' shall mean gross sales included in `gross sales,' as hereinafter provided, less
Article Five is entitled "Tenant's Operation of Store Building." Section 5.01 required the Tenant to operate a retail business in the "store building" for seven and a half years after its completion. During that period it forbade the Tenant's reducing the selling area devoted to such operations below 66,000 square feet and the Tenant's "by voluntary action substitut[ing] any other person or corporation as the occupant or tenant of the said building or as the operator of the retail business to be conducted therein * * *." The latter prohibition was not to apply to concessions or to licenses to others to conduct departments operated as part of the Tenant's retail business. Section 5.02 authorizes the Tenant after the 7 1/2 year period to restrict or discontinue its retail operations and to sublet to others all or any part of the "store building." Section 5.03 gives the Landlord an option, subject to certain conditions, to require the Tenant to purchase the leased property if it reduces or discontinues operations pursuant to Section 5.02.
Article Seventeen is entitled "Assignment, Mortgage and Sub-Leases." Section 17.01 permits the Landlord to convey and otherwise dispose of the demised premises and its interests under the lease at any time. This power was exercised the day after the lease was executed by its assignment of the lease to Drumcastle's stockholders. Section 17.03 authorized the Tenant to "sublet the premises or any part thereof, subject only to its obligation to construct a retail store with not less than 66,000 square feet of selling space, as set forth in ARTICLE THREE hereof and to operate said store as set forth in ARTICLE FIVE hereof."
The next document in point of time is the agreement of September 24, 1953, between the Walkers, Associated, and several neighborhood or improvement associations revising the general shopping center plan previously agreed upon between the Walkers and the associations. It is relevant to the present controversy only because of the plat attached thereto. This plat shows two separate proposed structures. The northern structure is shown as containing a large area marked "Stewart's" and, at its southern end, a group of three stores designated as "A Shops." (The fourth shop involved in this controversy is not shown on this plat and was apparently added to the plan at some later stage prior to the completion of the original building.) The southern structure, as shown on this plat, contains what are designated as "B Shops" (rather vaguely delineated) and "C Store." Each of the two principal structures is outlined by a relatively heavy black line. The "A Shops" are marked off by light interior lines; and the same is true as to the "B Shops" and the "C Store" in the southern structure.
Under the fifth operative clause it was agreed that any options granted to the Tenant under the lease might be exercised "either by the Realty Company as Tenant or by Associated either as tenant or subtenant." Finally, by the sixth operative clause, the Walkers consented to the assignment of the lease by Associated to the Realty Company and to the sublease by the Realty Company to Associated "on the terms and conditions hereinbefore set forth."
Associated accounted to the Walkers for additional rent based on sales for each of its fiscal years, which ended in January, from 1956 through 1962. None of these accountings included any rent based upon sales made by tenants of any of the "A Shops," and no claim to any such rent was asserted by the Walkers until late in 1959 or early in 1960, when such a claim was asserted by Mr. Penniman, who by then had become a trustee under the will of Talbott H. Walker. On one previous occasion, one phase of Associated's accounting had been reviewed by the Walkers' certified public accountant in accordance with a provision of the lease, but this review had nothing to do with sales by tenants of the "A Shops." The Walkers were aware of the existence of these stores.
The appellants found their claim upon Section 3.01 requiring Associated to conduct the "store building" of not less than 66,000 square feet of selling space and upon Section 4.03 providing for the payment of additional rent based upon sales made in or from the "store building." The appellee contends that
The appellee maintains that 66,000 square feet was the "magic figure to produce the desired minimum rent return," that the provisions of Section 4.03 for the inclusion of sales made by persons other than the Tenant at or from the store building in the rent base was solely because of the escape clause provisions of Section 5.02 allowing Associated to reduce its selling area after seven and a half years below the magic figure of 66,000 square feet, and that the clause in the amending agreement clearly limits, and confirms that the original lease limits, sales at and from the store building to be taken into account to sales made by Associated. They also seek to support this construction by reference to the prior negotiations of the parties, the site plan agreed upon in 1953 and the practical construction placed upon the agreement for the first several years in which rent based upon a percentage of sales was paid. They contend that even if the agreements between the parties were not entirely clear, they were at least ambiguous, so as to render parol evidence admissible as to their construction.
