p. 668The Round Lake Association, Resp’t, v. Bradford D. Kellogg, App’lt. (Supreme Court, General Term, Third Department, Filed September 14, 1892.)
Headnote
Abase—Covenants—Restraint of trade.Defendant is the assignee of a lease of land from plaintiff, which contains a provision that the same is made subject to all the rules, regulations and changes which may from time to time be adopted in relation thereto, and also that it was accepted subject to such rules and regulations, which were made a part of the lease. Subsequently the executive committee of plaintiff adopted a rule prohibiting the sale of general merchandise on the grounds of the association without a permit in writing, and fixed the sum at which defendant would be permitted to sell. Defendant having refused to pay the license fee, this action was brought for violation of the covenant. Held, that the covenant was one concerning the land, and ran with it; that in view of the purposes of the plaintiff corporation, and the circumstances, the rule adopted was a reasonable application of the covenant, and its enforcement proper.
Appeal from judgment in favor of plaintiff, enjoining defendant from carrying on his business of selling groceries, etc., at Round Lake without first obtaining a permit or license therefor from plaintiff, and without having paid the fee therefor.
p. 669The following is the opinion of the court below: Tapp AN, J.—This is an action to perpetually enjoin the defendant from carrying on the business of selling merchandise upon lots 1426 and 1427 situated on the westerly side of the railroad at Round Lake, leased by the plaintiff and held by the defendant under assignments of said leases. It is important to first consider what right, title or interest was acquired by Caroline J. Bancroft to lot 1426 by virtue of a grant and demise from plaintiff to her, dated March 7, 1884, assigned by her to defendant September 24, 1886; also by Rice Hall to lot 1427 by virtue of a like grant and demise from plaintiff to him, of like date, assigned by him to defendant September 5, 1886.- The leases run to the lessees, his and her executors and assigns, but the fourth paragraph of such leases provide that the lessee shall not assign the lease without first obtaining the written consent of the party of the first part, its successors or assigns thereto. It does not appear that the defendant obtained such written consent in either case, but the defendant entered into occupation of the premises under the assignments to him, and holds and occupies the same under said leases. Permitting defendant to do so, and bringing this action against him to enforce an alleged provision of such leases, is a waiver of the breach of such condition in regard to the written consent to the assignment of such leases. Chautauqua Assembly v. Alling, 46 Hun, 582 , 584; 12 St. Rep., 767 ; Murray v. Harway, 56 N. Y., 337 . The plaintiff was duly incorporated under an act entitled “ An act to incorporate the Round Lake Camp Meeting Association of the Methodist Episcopal Church of the Troy Conference, ” passed May 5, 1868. By the second section of that act such corporation was given power to purchase and hold personal and real estate, and take and hold the same by gift, grant and devise, and to mortgage, sell and convey any of its real or personal estate whenever it should be deemed advisable to promote the interests of the corporation; and the sixth section of such act confers upon said corporation the general powers, and made it subject to the general restrictions contained in the eighteenth chapter of the first part of the Revised Statutes. 1 R. S., Birdseye ed., 672. The second section of said act of 1868 provides that the corporation shall have power to adopt a constitution and prescribe rules and regulations not inconsistent with the constitution and laws of this state for its government and the election of its officers; and the fourth section provides that the persons named in the first section of the act shall be the first trustees; and provides for dividing the trustees into classes at their first meeting, and for the election of their successors, by electing each year after the organization seven trustees to hold office for three years and until others shall be elected in their places; and provides that all elections of trus-.
Defendant holds the title of the leases. He stands in the shoes of his assignors with their rights, and subject to their liabilities -under the provisions of the lease for the benefit and protection of the plaintiff.
