FROMME, J.:
This action was brought to cancel a forty year written lease on a commercial building in Wichita, Kansas. The lessee had operated a grocery on the premises and later subleased the premises to be operated as a shoe store. The lessor sought cancellation on the ground the lease was ambiguous and subject to an implied covenant which restricted the subleasing.
All parties appeared and filed pleadings. A pre-trial conference was held. At the pre-trial conference the petition was amended to substitute Forest Henderson in place of Wayne Coulson as trustee and plaintiff. Pertinent written instruments were admitted in evidence, witnesses were identified and a brief summary of their anticipated testimony was included in the pre-trial order. Other exhibits relating to negotiations between the parties before execution of the lease and letters between the parties after the controversy arose were excluded at first but later admitted in evidence. The court ruled no further oral testimony was necessary and entered summary judgment in favor of the defendants. The plaintiffs have appealed.
The plaintiff-trustees are the successors in interest to the original lessors, Howard T. Fleeson and Katherine M. Fleeson.
The defendant, Safeway Stores, Incorporated, is lessee. Safeway subleased the premises to defendant, Hill Bros. Distributors, Inc. and they are now in possession of the premises under a sublease.
The plaintiffs will be referred to as lessors. They contend on appeal (1) the lease is ambiguous by reason of a conflict between the assignment clause and the percentage rental clause, (2) the correct interpretation of the lease is that the assignment clause is subject to an implied restriction against assignment for use for purposes which would not yield a percentage rental comparable to that paid by lessee. They assert the restriction is implied in the lease, it was violated by subleasing to Hill Bros. and the lease and sublease should be cancelled.
Although the defendants have filed a cross-appeal from that portion of the order admitting certain exhibits they do not seek to alter the judgment. The purpose of the cross-appeal is to limit the record to be considered on appeal.
The facts leading up to the present controversy are not in substantial dispute. In 1941 Safeway Stores, Incorporated, owned a
The lease, omitting the designation of parties, the signatures, the acknowledgments and other portions not essential to the question presented, reads:
* * *
(Legal description omitted.)
"Together with the building constructed thereon.
* * *
* * *
* * *
* * *
Safeway operated a grocery store in this location from 1941 to 1959, inclusive. In January 1960 Safeway subleased the property to Hill Bros. Distributers, Inc. Included in this lease were four lots north of the store used for parking and certain personal property and fixtures in the building. This additional property was owned by Safeway.
This sublease was for an original term of ten years with an option to extend the term for two successive five year periods. Hill Bros. agreed to pay a base rental of $500.00 per month to Safeway. The sublease referred to the original lease and recited that it was subject to all terms and conditions thereof except the amount of base rental to be paid. It further recited that the sublease was to terminate at any time the original lease ended. The sublease contained a provision which limited the use of the premises to the retail sale and storage of footwear and accessories and prohibited the sublessee from conducting a grocery business therein.
Included in the sublease were provisions which obligated Safeway to pay real estate taxes and assessments and keep the building
The guaranteed base rental in the original lease is $120.83 per month and consists of two separate items. As shown in the thirteenth paragraph of the lease Safeway agreed to pay $38.33 per month to cover depreciation on the building amortized over the forty year life of the lease. In the second paragraph of the lease Safeway agreed to pay $82.50 per month as a fixed return on the original investment. This guaranteed base rental amounts to $990.00 per year on an investment of $22,067.00. Safeway pays taxes, insurance costs and all repairs so the $120.83 base rental is net to the lessors.
During the nineteen years Safeway operated a grocery on the premises they paid over $52,000.00 in additional rentals to the lessors based upon gross sales in excess of $207,000.00 annually as provided in the fourteenth paragraph of the lease.
Since Hill Bros. have operated the shoe store in this location no rental based upon percentage of gross sales has been earned or paid. Safeway has paid the trustees the base rental of $120.83 per month. Hill Bros. have paid Safeway $500.00 per month under the sublease.
