THE BARGAIN CENTER, INC. vs. HOWARD JOHNSON COMPANY

The petitioner, The Bargain Center, Inc., a Massachusetts corporation, is the registered owner named in and present holder of Certificate of Title No. 83018 issued by the Norfolk County Registry District of the Land Court which covers the land on Bridge and Neck streets in Weymouth in the County of Norfolk shown on Land Court Plan No. 24668[A] other than Lots 1 and 2 on Land Court Plans Nos. 24668[B] and 24668[C] (Exhibits B, C, E and F to the Complaint.) The petitioner's certificate of title is dated August 23, 1967 and contains, among references to other encumbrances, the following two provisions:

The above described land is subject to restrictions as set forth in a deed given by Howard D. Johnson (sic) to Jacob Rabinovitz et al, Trustees, dated September 14, 1953, duly recorded in Book 3203, Page 558.

..............

The above described land is subject also to the restrictions as set forth in Document No. 284788.

The document number last above referred to, 284788, is the deed from Lloyd D. Tarlin et al, Trustees of Dearborn Realty Trust, to the petitioner (Exhibit A to the Complaint). A carefully drawn instrument it imposes a restriction on the petitioner's premises to the effect that "no part of the granted premises, nor any buildings or structures thereon, shall be used for the conduct thereon or therein of a food store, a food supermarket or any business principally for the sale for consumption off the premises of groceries, or provisions, or fruits, or vegetables, or meat or fish, or delicatessen, or bakery products, or creamery products, or any combination thereof." The deed further provides that the restrictions are binding on the grantee, its successors and assigns for the benefit of the grantor, its successors and assigns, run with the land and are equitable servitudes. A mechanism is provided by which a covenant of compliance is to be obtained from the owner's transferee. The deed specifically states that the restrictions are to remain in effect for thirty years with provisions for extension. These restrictions are hereinafter generally referred to as the "1967 restrictions".

Exhibit A, the deed to the petitioner, contained the same language as the petitioner's certificate of title as to the applicability of the restrictions imposed by the Howard D. Johnson Company when it sold the premises in 1953. These restrictions (hereinafter generally referred to as the "Howard Johnson restrictions") were imposed by a deed, Exhibit D to the Complaint, from the respondent's corporate predecessor to Jacob Rabinovitz, et al, Trustees, dated September 14, 1953 and recorded with Norfolk Deeds, Book 3203, Page 558. The deed provides that the premises thereby conveyed "sha11 not be used for the purpose of conducting thereon the business of a public restaurant or other form of eating house". There being no stated expiration date, the Howard Johnson restrictions, unless sooner terminated, would expire by operation of law in thirty years from the date of said deed, i.e. September 14, 1983, G. L. c. 184 § 23.

The petitioner now seeks to have this Court enter an order amending said certificate of title by deleting the references therein to both the 1967 restrictions and the Howard Johnson restrictions. The named respondents in the Complaint were John J. Joyce, Jr., Trustee, Lloyd D. Tarlin et a1, Trustees and Howard Johnson Company. Only the latter appeared and answered. The Complaint was amended at the trial by leave of court to add an allegation that the respondent Howard Johnson Company has engaged in restraint of trade by attempting to purchase the land subject to the restrictions.

The 1967 restrictions were imposed by the deed to the petitioner so the difficult issues presented by the Howard Johnson restrictions are absent from a determination of the validity and vitality of the 1967 restrictions. The only real problem presented as to the latter is the seeming lack of interest of the grantors in Exhibit A in enforcement. G. L. c. 184 § 30 provides that "(n)o restriction shall in any proceedings be enforced or declared to be enforceable - unless it is determined that the restriction is at the time of the proceeding of actual and substantial benefit to a person claiming rights of enforcement". No such declaration can be made in a contested matter without the introduction of evidence bearing thereon. The failure of the persons who would have the right of enforcement to appear and answer leads to the inevitable conclusion that they already have determined that the restriction is not of actual and substantial benefit to them.

The Howard Johnson restrictions are another matter. The respondent answered stating that in 1953 when the restrictive covenant was imposed, a corporate subsidiary operated a Red Coach Grill restaurant in Hingham less than one mile from the premises on the same main thoroughfare, that the subsidiary was merged into the respondent in 1969 and that the respondent has operated such restaurant since 1969; that the restriction was in 1953 and still is for the benefit of said Red Coach Grill; that the restriction was not obsolete nor inequitable nor has there been any change in the character of the properties affected or the neighborhood; that the restriction runs with the land and not to enforce it would be inequitable to Howard Johnson Company, money damages being inadequate.

