MEDICO–DENTAL BLDG. CO. OF LOS ANGELES v. HORTON & CONVERSE.
I dissent. In this action for rent, and for money expended for renovation and electricity, judgment was for defendant, except as to $2.97 for electricity (which was admitted in the answer), on the ground that plaintiff had breached a restrictive covenant in the lease.
Plaintiff appeals and asserts that the judgment is erroneous for the reasons: (1) Covenants in leases are independent and performance of a covenant by the landlord is not a condition precedent to an action for rent, (2) a covenant “not to lease” for a restricted purpose is breached only by actual leasing for the restricted purpose, or by acquiescence in conduct of the other lessee which is in violation of the restriction, neither of which appears in this case, (3) that if the covenants are dependent and if there was a breach of the covenant involved herein, the breach was not so substantial as to go to the whole of the consideration, and (4) that there was a waiver by respondent of the alleged violation.
In July, 1934, respondent Horton & Converse, as lessee, entered into a written lease covering the southwest corner of the ground floor of the Medico–Dental Building at 8th and Francisco Streets, Los Angeles, for a term of sixteen years and four months, at certain percentage rentals and a minimum monthly rental of $600 for the part of the term involved herein. Respondent was in possession at the time the lease was made, having occupied the premises since 1925 under a prior lease. The original lessor in the lease involved herein assigned it to appellant, Medico–Dental Building Company.
The lease provided that: “The premises hereby leased are to be used and occupied by lessee as a drug store and for no other business or purpose without the written consent of lessor.”
The lease also provided: “Lessor agrees not to lease or sublease any part or portion of the Medico–Dental Building to any other person, firm, or corporation for the purpose of maintaining a drug store or selling drugs or ampoules, or for the purpose of maintaining a cafe, restaurant or lunch counter therein during the term of this lease.”
On December 30, 1937, appellant entered into a written lease whereby it leased the ninth floor of the same building to Dr. Boonshaft, a physician, for a term of three years commencing April 15, 1938, which lease provided: “The premises demised hereby are to be used solely as offices for the practice of medicine and dentistry, and lessee agrees that he will not maintain therein or thereon, nor permit to be maintained therein or thereon, a drug store or drug dispensary, nor will lessee compound or dispense, or permit to be compounded or dispensed, drugs or ampoules, except in connection with the regular course of treatment of lessee's own patients. Lessee agrees not to display any sign or advertisement on the inside or outside of the demised premises, or the building of which the demised premises are a part embodying the words ‘Pharmacy’, ‘Drug Store’, ‘Dispensary’, or words of like import. Lessee understands that lessor has heretofore executed a lease to Horton & Converse granting to said Horton & Converse the exclusive privilege of conducting a drug store or business on the ground floor of said Medico–Dental Building, and lessee agrees that he will not do, or permit to be done, anything in connection with the premises demised hereby which would in any way conflict with or constitute a breach by the lessor therein of said Horton & Converse lease.”
Dr. Boonshaft went into possession under his lease on April 15, 1938, and occupied the entire ninth floor of the building where he had from thirty–two to thirty–six treatment rooms and had eight to twelve doctors associated with him in an organization known as the Dr. Boonshaft Medical Group. The plan of operation of the medical group was to register groups of employees and lodge members and their families for medical treatment on the basis of paying a monthly sum per family; such payments entitled the patient to receive certain drugs, but additional charges were made for other drugs. He maintained a drug room in which drugs were sold and prescriptions filled for the patients of the group. He obtained a pharmacy license on May 8th. Until June 25th, he bought his drugs retail from respondent's store in the building. He objected to the sales tax charged by respondent and commenced buying wholesale from respondent's wholesale store at another location on June 25, 1938, and continued to buy his drugs from respondent wholesale to the time of trial.
