439 Pa. 452 | Pa. | 1970
Dissenting Opinion
Opinion in Support of Oedees by
I believe that these contractual provisions are not restrictive covenants which must be strictly construed. As I said in my dissent in Great A. & P. Co. v. Bailey, 421 Pa. 540, 547, 220 A. 2d 1, 4 (1966):
“It should be noted that we are not here faced with a challenge to the validity of the covenant. It is recognized and accepted that such covenants are valid and enforceable in this Commonwealth so long as they do not result in an unreasonable restraint of trade. See Hoffman v. Rittenhouse, 413 Pa. 587, 198 A. 2d 543 (1964) ; Cleaver v. Lenhart, 182 Pa. 285, 37 Atl. 811 (1897). There is no contention or suggestion that the present covenant, even if interpreted as urged by A & P, would work such an unreasonable restraint; the present restriction cannot be said to be greater than is required for the protection of the one for whose bene
“In considering the proper approach to the construction of a restrictive covenant in a commercial context, it is increasingly recognized that ‘parties are entitled to a degree of freedom in contracting to protect their own economic interests and that [the] controlled development of a given business center may be desirable____’” 421 Pa. at 549-50, 220 A. 2d at 5.
Peeling as I do that we should not construe lease provisions such as the instant one with any unusual parsimony, I believe that Sun is entitled to protection from Sterling’s competition in two of the three instances now present before this Court. In construing these leases, the touchstones of interpretation ought to be the similarity of the businesses from the point of view of the consumers and the extent to which customary business practice would consider the two operations to be coextensive. Using these standards, I think it clear that the provisions of the North Hills Village lease and the Eastland Shopping Center lease were meant to and do exclude competition from an operation such as Sterling’s.
The North Hills lease provides that the lessor shall not lease any of its other stores “for use as a drug store, with or without a prescription department,” and the evidence is that the products which Sterling’s North Hills store handles account for at least three-quarters
The Eastland Shopping Center lease provides that no other store may be used as “a drug store or a proprietary medicine store,” and the evidence demonstrated that Sterling’s Eastland store sold products which accounted for two-thirds of the Eastland Sun’s sales. I again fail to see how Sun could more clearly be protected. I also note that my brethren’s diversionary discussion of the possibility of shifting definitions of what a “drug store” is and of the virtues of free trade does not really answer the question whether Sun’s Eastland lease protected it against Sterling’s competition. I, too, am in favor of free trade and I, too, believe that shifting definitions might, in some contexts, be a problem
I would reverse the decree as to the Banksville store and affirm as to the two others.
Note, Restrictive Covenants in Shopping Center Leases, 34 N. Y. U. L. Rev. 940 (1959).
Of course, this problem could be taken care of by simply defining Sun’s business for the purposes of interpreting the restriction as that which they conducted at the time the lease was written.
Concurrence in Part
Concurring and Dissenting Opinion by
In this case we are called upon to construe three restrictive covenants—one in each of three leases—by which plaintiff, Sun Drug Company, Inc. (Sun) rented storerooms in various shopping centers near Pittsburgh. By a written lease of October 27, 1961, Sun rented a storeroom in the Eastland Shopping Center. Paragraph 8 of the lease provides in part: “During the term of this Lease, or any renewal or extension hereof, Landlord will not let or permit any Storeroom in the Shopping Center, or any other land controlled by landlord, either directly or indirectly, within a radius of one (1) mile of the Shopping Center to be used or occupied as a drug store or a proprietary medióme store ” (Emphasis supplied) By written lease dated February 4,1965, defendant, West Penn Realty Co. (West Penn) leased to defendant, Sterling Centers, Inc. (Sterling)
By written lease dated November 29, 1954, Sun rented a storeroom in the North Hills Village Shopping Center. That lease contains the following provision: “The Lessor agrees that it will not lease another storeroom in the shopping center of which the demised premises are a part for use as a drug store, with or without a prescription department. However, it is understood that other tenants in the shopping center may have for sale many of the items being sold by this Lessee.” (Emphasis supplied)
West Penn, by written lease dated March 17, 1966, leased to defendant, Sterling Centers #2, Inc. (Sterling #2), a storeroom in the shopping center for the purpose of “Retail sale of home beauty products and sundries.” Sterling #2 had notice of Sun’s lease prior to the signing of its lease.
