Neiman-Marcus Co. v. Hexter, NEIMAN-MARCUS

• Citation: 412 S.W.2d 915
• Decision Date: 03 February 1967
• Docket Number: No. 16850,NEIMAN-MARCUS,16850
• Parties: COMPANY et al., Appellants, v. Louis J. HEXTER et al., Appellees. . Dallas
• Court: Court of Appeals of Texas. Court of Civil Appeals of Texas

Page 915

412 S.W.2d 915

NEIMAN-MARCUS COMPANY et al., Appellants, v. Louis J. HEXTER et al., Appellees.

No. 16850.

Court of Civil Appeals of Texas Dallas.

Feb. 3, 1967.

Rehearing Denied March 10, 1967.

Sol Goodell, of Thompson, Knight, Simmons & Bullion, J. Richard Gowan, of Johnson, Bromberg, Leeds & Riggs, Dallas, for appellants.

Alfred Sallinger and H. Louis Nichols, of Saner, Jack, Sallinger & Nichols, Dallas, for appellees.

BATEMAN, Justice.

The appellees Louis J. Hexter, Sam Lobello, Sam Lobello, Jr. and Ruby D. Hexter brought this suit for declaratory judgment against the appellants Neiman-Marcus Company and Raymond D. Nasher. At the conclusion of a nonjury trial the court rendered the judgment requested by appellees.*

In 1947 appellees, owners of a long term lease of several acres in the City of University Park, Dallas County, Texas, developed the tract as a shopping center known as Varsity Village, and later as Preston Center. In 1948 appellees subleased to Neiman-Marcus Company (herein called Neiman-Marcus) a part thereof on which Neiman-Marcus constructed a store building and maintained a store for approximately 15 years. This sublease was for a term of 25 years, with a 25-year renewal option. On July 20, 1965 Neiman-Marcus assigned its rights under this sublease, and its interest in the store building, to the appellant Nasher, retaining vendor's and deed of trust liens thereon to secure payment of part of the purchase price. The assignment contained the following provision:

'Nasher further expressly agrees, covenants and warrants that, without the prior written consent of Neiman-Marcus, he will not prior to July 20, 1985 sell, assign, transfer, lease or sublease the Preston Center Store Buliding, or the demised premises, or any part of either, to Bonwit-Teller, Bergdorf-Goodman, Lord & Taylor, or any other comparable specialty store dealing in luxury merchandise, or to Lou Lattimore, Inc. or Marie Leavell Specialty Shop, which are two stores currently dealing in luxury women's apparel and accessories in Dallas, Texas.'

The record also shows that on May 3, 1963 the appellant Nasher, who had developed NorthPark Shopping Center on Northwest Highway, slightly less than two miles from the property in question, leased store premises therein to Neiman-Marcus, which opened and operated a retail store therein for the sale of luxury merchandise. That lease prohibited Neiman-Marcus from managing, operating or conducting or having any interest in any retail store within five miles of the NorthPark Shopping Center, except that Neiman-Marcus might continue to operate its store located in Preston Center, provided it was not operated under the name of Neiman-Marcus or any comparable name, or as 'a typical Neiman-Marcus store,' or for the sale of merchandise within the price range of that being sold from its NorthPark store.

The trial court declared the above quoted provision in the assignment to be void and unenforceable as being in violation of the anti-trust laws of Texas, Vernon's Ann.Civ.St. Art. 7426, and the appellant Neiman-Marcus, by its first point of error on appeal, challenges the correctness of this declaration.

Although the lease between Nasher and Neiman-Marcus covering the NorthPark premises was made in May 1963, and the assignment to Nasher of the Preston Center lease in July 1965, Nasher testified that they were parts of one transaction. Appellees do not contend that the leasing of the NorthPark premises to Neiman-Marcus, standing alone, would violate the Texas anti-trust laws, but argue that the effect of that transaction, coupled with the restrictive assignment of the Preston Center lease to Nasher, was calculated to create a monopoly and eliminate competition with the Neiman-Marcus store in NorthPark Shopping Center within a radius of five miles thereof, which appellees say comprises an area of 75 to 80 square miles. We do not agree with this contention of appellees.

Neiman-Marcus' lease covering premises in Varsity Village, or Preston Center, did not obligate it to build a building thereon or to occupy it or to conduct any particular kind or quality of business therein. Moreover, it accorded to Neiman-Marcus the right to assign the lease and be relieved of all obligations thereunder. It did not provide for a rental based on a percentage of sales but only a fixed ground rent.

As the owner of the Preston Center lease, Neiman-Marcus had the right to require the restriction contained therein as a condition to its assignment of the lease to Nasher. In doing so, it was only exercising 'one of the inherent rights incident to the ownership of real property,' which was 'within the well-recognized exception to the general rule' which might render such agreement or combination unlawful under the anti-trust statutes. Celli & Del Papa v. Galveston Brewing Co., Tex.Comm.App., 227 S.W. 941, 942. The same may be said of Nasher's right to require the restrictions contained in his lease to Neiman-Marcus covering the NorthPark store.

We think this court correctly stated the applicable rule in Weinkrantz v. Southwestern Life Ins. Co., Tex.Civ.App., 264 S.W. 550, no wr. hist., as follows:

'The right of a lessor to control the use of his premises is undisputed. He may insert such conditions in the lease contract with reference thereto as he pleases, and it is not for the lessee to say that they are unreasonable; thus covenants not to carry on a particular business or not to carry on any business except the one named in the lease contract is binding and may be enforced.'

See also State v. Gulf Refining Co., Tex.Civ.App., 279 S.W. 526, wr. ref.; Schnitzer v. Southwest Shoe Corp., Tex.Sup.1963, 364 S.W.2d 373; and Weil v. Lewis (Ann) Shops, Inc., Tex.Civ.App., 281 S .W.2d 651, wr. ref.; 35 Tex.Jur.2d, LANDLORD and TENANT, § 57, p. 545; Redland Fruit Co. v. Sargent, 51 Tex.Civ.App. 619, 113 S.W. 330, no wr. hist.

If the combination of the restrictions contained in the two instruments creates a monopoly or is in restraint of trade (and we do not hold that it is), such is in our view a fortuitous circumstance resulting from contracts between the appellants which they had a legal right to make and concerning which neither of them is complaining.

Appellant Neiman-Marcus' first point of error is sustained.

The trial court also declared in its judgment that certain restrictive provisions contained in Section XVII of the sublease from appellees to Neiman-Marcus were personal covenants to Neiman-Marcus and no longer in force and effect or binding upon appellees since Neiman-Marcus no longer operated its store upon the leased premises. Neiman-Marcus by its second point of error on appeal, and Nasher by his only point of error, attack this part of the judgment contending that, except as to certain parts here-matter noted, the covenants in question run with the land and remain in force and effect for the life of the sublease.

The covenants in question are contained in Paragraph XVII of the sublease and are as follows:

'Lessor covenants and agrees that during the life of this lease and any extension thereof no property in Varsity Village not included in the premises hereby leased will be leased by it for any of the following uses, to wit: Saloon, package store, fish market, drive-in restaurant, hamburger stand (where food and drink are served in automobiles), manufacturing, processing, dwelling or apartment purposes, or, without Lessee's written approval, no apparel mercantile establishment from outside the City of Dallas comparable to such apparel stores as Sak's Fifth Avenue, Bonwit-Teller, Peck & Peck, or Bullock's Wilshire, and no specialty store which is either a subsidiary or affiliate of any department store or specialty store now located in Dallas, or owned or...