Daily Development for Thursday, January 17, 2002

 

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

 

RESTRICTIVE COVENANTS; USE RESTRICTIONS: (2 cases) (1)  Deed provision  prohibiting "use" of property as drug store also prohibited use as parking lot for drug store to be constructed on adjacent, unrestricted parcel.  Eckerd Corp. v. Corners Group, Inc.,

786 So.2d 588 (Fla.App. 5 Dist. 2000). (2) Deed provision prohibiting "operation of a drug store" on property also prohibited use as parking lot for adjacent pharmacy. Eckerd Corp. v. Zaremba Land Dev., L.L.C., 790 So.2d 591 (Fla.App. 5 Dist. 2001)

 

Obviously these two cases involve skirmishes in the "drugstore wars" earlier commented upon here.  In Corners Group, Eckerd accumulated a group of parcels on which to build a new drug store facility.  It had intended to acquire even more area and built a "prototype" drug store, but was unable to complete this acquisition.  When Eckerd simply built its "standard" model drug store facility, the instant parcel became surplus and it sold it to others.  Perhaps keenly aware that its competition was engaged in a practice of locating new drug store facilities as close as possible to its new facilities, Eckerd included in the sale of the new parcel a restriction that prohibited drug store competition on the parcel:

 

"No part of the property shall be used as a pharmacy or drug store or for the sale or offer for sale of any pharmaceutical products for a period fifty (50) years from [date of sale] and this restriction shall run with the land."

 

In Rosemont, Eckerd was the tenant in a shopping center.  The developer resolved to sell some of the property within the center.   Probably pursuant to "exclusive use" protections contained in Eckerd's lease, the developer included the following language in the deed:

 

"As long as the Eckerd Drug Store (or other similar drug store) occupies space in the Lake Conway Woods Shopping Center, the Premises shall not be used to operate a drug prescription department, or any store commonly known as an Army Navy store, drug store, surplus store, discount store, or any store or business devoting more than 1,000 square feet of retail floor space to the sale of cosmetics, health and beauty aids, and related items."

 

In both cases, parties who acquired the parcels in question resolved to use the parcels for parking facilities supporting a competing drug store. In both cases, the trial court, pursuant to the tradition established in Florida cases generally of construing restrictive covenants narrowly, concluded that the restrictions in question did not prohibit the use of the parcels as parking lots, even though related to pharmacy operations.  And in both cases, the Florida Supreme Court ultimately reversed.

 

Although the Florida Supreme Court acknowledged that there was an established common law tradition in Florida that "covenants running with the land must be strictly construed in favor of the free and unrestricted us of real property," it concluded that the "unambiguous intent" of the parties in this case was that parking lots supporting competing pharmacies were within the restriction and should not be permitted.

 

The court noted that this was a case of first impression in Florida.  It noted a contrary case in Pennsylvania and cases in accord with its position in Texas and Colorado.  The only other cases apparently that could be found dealt with the question of whether a restriction prohibiting "business purposes" or requiring "residential" use prohibited the construction of parking related to a business on adjacent unrestricted property.  These latter cases, arguably, present distinct issues, since parking supporting a business clearly is "business" itself, while parking supporting a pharmacy arguably is parking, and not a pharmacy. There was a dissent in the instant case that made this point.

 

Comment 1: This case is a 2-1 appellate decision.  It's safe to say that the "jury's still out" on the general issue.

 

Comment 2: Although the majority likely is correct that Eckerd had in mind prohibiting any use that might possibly be associated with a competing drug store, there may be some merit in requiring that parties with this objective in mind clearly so state.  What if, for instance, it would have been necessary to run a sewer line below ground on the restricted parcel in order to serve a pharmacy on a nearby adjacent parcel?  Was this prohibited?  Even if the local utility or municipality was proposing to condemn the property for that purpose?  Was Eckerd entitled to compensation in that event?  What if, after the restriction is created, sewer and water lines are installed and thereafter hooked up to a competing store?  For that matter, what if a public parking lot is created and later patrons of a competing store park there? Is it really sufficient to say that "we don't have those cases yet?" Wouldn't it be better to say that people who desire to restrict the alienability of land after they sell it should be very, very precise as to the nature of the restriction?  Just asking.

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