The language following such express agreement, which is preceded by the word "with" is permissive and not prohibitory and but emphasizes such intention. [1, 2] Plaintiff cites four cases in support of his contention that there is an implied covenant that lessee would, during the term of the lease, so conduct his business on plaintiff's premises as to make it mutually profitable to both parties: Selber Bros. v. Newstadt's Shoe Stores, 194 La. 654 [ 194 So. 579]; Cissna Loan Co. v. Baron, 149 Wn. 386 [ 270 P. 1022]; Mayfair Operating Corp. v. Bessemer Properties, 150 Fla. 132 [ 7 So.2d 342]; Garden Suburbs etc. Club v. Pruitt, 156 Fla. 825 [ 24 So.2d 898]. These cases are all distinguishable from the instant case.
The fixed annual rent for property in Canandaigua, N.Y. of $6,000 leaves little room for the argument that it was, as a matter of law, an inadequate consideration for the demised premises. From the increase in fixed and decrease in percentage rental to be paid during the extended term, we are led to the conclusion that amounts to be paid on the basis of the gross business done were in the nature of a bonus. (See Selber Bros. v. Newstadt's Shoe Stores, 194 La. 654; Jenkins v. Rose's Stores, 213 N.C. 606.) The lease as a whole cannot be said to be without meaning absent a provision insuring plaintiff's right to a bonus.
(See anno. 46 A.L.R. 1134.) Some courts have implied such a covenant when the rental for the premises is based upon a percentage of the proceeds from the business for which they are let. ( Plassmeyer v. Brenta, 24 N.J. Super. 322 [ 94 A.2d 508, 510]; Selber Bros. v. Newstadt's Shoe Store, 194 La. 654 [ 194 So. 579]; Marvin Drug Co. v. Couch, (Tex.Civ. App.) 134 S.W.2d 356; see anno. 170 A.L.R. 1113, 1117-1121.) These cases rest upon a theory of interpretation similar to that employed in the consideration of "output" contracts, where the courts have found "from the business situation, from the conduct of the parties, and from the startling disproportionate burden otherwise cast upon one of them, a promise implied in fact by the seller to continue in good faith production or sales, or on the part of the buyer to maintain his business or plant as a going concern and to take its bona fide requirements.
is to occupy the leased premises and conduct his business therein during the term of the lease, and where no implied covenant or obligation to operate the business is necessary to effectuate the intention of the parties, the minimum stipulated or guaranteed rental is the only amount which the lessor may claim. However where the implied obligation of the tenant exists, he cannot, by ceasing to operate or by changing the nature of his business, or by diverting his business to another store which he owns, or by moving some departments of the business to other premises, escape liability for rent based on the percentage of his profits or sales by paying the minimum amount stipulated. 52 C.J.S., Landlord and Tenant, § 502, p. 284; Seggebruch v. Stosor, 309 Ill. App. 385, 33 N.E.2d 159; Goldberg, 168-05 Corporation v. Levy, 256 App. Div. 1086, 11 N.Y.S.2d 315; Cissna Loan Co. v. Baron, 149 Wn. 386, 270 P. 1022, 1023; Mayfair Operating Corp. v. Bessemer Properties, 150 Fla. 132, 7 So.2d 342; Selber Bros. v. Newstadt's Shoe Stores, 194 La. 654, 194 So. 579; Id., 203 La. 316, 14 So.2d 10; Congressional Amusement Corp. v. Weltman, D.C.Mun.App., 55 A.2d 95; Sinclair Refining Co. v. Giddens, 54 Ga. App. 69, 187 S.E. 201; Sinclair Refining Co. v. Davis, 47 Ga. App. 601, 171 S.E. 150; Spring Brook Railway Co. v. Lehigh Coal Nav. Co., 181 Pa. 294, 37 A. 525; Orkin's Fashions Stores v. S. H. Kress Co., Sup., 68 N.Y.S.2d 764, 766; Marvin Drug Co. v. Couch, Tex.Civ.App., 134 S.W.2d 356. Godbold Hobbs, Montgomery, Amici Curiae.
"'The obligation of contracts extends not only to what is expressly stipulated, but also to everything that, by law, equity or custom, is considered as incidental to the particular contract, or necessary to carry it into effect.' "As to its application in the present case see Selber Bros. v. Newstadt's Shoe Stores, 194 La. 654, 194 So. 579. Same case 203 La. 316, 14 So.2d 10. "It is the opinion of the Court that the defendant was required to conduct its operations in plaintiff's premises for the mutual benefit of the shopping center and the parties to the contract.