The court found that during the month of May, 1938, a drug store in charge of a registered pharmacist was opened and maintained on the ninth floor of the Medico–Dental Building, which said drug store was registered as a pharmacy with the California State Board of Pharmacy; that drugs were sold in the drug store and prescriptions were compounded, filled, and a charge made for the prescriptions in the drug store, during the month of May, 1938; that on July 8, 1938, a sales tax permit was issued to Dr. Boonshaft; that during the last week of July, 1938, the defendant learned that a drug store in charge of a registered pharmacist was opened and maintained in the Medico–Dental Building, and that drugs were being sold in the drug store and prescriptions were being compounded, filled and charged for in the drug store; that defendant did on August 3, 1938, notify plaintiff in writing of said facts as to the drug store and that the lease was being breached (the letter demanded that the selling of drugs, compounding and filling of prescriptions be stopped immediately); that during the time between August 3, 1938, and August 31, 1938, a drug store was being maintained on the ninth floor of the building, and that drugs were being sold and prescriptions compounded and filled in said drug store and a charge made therefor; that agents of plaintiff had conferences relative to the objection by defendant to the drug store, and that such discussions were not communicated to defendant and defendant had no knowledge of plaintiff's disposition regarding its complaint except a conference had in defendant's office on August 8, 1938, at which time plaintiff advised defendant that it would take the matter up further and see what it could do about it and advise defendant; that defendant did not have any further communication from plaintiff concerning the objection to the drug store until August 19, 1938, at which time the attorney for plaintiff informed defendant that no arrangements could be made with Dr. Boonshaft and that plaintiff could not do anything with him; and on that occasion defendant, through its president, advised plaintiff that defendant was going to vacate the premises in order to avoid a waiver of its exclusive right to maintain a drug store and sell drugs in the building; (the testimony was that plaintiff then replied, “Well, use your own judgment as to that.”) that plaintiff failed thereafter to take any further action; (The next day defendant closed the doors of its store and put signs on them stating it had moved the store to another location, and piled empty boxes at the entrance and on the main part of the floor for the purpose of impressing plaintiff that it intended to move.) that on August 24, 1938, defendant sent plaintiff a written notice of rescission and vacated the premises on August 31, 1938.
The court further found that appellant by executing the lease with Dr. Boonshaft did lease a part of the Medico–Dental Building to a tenant other than the respondent for the purpose of maintaining a drug store and selling drugs in the Medico–Dental Building, and that the making of the lease with Dr. Boonshaft was a breach of respondent's lease; and that the appellant in not taking immediate action to abate the drug store on the ninth floor of the building breached its lease with respondent; and that appellant breached its lease with respondent on August 19, 1938, when it advised respondent that appellant could make no arrangements with Dr. Boonshaft and could not do anything with him regarding the selling of drugs and maintaining the drug store; and that such breaches of the lease were in material respects, and were not waived by respondent.
The court further found that a material part of the consideration from plaintiff to defendant which induced defendant to execute said lease was the right to be protected against competition, and that a material part of the consideration failed in that plaintiff executed said lease with Dr. Boonshaft.
The court further found that it was not true that defendant or any person on behalf of defendant did assist or encourage the appellant or anyone to establish or maintain a drug store, or selling of drugs, in any part of the Medico–Dental Building other than the premises demised by plaintiff to defendant; that it was not true that Mr. Walsh informed the business manager of the Boonshaft group that it would be necessary to obtain a pharmacy license or a sales tax permit, or that he would assist in or outline a procedure for obtaining such license or permit.
The first question upon this appeal is whether the covenants “not to lease” and “to pay rent” are independent of or dependent upon each other.
The agreement by the lessor “not to lease” any other part of the building to any other person for a drug store, and the agreement by the lessee “to pay rent” appear in a rider attached to and made a part of the lease. The lessee was limited by the terms of the lease to maintaining a drug store, and the lessor was prohibited from leasing any other part of the building to any other person for a drug store.
Appellant's position is that a lease is a conveyance and not a contract and that any covenant on the part of the lessor is independent of lessee's promise to pay rent, and that each has his remedy for breach of covenant in an action for damages. While it is true that a lease is primarily a conveyance in that it transfers an estate to the lessee, it was held in Samuels v. Ottinger, 169 Cal. 209, 146 P. 638, Ann.Cas.1916E, 830, that “a lease has a dual character––it presents the aspect of a contract and also that of a conveyance. * * * ‘Consequently the lease has two sets of rights and obligations––one comprising those growing out of the relation of landlord and tenant, and said to be based on the “privity of estate,” and the other comprising those growing out of the express stipulations of the lease.’ ”
In 32 American Jurisprudence, section 144 (1941), it is stated that according to some authorities, covenants in leases are generally mutually independent and are not subject to the rule in contracts generally, and that the lessee's promise to pay rent is ordinarily independent of the lessor's promise to repair or improve. It is there further stated that “according to other authorities, however, covenants and stipulations on the part of the lessee and lessor are to be construed to be dependent upon each other or independent of each other, according to the intention of the parties and the good sense of the case, and technical words should give way to such intention * * *.”