p. 670tees shall be held in the manner prescribed in the constitution and by-laws of the said corporation, and that any vacancy occurring in the intervals of election may be filled by the board of trustees. The original incorporators were twenty-one different persons named in the first section of the act. Section one of the chapter of the Revised Statutes above mentioned provides that every corporation created after the enactment of that law shall have the following powers, although they may not be specified in its charter or the act in which it shall be incorporated, viz: 1. To have succession by its corporate name for the period limited in its charter, and when no period is limited, perpetually. 2. To sue and be sued, complain and' defend, in any court of law and equity. 3. To make and use a common seal and alter the same at pleasure. 4. To hold, purchase and convey real estate as the purposes of the corporation shall require, not exceeding the amount limited in its charter. 5. To appoint such subordinate officers and agents as the business of the corporation shall require and to allow them a suitable compensation. 6. Make by-laws not inconsistent with any existing law for the management of its property, the regulation of its affairs and for the transfer of its stock. Section 6 of this same statute provides that when the corporate powers of any corporation are directed by its charter to be exercised by any particular body or number of persons, a majority of such body or persons, if it be not otherwise provided in the charter, shall be a sufficient number to form a board for the transaction of business and any decision of a majority of the persons duly assembled as a board shall be valid as a corporate act. Such body is not duly assembled unless each -person constituting it is present or each person has had notice and a majority has assembled, then the decision of such majority is valid as a corporate act. People's Bank v. St. Anthony's R. C. Ch., 39 Hun, 498 ; Potter on Corporations, 417, chap. 13, § 336, note 1; People v. Batchelor, 22 N.Y., 128 ; Peoples Ins. Co. v. Westcott, 14 Gray, 440 ; Despatch Line of Packets v. Bellamy Co., 12 N. H., 205 ; S. C., 37 Am. Dec., 203 ; Elliot v. Abbot, 12 N. H., 549 ; S. C., 37 Am. Dec., 227 . This is the rule nothwithstanding what is said in Porter v. Robinson, 30 Hun, 209 , and Edgerly v. Emerson, 23 N. H., 555 ; S. C., 55 Am. Dec., 207 . This is a sufficient concession to the convenience of transacting business and a conservative construction of this statute. When a society or corporation is composed of an indefinite number of persons, as is the case with this corporation, a majority of those who appear at a regular meeting of the same constitute a body competent to transact business. Potter on Corporations, § 338, 351; Ex parte Willcocks, 7 Cowen, 402, 409; Field v. Field, 9 Wend., 394 , 403. Notice is not required where the times and places for holding
p. 671is fixed in the charter or constitution or by-laws, or in the published rules and regulations of the corporation. Potter on Corporations, §§ 340, 342. Where it appears on the record of the corporation that a meeting of the body was held and a quorum was present, notice to the others is presumed, but the contrary may be shown by proof. Sargent v. Webster, 13 Met., 497 ; Lane v. Brainerd, 30 Conn., 565 ; Middlesex Husbandmen v. Davis, 3 Met., 133 ; Chouteau Ins. Co. v. Holmes, 68 Mo., 601 ; S. C., 30 Am., 307. The first meeting of the trustees of the plaintiff was held at Troy May 4,1868, and the executive committee was then directed to draft a constitution and report the same at the next meeting of the board. The next meeting of the trustees was held at the committee tent on the grounds, September 9, 1868, the records showing twelve trustees present. The committee on constitution then presented their report; and the constitution and by-laws then reported by said committee were then adopted by the trustees by voting on each article. These original incorporators and trustees were authorized by the act of incorporation to adopt a constitution. They were then the corporation. They were given carte blanche. The act, except by the name, did not indicate even the objects of the corporation. This constitution provided that the objects of. the association should be to hold such camp meetings within the bounds of the Troy conference as they might choose. Article 3 provides that the members of the association should be: First. The persons named in the act of incorporation and their successors. Second. All persons who should contribute to the fund of the association an amount of money not less than $100. Third. Churches which should contribute $100 and upwards might be represented by their stewards or the pastors of such churches as their quarterly conference might direct Officers were to be elected by the trustees from their number.. The president, vice-president, secretary and a prudential committee of three, together were to constitute an executive committee. And it was provided that they should have full power to act for the board of trustees during the interim of their regular meetings and should hold their offices until successors should be duly elected. It is provided by article 5, § 2, that the trustees shall have the general oversight of all the interests of the association and shall have all the power vested in them by virtue of the acts of incorporation. By § 5, article 6, it is provided that the executive committee shall arrange the price of the ground rent, privileges for boarding, tents, and other privileges. Article 10 provides that this constitution and these by-laws shall not be altered or amended except by a vote of three-fourths of the members present at a regular meeting of the association, written notice of such alteration or amendment having been given at a previous meeting. This constitution was approved by the
