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MORRISVILLE SHOPPING CENTER v. SUN RAY DRUG CO. (03/14/55)

THE SUPREME COURT OF PENNSYLVANIA


March 14, 1955

MORRISVILLE SHOPPING CENTER, INC.
v.
SUN RAY DRUG CO., APPELLANT.

Appeal, No. 60, Jan. T., 1955, from order of Court of Common Pleas of Bucks County, March T., 1954, No. 68, in case of Morrisville Shopping Center, Inc. v. Sun Ray Drug Co. Order affirmed.

COUNSEL

Bernard Eskin, with him Wolf, Block, Schorr & Solis-Cohen, for appellant.

George F. Shinehouse, Jr., with him T. Sidney Cadwallader, II, Grim, Cadwallader, Darlington & Clark and Zink, Shinehouse & Holmes, for appellee.

Before Stern, C.j., Stearne, Jones, Bell, Chidsey and Musmanno, JJ.

Author: Bell

[ 381 Pa. Page 578]

OPINION BY MR. JUSTICE BELL

Plaintiff is the owner of a newly developed shopping center in Morrisville, bucks County. The center has facilities for about twenty stores with varying floor space and a substantial customer parking area.

One hundred and forty-seven retail drug stores in Pennsylvania, New Jersey, Delaware, Maryland and West Virginia are operated under defendant's name. In addition to a drug department and other characteristics of a modern drug store, these stores generally include a soda fountain and luncheonette, a tobacco department and also facilities for the sale of a large variety of commodities.

Plaintiff leased to defendant by written lease dated December 16, 1952, a store unit in the Morrisville center which was by its terms to include all of the above mentioned facilities. The premises were still under construction when the lease was entered into and were not completed until October 9, 1953, when the

[ 381 Pa. Page 579]

    store was opened and the 20 year term of the lease began. The rent payable by the tenant during the first five years of the lease was designated as five and one-half per cent of the gross sales (excepting tobacco), and the average rentals during this period determined the minimum rental for the second five years. The minimum rental for the last ren years was based on the average rentals during the first ten years. The lease prohibited (1) an assignment, mortgage, pledge or encumbrance of the lease; and (2) a subletting of the whole or any substantial part of the demised premises without the written consent of the landlord, except as otherwise provided in Article 4 thereof. The tremendous importance of the gross sales and in turn the merchandising ability of the tenant or sublessee is obvious and it is therefore easy to understand the reason for the subletting provision and the forfeiture provisions of the lease.

On September 25, 1953, about two weeks before the store opened, defendant entered into a written agreement with two individuals, William Bielitsky and Bernard Benjamin. The agreement was entitled "Agreement of Sale". It described the parties as "Licensor" and "Licensee" and provided, inter alia, for the purchase of the drug store at the Morrisville Center by Bielitsky and Benjamin, the purchase price being the total of invoices rendered to the "Licensee" for equipment, fixtures, stock, supplies and lighting. The record indicates that this total was $46,000; and after a down payment of $10,000., Bielitsky and Benjamin had five years in which to pay the balance.

On the same day, to wot, September 25, 1953, the same parties, namely, defendant and Bielitsky and Benjamin, entered into a "License Agreement" which authorized the "Licensees", Bielitsky and Benjamin, to use the name of "Sun Ray" and required them to make

[ 381 Pa. Page 580]

    all purchases from Sun Ray so long as the partners were indebted to the drug organization for other than Current purchases of stock. This agreement states that Bielitsky and Benjamin were not the agents of Sun Ray for any purpose; that all employees were to be those of Bielitsky and Benjamin; and that the profits of the business "are the sole and exclusive property of Licensees [Bielitsky and Benjamin]".

On December 1, 1953, after having observed Bielitsky and Benjamin operating all but the minor portion of the leased premises devoted to the restaurant, the plaintiff gave five days' notice of termination to Sun Ray, alleging that the prohibition in the lease against subletting had been violated. On March 23, 1954, an amicable action and confession of judgment in ejectment was filed and judgment entered on the same day. Defendant now appeals from a refusal of the Court below to open the judgment.

