Case Name: Cleveland & Sandusky Brewing Co. v. Joseph Demko et al.
Court: Cuyahoga Circuit Court
Jurisdiction: Ohio
Decision Date: 1907-01-14
Citations: 19 Ohio C.C. Dec. 102
Docket Number: 
Parties: Cleveland & Sandusky Brewing Co. v. Joseph Demko et al.
Judges: Marvin and Henry, JJ., concur.
Reporter: Ohio Circuit Court Decisions
Volume: 19
Pages: 102–107

Head Matter:
MORTGAGES,
[Cuyahoga (8th) Circuit Court,
January 14, 1907.]
Marvin, Winch and Henry, JJ.
Cleveland & Sandusky Brewing Co. v. Joseph Demko et al.
Restriction in Mortgage Giving Limited Monopoly Valid.
The condition in a mortgage given to a brewing company for a sum of money advanced by it, to enable the mortgagor to build a saloon upon the mortgaged premises, that the mortgagor shall not; for a period of twelve years, sell upon the mortgaged premises any beer, ale, or porter except that manufactured by the mortgagee, is founded upon a valuable consideration, is not against public policy as in restraint of trade, and may be enforced by injunction to prevent the sale on the premises of other brews than that of the mortgagee.
[For other eases in point, see 2 Cye. Dig., “Contracts,” §§ 403-412, 651-695. - — Ed.]
[Proofs of this decision and syllabus were submitted to Judge Winch and corrected. — Ed.]
Appeal from Cuyahoga common pleas court.
Higley & Maurer, for plaintiff:
The contract is valid, considered as one in partial restraint of trade for it complies with all the requirements of an enforcible contract in restraint of trade. Lange v. Werk, 2 Ohio St. 519; Grasselli v. Lowden, 11 Ohio St. 349.
Contracts to sell exclusively certain products are not against public policy. 24 Am. & Eng. Enc. Law (2 ed.) 855; Anheuser-Busch 'Breiu. Assn. v. Houck, 27 S. W. Rep. 692 (Tex. App.); L. R. 4 Chan. 654.
The contract does not concern a commodity known as a prime necessity of life, nor a commodity trade in which the public is interested in extending. The reason for the rule that contracts in restraint of trade may not be enforced therefore in the present instance fails. 24 Am. & Eng. Enc. Law (2 ed.) 854; Harrison v. Lockhart, 25 Ind. 112; Watrous v. Allen, 57 Mich. 362 [24 N. W. Rep. 104; 58 Am. Rep. 363]; Anheuser-Busch Breiu. Assn. v. Houck, 27 S. W. Rep. 692 (Tex. App.).
Agreements not to sell or covenants to sell only a particular product are enforcible. Ferris v. Brewing Go. 155 Ind. 539 [58 N. E. Rep. 701; 52 L. R A. 305] ; L. R. 4 Chan. 654; Grasselli v. Lowden, 11 Ohio St. 349.
If any question shall arise as to the sufficiency of the consideration for the agreement of ratification made at the time the mortgage was released and evidenced by a conditional release we would suggest: That the contract to sell the product of the plaintiff was broken from and after May 26, 1906, and notwithstanding the payment of the money claim, plaintiff had a legal right to maintain an action of ejectment and recover possession of the property., and to such action neither the payment of the money nor the inability of both parties to procure specific performance of the remaining contract, would have been available as a defense. This substantial right on the part of plaintiff was released and forms a valuable consideration for the stipulation continuing in effect the limitation upon the use of the property. The legal title at the time of the release was in the plaintiff and the situation is in all respects similar to a conveyance by the plaintiff to the defendant of the property in question with a limitation upon its use. Doe v. Roll, 7 Ohio (pt.-2) 70; Hale v. Wetmore, 4 Ohio St. 602; Allen v. Everly, 24 Ohio St. 97; Williams v. Englebrecht, 37 Ohio St. 383; Bradfield v. Hale, 67 Ohio St. 316 [65 N. E. Rép. 1008].
E. J. Albe and E. K. Wilcox, for defendant.

Opinion:
WINCH, J.
In this action the plaintiff seeks to enjoin the defendant, Joseph Demko, from selling any beer, ale or porter, except of the manufacture of the plaintiff, upon certain premises in the city of. Cleveland, belonging to said Demko.
