Case Name: De Kalb Holding Company, Appellant, v. Madison Theatre Company, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1914-12-24
Citations: 165 A.D. 202
Docket Number: 
Parties: De Kalb Holding Company, Appellant, v. Madison Theatre Company, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 165
Pages: 202–206

Head Matter:
De Kalb Holding Company, Appellant, v. Madison Theatre Company, Respondent.
Second Department,
December 24, 1914.
Heal property — restrictive covenant in lease — when covenants will be canceled in equity — form of judgment.
A recorded twenty-one years’ lease of a theatre property made by defendant to plaintiff’s assignor, for the prevention of competition by said theatre with another in the field then occupied by the latter, contained a covenant that the lessee would not charge more than one dollar for an admission, and provided that the restriction .as to price should become “inoperative” upon the other theatre offering weekly vaudeville performances, or if the stockholders common to both theatres disposed of their stock in the lessor. In accordance with the terms of the lease the lessee deposited a large sum of money with the lessor as security and the lessor gave a mortgage to the lessee as security for the said deposit. The lessor in offering weekly vaudeville performances in the other theatre made the covenant in the lease “inoperative.”
Held, that the lessee was entitled to equitable relief for the cancellation of the covenant as a cloud upon the title, on the ground that it might be used injuriously or vexatiously to embarrass or affect his title, as, with the covenant in apparently full force, the lessor might forfeit the security and defeat a foreclosure of the mortgage by plea of the • covenant.
The mere fact that the lessee might prevail against any attempt of the lessor to enforce the covenant, or could have an action at law for any injustice done was not enough to cause the court to withhold preventive relief, for such remedy is not limited to real estate.
The form of the decision in such ease should be simply an order for judgment without findings of fact.
While on appeal a judgment dismissing the complaint might be reversed and judgment ordered for plaintiff, the best disposition is to reverse the judgment and grant a new trial, costs to abide the final award of costs.
Appeal by the plaintiff, De Kalb Holding Company, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Kings on the 28th day of March, 1914, dismissing the complaint upon the decision of the court after a trial at the Kings County Special Term.
Charles A. Brodek, for the appellant.
John J. Curtin, for the respondent.

Opinion:
Jenks, P. J.:
The recorded lease for 21 years of the De Kalb Avenue Theatre property, made by defendant to plaintiff's assignor, contained a covenant that the De Kalb Avenue Theatre would not charge more than one dollar for an admission. The purpose of this covenant was to prevent competition by the said theatre with the Shubert Theatre in the field then occupied by the latter. The reason for the covenant is found in the recital in the lease that some of the stockholders of the lessor were stockholders in the Shubert Theatre, and did not wish conflict or competition between the two theatres. That such competition was restricted to the field then occupied by the Shubert Theatre is shown by the provision that the restriction as to price should become " inoperative " upon the Shubert Theatre offering weekly vaudeville performances, and that such restriction was for the benefit of those who were stockholders common to the lessor and the Shubert Theatre is shown by the provision that the restriction should be " inoperative" if such stockholders disposed of their stock in the lessor.
This action is brought to cancel that covenant as a cloud on title, in that the said covenant has become ' inoperative " by the affirmative act of the Shubert Theatre in offering weekly vaudeville performances. The making of the lease in March, 1911, the recording thereof, plaintiff's possession thereunder and full compliance therewith, are admitted. And by failure of denial of a part of plaintiff's pleadings it is established "That in the month of April, 1912, and by said change in policy, the performance of so-called 'legitimate productions' ceased in the said Sam L. Shubert Theatre and in place thereof ' weekly vaudeville,' that is to say, vaudeville and moving picture shows, were and continuously have been and now are produced in the said theatre, and that said performances are of the same type and style as have from the outset been, and still are produced in the said De Kalb Avenue Theatre, that for such performances at the said Sam S. Shubert Theatre the charge for tickets have (sic) been reduced to twenty-five cents as the maximum charge, which is the same charge as was and is made at said De Kalb Avenue Theatre." Plaintiff's brief proof was offered to establish that the value of the lease was lessened by the existence of the said covenant. Almost all of that proof was excluded under general objections as to incompetency, immateriality and irrelevancy. I am inclined to think that some.of the proof excluded if made by a competent witness was evidence, but aside from this consideration I am of opinion that the plaintiff, at the time that the court dismissed it upon the merits, had made out a case for consideration upon the merits.