The trustees seek cancellation of the forty year lease alleging an implied restriction against assignment for use which would not yield a percentage rental comparable to that paid by Safeway. They would imply such a restriction based upon an alleged conflict between the assignment clause (fifth paragraph) and the percentage rental clause (fourteenth paragraph) of the lease.
The parties state this is the first time our court has been called upon to examine a lease with a provision for rental based upon a percentage of sales from leased permises. The same rules of construction and interpretation applicable to any ordinary lease apply to this type of lease. (See 170 A.L.R. 1113 and 38 A.L.R.2d 1113.) Let us examine some of these pertinent rules of construction.
When a sale of premises and a lease thereof are part of a single transaction they may be read and considered together in determining
The only limitation on the common law right of a lessee to sublet the premises is that they cannot sublet to be used in a manner inconsistent with the terms of the original lease, or injurious to the premises. (Leslie v. Sherman, 157, Kan. 157, 139 P.2d 133; 51 C.J.S. Landlord and Tenant § 31; 32 Am. Jur. Landlord and Tenant § 394.)
Kansas has placed no statutory restrictions on assignments of leases except when a tenancy is for a term of two years or less. (K.S.A. 58-2511.)
An express covenant on a given subject matter excludes the possibility of an implied covenant of a different or contradictory nature. (Duvanel v. Sinclair Refining Co., 170 Kan. 483, 227 P.2d 88; 21 C.J.S. Covenants § 14; 20 Am.Jur.2d Covenants, Conditions, etc. § 12.)
Restrictions against assignment of a lease constitute prohibitions against the right of alienation. They are not favored by the courts and, absent statutory prohibitions, are strictly construed against the lessor. They are not extended by implication. (Lawrence v. Cooper Independent Theatres, 177 Kan. 125, 276 P.2d 350; 51 C.J.S. Landlord and Tenant § 33; 32 Am. Landlord and Tenant § 397.)
When a contract is complete, unambiguous and free from uncertainty, parol evidence of prior or contemporaneous agreements or understanding, tending to vary or substitute a new and different contract for the one evidenced by the writing is inadmissible. (Brown v. Beckerdite, 174 Kan. 153, 254 P.2d 308; 17A C.J.S. Contracts § 322; 17 Am.Jur.2d Contracts § 260.)
When terms of a lease are plain and unambiguous the meaning must be determined by its contents alone and words cannot be read into the agreement which import an intent wholly unexpressed when it was executed. (Borgen v. Wiglesworth, 189 Kan. 261, 369 P.2d 360; 17A C.J.S. Contracts § 321; 17 Am.Jur.2d Contracts § 261.)
The petition alleges that Safeway was operating two competing grocery stores in the neighborhood at the time they discontinued the grocery at 21st and Jackson Avenue. One of these competing grocery stores was seven blocks away and the other was fifteen blocks distant. We find nothing in the lease restricting the lessee
The trustees contend the parties intended the premises to be used for a grocery store when the lease was executed. The sale and lease were all part of a single transaction and under Setchell v. Reed, supra, they may be considered together. The parties completed the transaction with the intention of lessee using the premises for a grocery business. The parties did not deem such intention of sufficient importance to mention the same in the written lease and they did not place a restriction on use in the lease.
In Borgen v. Wiglesworth, supra, the parties expressly stated in the lease the premises were to be used for car washing and servicing. A special building was constructed on the permises by the lessee. The lease prohibited use of the premises as a cafe or restaurant. The lessee discontinued the car wash business and remodeled the building in order to begin a "launderaide business." This court held the provision authorizing a specific use and describing the character of the premises was not a restriction on use. It described the original use, was descriptive only and was not a restriction on future use. The express prohibition on use as a cafe was held to negate an implied prohibition against other use.
In our present case the intention of the parties as to use of the premises was unexpressed in the lease. There was no express prohibition on use of the premises and it would appear under Borgen the original use intended whether implied or expressed is not to be considered a restriction on future use of the property.