p. 672stockholders of the association assembled at a meeting at the State Street M. E. Church, Troy, March 31, 1869. At the sixth annual meeting of the association, held at the same place, March 25, 1874, a committee appointed at the last, annual meeting to prepare such amendments to the constitution as will make it conform to the change from the script form to the lot form reported through Dr. King, and the meeting proposed to to take up the proposed amendments section by section, all of which were adopted with one dissenting voice. The records, showed proper notice had been given at a previous meeting and the amendments to have been regularly properly adopted. The amendments attempted by the executive committee of the trustees at their meetings held March 12, 1887, d'o not appear to have been passed as provided by the previous constitution and were, therefore, without proper authority and did not become a part of the constitution. Due regard to the rights of all the members of the corporation required strict regularity to give authority to amendments to the constitution and by-laws, which under an act as general as that incorporating the plaintiff is the record of the rights, power and purposes of the plaintiff in which every member is equally interested. The executive committee were clothed with all the powers of the trustees during the interim of their regular meetings and had authority to make the rules and regulations of 1887, and such rules were duly made by said executive committee at its meeting held at Albany, March 26, 1887; such regulations provided that merchandise, general or special, should not be sold or offered for sale on any lot or at any place cm the association grounds either on the east or west side of the railroad without a purchase permit given in writing by the executive committee. The executive committee had power to then pass a resolution that the defendant be permitted to conduct a store for the sale of groceries, dry goods, crockery, hardware, tinware, boots, shoes, tobacco, cigars, at fifty dollars for 1887_ and not to exceed $400 for the next four years. These regulations referred to the ordinary transactions of the corporation, and its full power was lawfully exercised in passing them. By chap. 244, Laws of 1869, the trustees were authorized to issue script payable as the interest of the association might permit, to the amount of $25,000, to be divided into shares of $100 each, bearing interest of not exceeding seven per cent per annum as the balance in the hands of the treasurer might justify. After meeting all legal claims against the association, it was provided that all surplus of excess after making improvements on the grounds and public buildings as the interest of the association demanded to be paid to the trustees of the Troy Conference for the benefit of the conference claimants. By chap. 227, Laws of 1873, the association was given power to sell and convey lots to script holders, and to receive the script held by them in exchange in payment therefor, upon such terms as the . trustees might prescribe. The leases in question were
p. 673made in pursuance of the power given by this act They contained two covenants, the first of which, after the usual words of leasing and the description of the lots, was as follows: “ Subject, to all the rules, regulations and changes which may from time to time be adopted in relation thereto.” This covenant relates specially to the specific lot demised by the lease. The other covenant is as follows: “ The lease is accepted by said party of the second part subject to all the rules and regulations which may from time to time be adopted and promulgated by the party of the first part for the government of the said grounds, and which are hereby made a part of this lease as fully to all intents and purposes as if they were incorporated therein." This covenant follows a provision in said leases in the following language: “ This lease is granted by said party of the first part and accepted by said party of the second part subject to the following express conditions, reservations and restrictions.” The tenure of land by the constitution is allodial, so that the-entire and absolute property is vested in the owner, and such was the plaintiff’s title before these leases were made. The power to sell and convey real estate includes the power to sell and convey a restricted and limited interest by lease. This corporation has the same power under the statute to demise their lands, giving only a limited or restricted interest, that an individual has. By the leases in question the plaintiff did not convey the entire- and absolute property, and the defendant by the demise is not the owner of the premises in that sense. The principal and primary purpose of dividing the property into lots was to provide the persons congregating on the grounds of the plaintiff with an opportunity to erect local habitations more-convenient than the tents under which the persons attending camp meetings were originally sheltered. Plaintiff had provided a store for the sale of general merchandise, and other stores for the sale of different kinds of goods, and had rented the same for such purposes, and thereby derived a portion of its revenue therefrom, and had the right to make such reservations and conditions, and require such covenants as would protect its own place of business from a competition which would impair the ability of the occupants to contribute toward such revenues, and would°secure the use of all other property for residential purposes only. Where a grantee binds himself by a covenant in his deed limiting the use of land purchased in a particular manner so as not to interfere with the trade or business of the grantor, such covenant may be enforced against the grantee or has grantee taking title-with notice of the restriction.
The design of the provisions in the lease was to create an easement or servitude in the property leased for the benefit of other-lots owned by the plaintiff, some of which would be acquired by others, and for the purpose of effectually securing the objects for which the association was created and is conducted.
