Kroger Co. v. Bonny Corp.

• Decision Date: 22 April 1975
• Docket Number: 3,Nos. 1,2,No. 50368,50368,s. 1
• Parties: The KROGER COMPANY v. The BONNY CORPORATION
• Court: Georgia Court of Appeals

Page 341

216 S.E.2d 341

134 Ga.App. 834

The KROGER COMPANY v. The BONNY CORPORATION.

No. 50368.

Court of Appeals of Georgia, Division Nos. 1, 2, 3.

April 22, 1975.

Rehearing Denied May 15, 1975.

Syllabus by the Court

1. There is no requirement in the lease between the assignee of the owner of a shopping center and the defendant supermarket corporation which compels the latter to remain in the business of selling groceries at the location throughout the lifetime of the lease.

2. The lease provisions, considered with respect to other evidence concerning income, rentals paid, and leases to other tenants within the complex, raise no implied lease obligation to continue in business, under testimony revealing that the percentage of sales provisions for additional rent are not a substantial amount of the over-all rent stipulated, and that lease provisions used by the landlord with some other tenants forbidding abandonment of premises and stipulating exclusive uses are not included as to this tenant. The trial court erred in denying the tenant's motion for summary judgment.

Bonny Corporation, owner of a shopping center, and Kroger Company, tenant of one of its four largest rental units, are bound by a 15-year lease with renewal options entered into in September, 1960. In December, 1973, Kroger closed its store and opened another in a new shopping center a mile and a half away, continuing, however, to pay base rent and seeking to obtain a subtenant for the location. The lessor brought an action for injunction and damages, contending that the lease contains implied covenants against this course of action. The defendant's motion for summary judgment was denied and it appeals.

Hansell, Post, Brandon & Dorsey, Gary W. Hatch, Atlanta, for appellant.

Alex McLennan, Scott Hogg, Atlanta, for appellee.

DEEN, Presiding Judge.

1. The lease is on a printed form of Kroger Co. and contains an initial stipulation that it is 'at a rental of $2,253.00 per month payable in advance by Tenant.' A typed paragraph at the end of the lease further states: 'Tenant agrees to pay to landlord a sum of money equal of 1% of its sales in excess of $2,704,000 per year, hereinafter called the minimum sales base' along with stipulations for figuring time and sales. A modification agreement dated in July, 1961, refers to the lease as 'primarily covering a food store located at Chamblee Plaza Shopping Center,' a fact not in dispute. A typed provision of the original lease guarantees that the lessor will not permit more than one other retail grocery store (to be occupied by Colonial Stores) and a delicatessen primarily interested in the sale of prepared foods in competition with the tenant. The lease at the time of the alleged breach had been in effect some thirteen years, for the first 12 of which sales were not in an amount sufficient to invoke the percentage rental clause denominated 'additional rent.' During the last year increasing sales resulted in an additional payment of $4,688.73 above the stipulated minimum. The question at issue is whether there is fairly to be implied a covenant on the part of the lessee to continue in business at the location stated throughout the lease period. The lease also includes a warranty by the lessor that the entire shopping center will be properly built and maintained. The only language restricting the tenant's occupancy is found in paragraph 8: 'Tenant will use said premises in a lawful manner.' Paragraph 31 specifically states that 'the provisions of this lease shall bind and inure to the benefit of the parties hereto, their heirs . . . successors, and assigns.'