The lease itself recites that all the terms and covenants of the lease are conditions. In the lease involved herein there is a provision (paragraph 25) as follows: “Time is of the essence of this lease and all of the terms and covenants hereof are conditions, and upon the breach by lessee of any of the same lessor may, at lessor's option, terminate this lease * * *.” This provision is an indication of an intention of the parties to make the covenant “not to lease” a dependent covenant.
The restrictive covenant in respondent's lease was vital to the protection of its business under the circumstances which prevailed in this case. Respondent's business was different from the ordinary drug store in that it catered principally to doctors and dentists for reference of prescription work, did not maintain the usual line of merchandise found in the ordinary drug store, and did not depend upon transient trade. Respondent was and had been operating a chain of exclusive prescription pharmacies in Los Angeles for eighteen years. It was attracted to this building in the first place because the building was occupied mainly by practitioners of the medical and dental professions. It had occupied the same premises since 1925, and depended upon the tenants of the building and their patients for the major part of its business. Appellant knew as stated in its letter to respondent (Ex. 6), that the “chief source” of respondent's business on the premises was the tenants in the building.
It is apparent from such circumstances that it was the intention of the parties to the lease, in attaching the special rider embodying the restrictive covenant in favor of respondent, to constitute the provisions relative to competitive business one of the vital provisions of the lease. Respondent contracted for the exclusive right to engage in a particular business in a particular building. It is a reasonable inference from the fact that an entire floor was leased “as offices for the practice of medicine and dentistry” that a substantial amount of business would be created by the several doctors occupying the several offices on that floor. The covenant on the part of the lessor went to the whole of the consideration and was not subordinate or incidental to the main purposes of the lease. A consideration of the provisions of the lease and of the facts and circumstances requires the conclusion that the restrictive covenant is a dependent covenant. The covenants “not to lease” and “to pay rent” being dependent upon each other, the respondent was entitled upon a breach of the covenant by the lessor to vacate the premises without further liability for payment of rent.
In the case of University Club v. Deakin, 1914, 265 Ill. 257, 106 N.E. 790, 791, L.R.A.1915C, 854, the action was to recover rent for a store room. The lease provided that the lessee should use the room for a jewelry and art shop and for no other purpose and “Lessor hereby agrees during the term of this lease not to rent any other store in said University Club building to any tenant making a specialty of the sale of Japanese or Chinese goods or pearls.” Thereafter the lessor leased another room in the building to another person, and provided in the second lease that the lessee would not make a specialty in the leased premises of the sale of pearls. Thereafter the first lessee sought a cancellation of his lease on the ground that his lease had been violated by making the second lease and permitting the lessee to display and sell pearls. The lessor refused to cancel the lease and the first lessee vacated the premises. The court said: “By the terms of its contract with plaintiff in error it agreed that no other portion of its premises should be leased to anyone engaged in the prohibited line of business, and, if it failed to prevent any subsequent tenant from engaging in the business of making a specialty of the sale of pearls, it did so at the risk of plaintiff in error terminating his lease and surrendering possession of the premises.” And the court further said: “It is idle to say that an action for damages for a breach of contract would afford him ample remedy. He contracted with defendant in error for the sole right to engage in this specialty in its building, and, if defendant in error say fit to ignore that provision of the contract and suffer a breach of the same, plaintiff in error had the right to terminate his lease, surrender possession of the premises, and refuse to further perform on his part the provisions of the contract.”
In the case of Hiatt Investment Co. v. Buehler, 1929, 225 Mo.App. 151, 16 S.W.2d 219, 221, defendant leased a drug store from the plaintiff. A rider was attached to the lease which provided: “It is expressly understood that there is to be no other drug store in the holdings of the Hiatt Investment Company.” Soon after the lease was made the lessor sold one of its lots, which was across the street from lessee's drug store, and the purchaser of the lot erected a storeroom thereon and leased it to a competing drug store. Defendant sold his stock of drugs and vacated the premises. Plaintiff sued for the balance of the rent due under the lease and defendant counterclaimed for damages for breach of the restrictive covenant in the lease. Judgment was rendered against the plaintiff and for the defendant for damages for breach of the covenant. The Missouri Court of Appeal affirmed that judgment holding that plaintiff having breached the covenant defendant was entitled to vacate the premises without any further liability for rent. The court stated: “The covenant in the case at bar goes to the whole consideration; it was not merely incidental to the main purposes of the lease and defendant elected to surrender the lease. The evidence shows that the lease would not have been executed if it had not been for the insertion of the restrictive covenant in it; that it was vital to the protection of defendant's business.”
