Lowe's of Shelby, Inc. v. Hunt

226 S.E.2d 232 (1976) 30 N.C. App. 84

LOWE'S OF SHELBY, INC.
v.
John J. HUNT, and wife, Ruby C. Hunt.

No. 7623SC66.

Court of Appeals of North Carolina.

July 7, 1976. Certiorari Denied September 1, 1976.

McElwee, Hall & McElwee by W. H. McElwee, North Wilkesboro, for plaintiff-appellee.

Horn, West, Horn & Wray by J. A. West, Shelby, for defendants-appellants.

Certiorari Denied by Supreme Court September 1, 1976.

CLARK, Judge.

This appeal presents the following issue: Does the lease agreement of 1 August 1969, providing for payment of additional rental of one-half per cent of all sales in excess of $900,000, apply to sales made at plaintiff's new location between 31 August 1973, when plaintiff moved out of the leased premises, and 31 July 1974, the termination date of the lease?

The defendants contend that the provision in the lease for additional rental based on percentage of sales plainly states that it applies to "all sales" in excess of $900,000.00, and relies on the basic rule of contract law that a contract is to be interpreted as written, and "``if there be no dispute in respect of the terms of the contract and they are plain and unambiguous, there is no room for construction.'" Kohler v. Construction Co., 20 N.C.App. 486, 490, 201 S.E.2d 728, 731 (1974).

On the other hand, the plaintiff relies on the landmark case of Jenkins v. Rose's Stores, Inc., 213 N.C. 606, 197 S.E. 174 (1938). The lease provided for a guaranteed "minimum rental of $2400" per year and "five per cent (5%) of the gross sales made by the store operating in said building" during the year. Defendant, after renewing the lease for the year of 1936, did not operate any store or business in the demised premises, but conducted its business in another location. Defendant paid the "minimum rental" of $2400.00 for the year of 1936, but plaintiff sought to recover an additional rental under the percentage of sales provision. It was held that since "the lease fails to show any stipulation or agreement requiring the defendant to operate a store in the demised premises" and the plaintiffs "very completely protected their interests in any contingency by requiring a fixed minimum rental", the $2400.00 paid by defendant was in full settlement of the rent due.

We note that in Jenkins the percentage of sales provision in the lease included the language "sales made by the store operating in said building", but in the case before us the lease provides for a percentage of "all sales" in excess of $900,000.00. However, apart from the "Rental" paragraph, there are other provisions in the lease agreement which make it clear that the plaintiff was not required to conduct business on the premises for the full term of the lease. The "Use of Premises" paragraph provides that the leased premises may be used for any lawful purpose, and the "Sublease paragraph provided that plaintiff "shall have the right to sublet the premises or to assign this lease or any part thereof." The Jenkins case, if not controlling, is highly persuasive. Sub judice, it is apparent that the lease agreement did not require plaintiff to occupy or operate its business in the leased premises during the lease term or in any other location within the trading area; if it elected to vacate and cease operations, plaintiff was required to pay only the fixed rental and not the additional sales percentage rental. Having this option, the lease agreement, reasonably interpreted, does not require payment of the sales percentage rental where plaintiff elected to vacate the premises and operate its business in a new location.

Law review commentators have vigorously attacked Jenkins, crediting it with the development of the "substantial minimum rental" doctrine. See 72 Columbia L.Rev. 625; 61 Harv.L.Rev. 317 (1948); 60 Nw.U. L.Rev. 677 (1965); 33 Tex.L.Rev. 530 (1955). However, we do not concede, as these commentators announce, that the decision in Jenkins is founded on the premise that the primary rental obligation under the lease is the fixed rental and the sales percentage rental merely a "bonus". These rental provisions are not controlling but must be considered with all other applicable provisions of the lease agreement in determining whether the lease requires payment of percentage rental if the lessee vacates the leased premises and moves to a new location. See Masciotra v. Harlow, 105 Cal. App. 2d 376, 233 P.2d 586 (1951); Tuttle v. W. T. Grant Co., 5 A.D.2d 370, 171 N.Y.S.2d 954, aff'd, App.Div., 204 N.Y.S.2d 124 (1960).

The judgment of the trial court, which limited defendants' recovery to liquidated damages in the sum of $3,000.00 and to $1,319.73 additional rental based on sales in August 1973, is

Affirmed.

BROCK, C.J., and HEDRICK, J., concur.