Berman v. City Products Corp.

• Decision Date: 08 March 1979
• Docket Number: No. 5064,5064
• Citation: Berman v. City Products Corp., 579 S.W.2d 313 (Tex. Ct. App. 1979)
• Parties: 1979-2 Trade Cases P 62,859 Sydell BERMAN et al., Appellants, v. CITY PRODUCTS CORPORATION et al., Appellees.
• Court: Texas Civil Court of Appeals

Page 313

579 S.W.2d 313

1979-2 Trade Cases P 62,859

Sydell BERMAN et al., Appellants, v. CITY PRODUCTS CORPORATION et al., Appellees.

No. 5064.

Court of Civil Appeals of Texas, Eastland.

March 8, 1979.

Rehearing Denied April 12, 1979.

Harold B. Berman, Toby L. Gerber, Berman, Fichtner & Mitchell, Dallas, Johnny M. Moore, Mays, Moore, Dickson and Roberts, Sweetwater, for appellants.

Stanley P. Wilson, Abilene, Joseph L. Rand, Chicago, Ill., Jack Sayles, Abilene, Charles R. Griggs, Nunn, Griggs, Beall & Wilks, Sweetwater, for appellees.

McCLOUD, Chief Justice.

The controlling question in this antitrust case is whether a husband, who signs a lease agreement containing a covenant restricting competition, owns a "property interest" in the premises leased, if the premises are owned by his wife as her separate property.

Plaintiff, City Products Corporation, and intervenors, Z. S., Inc., and Zeno R. Smith, sued defendants, Sydell Berman, individually, and Sydell Berman and First National Bank in Dallas, as Independent Executors of the Estate of Max Berman, deceased (Berman), Perry Brothers, Inc., Freda Levy, a widow, I. A. Loeb and wife, Fannie Loeb, Morris Siegel and wife, Helen Siegel, William Sheridan and wife, Hattie Sheridan, and A & I Levy Estates, a limited partnership, seeking an injunction and damages, resulting from an alleged violation of a protective covenant contained in a lease agreement. Defendants Berman and Perry Brothers answered that the protective covenant violated the Texas antitrust statutes. Berman and Perry Brothers filed a counterclaim and cross-claim against plaintiff, intervenors, and the other defendants. Berman and Perry Brothers sought actual and punitive damages resulting from a violation of the Texas antitrust statutes. Plaintiff and intervenors, City Products, Z. S., Inc. and Zeno R. Smith, and defendants, Freda Levy, I. A. Loeb and wife, Fannie Loeb, Morris Siegel and wife, Helen Siegel, and William Sheridan and wife, Hattie Sheridan, were granted partial summary judgments as to the claim for damages asserted by Berman and Perry Brothers. I. A. Loeb died during trial and the court severed the claims asserted against and by him. Following a jury trial, the court rendered judgment enjoining defendants, Berman and Perry Brothers, from leasing or permitting to be used, for a variety store, a certain building owned by Berman and leased to Perry Brothers. The jury found punitive, but no actual, damages. The court awarded City Products $30,000, and Z. S., Inc., $15,000, punitive damages against Perry Brothers. The partial summary judgments were merged into and became a part of the final judgment.

Perry Brothers and Berman have appealed. We reverse and render in part, and reverse and remand in part.

City Products is the "Tenant" of a building located at 185 East Second Street in Colorado City. For several years, a "Ben Franklin" store has been located in the building. The current franchisee-subtenant is intervenor, Z. S., Inc., whose president and principal stockholder is intervenor, Zeno R. Smith.

The original lease agreement contained the following "protective" covenant:

That the landlord will not, during the term hereof, or any renewal or extension hereof, lease or permit to be used, any portion of the building in which the demised premises are situated or any portion of Any other building or premises controlled by the landlord located within one thousand (1,000) feet of the herein demised premises, for any business similar to the business of the Tenant, that is to say, for any variety store, or any business conducted under the name of a five and ten cent store, five cents to one dollar store or similar name. (Emphasis added)

On January 4, 1971, the conditions of the original lease, as amended, were ratified, and the term of the lease was extended to April 30, 1980, by a supplemental agreement. The supplemental agreement designated as "Landlord" the following: "Freda Levy, a widow, I. A. Loeb and Fannie Loeb, his wife, Morris L. Siegel and Helen Siegel, his wife, William Sheridan and Hattie Sheridan, his wife, and Max Berman and Sydell Berman, his wife, a Limited Partnership, doing business as A & I Levy Estates." Each of the named parties signed the agreement as a "General Partner." No limited partnership existed. Helen Siegel and Hattie Sheridan, wives of Morris Siegel and William Sheridan, respectively, had each inherited an interest in the leased premises. It is undisputed that all parties who signed the lease as "Landlord," other than Morris Siegel and William Sheridan, owned an interest in the premises.