Appellant asserts that in the California courts it is well established that covenants in leases are independent. In support of such contention it relies upon the cases of Arnold v. Krigbaum, 169 Cal. 143, 146 P. 423, Ann.Cas.1916D, 370, and Exchange Securities Company v. Rossini, 44 Cal.App. 583, 186 P. 828.
The case of Arnold v. Krigbaum, supra [169 Cal. 143, 146 P. 424, Ann.Cas.1916D, 370], presents a factual situation quite different from that presented here. That was an action in unlawful detainer and defendants set up a counterclaim and cross–complaint alleging a violation by lessor of a covenant to make repairs. The court ruled that neither a counterclaim or a cross–complaint of any kind is permissible in unlawful detainer and sustained the trial court in striking them out. The court then stated: “A covenant to repair on the part of the lessor and a covenant to pay rent on the part of the lessee are usually considered as independent covenants, and unless the covenant to repair is expressly or impliedly made a condition precedent to the covenant to pay rent, the breach of the former does not justify the refusal on the part of the lessee to perform the latter.” It thus appears that the statement relative to covenants was not material to the decision for the reason the decision was based upon the principle that in an unlawful detainer action neither a counterclaim or a cross–complaint of any kind is permissible, and therefore, it was immaterial whether the covenant mentioned therein was independent or dependent. If, however, it were a material statement, it does not support appellant's contention that “covenants in leases are independent.” It refers only to a covenant to repair and a covenant to pay rent and states that they are usually considered as independent covenants. That statement indicates that there may be circumstances in which a particular covenant, even a covenant to repair, may be dependent without an express stipulation in the lease to that effect.
The case of Exchange Securities Co. v. Rossini, supra [44 Cal.App. 583, 186 P. 829], also is quite different from the present case. In that case the covenant in the lease was that the lessor would give the lessees an option to purchase the property before selling it. The lessor sold the property without any notice to lessees, in violation of the covenant to give the lessees an opportunity to purchase. Lessees vacated the premises and the lessor sued for rent accrued after lessees left. The sole point in controversy was whether the covenant to give the option to purchase warranted the lessees in terminating the lease. It was there stated that the breach of an independent covenant by the landlord will not warrant the tenant in terminating the lease in the absence of a stipulation in the lease to that effect. Since such a stipulation was not in the lease, it only remained for the court to determine whether the covenant to give an option to purchase was independent or dependent. The court stated: “Our conclusion is that the covenant in question on the part of the lessor was in its nature independent, and not a condition precedent to the payment of rent by the lessees * * *.” (Emphasis added.) It is clear that the enjoyment of the premises by the tenant was not affected in any way by the refusal by the landlord to give the tenant an opportunity to purchase the premises. The covenant in its nature was clearly collateral to and independent of the main agreement to convey a leasehold.
It thus appears that the cases so relied upon by the appellant do not sustain the contention that it is established in this state that covenants in leases are independent. There is no rule that all covenants in leases are independent.
Covenants in leases are independent or dependent according to the nature of the covenants, their relation to each other, the intention of the parties as shown by the provisions of the particular leases, and the facts and circumstances of each particular case. University Club v. Deakin, supra; Hiatt Investment Co. v. Buehler, supra; Exchange Securities Co. v. Rossini, supra; 32 Amer.Jur., § 144 supra.
The second question is whether the restrictive covenant was breached by leasing for the restricted purpose, or by acquiescence by the lessor in conduct of the other lessee which was in violation of the restriction.
As to the first part of this question, relative to leasing for the restricted purpose, the trial court found that appellant did lease to Dr. Boonshaft for the purpose of maintaining a drug store and selling drugs; that appellant by executing said lease breached its lease with defendant; and that appellant by virtue of one of the provisions of the lease intended to and did give Dr. Boonshaft the right and privilege of maintaining a drug store, selling drugs and compounding prescriptions on the premises, and by so doing failed to protect defendant against competition.