We first consider the lease in the absence of aliunde evidence as to the intention of the parties to see whether the provisions as written are ambiguous, and whether they indicate a duty on the part of the tenant to continue in business for the duration of the leasehold. The lease is for more than five years, contains no provisions against assignment, and states that it shall bind the assigns of both parties. Certainly it must be considered, prima facie, as being assignable. See Warehouses, Inc. v. Wetherbee, 203 Ga. 483 (5, 6), 46 S.E.2d 894. This in itself weighs against an implied intent to require the tenant to continue in business throughout the term of the lease. The trial court correctly held the lease to be assignable. There is a strong implication in conducted in a lwful manner. Nor do we premises is not limited so long as it is conducted in a lawful manner. Nor do se find from the landlord's covenant not to place more than one competing grocery store in the mall (although this shows an implied understanding that Kroger was in fact intending to use the space for this purpose ) any implied covenant on the part of Kroger to so use the space for the full term of the lease; a contrary inference might be drawn from the fact that an obligation in the area of competition is placed on one party but omitted on the part of the other. Considered without regard to aliunde facts, the lease places no burden on the tenant to occupy the premises, so long as the rent is paid. Nothing to the contrary is held in Daitch Crystal Dairies v. Neisloss, 8 A.D.2d 965, 190 N.Y.S.2d 737, which has to do only with the obligation of the landlord under such circumstances. Nor can a contrary conclusion be reached from Buford-Clairmont v. Jacobs Pharmacy, 131 Ga.App. 643, 646, 206 S.E.2d 674, 677, stating that 'in a shopping center, under agreements such as existed here, tenants actively operate their businesses as a part of a whole enterprise,' where the statement is drawn from application of a lease provision not present in this instrument that the tenant shall not 'abandon or vacate the leased premises during the term.' Again, while it is true that the landlord, as an inducement to the tenant at the time of signing the lease, agreed that if a minimum amount of footage in the shopping center was not rented when the premises became ready for occupancy the tenant had an option to cancel, and while such language does suggest that substantial occupancy is important to the success of the area, there is no equivalent suggestion that the tenant has a corresponding obligation to keep the demised premises occupied. The lease must be read in the light of what is omitted as well as what is required.

2. In attempting, however, to arrive at the true intention of the parties in entering into the contract, the court properly took into consideration the composition of the shopping center as a whole, the content of the leases entered into with other tenants, and the rental payments made over the years. From this it appears that the plan of the shopping center included four major stores and another two dozen small ones offering varied commodities. Of the major tenants, defendant was charged the most per square foot, at a rate which the landlord testified was 'the basic standard thirteen years ago when the lease was negotiated.' Colonial Stores first paid sales-percentage rent in the thirteenth year, the other two have never done so. Kroger's lease differs from Colonial's in that the latter may not use the premises for any purpose except that of a supermarket without written consent of lessor; Kroger covenants only that its purposes are lawful. The leases of most of the smaller tenants contain a provision that 'lessee agrees not to abandon or vacate leased premises during the period of this lease' but none of the four primary tenants are so bound. The landlord does not contend that any of the lease provisions at issue are the result of fraud, mistake, inadvertence or a custom so universal as to be assumed on both sides. We may well assume, as pointed out in Buford-Clairmont, supra, that both parties understood the needs and purposes of shopping centers, the importance of representation, diversification, and substantial capacity rentals. Nevertheless, the present landlord and its assignor dealt with multiple leasings and multiple requirements. They were not overreached. They limited certain tenants to particular sales areas and not others; they required covenants against vacancy and abandonment of certain tenants and not of others. The leases were executed around the same time; it is therefore perfectly obvious that the landlord, in its individual dealings with separate tenants, tailored the leases according to the exigencies of the situation.

Does the formula for determination of rent require that the tenant not cease his business activities on the property? See 38 ALR2d, Anno. p. 1113 et seq., construction and application of provision in lease under which landlord is to receive percentage of lessee's profits or receipts. The general rule is, as there abstracted from Cousins Invest. Co. v. Hastings Clothing Co., 45 Cal.App.2d, 141, 113 P.2d 878, and Masciotra v. Harlow, 105 Cal.App.2d 376, 233 P.2d 586, that 'covenants would be implied only where the implication must arise from the language used or was indispensable to effectuate the intention of the parties, and that when the rental to be received under a lease is based on a percentage of the gross receipts of the business, with a substantial minimum, there is no implied covenant that the lessee will operate its business in the leased premises throughout the term of the lease.' 38 ALR2d Anno. pp. 1115, 1116. See also Hicks v. Whelan Drug Co., 131 Cal.App.2d 110, 280 P.2d 104; Food Fair Stores, Inc. v. Blumberg, 234 Md. 521, 200 A.2d 166; Stop & Shop, Inc. v. Ganem, 347 Mass. 697, 200 N.E.2d 248; Tuttle v. W. T. Grant Co., 5 A.D.2d 370, 171 N.Y.S.2d 954; Kretch v. Stark (Ohio Com.Pl.) 193 N.E.2d 307; Weil v. Ann Lewis Shops, Inc., Tex.Civ.App., 281 S.W.2d 651. In both Sinclair Refining Co. v. Davis, 47 Ga.App. 601, 171 S.E. 150 and Sinclair Refining Co. v. Giddens, 54 Ga.App. 69, 187 S.E.201 premises outfitted as a service station were rented for a designated sum of money per gallon of gasoline sold, with a stipulation...