Court Opinion

ID: 9749161
Source: CourtListenerOpinion
Date Created: 2023-08-27 16:25:46.009118+00
Date Added: 2024-06-11T07:25:44.533512
License: Public Domain

Dissenting Opinion by
Mr. J ustice Roberts :
I am unable to agree with the majority’s unreasonably narrow construction of the restrictive covenant presently in dispute. In my view, the only reasonable construction of the covenant on this record is that by the use of the term “adjacent property”, appellant, A & P, sought and appellees agreed to bind any land which was assimilated into the shopping center “during the term of [A&P’s] lease or . . . [its] renewals.” The failure of the majority to give effect to this restriction improperly deprives A & P of the benefit of a contractual right for which it bargained and is entitled to have fairly enforced.
The record reveals that in November 1954, defendant-appellees were record owners of certain unimproved real estate located in Vernon Township, Crawford County, on which they proposed to develop a shopping center. As the first step in this development, they entered into an agreement with A & P for the lease of a supermarket to be constructed at the site of the proposed center. The lease agreement contained, inter alia, the covenant here in dispute which provided: “It is . . . understood and agreed between the Lessors and Lessee . . . that no other supermarket, grocery, meat or vegetable market will be permitted to occupy space on the adjacent property owned by the Lessors during the term of this lease or the renewals herein granted.”
Until 1957, appellant’s supermarket was the sole mercantile establishment in the development. Thereafter, other tenants were obtained and by 1962 the center had expanded to the point that the plot of land *548owned by appellees at the time the lease with A & P was executed had been fully utilized. Desiring to enlarge the shopping center, appellees purchased two contiguous tracts of land lying directly to the north of the center. On April 3, 1964, they executed a lease for a portion of the newly acquired tract of land with Super Duper, Inc., for the operation of a supermarket. It is this lease and the right of appellees to enter into it in light of the restrictive covenant contained in the A & P agreement which is the source of the present litigation.
In urging that the lease entered into by appellees with Super Duper, Inc., was in breach of the 1954 agreement of the parties, A & P relies on the covenant contained therein that defendant-appellees would not permit a competing supermarket “to occupy space on the adjacent property owned by . . . [defendant-appellees] during the term of this lease or the renewals herein granted.”
Defendant-appellees, however, contend that the restrictive covenant does not extend to property acquired subsequent to the execution of the lease agreement with A & P. It is their position that the term “owned” was inserted following the phrase “adjacent property” in order to embody the intention of the parties that the covenant encompass only property held by defendant-appellees at the time the lease agreement was executed.
A & P on the other hand, asserts that the term “owned” was employed, not in a restrictive sense, but merely to describe the nature of defendant-appellees’ relationship to the property sought to be restricted, and, therefore, should be construed to apply to subsequently acquired property in order to give effect to the purpose for which the covenant was included.
While the majority recognizes the basic principle that the intention of the parties must govern the reso*549lution of this dispute,1 it applies a rule of construction which precludes the parties from establishing their true intent and deprives A & P of the benefit of its bargain with defendant-appellees. I am unable to agree with the approach taken by the majority. In my view, there is no justification for permitting constructional guides to obscure the realities of modern commercial life and to defeat the purposes of economic bargaining.
It should be noted that we are not here faced with a challenge to the validity of the covenant. It is recognized and accepted that such covenants are valid and enforceable in this Commonwealth so long as they do not result in an unreasonable restraint of trade. See Hoffman v. Rittenhouse, 413 Pa. 587, 198 A. 2d 543 (1964); Cleaver v. Lenhart, 182 Pa. 285, 37 Atl. 811 (1897). There is no contention or suggestion that the present covenant, even if interpreted as urged by A & P, would work such an unreasonable restraint; the present restriction cannot be said to be greater than is required for the protection of the one for whose benefit it was imposed or to cause an undue hardship upon the person restricted. See Restatement, Contracts, §515 (1932); cf. Harris Calorific Co. v. Marra, 345 Pa. 464, 29 A. 2d 64 (1942). Thus, the sole issue before this Court is whether the covenant was intended by the parties and should be construed to bind after-acquired property adjacent to and made part of the shopping center.
In considering the proper approach to the construction of a restrictive covenant in a commercial context, *550it is increasingly recognized that “parties are entitled to a degree of freedom in contracting to protect their own economic interests and that [the] controlled development of a given business center may be desirable. . . .”2 In Cragmere Holding Corp. v. Socony-Mobil Oil Co., 65 N.J. Super. 322, 167 A. 2d 825 (1961), the issue, as here, was the applicability of a restrictive covenant to after-acquired property. In refusing to permit the rule of strict construction to defeat the intent of the parties and in holding the covenant applicable to property thus acquired, the court stated, “the rule of strict construction is counterbalanced ... by an evolving principle to the effect that covenants to refrain from competition, or to refrain from leasing to a competitor, if sufficiently reasonable in scope to avoid being labeled in restraint of trade, will be realistically construed in furtherance of their obvious purpose.” Id. at 326, 167 A. 2d at 827. (Emphasis supplied.)3