A trial was held on June 30, 1977 at which a stenographer was appointed to record the testimony. All exhibits introduced into evidence are incorporated herein for the purpose of any appeal. At the trial the parties stipulated as follows:

For the purposes of this stipulation, The Bargain Center, Inc. shall be referred to as "the Petitioner"; the land which is the subject of this Petition shall be referred to as "the Petitioner's land"; and the restrictive covenant inserted in the September 14, 1953 deed from the Howard D. Johnson Company to Jacob Rabinovitz et als, Trustees of Dearborn Realty Trust, shall be referred to as "the restriction."

The Petitioner and the Howard Johnson Company hereby stipulate and agree to the following:

1) All of Paragraphs 1 through 4, inclusive, of the Petitioner's petition, and Exhibits A through I, inclusive, referred to in said petition.

2) Since December of 1965 to this date, neither the Howard D. Johnson Company nor its successor by statutory merger, the Howard Johnson Company, has owned any land abutting or adjacent to the Petitioner's land.

3) The restriction was created to prevent competition with the Red Coach Grill Restaurant at 428 Lincoln Street, Hingham, Massachusetts, owned and operated in accordance with the affidavit attached hereto. [Note 1]

4) Said Red Coach Grill is approximately .9 of a mile from the Petitioner's land, and has been in continuous operation from 1953 to the present date.

5) The Petitioner's land is numbered 666 Bridge Street, North Weymouth, Massachusetts.

6) It has 288,464 feet of land.

7) A one-story commercial type supermarket building, built in approximately 1953, is on the property. It was used as a supermarket until 1967, when Petitioner purchased the land. It has since that time been used as a warehouse. It is in need of repairs.

8) The Petitioner's land is located in a Business B-1 Zoning District, which zoning permits general business uses, including restaurants.

I interpret paragraph 1 of the stipulation as an agreement that the facts set forth in paragraphs 1 to 4 of the Complaint are correct and Exhibits A through I inclusive are true copies of the relevant instruments.

At the trial the petitioner sought to introduce a letter from a "Site Selection Specialist" at R. M. Bradley & Co., Inc. addressed to the petitioner's treasurer and setting forth certain terms upon which the respondent allegedly would be amenable to leasing the premises together with a preliminary site study prepared by it. (Exhibits 1 and 2.) These exhibits were admitted de bene over the respondent's objection as to their materiality. A motion to strike was made at the conclusion of the evidence and taken under advisement. One of the grounds listed in G. L. c. 184 § 30 for refusing specific enforcement of a restriction is that "conduct of persons from time to time entitled to enforce it has rendered it inequitable to enforce except by award of, money damages". The common law rule is that motive in such a situation is immaterial. Hamlen v. Sorkin, 251 Mass. 143 (1925). To the extent the statute changes the law the respondent's interest in the premises may have some bearing on the issue of specific performance. I accordingly deny the motion to strike.

On all the evidence I find as follows:

1. Howard D. Johnson Company, to which the respondent is a successor corporation, was the record owner of the premises during the period from 1940 to 1953 and operated one of its usual ice cream stands thereon. [Note 2]

2. In 1953 and continuously until today there has been a Red Coach Grill, also a well-known restaurant chain, located approximately .9 of a mile from the locus on State Route 3A [Note 2A] in Hingham, the petitioner's premises being on the same public way (Bridge street) in Weymouth. The restaurants in this chain are full service restaurants with a menu more expensive than those in a typical Howard Johnson operation. They are not fast food operations and would be considered a different type of eating place than others in the vicinity.

3. The Red Coach Grill has operated from 1953 until 1961 by Tally Ho Grill of Boston, Inc. which was liquidated in 1969 and its assets transferred to the respondent. From 1941 until 1969 Tally Ho Grill of Boston, Inc. was responsible for the operation of certain Red Coach Grills including that in Hingham with the responsibility passing to the respondent in 1969.

4. From the organization of Tally Ho Grill of Boston, Inc. in 1941 until 1961 it was owned and controlled by members of the family which owned and controlled all of the corporations which were predecessors of the respondent, and from 1961 until its liquidation in 1969 it was a wholly owned subsidiary of the respondent.

5. No evidence was introduced as to the record ownership of the real estate on which the Red Coach Grill is located. Accordingly it is assumed for purposes of this decision that the same entity which operated the restaurant held the record title to the premises.

6. After the sale of the locus in 1953 a supermarket was constructed and operated thereon.

7. The petitioner is the operator of a discount department store in Quincy Center.

8. It acquired the locus on August 23, 1967, the case of Shell Oil Company v. Henry Ouellette & Sons Co., Inc., 352 Mass. 725 having been decided on June 13, 1967.

9. Neither the respondent nor any of its constituent corporations owned any land immediately adjacent to, or abutting, the premises. The language of the deed imposing the restriction does not specifically refer to the land which it was intended to benefit, but I find that it was the site of the Red Coach Grill.