The clause relied on by plaintiff to support its judgment is Article 10 which provides: "Assigning, Mortgaging, Subletting - (10) The Tenant agrees not to assign, mortgage, pledge or encumber this lease, or except as otherwise provided in Article 4 of this Lease, sublet the whole or any substantial part of the demised premises without first obtaining the written consent of the landlord. Tenant agrees that, in the event of any such assignment of this lease, or subletting, made with the written consent of the Landlord as aforesaid, it will nevertheless remain liable for the performance of all the terms, conditions and covenants of this Lease. Lessor agrees not to unreasonably withhold consent to this provision."

Defendant relies upon Article 4, the pertinent provisions of which are as follows: "Annual Percentage Rental - ... (d) The Tenant agrees that the Landlord, or the Landlord's agents, may at all reasonable times

[ 381 Pa. Page 581]

    inspect, at Tenant's principal office, the Tenant's records of sales made by it in the demised premises and receipts of sales made therein by concessionaires and sublessees, if any, of the Tenant in said demised premises .... (e) In computing total sales for the purposes of this Article 4., the Tenant shall take the total amount realized as a result of sales of merchandise made in the Tenant's store in the demised premises, by the Tenant, its concessionaires and sublessees, if any,*fn* to which shall be added the following: ...".

Plaintiff contends that neither Article 10 nor Article 4 allow either an assignment or a sub-lease without plaintiff's written consent and since this was admittedly never given, the covenant has been breached and the landlord can terminate the lease.

Defendant, on the other hand, contends that the relationship between it and Bielitsky and Benjamin was a license rather than a sub-lease; and that even if it were a sub-lease the provisions of the original lease with respect to sub-leases were so ambiguous that a forfeiture which is never a favorite of the law, should not be allowed. No contention is made by defendant that the landlord had consented to the arrangement or agreements it made with Bielitsky and Benjamin.

"A petition to open a judgment by default is addressed to the sound discretion of the Court below and is essentially an equitable proceeding ruled by equitable principles; and the decision of the lower Court will be reversed on appeal only when there has been a clear or manifest abuse of discretion: Downes v. Hodin & Kornfeld, 377 Pa. 208, 104 A.2d 495, and cases cited therein": McCune v. Gross, 377 Pa. 360, 363, 105 A.2d 367. See also: Nissenbaum v. Farley, 380 Pa. 257, 110 A.2d 230. Consequently, we must examine the written

[ 381 Pa. Page 582]

    agreements and the evidence to determine whether they support the lower Court's finding that the "arrangement between Sun Ray and Messrs. Bielitsky and Benjamin constituted either a sub-lease or a pro tanto assignment of lease of a substantial portion of the premises in question"; and whether the lower Court clearly abused its discretion in refusing to open the judgment.

It is difficult to define a lease in terms which will fit all modern conditions; it may, we believe, be accurately defined as a conveyance or grant or demise of certain described land or tenement (usually in consideration of rent or other recompense) for a prescribed period or at will, but for a less time than the lessor hath in the premises: Cf. 2 Blackstone Comm. 317; Ottman v. Albert Company, 327 Pa. 49, 54, 192 A. 897; Delaware, Lackawanna and Western Railroad Company v. Sanderson, 109 Pa. 583, 589, 1 A. 394; Offerman v. Starr, 2 Pa. 394, 396; Tiffany, Landlord and Tenant Chapter 3 (1910); Archbold's Landlord & Tenant; Woodfall Landlord & Tenant (16th ed.) 132; Stern's Trickett on the Law of Landlord & Tenant § 1 (1950): 2 Bouvier's Law Dictionary (8th ed. 1914), page 1887; Black's Law Dictionary (4th ed. 1951) page 1035.

"... no particular form of words is necessary to constitute a lease and ... any writing is sufficient which establishes the intention of one party voluntarily to dispossess himself of the premises, for a consideration, and of the other to assume the possession for a prescribed period: Bussman v. Ganster, 72 Pa. 285; Davis v. Hartel, 56 Pa. Superior Ct. 557, 559": Schweitzer v. Evans, 360 Pa. 552, 555, 63 A.2d 39; Stern's Trickett on the Law of Landlord & Tenant § 3.

"It is not necessary that the term 'lease' should be used .... If the words assume the form of a license,

[ 381 Pa. Page 583]

    covenant, or agreement, and the other requisites of a lease are present, they will be sufficient": Moore v. Miller, 8 Pa. 272, 283.

Disposition

The Order of the Court below is affirmed; appellant to pay the costs.


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