From the pleadings and the conceded facts in the case, it appears that on August 3, 1905, the defendant, Joseph Demko, was the owner of said premises, which are described in the petition, and was desirous of building a saloon thereon, and for that purpose applied to the plaintiff for funds with which to pay off a small mortgage then existing upon the said premises, and to erect said improvements. The plaintiff, on said date, loaned the defendant the sum of $3,700 for said purpose, upon certain conditions and covenants which are set forth in the mortgage of said premises of said date executed and delivered by said defendant to the plaintiff. Said mortgage recites that the grantors, for the' consideration of $3,700, and other valuable considerations received to their full satisfaction from the brewing company, had conveyed said premises to the brewing company. Then follows an agreement in the following language:
' ' And we, the said grantors, for ourselves and our heirs, executors, administrators and assigns, covenant with the said grantee, its successors and assigns, that for a period of twelve years from and after date hereof, the premises above described shall not be used for the sale of any beer, ale or porter whatsoever except of the manufacture of the Cleveland & Sandusky Brewing Company, its successors and assigns; and this covenant and agreement shall run with the land and be a limitation and restriction upon the use thereof for said period of time without reference to the conditions upon which this mortgage deed is made, and shall be held as a grant for the benefit of the said The Cleveland & .Sandusky Brewing Company, its successors and assigns, wholly independent of, and in addition to, the above conveyance of the premises by way of mortgage, and shall not be discharged by performance of any or all of the conditions and agreements, the performance of which are hereinafter stipulated as rendering the mortgage void."
The defeasance clause of the mortgage is as follows:
"Whereas said grantors, in consideration of the granting of said loan, especially agree to conduct a saloon on said premises known as No. — corner Woodland avenue and Goukling street, Cleveland, Ohio, for a period of twelve years, and until said obligation and debt is paid and to buy and sell thereon during said period of time, beer, ale and porter of the manufacture of said grantee, its successors and assigns, and more particularly the beer of its Cleveland or Gehring branch, and no other b'eer, ale or porter whatsoever, and to pay for same upon request of said company; and further agree that any sum now or hereafter due to grantee for beer, ale or porter delivered by it, for Dow tax or other money advanced by it, or for rent, or otherwise, shall be a lien upon said property and secured by this mortgage. And the said grantee hereby agrees to supply in its customary manner, good, wholesome and merchantable beer, ale and porter for and during said period of time at a price mutually agreed upon and made a part hereof; provided, however, that in case said grantors should fail to pay for same as aforesaid, or in case said grantors should fail to pay upon demand any installment due to grantee for rent, or for money advanced by it for Dow tax or otherwise, then grantee's obligation to supply said beer, ale or porter shall be void at its option; in case of breach of this covenant, or any part thereof, the damages accruing to said grantee shall be a lien on said premises, and be secured by this mortgage. Any waiver by grantee of any breach of this covenant, or any part thereof, shall not be deemed a waiver as to any subsequent breach thereof. In ease any additional tax or burden shall be imposed upon the sale or manufacture of beer, ale dr porter the price agreed upon as hereinbefore set forth shall be increased by such added amount."
The defendant used the money in the improvement of his property, as agreed, and opened and conducted a saloon thereon, buying his beer of the plaintiff company until about May 26, 1906, about which time the Aiken law (98 O. L. 99; Rev. Stat. 4364-9 et seq.; Lan. 7248 et seq.), increasing the tax on saloons from $350 to $1,000, went into effect, and Demko then stated to the plaintiff that he could not run his business profitably any longer and pay the plaintiff the agreed price for its beer. The brewing company, however, refused to reduce the price of its beer, and Demko quit the saloon business temporarily and repaid to the plaintiff said sum of $3,700, with interest accrued; whereupon the plaintiff indorsed upon said mortgage the following:
"The conditions of this mortgage have been complied with and the same is hereby satisfied and discharged; the independent contract herein contained, limiting the use of the premises, remains in full force and effect."
The brewing company also canceled the note secured by the said mortgage, and delivered said canceled note and the mortgage, with said indorsement, to the defendant, Demko.
On June 23, 1906, about a month after this transaction, Demko opened up his saloon again, vending therein the beer of another brewing company, whereupon the plaintiff brought its action, as above stated.
It is claimed by the defendant that plaintiff is not entitled to the equitable relief it seeks, for three reasons:
First, because the contract sued upon is without consideration.
Second, because it is against public policy, being in restraint of trade.