This finding, as to the purpose of appellant in making the lease, was based undoubtedly upon inferences drawn from the provisions of the lease with Dr. Boonshaft; inferences that appellant knew at the time of making the lease that the kind of medical business to be conducted by the Boonshaft group would require a large volume of drugs, and that a drug store would be maintained; that the right to maintain a drug store for his own patients was one of the main considerations to Dr. Boonshaft in making the lease; and inferences drawn from the conduct of Dr. Boonshaft and appellant after possession was taken.
One of the provisions in the lease with Dr. Boonshaft was in part, “The premises––are to be used solely * * * for the practice of medicine and dentistry and lessee agrees that he will not maintain therein * * * a drug store or drug dispensary, nor will lessee compound or dispense * * * drugs or ampules except in connection with the regular course of treatment of lessee's own patients.”
This provision has been so written that it presents an ambiguity in that a question arises whether the exception relative to treating lessee's own patients applies only to compounding or dispensing drugs, or applies also to maintaining a drug store. That is, with reference to the words “drug store,” the sentence may be read “* * * lessee agrees that he will not maintain therein * * * a drug store * * * except in connection with the regular course of treatment of lessee's own patients.”
From this provision an inference may be drawn properly that it was intended that a drug store would be maintained but it would be in connection with the treatment of lessee's own patients. That such an inference is proper is indicated further by the provision of the lease which follows the one last mentioned, which is, “Lessee agrees not to display any sign or advertisement on the inside or outside of the demised premises or the building * * * embodying the words ‘Pharmacy,’ ‘Drug Store,’ ‘Dispensary,’ or words of like import.” It seems improbable that any provision prohibiting signs indicating a drug store would have been included if it had not been contemplated that a drug store of some kind would be maintained, even though it be one limited to the lessee's patients.
From this last mentioned provision of the lease it is a reasonable inference that appellant employed such detailed language, relative to a sign, in an effort to prearrange an alleged defense that the drug shop was not a pharmacy because it did not have such a sign on it. In this connection it should be noted that the Business and Professions Code, section 4035, St.1937, p. 1301, states, “* * * pharmacy means and includes every store or shop where drugs * * * are dispensed or sold at retail * * * or where prescriptions are compounded, which has upon it or in it as a sign, the words * * * ‘pharmacy,’ ‘drug store’ * * * or any of these words.” It is thus apparent, from the use of the Code language in the lease, that appellant considered that a drug shop which did not come within the specific definition of drug store as stated in that Code would not be a drug store within the meaning of its agreement to protect Horton & Converse against competition.
It is not a sufficient answer to say that it was not leased for the purpose of maintaining a drug store because he agreed not to display any such sign and never did display one. The question here is not whether he maintained a pharmacy in violation of a statute, but whether he violated the contractual right of respondent to have the exclusive privilege of maintaining a pharmacy in the building. Insofar as respondent's contractual rights are concerned, it is immaterial whether Boonshaft had a sign on his drug store designating it what it really was, or falsely designating it, or no sign at all. A drug store does not lose its character as such merely because it is not labeled a drug store.
It was reasonable for the trial court to infer from such provisions of the lease, from the fact that an entire floor was leased, and from the circumstances of making the lease, that appellant knew the type of medical business which was to be conducted by Dr. Boonshaft; and it was reasonable to infer further that appellant understood that under the Boonshaft plan of including certain drugs for the monthly fee charged his patients, and under his agreement with his patients to furnish other drugs and prescriptions “at low cost,” that a large volume of drugs would be required and that Dr. Boonshaft would maintain a drug store; it was also a reasonable inference that appellant and Dr. Boonshaft considered at the time of making the lease that a drug store maintained on the ninth floor “in connection with the regular course of treatment of lessee's own patients” and without a sign on it would not be in violation of the lease with Horton & Converse.
The purpose of appellant in making the lease is indicated also by the testimony of Mr. Wilder, the property manager of appellant, when he testified that he did not know that a drug store was being operated on the ninth floor in any other way than that prescribed by the lease, and as to the meaning of his statement to that effect he testified, “I mean that in the Boonshaft lease it specifically states that they cannot conduct a drug store or a pharmacy except to compound prescriptions for their own doctors. That is the substance of the lease, and that is what I mean by that, ‘provided for as in the lease.’ ” Tr. 190.
