Uptown Food Store, Inc. v. Ginsberg

• Decision Date: 16 July 1963
• Docket Number: No. 50969,50969
• Citation: 255 Iowa 462,1 A.L.R.2d 765,123 N.W.2d 59
• Parties: , 1 A.L.R.3d 765 UPTOWN FOOD STORE, INC., An Iowa Corporation, Appellant, v. T. A. GINSBERG and Helen Ginsberg, Appellees.
• Court: Iowa Supreme Court

Page 59

123 N.W.2d 59

255 Iowa 462, 1 A.L.R.3d 765

UPTOWN FOOD STORE, INC., An Iowa Corporation, Appellant, v. T. A. GINSBERG and Helen Ginsberg, Appellees.

No. 50969.

Supreme Court of Iowa.

July 16, 1963.

McManus & McManus, Keokuk, for appellant.

George L. Norman, Keokuk, for appellees.

THORNTON, Justice.

Plaintiff's suit is to enforce a negative covenant contained in a lease. Plaintiff corporation leased realty, equipment and fixtures from defendants for the purpose of merchandising 'groceries, meats, produce and allied lines of merchandise customarily sold in supermarkets and no other.' The lease provides the rental shall be paid on a percentage basis with a minimum and maximum. The term was for five years commencing September 28, 1954. The lease provided for renewal periods and plaintiff is in possession at all times pertinent under an agreed renewal. The lease contained the following paragraph:

'13. Lessors expressly grant to the Lessee all rights and privileges in and to the trade name 'Uptown Food Stores' under which trade name the Lessors have heretofore conducted a food store business in the City of Keokuk, Lee County, Iowa. The Lessors further expressly agree not to engage in the business of food retailing, either directly or indirectly, in the City of Keokuk, Lee County, Iowa, other than at the store presently operated by them and located at 810 Main Street, Keokuk, Lee County, Iowa, or in any way to compete with the business of the Lessee in the City of Keokuk, Lee County, Iowa, during the term of this lease or any extension or renewal thereof except as hereinabove provided for.'

The lease was signed, 'T. A. Ginsberg, Helen K. Ginsberg, Lessors.'

Plaintiff contends defendant T. A. Ginsberg has violated the negative covenant in paragraph 13 by financing, assisting in financing and assisting his 26 year old son, Ronald Ginsberg, in the operation and management of a supermarket known as the Big G Discount Store in Keokuk.

The trial court held the covenant of the defendant lessors was joint and not several and was not violated by the acts of T. A. Ginsberg alone. It also held the actions of T. A. Ginsberg did not violate the terms of the covenant.

Plaintiff urges for reversal here the covenant was several as well as joint, i. e., one of the covenanters acting alone could violate the covenant, and the acts of T. A. Ginsberg violated the covenant. Another proposition to sustain the trial court is raised by appellee. The trial court did not mention it but defendant so pleaded in his answer. It is, that the provision itself is invalid because of the provision permitting defendants to operate their store at 810 Main St. and enforcement would not be to protect plaintiff but is an invalid and unenforceable penalty against defendant. The action was dismissed by the court as to defendant Helen Ginsberg before trial. This is not argued here.

It is apparent, if the trial court was correct on either proposition passed on, or defendant is correct on the matter urged to sustain the decree, the decree of the trial court must be affirmed. On the other hand it is necessary for plaintiff to prevail as to all to obtain a reversal.

I. Our review in this equity action is do novo. Rule 334, Rules of Civil Procedure, 58 I.C.A. The scope of review is the entire action. Cuthburtson v. Harry C. Harter Post No. 839 of the V.F.W., 245 Iowa 922, 927, 65 N.W.2d 83, 87. Defendant may properly sustain the decree by pleaded propositions not reflected in the trial court's findings and conclusions, Brandt v. Schucha, 250 Iowa 679, 682, 96 N.W.2d 179, 181, and matters not argued here are waived, rule 344(a)(4) (Third), Rules of Civil Procedure.

II. The trial court's conclusion of law that defendants are bound jointly and not severally, i. e., that one of the signers cannot alone violate the covenant, but to violate the covenant they must act jointly, finds support in Streichen v. Fehleisen, 112 Iowa 612, 84 N.W. 715, 51 L.R.A. 412; Rapalee v. John Malmquist & Son, 165 Iowa 249, 145 N.W. 279; and Barron v. Collenbaugh, 114 Iowa 71, 86 N.W. 53. See also Williams v. Mercury Record Corporation, 295 F.2d 284 (7th Cir. 1961).

