Hodge v. Sloan — 11 N.Y. St. Rep. 770

Majority

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Augustus M. Hodge, Ex’r, etc., and John Neill, App’lt, v. Richard Sloan, Resp’t^[1] .

(Court of Appeals,

Filed October 28, 1887.)

Headnote

1. Deed—Covenants in—Restrictive—Collateral.

The plaintiff owned lands containing deposits of building sand, the sale of said sand constituting his only business. The plaintiff agreed to sell to John Sloan a certain portion of said land upon the latter stipulating i ot to sell any sand off from said land. The plaintiff conveyed the land sold to said Sloan by deed, in which deed, immediately after the description, w as inserted the covenant: “ Said party of the second part hereby agrees not to-sell! any sand off said premises. Six years later said Sloan conveyed said land so-conveyed to him to his son, the defendant. The deed to the defendant contained no exception, reservation or condition, and no reference to the covenant aforesaid in the first mentioned deed, but the defendant before^[1] and at the time of taking said last mentioned deed had full knowledge-of such covenant, and that it was contained in the deed to said John Sloan. After such purchase, the defendant entered upon the said land and si.Id sand therefrom, and refused to keep the covenant in said first mentioned' deed. The plaintiff, after selling said land and up to the time of bringing this action, had sand land retained by him sufficient to supply the demand, for sand for all time; and at all said times had the facilities to supply, and did supply, the demand for such sand. Held, that the covenant in question is restrictive, not collateral to the land, but relates to its use, and that upon the facts the plaintiff was entitled to an injunction. Andrews and Earl, JJ., dissénting.

8. Same—When court of equity will enforce.

Each case will depend upon its own circumstances, and the jurisdiction of a court of equity may be exercised for their enforcement, or refused, according to its discretion.

8. Same—When successors in title bound by.

In order to uphold the liability of the successor in title, it is not necessary that the covenant should be one technically attachingto and concerning the land, and so running with the title. It is enough that a purchaser has

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notice of it. In equity, the question being, not whether the covenant ran with the land, but whether a party shall be permitted to use the land inconsistently with the contract entered into by his vendor and with notice of which he purchased.

8. Same—What restraint allowed.

The restraint may be against the use of the premises for one or another particular purpose, or the omission of all business, certain kinds of business, or the erection or non-erection of buildings upon the property. The agreement which secures the restraint, if fair and valid in other respects, is valid as a restraint. A personal obligation, so insisted upon by a grantor and assumed by a grantee, which is a restriction as to the use of land, may be enforced, in equity, against the grantee and subsequent purchasers with notice.

6. Contract in restraint op trade—What allowed.

_ A contract, though in restraint of trade is valid, if it imposes no restriction upon one party, which is not beneficial to the other, and is induced by a consideration which makes it reasonable for the parties to enter into it. Following Diamond Match Go. v. Boeber, 11 ÍT. T. State Rep., 47.

7. Same—Vendor may, by contract, restrain particular use op INSTRUMENT.

There is no reason of public policy which requires a vendor, upon the sale of an instrument, etc., susceptible of several uses, one of which will work mischief to himself, which requires him to consent to that use or prohibits him from binding his vendee against it.

The action was brought to restrain the defendant from selling sand taken from land conveyed by the plaintiff to John D. Sloan, and by him to the defendant, in violation of a covenant contained in the deed to John £>. Sloan, and of which the defendant, when he bought, had notice. The complaint was dismissed and the decision of the trial court affirmed by the supreme court, general term, third department. After an appeal to this court from the judgment then entered, the plaintiff died and his executor was substituted as appellant. The case, so far as it is material to the point decided, is stated in the opinion.

Mr. Morrell, for app’lts; Mr. Huston, for resp’t.