It is to be noted that the representation in the lease by appellant to Dr. Boonshaft relative to the exclusive right of respondent to conduct a drug store was that the exclusive right was limited to the ground floor. That provision was in part, “* * * lessee * * * has heretofore executed a lease * * * granting to Horton & Converse the exclusive privilege of conducting a drug store business on the ground floor of the Medico–Dental Building. * * *”
This misrepresentation as to the extent of the exclusive right may be the basis for the position taken by Boonshaft at the conference on August 8th when he said, “I am doing only what my lease gives me the privilege to do.” He did not say he was not maintaining a drug store.
By reason of the provision in the lease that he would not maintain a drug store or sell drugs or compound prescriptions, except in connection with his own patients; the provision that he would not display a sign; the provision that the exclusive privilege of Horton & Converse was limited to the ground floor; and the type of his medical business; it is obviously a required and reasonable inference that at the time the lease was executed, it was the purpose of Dr. Boonshaft to maintain a drug store, sell drugs, and compound prescriptions. Likewise it is reasonable to infer that at the time of executing the lease, appellant knew the said purpose of Dr. Boonshaft and leased to him for such purpose, upon the assumption that such leasing would not be in violation of the contract with Horton & Converse, for the reason, that Dr. Boonshaft as a physician would be entitled under the Business and Professions Code to operate a drug store in connection with his own patients.
That Code provides (§ 4030) that, “* * * it is unlawful for any person to * * * compound, sell or dispense any drug * * * or * * * compound any prescription of a medical practitioner, unless he is a registered pharmacist * * *” and section 4031 provides that, “This * * * does not apply to * * * one, who holds a physician's and surgeon's certificate and who is duly registered * * * with supplying his own patients with such remedies as he may desire if he acts as their physician * * * and if he does not keep a pharmacy, open shop or drug store, advertised or otherwise, for the retailing of medicines * * *.”
Dr. Boonshaft did have the legal right as a physician to supply his own patients with medicines, provided he did not keep a pharmacy, open shop or drug store for retailing medicines. Although he kept a drug store he did not violate the Business and Professions Code for the reason that he employed a pharmacist as was required by that Code.
Persons other than physicians have the right by law to maintain a drug store by employing a pharmacist and otherwise complying with the law, but such a right and compliance with legal requirements are not justification for making a lease to such a person in violation of a contract to protect against competition. The fact that Dr. Boonshaft may be entitled legally to maintain a drug store by employing a pharmacist does not meet the contractual obligation of appellant to protect respondent against competition in the building. A drug store maintained by a physician with a pharmacist in charge to supply, sell drugs and compound prescriptions, not only to patients personally treated by the physician, but for patients personally treated by eight, twelve or thirty doctors associated with him, would be as much competition as if the drug store were maintained by a pharmacist or anyone not a physician.
The drug shop was a drug store in every common acceptation of the word. The finding of the court that it was a drug store is supported fully by testimony as follows:
Two inspectors of the State Board of Pharmacy, who had been so employed nine years, testified they visited the ninth floor between May, 1938, and August 31, 1938, and that they saw a separate room stocked with drugs, medicines, pharmacist's scales, mortars, graduates, usual tools used in compounding drugs, and two licentiate certificates displayed.
An inspector of the Board of Pharmacy, who had been so employed twenty–five years, and had been a registered pharmacist for twenty–five years, testified he visited the ninth floor on August 15, 1938, and he saw a prescription case, pharmacist's scales, tools, mortars, spatulas, pharmacy licenses and permits, prescription file, and shelves around the walls with drugs on most of them.
A registered pharmacist, of thirty–five years' experience, testified he had been employed by Dr. Boonshaft from June, 1938, into September, 1938, and was in charge of the pharmacy room, that he worked there steadily during August receiving and compounding prescriptions, and setting and collecting the charges therefor, and that his duties were no different from his duties in the prescription room in other drug stores where he had worked.
Appellant asserts that respondent's conduct in vacating the premises was motivated by a desire to be relieved of the burden of the lease, and that respondent's claim that its lease was breached was a pretext to terminate its lease.
It is more reasonable to infer, as perhaps the trial court did, since the Medico–Dental Building had been involved in bankruptcy and there were several vacancies in the building, that appellant's conduct in leasing to Dr. Boonshaft was motivated by the desire to be relieved of a vacant floor and to grasp the opportunity which presented itself to lease an entire floor at one time to one person, even though such leasing for the purpose required would involve a question as to a violation of the exclusive privilege agreement with respondent. All of the surrounding facts, including the motive and anxiety of appellant to lease, the ambiguity in the lease, the representation that the exclusive privilege was limited to the ground floor, and the claim that a physician had a statutory right to supply medicines to patients not treated personally by him but by his associates, indicates that appellant was willing to take a chance that respondent, its long time tenant, would not object if it made such a lease.
