Davidson Bros., Inc. v. D. Katz & Sons, Inc. case brief

Davidson Brothers, Inc. v. D. Katz & Sons, Inc. case brief summary
643 A.2d 642 (Super. Ct. App. Div. 1994)

CASE SYNOPSIS

Plaintiff corporation appealed a judgment from the Superior Court of New Jersey, Middlesex County, that held a covenant prohibiting the use of property as a supermarket was unenforceable against defendant city, who purchased the property for use as a supermarket in an effort to promote economic development in the downtown area.

CASE FACTS
Plaintiff corporation closed one of its supermarket's in the downtown area, and sold the property to a merchant, who then sold the property to defendant city. Defendant then leased the property to another company that operated a supermarket at the location in violation of a covenant prohibiting the operation of a supermarket at that location contained in the contract of sale from plaintiff. 

DISCUSSION

• The court affirmed the judgment which held that plaintiff's covenant adversely impacted the public interest and therefore was unenforceable. 
• Closing the supermarket caused difficulties and hardships on the downtown citizens, who lost the only opportunity to purchase food at a reasonably close location. 
• Plaintiff's restriction impeded the relocation of another supermarket operation to the downtown area. 
• This obstacle to remediation efforts by defendant city was so contrary to the public policies expressed in the New Jersey Urban Enterprise Zone Act, N.J. Stat. Ann. §§ 52:27H-60 to H89, and similar acts, that it represented a scorched earth policy that under the circumstances was unreasonable and unenforceable.

CONCLUSION
The court affirmed the judgment that held plaintiff corporation's covenant prohibiting the use of a property sold to defendant city for a supermarket was unenforceable. The covenant was so contrary to the public policy of promoting growth in the downtown area that the covenant was in these circumstances unreasonable and unenforceable.

NOTES
-Having incl. in a deed a restrictive covenant that the property being conveyed would not be used as a supermarket, P, the grantor, sought to enforce the covenant against Housing Auth (D), a subsequent purchaser with actual notice of the covenant.

Rule: A noncompetition covenant will be enforced against a subsequent purchaser with actual notice if the covenant is reasonable.

“Reasonableness Factors”

1. intention of the parties when the covenant was executed
2. if consideration was paid in exchange for the covenant
3. whether the covenant clearly and expressly set forth the restrictions
4. whether the covenant was in writing and recorded
5. whether the covenant was reasonable in time/duration
6. whether an unreasonable restraint on trade
7. whether interfered with public interest
8. whether changed circumstances now make covenant unreasonble
   1. the hardship which enforcement at the present time will impose on the covenantor (or his successor) has substantially increased since the time of the covenant due to unforeseen circumstances
   2. the benefit which enforcement will give to the covenantee has sub. decreased.