Keith Hardware, Inc. v. White

• Decision Date: 06 June 1997
• Citation: 956 S.W.2d 500
• Parties: KEITH HARDWARE, INC., Plaintiff-Appellant, v. Douglas L. WHITE and wife, Carolyn L. White, Defendants-Appellees.
• Court: Tennessee Court of Appeals

Page 500

956 S.W.2d 500

KEITH HARDWARE, INC., Plaintiff-Appellant, v. Douglas L. WHITE and wife, Carolyn L. White, Defendants-Appellees.

Court of Appeals of Tennessee,

Eastern Section.

June 6, 1997.

Permission to Appeal

Denied by Supreme Court Dec. 1, 1997.

Certiorari Denied Dec. 1, 1997.

M. Stanley Givens, Anderson, Fugate, Givens, Counts & Belisle, Johnson City, for plaintiff-appellant.

John S. Taylor, McKinnon, Fowler, Fox & Taylor, Johnson City, for defendants-appellees.

OPINION

FRANKS, Judge.

The issue on this interlocutory appeal granted pursuant to T.R.A.P. Rule 9, is whether the lease between the parties is too broad to be enforceable, as was held by the Trial Court.

Since 1994, appellant has been a tenant in appellees' shopping center, and the lease contains the following clause During the term of this Lease, the Tenant shall have the exclusive and sole right to operate a retail store in the shopping center, the principal business of which is the selling of any one of the following classes of merchandise, to wit: hardware, housewares, automobile supplies, electrical plumbing, toys, home furnishings, sporting goods, appliances and paints. No other retail store in the shopping center shall devote more than twenty-five percent (25%) of its sales to the aggregate of the foregoing classes of merchandise.

In 1996, appellant was made aware that appellees had rented space in the shopping center to a Dollar General Store and Auto Zone. Appellant filed suit to prevent what was seen as a violation of its lease by the landlord.

On the hearing for an injunction, appellant's owner testified that the products sold at Dollar General Store overlapped with 68% of the merchandise sold at his store, such as electrical equipment, lawn and garden furniture, appliances, paint, sporting goods, and toys. He also testified that 7.9% of appellant's sales came from automotive products, which he believed would be negatively affected by the competition of Auto Zone. Appellees' witnesses testified that the restrictive covenant was broader than that in a typical commercial lease and that, in their opinion, the additional businesses would bring extra traffic to appellant and improve its business.

The Trial Court denied appellant's application for an injunction, finding that the clause in the lease was too broad to be enforceable and that there had been "no demonstration that the Plaintiff would suffer irreparable harm from this time until we try this lawsuit."

Restrictive covenants are frequently inserted into shopping center leases, for the purpose of protecting the tenant against competition within the center. 49 Am.Jur 2d Landlord and Tenant § 70 (1995). We have been referred to no Tennessee case which has addressed their enforceability. However, many other states have considered such clauses and found them enforceable so long as they are reasonable in scope. C.K. & J.K., Inc. v. Fairview Shopping Center Corp., 63 Ohio St.2d 201, 407 N.E.2d 507 (1980); Alexander's Dep't Stores v. Arnold Constable Corp., 105 N.J.Super. 14, 250 A.2d 792 (Ch.Div.1969); National Super Markets, Inc. v. Magna Trust Co., 212 Ill.App.3d 358, 156 Ill.Dec. 469, 570 N.E.2d 1191 (1991); Mendell v. Golden-Farley of Hopkinsville, Inc., 573 S.W.2d 346 (Ky.Ct.App.1978). The rationale behind these decisions is the recognition that rather than restricting competition, such covenants serve to facilitate trade and induce tenants to rent in a particular shopping center.

The reasonableness of a restrictive covenant is examined in terms of its scope and effect. C.K. & J.K., Inc. The restriction in this case is not unreasonably broad by these criteria. In terms of...