—There is no controversy in regard to the findings of the trial judge as to the facts, and from those it appears that on the 9th day of May, 1868, Edward Null, the original plaintiff, and afterwards the appellant’s testator, was the owner in fee of about forty acres of land in the village of Canajoharie containing deposits of building sand. These he opened, and the sale therefrom at that time and ever since constituted his only business. His customers came from Canajoharie, Palatine Bridge, Amsterdam and the city of Utica. Sales averaged about ten loads each day. This business being well established, one John D. Sloan “applied to him for a small parcel thereof, béing about one-half acre, as described in the complaint, but plaintiff declined to sell on the ground that by such sale he -would be injuring his business and depriving himself of his

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living; upon such objections being made, Sloan agreed to purchase the same and pay therefor $650, and stipulate not to sell any sand off said lands, and pursuant to such negotiation the plaintiff executed a written contract of sale of said parcel of land to him for such consideration, and containing a covenant to that effect, and Sloan afterwards having fully paid the consideration, plaintiff, by warranty deed, conveyed the contracted land to him. In that deed, immediately after the description was inserted, the covenant contained in such contract, viz.: “said party of the second part hereby agreeing not to sell any sand off of said premises.” Said deed was duly recorded in the Montgomery county clerk’s office on March 30th, 1875, Sloan accepted the contract and deed, and possessed and occupied the land thereunder. On the 26th day of March, 1881, by warranty deed, John D. Sloan conveyed the last mentioned premises to his son, Richard Sloan, the defendant. That deed contained no exception, reservation or condition, and no reference to the covenant contained in the deed to John D. Sloan, but the defendant, before and at the time of taking the conveyance, had full knowledge of such covenant, and that it was contained in the deed to his grantor. With this notice he entered upon the described premises, opened a bank or pit and sold sand therefrom, and, notwithstanding the remonstrances of the plaintiff and his request to observe and keep the covenant of John D. Sloan, the defendant declared that he should continue to sell the sand notwithstanding such covenant.

The trial judge also found that the plaintiff, at the time of the sale of said land to John D. Sloan, had, and ever since then has had, and now has, upon his said land, retained by him sufficient sand to supply the demand for sand for local use, and to be transported to a distance and used, and such supply will be sufficient for all time to come, and plaintiff, during all such time, has had facilities to supply the demand for such sand, and has fully supplied the same, and desires to continue the sale of sand and to fully supply such demand for the same in future. And further, that the covenant was inserted in the said deed from the plaintiff to the said John D. Sloan to prevent competition in the plaintiff’s said business of selling sand.

But as conclusions of law he held, first, that the clause inserted in the deed from the plaintiff to John D. Sloan, was not an exception, reservation or condition, but w7as a covenant, the deed having been accepted and the land therein described held by virtue thereof, by the said John D. Sloan, such covenant was his covenant not to sell sand off the premises granted, and the same having been incorporated in the instrument, by which title to the land was

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acquired, if not void as against public policy, ran with the land and bound the grantees and assigns of said Sloan.

Second. Said covenant was in restraint of trade, contrary to public policy, and void, and hence dismissed the complaint.

This conclusion is against our ideas of natural justice, for it-takes from one party an advantage which he refused to sell, and secures to the other without price a privilege which his grantor was unable to buy. Nor do we find that this denial of private right is required by any rule of public policy. Assuming with the respondent that the covenant is in restraint of trade, it is still valid if it imposes no restriction upon one party which is not beneficial to the other, and was induced by a consideration which made it reasonable for the parties to enter into it, or in other words, if it was a proper and useful contract, or such as could not be disregarded without injury to a fair contractor. This is the doctrine of Chappel v. Brockway ( 21 Wend., 157 ), and Ross v. Sadgbeer ( 21 Wend., 166 ), derived by a learned court from the leading case of Mitchel v. Reynolds (1 P. Wm., 181) and an examination of subsequent decisions. It is also so amplified and discussed in a case just decided by this court (Diamond Match Co. v. Roeber. opinion by Andrews, J , September 29, 1887; 11 N. Y. State Rep., 47), as to make any elaboration of the general rule quite superfluous. The subject of the contract at the bottom of this controversy was a piece of land which Sloan wanted to buy and which the plaintiff was willing to sell, provided it should not be made an instrument for the destruction of his means of livelihood or detrimental to his business. The principle which favors freedom of trade requires that every man shall be at liberty to work for himself, and shall not deprive himself or the state of the benefit of his industry by any contract that he enters into. The same principle must justify a party in withholding from market the tools, or instruments, or means by which he gains the support of his family, or if, as in the case before us, the instrument or means are susceptible of several uses, one of which will work mischief to himself by the loss or impairment of his livelihood, there is no reason of public policy which requires him upon a sale of the instrument to consent to that use, or prohibits him from binding his vendee against it.

