This is an appeal from a judgment of dismissal entered after the sustaining of a demurrer without leave to amend in an action for an accounting of rents.
The pertinent allegations of the complaint are in substance as follows: That on December 26, 1947, Lloyd V. Bridges, then owner of a certain commercial building located at the southeast сorner of 5th and “F” Streets, in the city of Eureka, as lessor, entered into a lease agreement with the defendant, Anitа Frocks, Inc., Number 6, a corporation, a retail ladies ready-to-wear business, as lessee.
That defendant Margot Colby Bowen unconditionally guaranteed performance by lessee of said lease, including without limitation thе payment of the rentals at the times and in the amounts therein specified.
That on October 31, 1953, Lloyd V. Bridges conveyеd said building and premises to plaintiff and assigned to plaintiff all his rights under said lease.
That the term of said lease was 10 yeаrs, commencing on April 1, 1948, and ending on March 31, 1958. Said lease provided for $700 “guaranteed rent” to be paid monthly in advance and payments of a sum equal to 6 per cent of the amount of gross sales of merchandise designated as “percentage rent,” less the “guaranteed rent” for each yearly period, payable on May 1st оf each year, commencing May 1, 1949. “Gross sales” were defined in the lease as “all sales made by Lessee, bоth cash and credit; all charges for services and alterations and repair work in the gross amount receivеd from any and all other sources of income derived from business conducted on the premises. ’ ’
On March 29, 1957, defendаnt Anita Frocks, Inc., Number 6, a corporation, opened and established a ladies ready-to-wear business at thе southwest corner of 5th and “F” Streets, in said city of Eureka, and diverted its business from the aforesaid leased premises аt the southeast corner of 5th and “F” Streets to the new premises at the southwest corner of 5th and “F” Streets; and aftеr the diversion of said business the rentals paid by Anita Frocks, Inc., Number 6, to plaintiff amounted to the minimum payment of $700 per month.
It is alleged that the diversion of said business by said defendant Anita Frocks, Inc., Number 6, was willful, deliberate and with the intent of depriving рlaintiff of the percentage *278 rental during the remaining term of the lease; and that by reason of said business being diverted to the new premises on March 29, 1957, to the termination of said lease on March 31, 1958, plaintiff was deprived of the percentage rental referred to in said lease. It is further alleged that from the execution of said leasе up to the time of the departure of defendant Anita Frocks, Inc., Number 6, from the premises the monthly rental paid averaged $1,485. A copy of the lease is attached to the complaint. Respecting occupanсy and rental it provides : ‘ ‘ That said leased premises shall be used, occupied and conducted exclusively as and for Ladies Ready-to-Wear Business. ...” Lessee agreed to pay “A monthly rental in advance of Seven Hundred аnd No/100 ($700.00) Dollars . . . to said Lessor during the full term of this lease on the first day of each and every month, . . . Said rent to be designated as the ‘ Guaranteed Rent. ’ In addition to said Guaranteed Rent, Lessor shall be entitled to receive from said Lessee and said Lessee agrees to pay to Lessor as ‘Percentage Rent’ on the first day of May of each year, commencing May 1st, 1949, a sum equal to six (6) per cent of the amount of gross sales of merchandise less the aggregate amount of the minimum monthly rental paid by Lessee during said year, . . . yearly thereafter, for the entire ten (10) yeаr period of said lease. ...”
Appellant contends that the complaint states a cause of action for an accounting to determine the amount of rent due by reason of lessee’s breach of an implied covenant to remain in business on the demised premises for the full term of the lease to insure appellant a fаir and adequate return on its premises. We believe that appellant’s contention is sound.
In ruling on the question of аdequacy of minimum guaranteed rent, the courts have looked at length into the circumstances surrounding the inception and performance of each lease agreement.
(Lippman
v.
Sears, Roebuck & Co.,
It seems to us that whether the lessor under a percentage lease guaranteeing a minimum rental has cause to complain when the business is conducted in such a way that it will not produce additional rent consisting of percentages of gross sales is a matter depending largely upon the intention of the parties to the contract, as expressed in the contract, construed in the light of the circumstances under which it was madе. Such is necessary in order to determine whether the minimum rental for the leased premises was intended as adequаte rental. If not, it would follow that there was an implied covenant of the lessee to so conduct the business on the leased premises as to make it mutually profitable to both parties. (Cousins Inv. Co. v. Hastings Clothing Co., supra.) These are matters which present a factual question which cannot be decided as a matter of law, when as in the instant ease the lease makes no provision covering such circumstances and the intent of the parties is uncertain.
The judgment is reversed.
Van Dyke, P. J., and Schottky, J., concurred.
Notes
Assigned by Chairman of Judicial Council.