Jones v. Andy Griffith Products, Inc.

241 S.E.2d 140 (1978)

35 N.C. App. 170

Seby B. JONES and Robert D. Gorham v. ANDY GRIFFITH PRODUCTS, INC. and Silver's Enterprises, Inc.

No. 7710SC134.

Court of Appeals of North Carolina.

February 7, 1978.

*142 Poyner, Geraghty, Hartsfield & Townsend by David W. Long and Lacy H. Reaves, Raleigh, for plaintiffs.

Kimzey & Smith by James M. Kimzey, Raleigh, for defendant Silver's Enterprises, Inc.

Sanford, Cannon, Adams & McCullough by H. Hugh Stevens, Jr., Raleigh, for defendant Andy Griffith Products, Inc.

BROCK, Chief Judge.

The sole question presented for review in this case is whether the trial court erred in holding that plaintiffs' refusal to consent to the proposed sublease to DeLisse was reasonable. If plaintiffs' refusal were found to be unreasonable, such would constitute a breach of that part of Section 1.16 of the Lease Agreement providing that approval by plaintiffs of a proposed sublease "shall not be unreasonably withheld."

The trial court made the following finding of fact:

"18. Plaintiffs' refusal to consent to a sublease of the 2110 North Boulevard premises to DeLisse was not unreasonable."

A threshold question arises as to the scope of appellate review of such a finding. As a general rule, findings of fact by the trial court are conclusive on appeal if supported by any competent evidence. However, when an item designated as a "finding of fact" is in reality a mixture of findings of fact and conclusions of law, such a finding is itself reviewable by the appellate courts. Brown v. Board of Education, 269 N.C. 667, 153 S.E.2d 335 (1967). The above finding by the court is just such a mixed finding. It involves "an application of principles of law to the determination of facts." Id. 269 N.C. at 270, 153 S.E.2d at 338. In reviewing this mixed question of law and fact, we must determine whether facts otherwise found by the trial court are legally sufficient to support the conclusion that plaintiffs' refusal to consent to the sublease was not unreasonable. We hold that they are.

*143 The trial court made the following finding of fact:

"16. Plaintiffs' decision to disapprove a sublease to DeLisse was reasonably based upon the nature of the building at 2110 North Boulevard. Such building was constructed and designed for use as a restaurant. Because of factors such as the cost of heating, ventilating and air conditioning and electrical service, the cost of construction of a building designed for use as a restaurant is substantially greater than the cost of construction of a comparably sized building designed for general merchandising purposes, such as that occupied by DeLisse in Gateway Plaza Shopping Center. The occupancy of the 2110 North Boulevard premises by a non-restaurant tenant such as DeLisse could not reasonably have been expected to yield as great a return on plaintiffs' investment as could be expected from the operation of a restaurant thereon."

There is uncontroverted evidence in the record that one of plaintiffs' reasons for withholding consent to a sublease to DeLisse was their desire to maintain a restaurant operation in the subject premises due to the higher costs of the construction of the building, and due to demographic factors in the area, including tenant mix in the shopping center. Unquestionably, their motive was to enhance the potential for the percentage rentals contemplated in the Lease Agreement. There is no suggestion of bad faith in plaintiffs' refusal to accept a subtenant. Rather, the record indicates that plaintiffs or their agents actively contacted some thirty-six potential tenants for the building, eventually locating one who started paying rent on 8 February 1976.

Thus we come, in our analysis, to the question of whether plaintiffs' desire to maintain a restaurant operation in the subject premises in light of the nature of the building and the desire for percentage rental constituted reasonable grounds for withholding consent to the proposed sublease to Lafayette. We are unable to find any guidance on this question in the case law of this jurisdiction. Other states have, however, faced similar problems in interpreting consent to sublease clauses in leases. Much of the existing case law is summarized in Annot., 54 A.L.R.3d 679 (1973).

The court in Broad & Branford Place Corp. v. J. J. Hockenjos Co., 132 N.J.L. 229, 39 A.2d 80 (1944) discussed the standard for judging the reasonableness of a landlord's action in withholding consent to a sublease, as follows:

"Arbitrary considerations of personal taste, sensibility, or convenience do not constitute the criteria of the landlord's duty under an agreement such as this [not to unreasonably withhold consent to a sublease]. Personal satisfaction is not the sole determining factor. Mere whim or caprice, however honest the judgment, will not suffice. (citations omitted) The standard is the action of a reasonable man in the landlord's position. . . . The term `reasonable' is relative and not readily definable. As here used, it connotes action according to the dictates of reasonsuch as is just, fair and suitable in the circumstances." (Emphasis added.) 39 A.2d at 82.

In American Book Co. v. Yeshiva University Development Foundation, Inc., 59 Misc.2d 31, 297 N.Y.S.2d 156 (Sup.Ct.1969), the court held that a lessor associated with a religious university acted unreasonably in withholding consent to a proposed sublease on grounds of philosophical and idealogical differences and the controversial nature of the proposed subtenant, a planned parenthood organization, which intended to use the space for the same type of functions as the prime tenant. In the course of the opinion, the court set out certain objective criteria which might form a basis upon which to predicate a reasonable refusal of a subtenant. These are (1) financial responsibility of the proposed subtenant; (2) identity or business character of the subtenant his suitability for the particular building; (3) legality of the proposed use of the premises; and (4) nature of the occupancy, such as office, factory, clinic, etc. 297 N.Y.S.2d at 160.

*144 Obviously, plaintiffs' refusal to consent to the proposed DeLisse subtenancy was grounded upon considerations such as those embodied in (2) and (4) above, which if reasonable in and of themselves, constituted an objective business judgment as opposed to an arbitrary or whimsical and thus unreasonable decision. Based upon competent evidence, the trial court found that plaintiffs preference for a restaurant operation was reasonable due to the nature of the building and the expectations of a higher return on investment. This finding is conclusive on appeal even though defendants presented evidence from which the court might have found plaintiffs' expectations unreasonable.

We hold therefore, that plaintiffs' decision to withhold consent to the proposed sublease was based upon legally sufficient, "reasonable" grounds. We are not saying that in all cases such as this, a withholding of consent by a landlord will be adjudged reasonable where the proposed subtenant is in a different type of business from the prime tenant. Each case must be determined upon its own peculiar facts. However, the burden of proving the unreasonableness of the landlord's conduct rests upon the party challenging such conduct. Broad & Branford Place Corp. v. J. J. Hockenjos Co., supra ; Arrington v. Heller International Corp., 30 Ill.App.3d 631, 333 N.E.2d 50 (1975).

In light of our decision, we find it unnecessary to consider any questions raised by the trial court's finding of fact No. 17, to the effect that plaintiffs' withholding of consent was reasonably based upon the fact that DeLisse was already a tenant of plaintiff Jones in Gateway Plaza Shopping Center.

For the reasons set out above, the judgment of the trial court is

Affirmed.

MARTIN and CLARK, JJ., concur.