*551The approach taken by the court in Cragmere is in line with the weight of modern authority4 and, I believe, represents a sounder approach to the solution of the instant case than the uncritical application of the doctrine of strict construction to defeat the obvious purpose for which the covenant was included in the lease agreement between these parties.5
In ascertaining the intention of the parties, the terms of the restriction should be interpreted in light *552of the apparent object or purpose of the covenant and the conditions existing at the time the lease agreement was executed. Cf. Parker v. Hough, 420 Pa. 7, 12-13, 215 A. 2d 667, 670 (1966); MeCandless v. Burns, 377 Pa. 18, 19 104 A. 2d 123, 126 (1954); Baederwood, Inc. v. Moyer, 370 Pa. 35, 40-41, 87 A. 2d 246, 248 (1952).
There is no dispute as to the objective the parties sought to achieve by the inclusion of the restrictive covenant in the lease agreement. A & P sought assurance that its expenditures in moving into and promoting a new and untried market area would not be jeopardized by competition from another lessee of defendant-appellees. There is nothing in the record to suggest that such assurances were not intended to reach after-acquired property assimilated into the shopping center.
Although there are no cases directly on point in this Commonwealth, other jurisdictions, in determining the applicability of a covenant contained in a shopping center lease to after-acquired property made part of a shopping center, have held that the apparent purpose of the parties would be defeated were the covenant not to apply to such property. In Carter v. Adler, 138 Cal. App. 2d 63, 291 P. 2d 111 (D. Ct. App. 1955), a case presenting an analogous problem, the court recognized that were the restrictive covenant not to bind after-acquired property incorporated into a shopping center, the landlord could by devious means circumvent his obligation to his lessee. Thus, although no explicit reference to after-acquired property was contained in the covenant between the parties, the restriction was found to extend to such property by implication: “A restrictive covenant, such as the grant of the exclusive mercantile rights ... is not merely ornamental words, inserted to please the eye. It is a living expression of the grantor incorporated in a lease as a *553consideration for the lessee’s faithful performance. Concomitant with such a covenant is the implied obligation of the lessor not to cancel the covenant or derogate from its force by so using his adjoining property as substantially to impair the lessee’s enjoyment of the leased premises.” Carter v. Adler, supra at 70, 291 P. 2d at 115.6
On this record it is clear that the apparent purpose and object of the parties would be defeated were the covenant interpreted not to bind adjacent property acquired by the defendant-lessees after the execution of the lease with A & P. The lessee, by means of the restrictive covenant, sought protection against the possibility that defendant-appellees would lease adjacent property to a competitor. The majority here permits the defendant-appellees to evade the purpose and object of the present covenant by the purchase and incorporation of property into the shopping center, thus depriving A & P of the benefit of a contractual right bargained for and relied upon.
In 1954, when the parties entered into their lease agreement, the site of the present commercial center was undeveloped land. A & P abandoned an established location in the nearby town of Meadville, and expended large sums of money to move into and to promote this untried market area. For approximately two years, it was the only commercial tenant on the site of the present shopping center.
*554While no definite and precise plan existed at the time the lease was executed, both parties envisioned the development of the site as a shopping center.7 Because of the uncertain nature and direction of the future expansion, it is unlikely that either party was concerned with the precise status of land ownership when the covenant was given; rather, it is more reasonable to infer from the circumstances that their primary interest was in meeting A & P’s desire for assurance against competition in the event of future development of the site. It is from just such future development that the present economic threat emanates.
Given the circumstances surrounding the execution of the lease, the subject matter of the covenant, and the apparent object and purposes of the parties, I am led to the inevitable conclusion that the restriction was intended to preclude defendant-appellees from threatening the economic position of A & P by permitting a competitor to lease adjacent property. Since the apparent object of the parties was to prevent this type of competition, it is clear that the point in time at which defendant-appellees acquired the site sought to be leased to a competitor is irrelevant; the resulting competition would be equally harmful to the leasehold interest of A & P whether such property was owned prior to or acquired after the execution of its lease agreement.8
*555Absent evidence which would rebut the inference flowing from the circumstances here present, I can only conclude that the present covenant binds after-acquired property adjacent to and made part of defendant-appellees’ shopping center.
Accordingly, I dissent.
Mr. Justice Musmanno and Mr. Justice O’Brien join in this dissenting opinion.