10. The petitioner has a one-story warehouse on the premises which is deteriorating, and it is now desirous of selling its land free of restrictions. [Note 3] The respondent evinced some interest in leasing it in February of 1977, the petition having been filed on September 30, 1976 and the respondent's answer on October 25, 1976.

11. There are at least eight restaurants other than the Red Coach Grill located on State Route 3A between the Red Coach and the Quincy-Weymouth line.

Several classic textbook problems are illustrated by this case. The first and most elementary of these is the resolution of the question as to whether the grantor in Exhibit D intended the restriction to be appurtenant to the Red Coach land and if so, whether the intention may be carried out in the light of the physical location of the two properties. See Clapp v. Wilder, 176 Mass. 332 (1900). As was stated in Snow v. Van Dam, 291 Mass. 477 , 480 (1935) "(i)f [it is] not intended to benefit an ascertainable dominant estate, the restriction will not burden the supposed servient estate, but will be a mere personal contract on both sides". Should this be the correct posture of the case, the petitioner, not having been a party to the deed from Howard D. Johnson Company, would not be bound thereby. An initial step in any such inquiry is an examination of the language of the deed to see if there is any land stated to benefit by the restriction thereby imposed; in Exhibit D there is none. Nor is this an instance of a general scheme where as part of the orderly evolution of a development uniform restrictions are imposed on each lot within a definitive tract. Rather this is an instance of an owner [Note 4] of two separate parcels of land on the same street who disposes of one subject to a restriction which was intended to benefit the business on the other. It would seem that the grantor therefore must have intended this restriction not only to benefit the retained restaurant property but also to run with the land which had been conveyed. While this conclusion may seem unusual by reason of the noncontiguous nature of the two parcels, the latter is only one factor to be considered in weighing the intention of the parties to Exhibit D. Whatever the grantor may have intended, however, there may be policy reasons for not deeming a restriction to have been imposed for the benefit of a distant parcel of land where no common scheme is involved. I do not decide this question definitively in this proceeding, for there are other difficulties in the respondent's case.

The petitioner relies on the doctrine of Norcross v. James, 140 Mass. 188 (1885) and Shade v. M. 0'Keefe, Inc., 260 Mass. 180 (1927). These decisions characterized agreements not to carry on a competing business on land adjoining that of the conveyancer, although worded as a restriction, as a collateral easement which could not be annexed to land so as to bind it in the hands of a subsequent grantee. This doctrine is unique to Massachusetts, and even in this Commonwealth does not prevail in the case of leases. To avoid doing violence to titles to land acquired in reliance on this principle, the Supreme Judicial Court followed these decisions in Shell Oil v. Henry Ouellette & Sons Co., Inc., 352 Mass. 725 (1967) where the Court stated:

It seems to us that in this case, as in probably numerous other past transactions, there may reasonably have been reliance upon Norcross v. James and Shade v. M. O'Keefe, Inc. Our decisions have not heretofore expressed any uncertainty about the soundness of those cases under modern conditions. We follow them in this case although, apart from their authority as precedents, we might have permitted Shell and Stafac to enforce in equity the 1962 restrictions against Ouellette and such of its successors in title as may have had actual or constructive notice of the restrictions.

In a revealing footnote which may presage a change in the previous case law the Court noted:

We need not now decide what result should be reached in the case of a reasonably limited covenant (of similar import) hereafter made, which shows clearly the parties' intention that the burden and benefit of the covenant are to run to successors in title of the covenantor and the covenantee. We do not now overrule Norcross v. James and Shade v. M. O'Keefe, Inc. prospectively or otherwise. See United States ex rel. Angelet v. Fay, 333 F. 2d 12, 16-17 (2d Cir.), affd. 381 U.S. 654; Leach, Property Law Indicted, pp. 14-31. See also Cardozo, Nature of the Judicial Process, 142-156, and Growth of the Law, 117-126. We can consider whether to do so when there is before us a case arising upon a covenant made in the future. In the meantime, application of the pertinent legal principles may have been affected by legislation.