Third, because there is an adequate remedy at law.
We have no difficulty in finding that this agreement was upon a valuable consideration. The original advance of $3,700 by plaintiff to the defendant was sufficient consideration for his agreement to pay interest, ¡Buy beer of the plaintiff for twelve years, and not sell beer of any other brew for twelve years. Repayment of the money advanced would end the agreement to pay interest, but not the other two agreements, to buy plaintiff's beer and sell no other beer for the period limited, and so the matter stood between the parties, when defendant asked to have his mortgage canceled. He was not entitled to a release of the mortgage, though he had repaid the loan. It still stood as security for these two additional promises. Whether these promises were then enforcible in equity, because of their executory character on both sides, is immaterial. The plaintiff released defendant from his obligation to buy its beer and the surrender of this valuable agreement was sufficient consideration for the continuance of his further agreement not to sell any other brew of beer during the time limited in the agreement.
We have no difficulty in finding- that the agreement relied upon is not in restraint of trade. Tbis question would not be raised if the plaintiff was not in the brewing business. Restraints upon the liquor trade are favored in this state. Indeed, the constitution of the state (Sec. 18 of the schedule) authorizes the legislature to pass laws to provide against the evils resulting from the traffic in intoxicating liquors, and many laws have been passed absolutely forbidding the sale of such liquors in certain districts of the state, and have been held constitutional.
So much for the public policy of the state, regarding the liquor business. It seems clear that the contract under examination does not concern a prime necessity of life, and that the people are usually benefited by having such contracts enforced.
But it is said that the contract in question tends to assure the plaintiff in a monopoly of its beer business. Does it violate any of the rules laid down by Judge Ranney in the case of Lange v. Werk, 2 Ohio St. 520, by which contracts in restraint of trade are to be tested?
1. The restraint must be partial only.
Here the restraint is partial both as to time and place. It is limited to twelve years, and one lot in the city of Cleveland.
2. It must be founded upon a valuable consideration.
We have already discovered not only a valuable but an adequate consideration.
3. It must be reasonable and not oppressive.
This rule is explained in the case of Grasselli v. Lowden, 11 Ohio St. 349, 357, where it is said:
' ' The reasonableness of the restraint here .spoken of has no reference to its effect upon the rights and interest of the covenantor as such, but solely to its effect upon the rights of the covenantee and the rights and interests of the public as distinguished from those of the covenantor. "
It must be "such only as to afford a fair protection to the interests of the party in favor of whom it is given, and not so large as to interfere with the interests of the public."
It does not seem that this restriction was greater than the interests of the plaintiff required. It enabled the defendant to build up a business on the plaintiff's capital, with the understanding that the business so built up should be mutually beneficial.
It appears that this good will is now participated in by another brewing company, to the exclusion of the plaintiff. The defendant is not restricted by his agreement from carrying on any business he sees fit on his premises, or selling thereon any kind of liquor he chooses, except, if he sells beer, ale or poi'ter, he must vend that brewed by plaim tiff, during the time limited, and any place else, except on this particular lot, he can sell any brew of ale, porter or beer that he chooses.
So we conclude that this agreement is reasonable and not oppressive. It is within rule 560 of Greenhood, Public Policy page 677, where- cases on this subject are collected. See also Ferris v. Brewing Co. 155 Ind. 539 [58 N. E. Rep. 701; 52 L. R. A. 305].
But it is said that plaintiff is not entitled to equitable relief, — that he has an adequate remedy at law in an action for damages for breach of the covenant.
The case of Steinau v. Gas Co. 48 Ohio St. 324 [27 N. E. Rep. 545], is relied upon in this behalf.
In that ease the gas company had agreed to furnish illuminating gas to Steinau for ten years, sufficient to illuminate his place of business, and Steinau had agreed to buy its gas and none other. Upon breach of the agreement by Steinau, the gas company sought to enforce this executory agreement by injunction and failed, the- court pointing out that it would not be fair to hold Steinau to his agreement while the gas company could not be compelled to perform its agreement to furnish gas for the unexpired portion of the ten years.
But in this case, nothing remains for the brewing company to do; its agreement to sell beer has been canceled by mutual consent. Its executory contract has been terminated and we see no reason why an injunction should not be allowed in this case, so that a multiplicity of suits for damages may be avoided.
Injunction allowed as prayed for.
Marvin and Henry, JJ., concur.