The determination by the trial court as to the purpose in making the lease with Boonshaft was based upon a consideration of facts and an interpretation of an ambiguous contract. Various elements were considered as above indicated. Under such circumstances where an instrument is subject to different interpretations, the one adopted by the trial court should, if it is consistent with the intent of the parties, and not the result of an abuse of discretion, be followed by the reviewing court. City of Manhattan Beach v. Cortelyou, 10 Cal.2d 653, 660, 76 P.2d 483; Kautz v. Zurich Gen. A. & L. Ins. Co., 212 Cal. 576, 582, 300 P. 34; Neff v. Mutual Life Ins. Co., 48 Cal.App.2d 110, 119 P.2d 404; Coviello v. Moco Fruit Co., 42 Cal.App.2d 637, 640, 109 P.2d 765. The findings of the trial court as to this point are supported amply by the evidence.
As to the second part of the second question, whether the restrictive covenant was breached by acquiescence of appellant in conduct of Dr. Boonshaft which was in violation of the restriction, the court found that the appellant in not taking immediate action to abate the drug store on the ninth floor, and in informing respondent it could not do anything with Dr. Boonshaft, breached its lease.
The drug store on the ninth floor was opened in May, 1938. Respondent learned during the last week in July, 1938, that the drug store was there and on August 3, 1938, wrote a letter to appellant objecting to the drug store and demanding that the practice be stopped immediately. All of the parties concerned held a conference five days later in respondent's office with the result the appellant would see what could be done and advise respondent. Communications were had between appellant and Dr. Boonshaft, but no further communications were had with respondent until August 19, 1938, when appellant informed respondent that it could not do anything with Dr. Boonshaft, and appellant upon being notified at that time that respondent intended to vacate the premises, stated: “Use your own judgment about that.”
It thus appears that respondent did not vacate the premises abruptly upon learning in the last week in July that the drug store was being maintained, but proceeded in a deliberate and reasonable manner to give appellant an opportunity to adjust the matter by gradual processes. Mr. Wilder, the property manager for appellant, testified that at the conference he said, “Well, the meeting opened by my bringing to Dr. Boonshaft's attention the fact that he was definitely violating his lease.” He also testified that he said further to Dr. Boonshaft, “You most certainly are violating the terms of the lease, as Horton & Converse have the exclusive privilege of selling drugs and medicines in the building.” Relying upon appellant's admission that Boonshaft was violating his lease and that appellant would see what it could do about it, respondent cooperated further by waiting about two weeks more. Then appellant informed respondent in positive and emphatic language to the effect that negotiations were ended, nothing could be done with Boonshaft, and use its own judgment about moving out. Respondent having received such a blunt, plain, and final answer to its letter (after appellant had admitted respondent's charge of violation of the covenant), was bound to conclude that negotiations were over, that a continuation of cooperation would be futile and would involve a waiver of the violation, and that appellant was acquiescing in the violation by Boonshaft.
In opposition to the claim of acquiescence, appellant stated in argument that it should be noted that appellant did not say it would not do anything about Boonshaft. It appears, therefore, to be the contention that respondent should not have considered such statements, “could not do anything with him” and “use your own judgment,” according to the plain meaning of the words, but should have understood such language to mean that appellant would do something about it sometime. Further in opposition to the claim of acquiescence it is contended that appellant did not have sufficient time to do anything with Boonshaft, and that respondent acted abruptly. Appellant had more than two weeks to decide what the answer to the letter should be. The answer certainly was not susceptible even of a remote inference that more time was required. It was definitely final. Under such circumstances, respondent was compelled to elect whether it would continue under the lease after the next rent payment day and waive the violation, or vacate before the end of the month. It elected to rescind, and did so on August 24th, stating it would vacate before the end of the month. Although respondent piled empty boxes in the store to impress appellant that it intended to move, and put signs on the doors, it did not move until about ten days later. However, appellant did not communicate with respondent before it moved on August 31st.
The findings of the court relative to acquiescence are supported amply by the evidence, and the conclusion is required that appellant acquiesced in the conduct of Boonshaft in operating the drug store.
