While it is true that a lease is primarily a conveyance in that it transfers an estate to the lessee, it also presents the aspect of a contract. This dual character serves to create two distinct 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, and so said to be based on privity of contract. Those features of the lease, which are strictly contractual in their nature, should be construed according to the rules for the interpretation of contracts generally and in conformity with the fundamental principle that the intentions of the parties should be given effect as far as possible.
Defendant lessee's lease stated that the plaintiff lessor was not to lease any other premises to another entity which operated a drug store. A doctor signed a lease which stated that he was not going to operate a drug store. The lessee advised the lessor about a breach of the restrictive covenant not to lease to a drug store when the doctor began to operate a drug store. When the lessor was unable to stop the doctor's operations, the lessee vacated before another rent payment was due. Plaintiff brought a breach of lease contract action against the lessee. The trial court ruled for the lessee. On appeal, the court affirmed.
Where a lease contained a covenant that the lessor was "not to lease" to another drug store and the lessee was obligated "to pay rent," did violation of the covenant relieve the lessee of his obligation; the covenant addressing the estate conveyed in the lease and the obligation being a mere contract term?
The court affirmed the decision for the lessee because, where the covenant ran to the entire consideration of the lease, the restrictive covenant was dependent on the other lease obligations according to the parties' intentions. The doctor clearly operated a legal drug store under Cal. Bus. & Prof. Code §§ 4030, 4035. The evidence showed that the lessee did not acquiesce in the operation of the doctor's drug store.