On August 29, 1956, Sun leased from defendant, Banksville, Inc. a storeroom in the Banksville Shopping Center. Paragraph 17 of that lease provides: “Lessor, its assigns and successors in title, during the term of this lease or any renewal thereof, will not lease, rent, occupy or permit to be occupied, or sell without a covenant prohibiting such use or occupancy, any premises within the Banksville Plaza Shopping Center, as a store for retail drug business such as that of Tenant.” (Emphasis supplied) By written lease dated August 2, 1966, Banksville, Inc. leased to Sterling Centers #3, Inc. (Sterling ‡‡3) a storeroom in the Banks-ville Plaza Shopping Center for use “for the sale of health and beauty aids and related items, except as follows: A. Prescription drugs and prescription medicines; B. Cigars, cigarettes and tobacco; C. Soda fountain and lunch counter; and D. Greeting cards.”
The lower court found that at Eastland, Sterling operated a proprietary medicine store within the meaning of Sun’s lease; that at Banksville Plaza, Sterling #3 operated a retail drug business such as that of Sun within the meaning of Sun’s lease; and that at North Hills, Sterling #2 operated a drug store without a prescription department within the meaning of Sun’s lease. The chancellor did not award damages because Sun’s proof was not specific enough in showing changing customer patterns; Sun proved only sales erosion, and this was not a sufficiently precise base upon which to render a fair money award.
Defendants Sterling would have this Court reverse the decision of the court below by holding restrictive covenants whose purpose is the restraint of trade invalid as against public policy. I would not so hold because the showing of harm to the public is not so clear and conclusive as to outbalance the interests of parties in contracting as they wish. This does not mean that all restrictive covenants in restraint of trade are valid. Such covenants are valid if reasonable, i.e., limited in space, time and in scope to the extent required for the protection of the party for whose benefits the covenant was made. Great A. & P. Tea Co. v. Bailey, 421 Pa. 540, 220 A. 2d 1 (1966); Restatement, Contracts, §§515, 516 (1932). In that way the interests of the public and individual contracting parties are put in proper balance.
In terms of time and space, these covenants appear reasonable. All are for the term of the lease, and two
In order to determine Sun’s rights, it is necessary to construe carefully each restrictive covenant.
“It is a general rule of contract interpretation that the intention of the parties at the time the contract is entered into governs: Heidt v. Aughenbaugh Coal Co., 406 Pa. 188, 176 A. 2d 400 (1962). This same rule also holds true in the interpretation of restrictive covenants: Baederwood, Inc. v. Moyer, 370 Pa. 35, 87 A. 2d 246 (1952), and McCandless v. Burns, 377 Pa. 18, 104 A. 2d 123 (1954). However, in Pennsylvania, there is an important difference in the rule of interpretation as applied to restrictive covenants on the use of land. It is this. Land use restrictions are not favored in the law, are strictly construed, and nothing will be deemed a violation of such a restriction that is not in plain disregard of its express words.” Great A. & P. Tea Co. v. Bailey, supra at 544. (Emphasis supplied). Thus, the court can not enlarge a restriction by implication and can not save the draftsman from any ambiguity he has created for the restriction must be construed most strictly against the one asserting rights under it. Jones v. Park Lane For Convalescents, 384 Pa. 268, 272, 120 A. 2d 535 (1956).
I.
Considering first the Banlcsville Plaza lease, the key words are “as a store for retail drug business such as that of Tenant.” Sun must prove that Sterling #3 was a “retail drug business” and that it was “such as that of Tenant.” Certainly Sterling #3 can not avoid the lease’s effect just by calling itself a “health and beauty aid” store. This Court will not permit labels to obscure what substantive rights may be involved.
