Appeal, No. 157, Jan. T., 1954, from decree of Court of Common Pleas of Delaware County, June T., 1953, No. 2753, in case of Samuel Dickey v. Philadelphia Minit-Man Corporation. Decree affirmed. Ejectment. Defendant's preliminary objections sustained and decree entered dismissing complaint, opinion by SWENEY, J. Plaintiff appealed.
Robert W. Beatty, with him Morton Witkin and Butler, Beatty, Greer & Johnson, for appellant.
Robert D. Abrahams, with him Maurice J. Klein, George H. Class, Abrahams & Lowenstein and Lindenmuth & Class, for appellee.
Before Stern, C.j., Stearne, Jones, Bell, Chidsey, Musmanno and Arnold, JJ.
OPINION BY MR. CHIEF JUSTICE HORACE STERN
This case presents a question of first impression in Pennsylvania but one that has been considered, with some resulting diversity of opinion, in several other jurisdictions.
Plaintiff, Samuel Dickey, in 1947 leased to defendant, Philadelphia Minit-Man Corporation, a vacant piece of land in Millbourne, Delaware County, for a term of ten years with an option to the lessee of an additional ten-year term. The lease provided that the premises were to be occupied by the lessee "in the business of washing and cleaning automobiles within the scope of the business of the Philadelphia Minit-Man Corporation,... and for no other purpose." As rent the lessee was to pay a sum equal to 12 1/2% on the amount of the annual gross sales but a minimum of $1,800 per year; the term "gross sales" was to include the sales price of all merchandise sold and also all charges for services performed by the lessee in the course of the business conducted on the premises. The lessee agreed to erect and place on the premises the buildings and equipment needed to carry on the business; and buildings and fixtures erected by the lessee were to become the property of the lessor as and when the lease agreement should expire for any reason whatever. If default were made in the observance or performance of any of the conditions or agreements the lessor was to have the right to terminate the lease and re-enter the premises.
Defendant erected the buildings, installed the necessary equipment, and washed and cleaned cars until August, 1952, when it discontinued that feature of its business except as incidental to simonizing and polishing, and it so notified the public. Defendant never failed to pay at least the minimum rental, but in September, 1953, plaintiff filed the present action in ejectment seeking recovery of possession of the property on
the ground that defendant had defaulted by discontinuing the business specified in the lease. Defendant filed preliminary objections in the nature of a demurrer to the complaint; the court below sustained the objections and dismissed the action. Plaintiff appeals.
The question involved is whether there was any implied obligation on the part of the part of the lessee to continue to conduct the business on the premises of washing and cleaning cars if its failure to do so resulted in a diminution of rental payable to the lessor.
Generally speaking, a provision in a lease that the premises are to be used only for a certain prescribed purpose imports no obligation on the part of the lessee to use or continue to use the premises for that purpose; such a provision is a covenant against a noncompliance use, not a covenant to use. Plaintiff urges, however, that in a lease such as that here involved, in which the amount of rental to be paid is based upon the lessee's gross sales, there arises an implied obligation on his part to continue the business on the premises to the fullest extent reasonable possible. Defendant, on the other hand, contends that, where such an obligation is intended, it must be expressly inserted in the lease, and that the raising of an implied covenant is never justified except where obviously necessary to effectuate the intention of the parties and so clearly within their contemplation that they deemed it unnecessary to express it, and that this is especially true where a substantial minimum rental is provided the obvious purpose of which is to protect the lessor from any unfavorable circumstances that might subsequently arise whether caused by voluntary conduct of the lessee or by events beyond his control.
In Joseph E. Seagram & Sons v. Bynum, 191 F. 2d 5, it was held that the provision in a lease of a mill to a distilling company for a percentage rental based
on the number of barrel staves and heads produced at the mill did not impliedly obligate the lessee to operate the mill at its reasonable productive capacity in the absence of any express provision therein so requiring.
In Jenkins v. Rose's 5, 10 and 25 Stores, Inc., 213 N.C. 606, 197 S.E. 174, where there was a lease of a store building with a guaranteed minimum rental and a provision for a percentage payment on any sales in excess of a certain amount, it was held that there was no implied covenant to operate a store in the building and that the ...