We see nothing unreasonable in the restriction which the grantee imposed upon himself. He was not a dealer in sand. He wanted to buy the land on the best terms and in the most advantageous way, and in order to do this it was necessary that he should preclude himself from so using it, as that by its means he should enter into competition with the vendor. I cannot find that such a covenant contra

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venes any rule of public policy, nor that it is incapable of being enforced in a court of equity. It stands upon a good consideration and is not larger than is necessary for the protection of the covenantee in the enjoyment of his business. But the question presented. is, upon the conceded facts, really one of individual right with which the question of public policy has little, if anything, to do. Parties competent to contract have contracted, the one to sell a portion of his land, but only upon such conditions as will protect himself in the prosecution of business carried on upon the residue, the other agreeing to buy for a consideration affected by that condition, and enabled to do so only by acceding to it, and he, therefore, binds himself by contract to limit the use of the land purchased in a particular manner. There seems no reason why he and bis grantee, taking title with notice of the restriction, should not be equally bound. The contract was good between the original parties, and it should, in equity, at least, bind whoever takes title with notice of such covenant. By reason of it the vendor received less for his land, and the plain and expressed intention of the parties would be defeated if the covenant could not be enforced as well against a purchaser with notice as against the original covenantor. In order to uphold the liability of the successor in title, it is not necessary that the covenant should be" one technically attaching to and concerning the land and so running with the title. It is enough that a purchaser has notice of it. The question in equity being, as is said in Tulk v. Moxhay (11 Beav., 571; 2 Phillips, 774 ), not whether the covenant ran with the land, but whether a party shall be permitted to use the land inconsistently with the contract entered into by his vendor and with notice of which he purchased. This principle was applied in Tallmadge v. East River Bank ( 26 N. Y., 105 ), where the equity in regard to the manner of improvement and occupation of certain land grew out of a paroi contract made by the owner with the purchaser, and was held binding upon a subsequent purchaser with notice, although his legal title was absolute and unrestricted.

In Trustees v. Lynch ( 70 N. Y., 440 ) the action was brought to restrain the carrying on of business in certain premises in the city of New York, of which the defendant was owner, upon the ground that the premises were subject to a covenant reserving the property exclusively for dwelling houses. The court below held, among other things,, that the covenant did not run with the land and that the restriction against carrying on any business on the premises was liable to conflict with the public welfare, and. judgment.was given for the defendant. Upon appeal it was reversed, the covenant held to be valid and binding

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upon a subsequent grantee with notice as well as upon the original covenanter. So the restraint may be against the use of the premises for one or another particular purpose, as that no building thereon “shall be used for the sale of ale, beer, spirits,” etc., “or as an inn, public house, or beer house.” Carter v. Williams, L. R., 9 Eq. Cas., 678. And it is said a man may covenant not to erect a mill on his own lands. Mitchel v. Reynolds, supra.

Many other instances of restraint might be referred to, and where it is of such nature as concerns the mode of occupying or dealing with the property purchased in the way of business operations, or even the omission of all business, or certain kinds of business, or the erection or non-erection of buildings upon the property, we see no reason to doubt the validity of an agreement, fair and valid in other respects, which secures that restraint. Indeed it seems well settled by authority that a personal obligation so insisted upon by a grantor and assumed by a grantee, which is a restriction as to the use of the land, may be enforced in equity against the grantee and subsequent purchasers with notice. Parker v. Nightingale, 6 Allen, 344 ; Burbank v. Pillsbury, 48 N. H., 475 . Nor is it essential that the assignees of the covenantor should be named or referred to. Morland v. Cook, 6 Eq. Cases, L. R., 252. In Tulk v. Moxhay (Hall & Twell’s Ch. Rep., vol. 1, p. 105) it was said that the jurisdiction of the court in such cases is not fettered by the question whether the covenant does or does not run with the land. In that case the purchaser of land which was conveyed to him in fee simple, covenanted with the vendor that the land should be used and kept in ornamental repair as a pleasure garden, and it was held that the vendor was entitled to an injunction against the assignees of the purchaser to restrain them from building upon the land, upon the appeal the chancellor (Cottenham) said: “I have no doubt whatever upon the subject; in short, I cannot have a doubt upon it, without impeaching what I have considered as the settled rule of this court ever since I have known it.