The Supreme Judicial Court again considered covenants not to compete as applied to real estate in Gulf Oil Corporation v. Fall River Housing Authority, 364 Mass. 492 (1974) where it was decided that the covenant there under consideration was distinguishable. The Court's conclusion that the covenant was not primarily against competition but was directed at planning goals obviated the necessity of a consideration of overruling the Holmesian doctrine as urged by the oil company. Nonetheless, the language of the Courts suggests that prudence would dictate to a conveyancer that reliance on the decisions in Norcross and Shade would be inadvisable. Accordingly in an appropriate case where the covenant sought to be enforced met the criteria suggested by the Supreme Judicial Court in the Ouellette case footnote, I would report the matter for decision. However, I find and rule that the Howard Johnson restrictions do not show "clearly the parties' intentions that the burden and benefit of the covenant are to run to successors in title of the covenantor and the covenantee". The language customarily employed to denote this is absent and the land to be benefited is not delineated. Moreover the covenant was not made after the Ouellette decision since it was imposed by a deed delivered some fourteen years earlier. On the other hand it should be noted that the date of purchase of the land by the petitioner was after Ouellette, and the Howard Johnson restrictions are specifically referred to in the deed to the petitioner so there was actual, as well as, constructive notice thereof. The final factor to be weighed is whether the covenant is "reasonably limited", and I find that it is. Having weighed all the circumstances alluded to by the Supreme Judicial Court and finding some lacking, I am constrained by precedent to rule that the petitioner is not bound by such restrictions.

The parties also have analyzed the provisions of G. L. c. 184 § 30 [Note 5] insofar as they apply to the facts presented. I find nothing therein which would bar enforcement of the Howard Johnson restrictions. While admittedly there are other restaurants in the neighborhood of the premises, most of them are so-called fast food operations which would not be directly competitive with the Red Coach. The enforcement of the restriction accordingly would be of actual and substantial benefit to the respondent. Even so the statute lists five categories which, if present permit the enforcement of a restriction only by money damages. These are:

1) Changes in the character of the properties affected or their neighborhood, in available construction materials or techniques, in access, services or facilities, in applicable public controls of land use or construction, or in any other conditions or circumstances, reduce materially the need for the restriction or the likelihood of the restriction accomplishing its original purposes or render it obsolete or inequitable to enforce except by award of money damages.

The Court has been personally familiar with the premises for a period predating the imposition of the Howard D. Johnson restrictions. In 1953, as now, a large church is located on Route 3A across Neck street from the premises. In recent years several large multifamily housing units have been constructed in the vicinity, both on Bridge and off Neck street. A mini shopping mall has very recently been opened on the opposite side of the main road. The activity suggests the likelihood that the most renumerative use of the premises would be for some service-oriented purpose. There is nothing in any of the changes which impel the conclusion based on the statutory criteria that the restrictions should not be enforced. There are many uses other than a restaurant for which the locus appears to be suited.

2) Conduct of persons from time to time entitled to enforce the restriction has rendered it inequitable to enforce except by award of money damages.

The petitioner claims that the respondent is using the restriction as a bargaining tool in an attempt to purchase the premises. The only evidence of this is the respondent's apparent interest in leasing the premises, not purchasing them. The statutory test would seem to require more of an element of estoppel. As was said in Gulf Oil Corporation v. Fall River Housing Authority, 364 Mass. 492 (1974) at page 500 "There is no question that Gulf will reap private gain from the elimination of competition by the defendants. But a landowner's motive does not affect his right to enforce a restriction." Similarly here the enforceability of the restriction improves the respondent's position in any negotiation which it undertakes in relationship to the petitioner's land, but I do not view this as the type of conduct which the members of the general court intended to bar specific enforcement.

3) The provisions of (3) of said Section 30 are applicable only in the case of a common scheme and, thus, have no relationship to our present problem.

4) The fourth statutory reason for nonenforcement is that continuation of it would impede reasonable use of the land for purposes for which it is most suitable and would adversely affect the neighborhood or municipality or contribute to a deterioration of properties or result in a decadent or substandard areas or blighted open areas.

On all the evidence I find that barring a restaurant on the premises would not have an adverse effect on the neighborhood or on the town of Weymouth inconsistent with the public interest. If the restriction is continued, any deterioration in the property would stem from the nature of the petitioner's operation and is not from the restriction. One more fast food operation in the vicinity would have a greater likelihood of leading to a substandard area rather than the reverse.

5) There is no other reason for not enforcing the restriction.

There is a complete discussion of Section 30, its constitutionality and the reasons for its enactment in Blakeley v. Gorin, 365 Mass. 590 (1974). See also Cogliano v. Lyman supra and Harrod v. Rigelhaupt, 1 Mass. App. Ct. 376 (1973) [Note 6].

The same reasons which led the Supreme Judicial Court in Gulf to find the restriction there under consideration enforceable in light of the provisions of G. L. c. 184 § 30 lead me to the same result here, insofar as this statute is concerned. However, the precedent of Shell Oil v. Henry Ouellette & Sons Co., Inc., supra, and the criteria there stated which I find are not met by the Howard Johnson restrictions entitle the petitioner to the relief sought.

The petitioner at the trial moved for an award of reasonable counsel fees, costs and expenses on the ground that defenses made by the respondent are wholly insubstantial, frivolous and not advanced in good faith. For the reasons discussed at length in this decision as to the enforceability of the Howard Johnson restrictions, this motion is denied.

Decree accordingly.