The lessors state the provision for payment of rental based upon a percentage of gross sales from the premises was designed and inserted in the lease to protect them against inflation. They indicate that although the lease was assignable, it was assignable only for a use which would provide to lessors a comparable rental. The difficulty of accepting this argument is that the design of such a provision is to permit percentage rentals to fluctuate both up and down or to be discontinued when the gross sales from the permises are less than the stated sum. If this court determines an implied covenant in the lease existed which required payment of comparable rentals we say, in effect, it was intended as a fixed rental requiring comparable sales. The effect would be to change the percentage of income rental into a fixed rental based upon past sales experience.
The implied covenant which lessors seek to have enforced by cancellation of the lease is contradictory to the provisions of the fifth paragraph of the lease which provides for full rights to assign and sublet the premises. An express covenant on a given subject matter excludes the possibility of an implied covenant of a different or contradictory nature. (Duvanel v. Sinclair Refining Co., supra.)
The implied covenant urged by lessors constitutes a restriction against an expressed covenant permitting assignment of a lease. Such restrictions constitute prohibitions against the right of alienation and are strictly construed against the lessor. They are not extended by implication. (Lawrence v. Cooper Independent Theatres, supra.)
In Dickey v. Philadelphia Minit-Man Corp., 377 Pa. 549, 105 A.2d 580, the lessor sought possession of the premises on the ground that lessee had defaulted in the lease when he discontinued his business of washing automobiles. The lease provided for a percentage rental plus a guaranteed monthly rental and provided the premises were to be occupied for the business of washing and cleaning automobiles and no other purpose. The Pennsylvania court refused to imply an obligation on the lessee to use the premises for a particular purpose or to produce a comparable rental and said:
(See Food Fair v. Blumberg, 234 Md. 521, 200 A.2d 166; Riverside Rlty. Co. v. National Food Stores of La., Inc., 174 So.2d 229 [La. App. Ct. 1965.].)
Each case appears to depend largely upon its own facts. In order to find an implied covenant in a lease a court must first determine the lease is ambiguous or that a conflict exists between two covenants expressed in the lease. In our present case lessors state that there is a conflict between the assignment clause (fifth paragraph) and the percentage rental clause (fourteenth paragraph) of the lease. They indicate that while the assignment clause provides for assignment or subleasing, the percentage rental clause contemplates a rental comparable to that paid on the lessee's grocery business, therefore conflict exists. The fifth paragraph provides lessee shall have a right to assign or sublet the whole or any part of the premises without restriction. The fourteenth paragraph of the lease provides a general formula for arriving at a rental based upon "sales made in said leased premises." Transfers of merchandise to other stores or warehouses of lessee are excluded from such sales. Although this exclusion from sales is limited to sales of the lessee we can consider this in conjunction with the fifth paragraph which authorizes a sublease and assignment and with the third paragraph which authorizes the lessee "at any time during the term" to remove from the premises all personal property and fixtures. When so considered the reasonable construction based upon the apparent intent of parties would be to exclude payment of percentage rental on the value of merchandise removed from the premises in event the business was discontinued. We do not find a conflict between the fifth and the fourteenth paragraphs. They appear to be in harmony with each other.
Other provisions of this lease appear to be in harmony on the matter of unlimited subleasing. The third paragraph of the lease authorizes the lessee to remove all fixtures and personal property at any time during the term of the lease and this right is extended to items placed on the premises by a subtenant. In the sixteenth
The twelfth paragraph of the lease gives the lessee the option to terminate the lease under certain conditions but assures the lessors of a return of their original investment less depreciation by requiring lessee to repurchase the premises.
The fourteenth paragraph does not base the percentage rental upon sales of groceries or upon the number of specific units of merchandise sold. The rental provided is based upon sales made in the leased premises in any year. This could be applied to any retail business.
When the sublease was executed it required the sublessee to comply with all provisions of the original lease and incorporated an identical provision for payment of rental based upon the percentage of sales in excess of $207,000.00. If the present sublessee is able to increase his sales it is possible that additional percentage rentals may be earned and paid in the future.
