Freedman v. Seidler

• Decision Date: 12 November 1963
• Docket Number: No. 88,88
• Citation: 194 A.2d 778,233 Md. 39
• Parties: Israel FREEDMAN v. Minnie SEIDLER.
• Court: Maryland Court of Appeals

Page 39

233 Md. 39

194 A.2d 778

Israel FREEDMAN v.Minnie SEIDLER.

No. 88.

Court of Appeals of Maryland.

Nov. 12, 1963.

Melvin J. Sykes, Baltimore (Henry R. Wolfe, Baltimore, on the brief), for appellant.

Rubin Gertz, Baltimore, for appellee.

Before HENDERSON, HAMMOND, HORNEY, MARBURY and SYBERT, JJ.

HORNEY, Judge.

In this equity action for injunctive relief and a money judgment for damages allegedly sustained as the result of the breach by one tenant of the restrictive covenant in the lease between himself and the landlords prohibiting competition with another tenant of the same landlords, the questions on appeal relate to the dismissal of the final injunctive order, the award of damages and the allowance of counsel fees.

Since 1950Minnie Seidler(often herein referred to as the injured tenant) had operated a women's specialty shop at 3514 Eastern Avenue in Baltimore City for the sale of millinery, handbags, gloves, hosiery, costume jewelry, belts and accessories.In April 1958she entered into a renewal of her lease for another term of five years.In the lease, the landlords covenanted 'not to lease any other property owned by Landlords and fronting on Eastern Avenue * * * to any other person, firm or corporation which would conduct therein a business in direct competition with the business of the Tenant.'

In September 1960, Israel Freedman(often herein referred to as the offending tenant), who specialized in the sale of men's, women's and children's shoes, entered into a lease with the same landlords for the rental of 3516 Eastern Avenue.Prior thereto he had attempted to purchase the right to sell handbags and hosiery in the shoe shop he intended to operate next door to the specialty shop, but the negotiations were unsuccessful.Accordingly, the lease for the shoe shop provided that the premises were to be used for the retail sale of shoes 'and other kindred articles' and the tenant was specifically excluded from offering for sale any 'millinery, handbags, hosiery and gloves and costume jewelry.'When, however, the offending tenant opened his store on September 22, 1960, he placed signs in the window advertising: 'Free * * * Nylon hose with purchase of * * * shoes $3.99 and up' and 'Free gift of handbag with purchase of shoes of $5.99 and up.'He also placed handbags in the window in connection with the display of shoes.According to the offending tenant, the signs were taken out of the window when the distribution of hosiery and handbags ceased on October 25, 1960, but some handbags were displayed for a 'little while longer.'According to the injured tenant, however, the signs remained in the window until the latter part of November 1960 and the handbags were displayed for an additional month.

The original action was brought by Minnie Seidler, the injured tenant, against Nathan Katz and others, the landlords.Besides requesting an order to require the landlords to prohibit Israel Freedman, the offending tenant, from conducting his business 'in competition with and to the detriment' of her business by taking action against him, the injured tenant claimed damages for the violation of the covenant in her lease.The landlords impleaded the offending tenant as a third party and the injured tenant elected to so amend the action as to join the offending tenant as a defendant.Therein, the injured tenant, in addition to seeking permanent injunctive relief against the offending tenant, also sought damages for the violation of the restrictive covenant in the lease between the landlords and the offending tenant.

At the trial, the offending tenant testified that he was not offering hosiery and handbags for sale, but rather was giving them away as part of a promotional program to aid his sales of shoes.In support of her claim for damages, the injured tenant testified that as a result of the 'give away' of the hosiery and handbags, '[w]e had a drastic reduction in our business' and that the 'business fell off terribly.'She stated that the decline started 'as soon as those bags were given away and we have suffered since.'A sales clerk, who had been employed by the injured tenant from April 1951 to August 1962, testified to the effect that after the promotional program began there was a decline in business and that many of the regular customers stopped buying at the specialty shop.Neither the owner of the specialty shop nor the sales clerk testified as to the percentage the business fell off nor as to the loss in profits sustained during the promotional program and subsequent periods.The only other witness who testified as to damages was an accountant employed by the injured tenant to prepare a financial report showing his computation of her loss of profits during the period from September 22, 1960, to March 31, 1963, to be used in the trial of this case.In substance, the testimony of the accountant was contained in the financial report.Based upon a comparison of sales and profits for the years 1959-1960-1961, he testified that in 1960, until the beginning of the offending tenant's promotional scheme, gross sales averaged 10.87% ahead of 1959.By computing this percentage increase in sales with the sales made from September 22, 1960, until the business was discontinued on July 31, 1962, the report showed that the losses in net profits for the period from September 22, 1960, through July 31, 1962, were as follows: $1673.41 from September 22 to December 31, 1960; $3655.20 from January 1 to December 31, 1961; and $2364.23 from January 1 to July 31, 1962.No evidence was produced to show the difference in value between the lease of the injured tenant with the covenant unbroken and the same lease with the covenant broken.

At the conclusion of the trial, the lower court continued injunctive relief by permanently enjoining Israel Freedman, the shoe shop owner, from conducting his business in competition with the business of Minnie Seidler, the specialty shop owner; awarded her a money judgment against Israel Freedman for $7328.61 with costs, representing damages of $5328.61 and counsel fees of $2000; and dismissed the bill of complaint against Nathan Katz and the other landlords.Israel Freedman appealed, claiming (1) that the injunctive provisions of the decree should be reversed; (ii) that the damages awarded were speculative and conjectural and without rational foundation; and (iii) that the lower court erred in awarding counsel fees.

(i)

Insofar as Minnie Seidler is concerned, the decretal order directing the issuance of a permanent injunction against Israel Freedman should be dismissed as moot.It seems clear, since the operation of the specialty shop had been discontinued more than six months before the date of the final decree, that the change in circumstances which occurred after the issuance of the preliminary injunction, rendered the continuation of injunctive relief unnecessary.SeeTolman Laundry v. Walker, 171 Md. 7, 187 A. 836(1936).

(ii)

We do not agree that the damages awarded by the lower court were speculative and conjectural or without rational foundation, but we think they were excessive and for that reason the judgment for money damages should be modified.

It is well settled in this State that a covenant in a lease to the effect that the tenant shall have the exclusive right of conducting a specified business on the leased premises...