p. 674A covenant in restraint of trade is valid if it imposes no restriction upon one party which was not beneficial to the other, and was induced by a consideration which made it reasonable for the parties to enter into; and the covenant will be enforced if a disregai'd thereof will work injury to the covenantee. Hodge v. Sloan, 107 N. Y., 244 ; 11 St. Rep., 770 . The court in that case says: “ 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. By reason of it the vendor received less for his land, and the plain and express intention of the parties would be defeated if the covenant could not be enforced.” Ci Tulk v. Moxhay, 1 Hall & Twells Ch., 105, was where the purchaser of the land which was conveyed to him in fee simple covenanted with the grantor 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 assignee •of the purchaser to prevent him from building upon the land. The court says : “Of course the party purchasing the property which is under restriction gives less for it than he would if he had bought it unencumbered. Gan there 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 this third party should then hold it unfettered by the restrictions under which it was granted ? For illustrations of the same principle see Tallmadge v. East Riv. Bank, 26 N. Y., 105 ; Trustees Col. Col. v. Lynch, 70 id., 440; Carter v. Williams, L. R., 9 Eq. Cas., 678; Parker v. Nightingale, 6 Allen, 341 ; Burbank v. Pillsbury, 48 N. H., 475 . The covenant concerns the land granted, and runs with it. It was inserted in the lease as a covenant defining the conditions upon which the demised premises were to be held. In Brouwer v. Jones, 23 Barb., 158 , 160, a covenant not to use certain premises in a particular way was enforced against a purchaser in favor of a previous purchaser of the lands in same tract from the same grantor upon the ground that the covenant was for the benefit of the •owners of the whole tract and created an easement or servitude in the land which would be enforced in favor of any owner of any part of the tract for whose benefit it was created. See also, Barrow v. Richard, 8 Paige, 351; Wetmore v. Bruce, 118 N. Y., 319 , 322; 28 St. Rep., 687 ; Whitney v. Union R. R. Co., 11 Gray, 359 . A court of equity or law gives full effect to the stipulation on the complaint of a party for whose benefit and protection as owner of the land the stipulation was intended. See cases above cited; also, Hills v. Miller, 3 Paige, 256; Trustees of Watertown v. Cowen, 4 id., 511; Dorr v. Harrahan, 101 Mass., 531 . The covenants in these leases must be construed with reference
p. 675The organization of the association was not for the purposes of trade or for pecuniary profit to the members arising from trade. Dealers in merchandise could not have been reasonably expected by the parties to the lease to carry on their business on the grounds of the plaintiff, except to supply the immediate needs of those who might for the time be there and participate in the religious and other meetings to be conducted there. Such parties must, have understood that the determination as to who should 'trade and upon what terms was to be with the plaintiff, to be regulated with reference to its revenue, and to guard against the carrying on of unnecessary, improper trade, tending to disorder and to defeat the purposes of the organization. In this view, restraining a lot owner as to trade was a reasonable application of the covenant in the lease within its language, spirit! and meaning. But if it is not the best provision which we can see the parties could have made to accomplish the object intended, criticism against it is met with the rule that the owner of land selling or leasing it may insist on just such conditions as he pleases touching the use and mode of enjoyment of land. He has a right to define the injury for himself and a party contracting with him must abide the definition. This is substantially the language of the court in Steward v. Winters, 4 Sandf. Ch., 590 ; and for illustrations of the same doctrine, see Howard v. Ellis, 4 Sand., 369; Ambler v. Skinner, 7 Rob., 561 ; Diamond Match Co. v. Roeber, 106 N. Y., 473 ; 11 St. Rep., 47 ; Avery v. N. Y. C. & H. R. R. R. C., 106 N. Y., 142 ; 8 St. Rep., 612 ; Post v. Weil, 115 N. Y., 361 ; 26 St. Rep., 131 ; 2 Wash. on R. P., 12; Moore v. Pitts, 53 N. Y., 85 ; Gibert v. Peteler, 38 id., 165 ; Plumb v. Tubbs, 41 id., 442; McAdam’s Landlord & Tenant, 176, 177, §§ 98, 99; 361, 366, 161; Peck v. Conway, 119 Mass., 546 , 548. The defendant was notified by the terms of his lease of the-rights of plaintiff and he was informed by the officers of the plaintiff before he began to build his store that he would be required to purchase a permit for the sale of merchandise. An injunction in this class of cases is granted almost as a matter of course upon a breach of the covenant. Such a breach is a sufficient ground for interference by injunction. Pomeroy’s Equity-Jurisprudence, 273, § 1342; Brispham’s Pr. of Equity, 514, § 461.
to che acts of incorporation, the amendments thereto, the constitution and by-laws of the plaintiff in existence when the leases were made, and in view of the fact that plaintiff had acquired lands to further the common objects of the association, some of it to be held for its special use and occupancy and the common benefit of all the members and other portions to be demised in like manner as the lands included in these leases; that to accomplish the. purposes for which the plaintiff was incorporated, these lots and all others that might be demised were to be made valuable and enjoyable as aids to the common.purpose by means to be derived from the plaintiff’s revenue and by exercise of the power to make-rules and regulations for the common benefit of all the members, of the association.
p. 676And this view has been enforced by this court in Chautauqua Assembly v. Alling, 12 St. Rep., 767 , in a case in many respects like the case at bar. Plaintiff is entitled to a decree perpetually enjoining and restraining the defendant and all persons claiming under him from selling or offering for sale merchandise or from carrying on any business, trade or vocation upon the demised premises without the written consent of the plaintiff, with costs of this action. Decreed accordingly.
• James W. Verbech {M Countryman, of counsel), for app’lt; Charles S. Lester, for resp’t.
—I have examined this case, and it seems to me it . should be affirmed.
There have already been three opinions written in it. On, the merits the opinion of Judges Putnam and Tappan strike me as sufficient The general term opinion was to the propriety of a preliminary injunction and did not reach the merits.
I think the judgment should be affirmed.
Affirmed without opinion.
—I concur in the above conclusion.