Lessors complain of the inequity in permitting Safeway to collect $500.00 per month under the sublease and to pay only $120.83 per month to lessors. On the surface this would appear to be profiteering on the lease but let us examine the facts. The lessee originally owned this property. It still owns all fixtures and other personal property including lighting fixtures and air conditioning equipment which it installed in the premises. When the real estate was originally sold the forty year lease was taken contemporaneously with the sale. The lease provided for a guaranteed minimum rental which would return purchasers' investment in forty years and would provide a minimum additional rental of four and one-half percent on the original investment. Lessee agreed to pay all taxes, insurance and repairs on the premises. Lessee was obligated to install its own fixtures, air conditioning, light fixtures, ownings and machinery. The minimum guaranteed rental of $120.83 per month under the lease was to be free of any expense.
Under the sublease the $500.00 per month is subject to payment of all real estate taxes, assessments and cost of insurance on the building. In addition the lessee would be entitled to some rental
Adding the total net rentals received by the lessors since 1941 it would appear they have received more than $87,000.00 on their original investment of $22,067.00. Under all the circumstances we are not prepared to say that this is an unfair rental or that inequity has resulted from the original transaction between the parties. Regardless of whether a percentage rental based on gross sales is earned in the future a base rental is guaranteed to lessors of approximately four and one-half percent on their original investment.
The final contention of lessors relates to the eighteenth paragraph of the sublease which provides:
Lessors state that to allow the lessee to place such a restriction against use for a grocery store was an act of bad faith and in violation of the use of the premises contemplated by the parties.
As we have previously noted the only limitations on the common law right of a lessee to sublet are applied (1) so the premises cannot be sublet to be used in a manner inconsistent with the terms of the original lease and (2) so the premises cannot be sublet for use in a manner injurious to the premises. (Leslie v. Sherman, supra.) No contention is made that limiting the use to retail sales of footwear would be injurious to the premises, and we find nothing in the sublease inconsistent with the express terms of the original lease. Safeway had no obligation to continue using the premises as a grocery store. It had a right to sublease for the sale of footwear. If lessee had the right to sublease for the sale of footwear it would have a corresponding right to require the sublessee to use the premises solely for the sale of footwear and not for sale of groceries. Footwear and groceries not not generally considered complementary items sold by one store. Restricting the use of the building to sale of footwear and accessories and prohibiting the sale of groceries would not affect the normal gross sales of the sublessee. No bad faith on the part of the lessee is indicated.
The present lease covered the agreement of the parties in detail. It is reasonable to assume that any agreement to restrict lessee's
The intention of the parties and the meaning of a contract are to be deduced from the instrument when its terms are plain and unambiguous; when the language is clear and unequivocal the meaning must be determined by its contents alone. Words cannot be read into a contract which import an intent wholly unexpressed when it was drawn and executed. The court may not make an agreement for the parties which they did not make themselves. (Smith v. Holmes, 181 Kan. 438, 312 P.2d 228; Borgen v. Wiglesworth, supra.)
In view of our decision it is not necessary for this court to explore the matter presented on cross-appeal. Suffice it to say it does not appear for what purpose these exhibits were admitted in evidence. Since no implied covenant was found to exist they were not considered by the trial court to vary or contradict the terms of the written lease. Exhibits six through twelve related to negotiations of the parties leading to the execution of the deed and the lease and could not properly be considered to vary or contradict the terms of the written instruments. (Smith v. Holmes, supra; Borgen v. Wiglesworth, supra.)
The terms of the present lease appear clear and unambiguous. No covenant can be implied in the lease to restrict the lessee's express right to sublease except those existing at common law. The common law restrictions prevent a lessee from subleasing to be used in a manner inconsistent with the terms of the original lease, or in a manner injurious to the premises. The sublease did not permit the premises to be used in a manner inconsistent with the terms of the original lease, or in a manner injurious to the premises.
Judgment is affirmed.
FATZER, SCHROEDER and FONTRON, JJ., dissent.
Comment
User Comments