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

Brief Fact Summary. A deed restricted the use of property as a supermarket, which negatively affected the city.

Synopsis of Rule of Law. If a covenant is contrary to public policy, it may not be enforced.

Facts. Davidson Bros., Inc. (Plaintiffs) owned supermarkets. At one time, he owned a supermarket in the inner city, which he had to close because its volume decreased. Plaintiffs sold the property to D. Katz & Sons, Inc. (Defendant), a rug merchant. A covenant in the deed stated that the property could not be used as a supermarket, and that the covenant ran with the land. Defendant then leased the property to the local Housing Authority that planned to use it as a supermarket because the neighborhood was in need of one. The residents did not have easy access to another supermarket because many did not have cars. Plaintiffs seek to enforce the covenant.

Issue. If a covenant is contrary to public policy, does it still have to be enforced?

Held. No.
The covenant was so contrary to public policy that it should no longer be a valid, enforceable obligation.
The city where the store is located has been the focus of redevelopment and revitalization. Many moderate-income housing projects are located downtown. The residents depend on the supermarket for their shopping needs. Many do not have cars to go to other locations. The closing of the supermarket was a hardship.
When a supermarket leaves a neighborhood, many other merchants leave. Food becomes more expensive. A struggling neighborhood struggles even more because of the effects of the withdrawal of a supermarket.
The property in question could easily be reconverted to supermarket use, when other properties could not. Having a supermarket is essential to restore the community as a desirable place to live, work, and shop.
The deed restriction impeded the relocation of another supermarket operation in the area because there were no economically viable substitute supermarket locations. The covenant causes a hardship because of the withdrawal of a supermarket as well as the damage to the ongoing efforts to revitalize the city. The covenant is so contrary to the public interest so is unenforceable.

Discussion. When a covenant is no longer reasonable and ends up hurting a community, it will not be enforced.