Sterling #3’s lease prohibited the operation of a prescription department, lunch counter and soda fountain and the sale of greeting cards and tobacco products. These activities in which Sun engaged and Sterling #Z did not accounted for 58.50% of Sun’s sales at the Banksville store. Thus only 41.50% of Sun’s sales were from products which Sterling #3 carried. When more than half of Sun’s sales came from sales and operations in which Sterling #3 did not indulge, it is difficult to see how the latter’s business was “such as that of Tenant.” It is true that by excluding tobacco products, prescription drugs and fountain service, Sterling #3 carries 80% of the product lines sold by Sun, but when construing the “such as that of Tenant” phrase, there seems no reason to exclude those products and services. If Sun had desired a particular method of construing that phrase, it should have said so explicitly in the lease. In the absence of such a direction, this Court must make a natural and reasonable construction, and the percentages of sales figures discussed seem the most revelant ones for that purpose.
II.
Considering next the North Hills Village lease, the key words are “for use as a drug store, with or without a prescription department.” If this were all that appeared, it would be necessary to determine whether Sterling #2 were a drug store. However, a sentence appears after these words which casts great doubt on the meaning of the whole paragraph. The lease says “However, it is understood that other tenants in the shopping center may have for sale many of the items
The question, therefore, is whether three-fourths is the “many” recognized in the lease. Certainly “many” can not mean 100%, for then “all” would have been used. But at what point below 100% does “many” become applicable? There is no absolute answer to that question, and under the principles of construction of restraints on trade previously discussed, the matter must be determined against the party relying on the restraint. If it is argued that such an interpretation makes the clause meaningless while another reading (perhaps 20-30%) might make more sense as far as Sun is concerned, it must be remembered that in construing these restrictions “nothing will be deemed a violation of such a restriction that is not in plain disregard of its express words.” (Emphasis supplied) Great A. & P. Tea Co. v. Bailey, supra at 544. Sun must bear the consequences of the ambiguity it has created and can not rely on this Court to redraft its agreement in a way more favorable to it.
III.
With respect to the Eastland Shopping Center, the crucial part of clause 8 is “to be used or occupied as a drug store or a proprietary medicine store.” The lower court found that Sun’s Eastland store sold all the products Sterling did, and that these accounted for approximately two-thirds of Sun’s business. I do not
It must also be remembered that the United States and tMs Commonwealth strongly support the policy of free competition. In Sears, Roebuck and Co. v. Stiffel, 376 U.S. 225 (1964) and Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234 (1964), the Supreme Court emphasized the great public interest in having access to all goods. It stated that restraints on tMs access were narrowly drawn and even then existed only because of important competing policy consideration (e.g., encouragement of invention). Even though the specific subjects of those cases were patent law and unfair competition, what is important in tMs context
Also, with shopping centers playing an increasingly large role in the commercial life of this country, it is important to note the different type of competition that exists in a “downtown” shopping area as compared to a shopping center. It is very rare for one individual or corporation to own a significant part of a “downtown” shopping area, and therefore there is no one party who can determine how many of a given type of store can exist. The success or failure of any one store will depend on the dollar “votes” cast by the consumer. In addition, it is very easy for a customer to get from one store to its competitor. In a shopping center the situation is quite different. The promoter of the center, acting under pressures from his major tenants, can restrict the number of a given type of store. Also, when a customer comes to a shopping center, it is generally by automobile, and while not terribly difficult, it is certainly inconvenient for that customer to go to another shopping center, which may be several miles away, in order to patronize a competitor of a store owner in the first center. The tendency of the customer is to go to one shopping center and complete all his business there. Thus, given that free and unfettered competition is our general policy, with respect to shopping centers the concept of competition within a given center is of central importance. Therefore, in order for a restrictive covenant as to a shopping center to be enforceable, it must be drawn with great particularity and precision.
I would reverse each of the three decrees.
Lead Opinion
Opinion
lu appeals Nos. 4, 5 and 22 March Term, 1969, the decree of the court below (at No. 976 January Term, 1967 of the Court of Common Pleas of Allegheny County) is affirmed by an equally divided court.
In appeals Nos. 6 and 7 March Term, 1969, the decree of the court below (at No. 977 January Term, 1967 of the Court of Common Pleas of Allegheny County) is reversed. The appeal at No. 23 March Term, 1969 is dismissed.
In appeals Nos. 8, 9 and 24 March Term, 1969, the decree of the court below (at No. 978 January Term, 1967 of the Court of Common Pleas of Allegheny County) is affirmed by an equally divided court. Each party to bear own costs.