Across the street from the "Ben Franklin" building is the "Max Berman" building. On September 6, 1974, Max Berman and wife, Sydell Berman, owners of the Max Berman building and part owners of the Ben Franklin building, leased the Max Berman building to Perry Brothers. The Max Berman building is located within 1,000 feet of the Ben Franklin building. The jury found that the premises were used by Perry Brothers as a "variety store."

Perry Brothers and Berman argue that the protective covenant, copied above, contained in the lease agreement, which is the basis of the suit filed by plaintiff and intervenors, is void. We agree.

Texas statutes prohibit "trusts, monopolies, and conspiracies in restraint of trade." Section 15.02, Business and Commerce Code, provides:

(b) A "trust" is a combination of capital, skill or acts by two or more persons to

(1) restrict, or tend to restrict, trade, commerce, aids to commerce, the preparation of tangible personal property for market or transportation, or the free pursuit of a lawful business; . . .

(3) prevent or lessen competition in (A) the manufacture, transportation, sale or purchase of tangible personal property;

(7) refrain from engaging in business, or from buying or selling tangible personal property, partially or entirely in this state.

Section 15.04 of the Business and Commerce Code expressly provides that a "trust," as defined in Section 15.02 is illegal and an agreement violating such prohibition is "void and unenforceable in law or equity."

It is clear that the purpose of the protective covenant in issue is to prevent or lessen competition with the "Tenant" in the sale of tangible personal property. The provision violates the statutory prohibitions, unless it fits within an exception. Plaintiff and intervenors contend the protective covenant is valid since all parties signing the agreement as general partners have "an interest" in the property.

Our Supreme Court in Schnitzer v. Southwest Shoe Corporation, 364 S.W.2d 373 (Tex.1963) discussed the exception urged by plaintiff and intervenors. In Schnitzer, two owners of adjoining buildings, Schnitzer and his father-in-law, Alpard, agreed to operate their separately owned properties as an integral unit and were interested in developing the properties into a shopping center. Schnitzer leased the premises he owned to Southwest Shoe Corporation. The lease contained a provision giving Southwest Shoe exclusive right to sell shoes in the building located on Schnitzer's premises and in buildings of other owners who joined Schnitzer in ratifying the exclusive occupancy provision. Alpard, who owned no interest in the Schnitzer premises, ratified the exclusive occupancy restriction by signing the lease with Schnitzer. Thereafter, Alpard leased the premises he owned to a lessee who leased to a subtenant who sold shoes as a part of his business. The Supreme Court noted that Alpard had "an interest" in the Schnitzer property, but held that he owned no "property interest" in the premises, and the protective covenant was void. The court stated:

The clear purpose of the contract between Schnitzer, Alpard and Southwest was to create and carry out restrictions in the free pursuit of the business of selling shoes on the premises owned by Schnitzer and Alpard, and, to that extent, to prevent or lessen competition with Southwest in the sale of that merchandise. Unless the contract of the parties comes within some recognized exception to the statutory prohibition, it is in violation of the statute as a matter of law.

The rigidity of our anti-trust, monopoly and restraint of trade statutes has undoubtedly been softened in certain exceptional situations. See State v. Gulf Refining Co., Tex.Civ.App., 279 S.W. 526, 530, writ refused, and cases there cited. One of the exceptional situations is that in which an owner, lessor or one in control of premises agrees with another person that the other person shall have an exclusive right or privilege in or on the premises or that the other person will sell on the premises only the products or merchandise of the owner or lessor. Fort Worth & D.C. Ry. Co. v. State, 99 Tex. 34, 87 S.W. 336, 70 L.R.A. 950; Celli & Del Papa v. Galveston Brewing Co., Tex.Com.App., 227 S.W. 941; Edwards v. Old Settlers' Ass'n., Tex.Civ.App., 166 S.W. 423, writ refused; Redland Fruit Co. v. Sargent, 51 Tex.Civ.App. 619, 113 S.W. 330, no writ history; Cox v. Humble Oil & Refining Co., Tex.Com.App., 16 S.W.2d 285. For discussions of cases of this type, see 3 T.L.R. 349-362; 6A Corbin on Contracts 62, § 1389; 90 A.L.R. 1449. Contracts or agreements of this character are upheld when they are collateral or incidental to a lawful lease or grant of premises in which the lessor or grantor has a Property interest. (Emphasis added)

After stating that it is the duty of courts to enforce statutes as written by the Legislature, the court added:

If the agreement before us related only to the premises owned and leased by Schnitzer the exclusive right given Southwestern would be valid as collateral and incidental to the lease of Schnitzer's premises. But if two landowners may validly enter into this type of agreement with a lessee of premises of one only, so could a dozen or all in a given area. We are unwilling thus to extend this exception to the anti-trust laws. . . .

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