It is admitted that the lessor has made the covenant inoperative. And yet, if the covenant remain in the lease, then apparently the lessor (for the benefit of the Shubert Theatre) can restrict the character of the performances as before of the De Kalb Avenue Theatre. Thus apparently the Shubert Theatre could invade the province of the lattter, as it has done, and at the same time, so far as the restricted price was effective, compel the De Kalb Avenue Theatre to compete with it in its new venture. It is entirely possible that, with the Shubert Theatre as a competitor, the De Kalb Avenue Theatre would not prove a profitable venture, and that, therefore, it could not pay the stipulated rent. Or, its owners might think that it could be made more profitable if it entered another field of enterprise, which was not open to it unless it could charge more than one dollar as an admission fee. If the lessee sought to make a new departure, as if free' from the covenant, and yet the covenant remained on the face of the lease in apparent vigor, the lessor might invoke it to break the lease and to eject the lessor. Again, in accord with the terms of the lease the lessee has deposited $10,000 with the lessor as security, and the lessor has given a mortgage to the lessee as security for the said deposit. With the- covenant still in the lease apparently in full force, the lessor might forfeit the security and defend a foreclosure of the mortgage by plea of the covenant.
Equitable relief of the character sought may be afforded upon the ground that "the deed or other instrument or proceeding constituting the cloud maybe used to injuriously or vexatiously embarrass or affect a plaintiff's title. " (Pom. Eq. Juris. § 1398.) In the language of Kent, C., in Hamilton v. Cummings (1 Johns. Ch. 517, 524): "It is immoral for a person to retain a bond which is useless to him, and an annoyance to others. " The broad and adequate powers of equity are regulated by the circumstances of each case. (Hamilton v. Cummings, supra ; St. Stephen's Church v. Church of Transfiguration, 201 N. Y. 1; Sharon v. Tucker, 144 U. S. 533.) In the words of Field, J., in the case last cited, affirmative action by the court of equity would be "to remove difficulties in the way of owners of property using and enjoying it fully, when, from causes beyond their control, such use and enjoyment are obstructed." The court is justified in acting upon the application of the plaintiff if it appeared that there was reasonable ground for his fear of future injury. (Holland v. Challen, 110 U. S. 15, 26; Loring v. Hildreth, 170 Mass. 328; Pom. Eq. Juris. § 1399.) It is not enough to stay the court that the lessor has not attempted to enforce the covenant to the hindrance or vexation of the lessee. It does not appear that the lessee has attempted to act as if the covenant was " inoperative." Why should the defendant do more than stand at gaze ? At least, it appears that the defendant resists in the court an attempt to remove the covenant although defendant's admission is enough to establish that it has rendered the covenant inoperative. No reason is suggested, if the lessee could have secured cancellation by consent, why he has applied to the court for that relief.
Extrinsic evidence is required to establish the inoperation of the covenant. The mere fact that the lessee might prevail against any attempt of the lessor to enforce the covenant, or that the lessee could have an action at law for any injustice done, is not enough to cause the equity court to withhold preventive relief. The lessor might be entirely willing to stand the hazard of litigation, provided it could in the first instance work mischief perforce of the covenant apparently in full force and unimpaired. It is objected that the remedy is limited to real estate. But I do not so understand the rule. (Ward v. Dewey, 16 N. Y. 519; Town of Springport v. Teutonia Savings Bank, 75 id. 397; Mayor v. North Shore Staten Island Ferry Co., 9 Hun, 620; Herzig v. Blumenkrohn, 122 App. Div. 756; Spofford v. Bangor & Bucksport R. R. Co., 66 Maine, 51; Pom. Eq. Juris. § 1399, and note 4; § 727, and cases cited, § 729; New York & New Haven R. R. Co. v. Schuyler, 17 N. Y. 592.) I think that a lease with such a covenant was not as valuable as a lease free therefrom, under the circumstances of this plaintiff. I am not, however, prepared to say that the proof offered to show this was evidence thereof. *
And I suggest that the form of the decision should have been an order for judgment, and that there should not have been findings of fact. (McNulty Brothers v. Offerman, 141 App. Div. 730.) I think that while this court could reverse the judgment and order judgment for the plaintiff, the better disposition of this case is to reverse the judgment and to grant a new trial, costs to abide the final award of costs.
Burr, Thomas, Stapleton and Rich, JJ., concurred.
Judgment reversed and new trial granted, costs to abide the final award of costs.