 The guiding principle of contract interpretation that the intention of the parties governs, Heidt v. Aughenbaugh Coal Co., 406 Pa. 188, 176 A. 2d 400 (1962), is equally applicable to restrictive covenants. Parker v. Hough, 420 Pa. 7, 215 A. 2d 667 (1966): McCandless v. Burns, 377 Pa. 18, 104 A. 2d 123 (1954); Baederwood, Inc. v. Moyer, 370 Pa. 35, 87 A. 2d 246 (1952).

 Note, Restrictive Covenants in Shopping Center Leases, 34 N.Y.U. L. Rev. 940 (1959). This note reports that a study by the publication “Chain Store Age” in May of 1958 revealed that 40% of the shopping center leases abstracted contained restrictive covenants. Id. at 940 n.l.

 In Oragmere, a landlord leased premises for use as a gasoline station, and covenanted (with certain specific exceptions not here relevant) not to lease to a competitor of his tenant within 1000 feet of the leased premises. Approximately a year later, the lessor acquired additional real estate within the proscribed area. The court rejected his contention that the covenant should not be construed to bind after-acquired property, stating that the language of the lease should be read so as to attribute to the parties a rational meaning, consonant with their apparent purpose, and that “the crucial feature of this covenant is its applicability'‘during the term of this lease or any renewal or extention thereof.’ . . . Defendant [lessee] was seeking and, by virtue of the covenant, obtained protection against competition, direct or indirect, from its landlord.” Cragmere Molding Corp. v. Socony-Mobil Oil Co., 65 N.J. Super. 322, 325, 167 A. 2d 825, 826 (1961).

 See, e.g., Carter v. Adler, 138 Cal. App. 2d 03, 201 P. 2d 111 (D.Ct. App. 1955) ; Vaughan v. General Outdoor Advertising Co., 352 S.W. 2d 562 (Ky. 1961) ; Slice v. Carossa Properties, Inc., 215 Md. 357, 137 A. 2d 687 (1958) ; Sirates v. Keniry, 231 Mass. 426, 121 N.E. 151 (1918) ; Parker v. Lewis Grocer Co., 153 So. 2d 261 (Miss. 1963) ; Daitch Crystal Dairies, Inc. v. Neisloss, 16 Misc. 2d 504, aff’d, 8 N.Y. 2d 723, 201 N.Y.S. 2d 101, 167 N.E. 2d 643 (1960) ; Topol v. Smoleroff Development Corp., 264 App. Div. 164, 34 N.Y.S. 2d 653 (App. Div. 1942) ; South Buffalo Stores, Inc. v. W. T. Grant Co., 153 Misc. 76, 274 N.Y.S. 549, aff’d as modified, 248 App. Div. 668, 289 N.Y.S. 918, aff’d without opinion, 273 N.Y. 660, 8 N.E. 2d 335 1937) ; Renee Cleaners, Inc. v. Good Deal Super Marhets of N.J. Inc., 89 N.J. Super. 186, 214 A. 2d 437 (App. Div. 1965) ; Cragmere Holding Co. v. Socony-Mobil Oil Co., 65 N.J. Super. 322, 167 A. 2d 825 (1961) ; Shaft v. Carey, 107 Wise. 273, 83 N.W. 288 (1900).

 The majority relies upon that line of cases requiring restrictions contained in deeds to be strictly construed. These cases are presently inapposite. The historical and logical bases for construing a restrictive covenant contained in a deed strictly against the grantor are not compelling in the construction of a covenant not to compete embodied in a lease agreement. In the latter context, the doctrines developed to preclude unreasonable restraint of trade function to protect against undesirable restrictions on land use by reason of such covenants.
The majority also refers to the decisions in Siciliano v. Mister, 399 Pa. 406, 160 A. 2d 422 (1960), and Food Fair Stores, Inc. v. Kline, 396 Pa. 397, 152 A. 2d 661 (1959), both cases involving the construction of covenants restricting competition. However, the result reached in both cases may be supported under traditional principles of contract interpretation without reference to the doctrine of strict construction.

 In Garter, the lease agreement contained a covenant that the lessee would have “the exclusive rights on Grocery, Delicatessen, Meats, Produce, Pish and Poultry in Valley Market Town . . . .” The landlord (who had purchased the shopping center from the original owner) acquired a contiguous tract of land for the purpose of expanding- the center. In a declaratory judgment, the court held that the covenant bound after-acquired property made part of the shopping center. It should be noted that the restrictive covenant in the present case was also made in reference to a particular commercial development known as “a shopping center,”

 The court below found that all the covenants and conditions of the lease agreements were made in contemplation of the eventual development of the site as a shopping center.

 It should also be noted that the parties themselves appear to have acted on the premise that the covenant bound the property here involved. In 1956, the defendant-appellees sought to obtain a release from the restriction of the covenant for the purpose of leasing after-acquired adjacent property to Quality Markets, Inc. The release was conditionally obtained, but is presently inapplicable since the court below found that the conditions precedent to its effectiveness were not met. While I do not consider these *555circumstances to be controlling, courts, in order to determine the intent of the parties, may take into account subsequent acts tending to show the construction which the parties themselves placed upon the contract. See Reedy v. Nypano Railroad Co., 250 Pa. 51. 95 Atl. 343 (1915).