Waldorf-Astoria Segar Co. v. Salomon

The action was 'brought to enforce a negative covenant in a lease made by the defendant Salomon to the plaintiff, and the same relief is sought against the appellant Acker, Merrall & Condit Company, upon the ground that that company has accepted a lease from the defendant Salomon in violation of the covenant in the lease to the plaintiff with knowledge of that covenant. Salomon is the owner of a building at the corner of Forty-Second street and Fifth avenue, and on the 29th day of April, 1902, he leased to the plaintiff a store adjacent to the corner store on the said premises, 14 feet in width and about 68 feet in depth on both sides, “to be used by the party of the second part for the purposes only of wholesaling and retailing, selling and disposing, of cigars and tobacco and smokers’ articles for the term of ten (10) years from the first day of September, 1902.” The plaintiff being thus limited to the use of the store that it had leased, the defendant covenanted “not to rent any portion of the building and premises of which the store hereby leased is a part to any one for the purposes of wholesaling or retailing cigars and tobacco, and the said party of the second part [plaintiff] hereby agrees that it will not enter upon, or undertake the manufacture of cigars and tobacco in or about the premises hereby leased, but shall simply conduct a wholesale and retail trade in the aforesaid business; and the said lessor agrees not to consent to other tenants subletting for purposes of wholesaling and retailing cigars and tobacco.” Under this lease the plaintiff entered into possession of the premises. The corner of Forty-Second street and Fifth avenue is a busy corner, a large number of persons each day passing through Forty-Second street, and it is fair to assume that the covenant by which the plaintiff was secured from competition by another tenant in the defendant’s property was a consideration in fixing the rent reserved; and it is quite evident that this covenant was designed to prevent competition, in the immediate neighborhood of the store in which the plaintiff expects to carry on its business.

I think, in ascertaining the intention of the parties in making this lease, we are justified in looking at the situation that existed-, and the business that the plaintiff was to carry on. By this covenant

After the execution of this lease, when the plaintiff was in possession of the premises, the landlord executed to the defendant, the Acker, Merrall & Condit Company a lease of the corner store, which immediately adjoined the plaintiff’s store. This lease was dated March 4, 1904, was for a term of five years from the 1st of May, 1904, with a covenant for a renewal of five years, and the premises were “to be used by the tenant as one of its branch grocery stores, and for no other purpose.” The defendants’ lease was, therefore, to run during the whole period of the plaintiff’s lease, and the first question to be determined is whether the leasing of this store to the defendant Acker, Merrall & “Condit Company, to be used as one of of its branch grocery stores, was a violation of the covenant in the plaintiff’s lease that the landlord would not rent any portion of the premises for the purpose of wholesaling or retailing cigars and tobacco. The premises were to be used by the Acker, Merrall & Condit Company as one of its branch grocery stores. That company is a corporation engaged in maintaining in the city of New York and elsewhere wholesale and retail grocery stores. It has been in business many years, and the business that it conducts had an established character. It deals in groceries, wines, and cigars, and in all of its branch stores, so far as appears from the evidence, cigars are sold at retail, and wholesale orders were taken which are filled from its wholesale store. One of its officers testified that the corporation had sold from September 3, 1903, to January, 1905, cigars of the value of $1,782,800, wines and liquors $2,823,555, and groceries $3,100,000, and the amount of cigars sold at retail by the defendant for the same period was $413,000 out of a total retail business of $2,785,000. It was proved that after the making of this lease the Acker, Merrall

It is now settled in this state that a court of equity will by injunction enforce such a negative covenant, and restrain a party making the covenant from violating it. In Standard Fashion Co. v. Siegel-Cooper Co., 157 N. Y. 60 , 51 N. E. 408 , 43 L. R. A. 854 , 68 Am. St. Rep. 749 , in considering an action to' restrain a violation of a covenant somewhat similar to the case at bar, the court say:

“When the inconvenience of the court in acting is more than counterbalanced by the inconvenience of the public if they do not act, the interest of the public will prevail. But even if, upon a trial of the action, specific performance of the contract in its entirety were refused as impracticable, still the bill should be retained as one permitting an injunction, in the sound discretion of the court, to restrain the defendants from violating the negative and several covenants of the Siegel-Cooper Company that it would not ‘sell or allow to be sold on its premises during the duration of this [the] contract -any other make of paper patterns’ than those of the plaintiff. The learned Appellate Division (one of the judges dissenting) overruled the demurrers on this ground, holding that the court should extend its remedy as far as it is able, and thus prevent the principal defendant, not only from making money

by breaking its agreement, but from inflicting a double wrong upon the plaintiff by depriving it of the right to sell, and conferring that right on a business competitor. We think this is a sound and just conclusion, because it will compel the Siegel-Cooper Company to either perform its agreement, or lose all benefit from breaking it, and at the same time will shield the plaintiff from part of the loss caused by the breach if persisted in.”

And when that case was again before this court, a judgment in favor of the plaintiff, not only enjoining the Siegel-Cooper Company, but also the Butterick Publishing Company, which was the lessee of the Siegel-Cooper Company, from selling paper patterns upon the premises of the Siegel-Cooper Company, was affirmed; and this case has been followed,by the Court of Appeals, so far as it enforced by injunction a negative covenant, in the case of St. Regis Paper Co. v. S. C. Lumber Co., 173 N. Y. 149 , 65 N. E. 967 . In this case the appellant accepted this lease with full knowledge of the covenant that the landlord had made with the plaintiff, and it executed before the lease was signed an agreement to indemnify the landlord for any expenses that would be incurred by him in consequence of any legal proceedings taken against him by the plaintiff. It is true that the attorneys for the appellant had advised it that the covenant would not cover a case of a grocery store, although cigars were incidentally sold as a part of the grocery business—an opinion in which, for the reasons before stated, we are unable to concur—but the fact that there was such a covenant was known to the Acker, Merrall & Condit Company before they executed the lease. They took it with knowledge of the fact that their right to sell cigars, under the covenant might be questioned.

The judgment that has been awarded in this case does not prevent the Acker, Merrall & Condit Company from carrying on this business at its store, so far as it can do so without violating the covenant by which the landlord was not to lease the property for the purpose of selling cigars and tobacco; and we think that the plaintiff was entitled to such relief as against both defendants, as by such injunction, and such injunction only, can the plaintiff receive the benefit of the contract which it had made, and which the defendant Salomon violated when he made the lease to the Acker, Merrall & Condit Company. Certainly this defendant cannot complain because the court did not go further, and enjoin it from conducting the grocery business, or any business, under its lease upon the premises.

I think the judgment was right, and should be affirmed, with costs. All concur.