Was there an implied covenant in the lease that defendants would during the term of the lease so conduct the business as to make it mutually profitable to both parties?No. In Masciotra v. Harlow, 105 Cal.App.2d 376, 379 [ 233 P.2d 586], plaintiff made the same contention, relying among others on Selber Bros. v. Newstadt's Shoe Stores, 194 La. 654 [ 194 So. 579]; Mayfair Operating Corp. v. Bessemer Properties, 150 Fla. 132 [ 7 So.2d 342], and Garden Suburbs etc. Club v. Pruitt, 156 Fla. 825 [ 24 So.2d 898], in support of his claim that there was an implied covenant that the lessee, during the term of his lease, would so conduct his business as to make it mutually profitable to both parties. The court there held (p. 379 [1 2]) that such a covenant would not be implied.
Id. The provisions and circumstances that have been taken into account include whether the leased store is a magnet store for the shopping center, Walgreen Ariz. Drug Co. v. Plaza Ctr. Corp., 132 Ariz. 512, 647 P.2d 643 (1982), and whether the parties based the lease agreement on past performance of a specific type of store. Selber Bros., Inc. v. Newstadt's Shoe Stores, 194 La. 654, 194 So. 579 (1940). Other jurisdictions have been willing to imply a covenant to continue operations when the base rent is insubstantial.
Automatic Laundry Service, Inc. v. Demas, 216 Md. 544; 5 Williston, Contracts (3rd ed.), § 670. And we adopt the principle expressed by the Louisiana Court in Selber Bros. v. Newstadt's Shoe Stores, 194 So. 579, and thereafter, in substantially the same wording, by the Court of Appeals of California in Professional Building of Eureka v. Anita Frocks, Inc., 2 Cal. Reptr.2d 914: "Whether that doctrine [whether the lessor under a percentage lease guaranteeing a minimum rental has cause to complain when the business is conducted in such a way that it will not produce additional rent consisting of percentages of gross sales] is applicable to a given case depends upon the intention with which the parties entered into the contract of lease, as expressed in the contract, construed in the light of the circumstances in which the contract was made." Applying the above principles to the allegations contained in the lessors' bill of complaint, we reach the conclusion that lessors cannot prevail.
The fact that plaintiff in the instant case receives a base rental of $25,000 per year is not a valid distinguishing feature, as urged by defendant, since that sum of money is insufficient to pay interest and taxes. Other cases cited supporting plaintiff's view are: Daughetee v. Ohio Oil Co. 263 Ill. 518; Seggebruch v. Stosor, 309 Ill. App. 385; Marvin Drug Co. v. Couch, (Tex.Civ.App.) 134 S.W.2d 356; Cissna Loan Co. v. Baron, 149 Wn. 386, 270 P. 1022; Wood v. Duff-Gordon, 222 N.Y. 88; Selber Bros. v. Newstadt Shoe Store, 194 La. 654; Mayfair Operating Corp. v. Bessemer Properties Inc. 150 Fla. 132, 7 So.2d 342. The Daughetee case involved an oil and gas lease wherein lessor received $100 per year for the gas product of each well, also one-eighth part of oil produced and a ground rental of 25 cents per acre. This court held that the lease obliged the lessee to exploit its leasehold by digging.
Other cases relied on by plaintiff are distinguishable on one ground or another. Thus in Goldberg 168-05 Corporation v. Levy, 9 N.Y.S.2d 304; 11 N.Y.S.2d 315, where the lease provided that in the event that the gross sales of the lessee fell during any year below a specified sum he should have the right to terminate the lease, it was held that he could not escape paying the agreed-upon percentage of rental on his gross receipts by diverting business to another store for the sole purpose of depressing the gross receipts below the specified figure so as to lay the basis for a cancellation of the lease. In Selber Bros. Inc. v. Newstadt's Shoe Stores, 194 La. 654, 194 So. 579; 203 La. 316, 14 So.2d 10, the lessee of a shoe store abandoned the leased premises altogether and moved his business to a new location a block away. In Mayfair Operating Corporation v. Bessemer Properties, Inc., 150 Fla. 132, 7 So.2d 342, there was an express clause in the lease requiring the lessee to use its best efforts to obtain and maintain the highest volume of business on the premises.