The amending agreement of April 13, 1954, does not, in our view, change or purport to change the rent provisions of the lease beyond the evident and expressed purpose of the agreement. This was to substitute the so-called Realty Company as the holder of the long term lease (which, with renewals, could extend for over 94 years) so as to make it in effect the "title holder" of the lease and to permit it to undertake the construction and financing of the shopping center, without, however, changing the operating control and without releasing Associated from any of its obligations under the lease by reason of its becoming a subtenant, instead of the direct tenant under the lease. These obligations were expressly confirmed and retained. We find nothing to show any intention either to modify or to construe the meaning of the term "store building" and the express provisions of Section 4.03 for the payment of rent
We are also unable to read the lease as showing that those provisions of Section 4.03 are operative only if and when Associated may cease to use and occupy as much as 66,000 square feet of selling space in the store building. There is not one word in that portion of that section to indicate to us that it is to have any different meaning or effect before or after the expiration of the seven and a half year period or when Associated uses more or less than 66,000 square feet. The lease might have contained such provisions, but it does not. Associated was obligated to have not less than that amount of selling space in the store building. It elected to build more. It might have protected itself against liability for rent based on the sales of others in the store building so long as Associated maintained the "magic figure" of selling area in that building, but it did not do so.
The obligation of Associated under Section 3.01, the pertinent portion of which we have quoted, was to build a building containing not less than 66,000 square feet of selling area. This building is designated by a parenthetical clause in that section as "the store building," and it is so referred to throughout subsequent provisions of the lease. This designation does not even purport to restrict the meaning of the term "a building," and there is nothing to limit the meaning of the term "a building" to "that portion of a building occupied by Associated (or Stewart & Co.)." The evidence, we think, establishes that the entire northern building as originally constructed constituted one building.
We turn next to Section 4.03 dealing with both fixed rentals and additional rentals based upon percentages of sales. We first note that insofar as sales by Associated are concerned, it makes no difference whether Associated sells from the "store building" as originally constructed or as enlarged or from any other part of this shopping center. All of its sales from whatever part of the leased premises are included. Equally, clearly and explicitly sales by persons or corporations other than Associated, made at or from any part of the leased premises not
Under Section 4.03 sales at or from the "store building" as originally built or as it may later be enlarged which are or are not to serve as the basis for determining net sales upon which additional rent is to be calculated are dealt with at some length and, we think, quite definitely. First, the general rule is stated that "[r]etail sales made at or from the said store building by any person or corporation whatever shall be included in `gross sales.'" Then follows a proviso excluding from gross sales any sales by others than Associated at or from any additions which may be made to the original "store building." This in turn is followed by a provision for apportionment of sales made by others from premises partly within the original store building and partly within either an addition thereto or some other building on the leased premises. This apportionment is based upon selling areas in different categories, and such sales by others as are thus apportioned to the original "store building" are expressly included in "gross sales." In addition there are the provisions of Section 17.03 which permit subleases by Associated of any part of the demised premises, subject only to its obligations under Article Three to construct, and under Article Five to maintain for seven and a half years, not less than 66,000 square feet of selling area for its own use in the "store building." These provisions, in our opinion, render wholly untenable Associated's contention that only its own sales (including those of its affiliates, licensees or concessionaires) from the "store building" were to be taken into account in determining additional rent based on percentages of net sales under the terms of the original lease. We have already stated our view that the amendment of April 13, 1954, substituting Associated as subtenant for Associated as original tenant did not amend other provisions of the original lease.
Where, as here, the court finds no ambiguity in the pertinent language of the contract, there is no occasion to resort to outside aids to its construction. Slice v. Carozza Properties, Inc., 215 Md. 357, 368, 137 A.2d 687; Ray v. Eurice, 201 Md. 115,
The appellee's contentions with regard to the practical construction of the contract by the parties encounter similar difficulties insofar as the absence of ambiguity is concerned. Where there is an ambiguity, practical construction is of great importance and in other cases it may even amount to evidence of an amendment of the agreement. See Saul v. McIntyre, 190 Md. 31, 36, 57 A.2d 272; Evergreen Amusement Corporation v. Milstead, 206 Md. 610, 112 A.2d 901; Solomon's Marina, Inc. v. Rogers, 221 Md. 194, 198, 156 A.2d 432. However, only where there is an ambiguity in the contract is the conduct of the parties available as a practical construction of its meaning. Product Sales Company v. Guaranty Company of Maryland, 146 Md. 678, 127 A. 409; U.S. Naval Academy Alumni Association v. The American Publishing Company, 195 Md. 150, 156-57, 72 A.2d 735 (where this rule was clearly stated, but the appellant's proof of items in respect of which it sought to apply the rule was insufficient); Restatement, Contracts, § 235 (e), comment h.
The other situation in which the conduct of the parties may
In accordance with the views above expressed the decree will be reversed and the case remanded for the entry of a decree in conformity with this opinion (1) to the effect that sales from all stores within the original "store building" are to be included in "gross sales" to be used in determining net sales upon which additional rent based upon percentages of sales is to be calculated, subject to the formula contained in the lease where sales by any subtenant are made in part at or from the original "store building" and in part at or from any addition thereto; and (2) for an accounting.
Decree reversed and case remanded for further proceedings in accordance with this opinion; the costs to be paid by the appellee.