In Streichen defendant and his brother ran a lumber yard under the name of Boone Lumber Company. They sold the 'real estate, office, sheds, and scales of the Boone Lumber Company.' The covenant of the two partners was, '* * * the undersigned hereby agree that they will not state a new or fourth lumber yard in the city of Boone, * * *.' Each signed individually. It was claimed there as here the manner of signing indicated an individual agreement. We held the contract was joint, stating at page 615 of 112 Iowa, page 716 of 84 N.W.:

'* * * for he had never agreed not to engage in the business as an individual. His contract, as a member of the partnership, was that the firm would not enter said business within the time specified. The contract might have been so drawn as to cover the individual acts of each partner, and it may have been the intention of the plaintiffs to reach such a result, but it does not do so; and the law, not favoring contracts in restraint of trade, will construe it strictly. Greenhood Public Policy, 735; Haldeman v. Simonton, 55 Iowa 144, 7 N.W. 493.'

We further pointed out in Streichen that section 3465, Code of Iowa, 1897, now section 613.1, Code of Iowa, 1962, I.C.A., which provides, 'Where two or more persons are bound by contract * * * whether jointly only, or jointly and severally, or severally only, * * * the action * * * may * * * be brought against any or all of them.' had no application because there was not a violation of the contract.

In Rapalee the action was against the partnership and its members individually. The covenant under consideration was, 'said John Malmquist & Son will not directly or indirectly engage in the marble and granite business.' The firm name was signed 'John Malmquist & Son.' We again held an act of an individual partner did not violate the covenant. We said at page 251 of 165 Iowa, page 280 of 145 N.W.:

'The fact that this contract provides that said John Malmquist & Son will not directly or indirectly engage in such business does not change the rule, because it is the firm which is not to engage in the business directly or indirectly.'

It was again pointed out the contract might have been drawn to cover the facts of the individual partners.

In the Barron case, supra, an action for damages for breach of a contract not to engage in the livery business, the contract provided, 'agrees * * * that he [first party] will not re-engage in the livery business * * * during the time said parties of the second part may be engaged in said livery business on the above-named premises.' One of the second parties assigned his interest in the contract to the other, the plaintiff. We there held because of the wording of the contract the defendant coventer could re-engage in the livery business after second parties ceased to do business as a partnership.

In each of the above cases we cited Haldeman v. Simonton, 55 Iowa 144, 7 N.W. 493, as authority for the statement that the contract being in restraint of trade is to be strictly construed. What is actually said in Haldeman is, at page 146 of 55 Iowa, page 494 of 7 N.W.: 'The contract, [sale of medical practice] being in restraint of trade and personal liberty, should not be construed to extend beyond its fair import.'

In the Williams case, supra, plaintiff sought a declaratory judgment. He, together with four others, had entered into a contract to make phonograph records for defendant. Defendant contended for plaintiff alone to make records for another company violated his contract. The contract provided, '* * * the Artist agrees * * * he will not perform any material for any person other than [defendant].' The Court of Appeals at page 286 of 295 F.2d said:

'The artist parties to the contract are listed at the outset not only by their individual dividual names but also by the group name. The wording of the minimum recording requirements, the provisions for payment of royalties, repeated reference throughout the body of the contract to the group name, and the use of the group name in the signature, all support the construction that Mercury was dealing with these singers as a group singing together, and not as so many individuals singing solo performances.'

No mention is made by the Court of Appeals of construing the contract strictly.

In Sickles v. Lauman, 185 Iowa 37, 45, 169 N.W. 670, 673, 4 A.L.R. 1073, a case dealing with the assignment of the covenantee's interest in a covenant not to compete, we said:

'In discussion courts sometimes indulge in the loose generality that the law does not favor contracts in restraint of trade, and therefore an agreement by which a party undertakes not to enter a specific business in a specified city or town will be strictly construed. What the law does disfavor are contracts which unreasonably restrict the individual in his liberty of occupation and employment. But there is no public policy or rule of law which condemns or holds in disfavor a fair and reasonable agreement of this character, and such a contract is entitled to the same reasonable construction and the same effective enforcement that are accorded to business obligations in general.'

The above from the Sickles case places the construction of the contract in this case in proper perspective. It is not contended the contract is unreasonable as to size of the restricted area, the time element, service performed by covenanter, or the general circumstances involved. See Federated Mutual Implement and Hardware Insurance Company v. Erickson, 252 Iowa 1208, 1212, 110 N.W.2d 264, 266; Cogley Clinic v. Martini, 253 Iowa 541, 112 N.W.2d 678; Mutual Loan Co. v. Pierce, 245 Iowa 1051, 65 N.W.2d 405; and Brecher v. Brown, 235 Iowa 627, 17 N.W.2d 377. Nor would the contract be unreasonable in any respect if it does...