Where the owner of a piece of land enters into contract with his neighbor, founded, of course, upon a valuable or other good consideration, that he will either use or abstain from using his land in such a manner as the other party by the contract particularly specifies, it appears to me the very foundation of the whole of this jurisdiction to maintain that this court has authority to enforce such a contract. It has never, that I know of, been disputed.” The question before the court was stated to be whether a party taking property with a stipulation to use it in a particular manner, will be permitted by the court to use it in a way-

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diametrically opposite to that which the party has stipulated for. “ Of course,” he says, “of course the party purchasing the property which is under such restriction, gives less for it than he would have given if he had bought it unincumbered. Gan there, then, be anything much more inequitable or contrary to good conscience than .that a party, who takes property at a less price because it is subject to a restriction, should receive the full value from a third party, and that such third party should then hold it unfettered by the restriction under which it was granted? That would be most inequitable, most unjust and most unconscientious; and, as far as I am informed, this court never would sanction such course of proceedings.” And in language very applicable to the case before us, he adds: “ Without adverting to any question about a covenant running with land or not, I consider that this piece of land is purchased subject to an equity created by a party competent to create it; that the present defendant took it with distinct knowledge of such equity existing, and that such equity ought to be eforced against him, as it would have been against the party who originally took the land from Mr. Tulk.” This case is cited and followed as to restrictive covenants in many cases. Brown v. Great Eastern Railway Co., 2 Q. B. Div., L. R., 409; London, etc., R’way Co. v. Gomm, 20 Ch. Div., L., R., 576.

Each case will depend upon its own circumstances and the jurisdiction of a court of equity may be exercised for their enforcement, or refused, according to its discretion (Trustees, etc., v. Thacker, 87 N. Y., 311 ; but where the agreement is a just and honest one, its judgment should not be in favor of the wrong-doer. Such seems to us the character of the covenant in question; it is restrictive, not collateral to the land, but relates to its use, and upon the facts found the plaintiff is entitled to the equitable relief demanded. Brewer v. Marshall (4 C. E. Green, N. J. Eq., 537), is cited by the respondent as requiring a different construction. The general rules in regard to such covenants are not stated differently in that case. But in the opinion of the court it was not one for the interference of a court of equity. Among many other cases Tulk v. Moxhay (supra), is cited, and the learned court say: “It will be found upon examination, that these decisions proceed upon the principle of preventing a party having knowledge of the just rights of another, from defeating such rights, and not upon the idea that the engagements enforced create easements or are of a nature to run with the land. In some of the instances the language of the court is very clear on this point,” and from a “review of the authorities the court say it is entirely satisfied that a court of equity

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will sometime impose the burthen of a' covenant relating to lands on the alienee of such lands on a principle altogether aside from the existence of an easement or the capacity of such covenant to adhere to the title.” The only question which the court regarded as possessed of difficulty was whether the covenant then in controversy was embraced within the proper limits of this branch of equitable jurisdiction. By a divided court an injunction was denied. The circumstances were quite unlike those before us and the decision furnishes no precedent for us to follow.

The judgment appealed from should be reversed and a new trial granted, with costs to abide the event.

Ruger, Ch. J., Rapallo and Finch, JJ, concur; Andrews and Earl, JJ., dissent on the ground that the covenant was a personal one and not binding on the grantee of the land; Peckham, J., not voting.