The third point, that if there was a breach of the covenant, it was not so substantial as to go to the whole of the consideration, was discussed herein in the consideration of the first point concerning covenants. It was there shown by reason of various special circumstances such as the exclusive nature of respondent's business, the limited source of its patronage, and the many years of its occupancy of the building, that the breach did go to the whole of the consideration. If, as appellant contends, the breach did not go to the whole of the consideration, the appellant could execute similar leases on each floor of the building and thus practically destroy the essential source of respondent's patronage. Respondent was, and for many years had been, paying for the exclusive right to engage in a particular business in a particular building.
As a fourth point, appellant contends there was a waiver of the alleged violation of the restrictive covenant, and in support thereof refers to evidence in behalf of appellant to the effect: That Dr. Boonshaft obtained a pharmacy license on May 28, 1938, and that Mr. Walsh, vice–president of Horton & Converse, and a member of the State Board of Pharmacy, assisted Boonshaft in obtaining the pharmacy license, and signed the license as a member of the pharmacy board; that Boonshaft purchased all his drugs wholesale from respondent from June 25, 1938, to the time of trial; that when Boonshaft objected to paying the sales tax, that Walsh told him the tax would be charged unless he bought wholesale; that when Walsh saw the “drug room” in April or May that it was stocked with drugs; that although Walsh was aware of the facts, no notice was given to appellant for three months; and that Mr. Horton knew that a drug store “was reputed to be operated” three or four months prior to August, 1938.
However, as to the evidence above referred to relative to an alleged waiver, the court found upon the controverted issues of fact, concerning which there was very substantial evidence in support of respondent, that the facts were contrary to contention of appellant, and that there was no waiver. The finding of the court hereinabove specifically set forth, shows that Mr. Walsh did not assist or encourage Boonshaft in maintaining the drug store, obtaining the pharmacy license, or the sales tax permit. Appellant states that Mr. Walsh, a member of the pharmacy board, “signed Boonshaft's license,” and refers to the name of Mr. Walsh on the license as his “signature” attached to the pharmacy license. Apparently this was done to create an inference that Mr. Walsh knew by reason of his personal contact with the license in signing it that the drug store was there at the time the license was issued, and that a waiver results. The fact is, as shown by the evidence, that the name of Mr. Walsh was on the pharmacy license in facsimile and that he had no personal contact with it. Horton & Converse had been engaged eighteen years in operating a chain of many exclusive prescription pharmacies in Los Angeles, and sold retail and wholesale. Mr. Walsh was not located in their store in the Medico–Dental Building and was there only occasionally. The wholesale department was not there. From the time Boonshaft started to buy wholesale, on June 25th, until respondent learned of the drug store during the last week of July only a month elapsed. Respondent had many wholesale customers and it is not reasonable to infer because Boonshaft bought wholesale that Mr. Walsh or any other officer of respondent knew where the drugs were being delivered to him or that he was operating a drug store. Mr. Horton, the president of Horton & Converse, and Mr. Walsh, the vice–president, testified that they learned about the drug store during the last week in July. That was substantial testimony and the court found it to be true. Respondent acted promptly upon ascertaining the facts by sending the letter of objection within a few days thereafter, August 3d. There was no waiver.
The function of an appellate court in considering the point herein relative the purpose and interpretation of the lease has heretofore been discussed. As to the other points, in the second, third, and fourth questions which relate to acquiescence, whether the restrictive covenant goes to the whole of the consideration, and waiver, it must be recognized that the trial court had the benefit of personal observation of the witnesses and that the appellate function is to consider not relative weight of conflicting evidence, but only legal sufficiency to support the findings. Showalter v. Western Pac. Ry. R. Co., 16 Cal.2d 460, 106 P.2d 895; Raggio v. Mallory, 10 Cal.2d 723, 76 P.2d 660. Even though different inferences might be drawn from the evidence the inference adopted by the trial court in the absence of an abuse of discretion is conclusive on the appeal. Hamilton v. Pacific Electric R. Co., 12 Cal.2d 598, 86 P.2d 829. The findings of the trial court as to these questions were supported amply by the evidence and should be sustained.
The combination of all the circumstances presented compels the affirmance of the judgment, especially in the light of the rule as to the function of an appellate court in considering findings of the trial court.
The judgment should be affirmed.