Court Opinion

ID: 9885593
Source: CourtListenerOpinion
Date Created: 2023-10-06 13:07:57.255708+00
Date Added: 2024-06-11T07:48:55.254230
License: Public Domain

Desmond, J.
The facts of this controversy, and the issues, are set forth and discussed in the Appellate Division opinion. We will limit ourselves to a statement of our views on the principal questions of law.
Since plaintiff is suing for additional percentage rental under the 1939 ten-year lease of the three lower floors of 742 Fifth Avenue, New York City, it must base its claim on the covenants of that lease. Two only of those covenants are pertinent. We *252take them up in turn. The 4% percentage rental was to be paid on all sales made “ on, in, and from the demised premises ”. After, by separate leases made in 1945, defendant had taken over from plaintiff part of the fifth floor (and the eighth floor, not involved here), defendant made it a practice to pay commissions, on fur sales made on the fifth floor, to salespeople on the lower floor who sent customers to the fifth-floor fur department. We think it not unreasonable to hold, with the Appellate Division, that such sales were, within the lease’s intent, made “ from ” the main store and so subject to percentage rent. Such sales may be considered “ main store ” sales, as if a clerk in response to a telephone call took merchandise to a customer’s home, and there effected a sale. It would be going too far, though, to hold that all fur sales were made ‘ ‘ from ’ ’ the lower store simply because, as hereinafter more fully explained, the fur department was moved up to the fifth floor after that floor had been1 ‘ integrated ’ ’ with the main store.
By the other language (of the 1939 percentage lease) which we find pertinent, the tenant promised that the store it would conduct in the lower three floors would ‘1 at all times contain a stock of first class merchandise ” and would “ be conducted and maintained in a manner substantially similar to the Tenant’s present store at #729 Fifth Avenue ” (that is, the store across the street from which defendant was moving). That verbiage is to be read with the purpose clause (of that same 1939 lease) which prescribed the sale of all kinds of women’s apparel and accessories. Here, again, we agree with the Appellate Division that no more was intended than an agreement that there should be conducted, on the three lower floors of 742 Fifth Avenue, under the percentage lease, a woman’s clothing shop of the same general character as defendant’s store across the street. If plaintiff had desired further restrictions as to kinds of merchandise, etc., it should have insisted on them. Absent fraud or trickery (and the findings properly say there was none), defendant could carry on its business in the way that suited it so long as it did not deviate from those very broad and general lease specifications.
In 1945, defendant, needing more space, bought out a custom-made dress business which had been conducted in part of the fifth floor by another concern and made with plaintiff a new lease of that space at a flat no-percentage rent. Again, the *253lease terms went no further as to purpose than to state that the added space was to be used for the sale of female wearing apparel and accessories and for workrooms. The fifth-floor custom-made dress department ivas not successful and ivas soon discontinued. Defendant then made such physical changes in the building that two elevators, which had theretofore served the first three floors from inside the main store, now could be, and were, used to carry passengers inside the store not only to and from the first three floors but to and from the fifth floor, also (and the eighth floor, although that is not important here). The result was that the first, second, third and fifth floors were, as the phrase goes, “ integrated ” into one store fronting on Fifth Avenue and served by elevators reached through the main store from the Fifth Avenue entrances. Formerly, the fifth floor could be reached by the use of two other elevators only, to which elevators entrance was from the side street lobby on the 57th Street side of the building. Then defendant moved its fur department to the fifth floor, and thereafter paid no percentage rent on fur sales.
Trial Term held that plaintiff did not acquiesce in these changes. The Appellate Division held that it did. The question of fact is a close one but, acquiescence or not, we think the undisputed facts forbade a. recovery here by plaintiff of more than the percentage on certain fur sales, hereinbefore described as made on the fifth floor, but1 ‘ from ’ ’ the lower floors. There is nothing in the main lease to forbid the moving of the fur department and when plaintiff made the second, or fifth floor, lease, it again failed to include any restrictions as to particular kinds of merchandise to be sold in one or the other part of the building. It is clear enough that plaintiff did not contemplate, when it leased the fifth and eighth floors for a flat rental, that the fifth floor would be “ integrated ” with the lower floors into one store but such lack of foresight does not create rights or obligations. True, the second lease said that it would “ not have any effect ” on the earlier lease but the effect of the two leases, read together and enforcing both, was that defendant had the right to sell all kinds of women’s apparel, etc., in any part of the four floors, so long as no other use was made of the premises. As we see it, defendant merely exercised that right *254when it moved the fur department. As to changing the elevator doors, if that were a violation of any implied covenants (certainly not of an express covenant) redress could be had by injunction or, perhaps, by the landlord putting the elevator doors back as they had been and charging the expense to the tenant. But . such violations (if they were violations) could not result in a liability for additional rent not promised in the lease. Except as t,o the fur sales to customers sent upstairs, there were no additional sales ‘ ‘ on, in or from ’ ’ the premises covered by the percentage lease, even though certain activities with • respect to furs continued to be carried on in the lower store.
In the view we take of the case, it is unnecessary to engage in interesting but unproductive computations or speculations as to whether or not the new ‘ ‘ integrated ’ ’ store actually produced more percentage rent for plaintiff than if the fur department and the elevators had not been changed. It i§ the fact, though, that plaintiff proved no loss in that respect.
In deciding this case as we do, we are not .moving away from the good old rule that there is in every contract an implied covenant of fair dealing (Kirke La Shelle Co. v. Armstrong Co., 263 N. Y. 79). Defendant, as we see it, was merely exercising its rights. Nor do we reject such authorities as Cissna Loan Co. v. Baron (149 Wash. 386) which penalize unconscionable diversion of business from percentage-lease premises to others. The present case does not fit into that pattern.
The judgment should be affirmed, without costs.