Carusos v. Briarcliff Inc. , 76 Ga. App. 346 ( 1947 )

1. An action for breach of contract brought against two defendant corporations, charging conspiracy between them resulting in such breach, where the petition shows on its face that one of said corporations was created after the alleged breach of contract, is subject to the general demurrer of the corporation created after such alleged breach.

2. The measure of damages recoverable for a lessor's breach of covenant not to rent other stipulated premises for a competing business is the difference in value between the plaintiffs' leasehold with the covenant against competition unbroken and the same leasehold with the covenant broken. The value of said leasehold is not controlled by the stipulated rental therefor, nor the profits which the tenant could have realized from the operation of his business without the adjacent competing business. However, allegations and evidence of loss of profits are material to show the damage sustained by the lessee, in accordance with the rule herein stated. See 32 Am. Jur. 163; Sturgis v. Frost, 56 Ga. 189 (5); Juchter v. Boehm, 67 Ga. 535 (5); Parker v. Levin, 285 Mass. 125 (188 N.E. 502, 90 A.L.R. 1446); Hayes v. Atlanta, 1 Ga. App. 26 (6) (57 S.E. 1087).

3. A special demurrer goes to the structure merely, not to the substance; it must distinctly and particularly specify wherein the defect lies, and the party thus demurring is obliged to lay his finger on the very point contended to be defective. See Martin v. Bartow Iron Works, 35 Ga. 323; Douglas, Augusta Gulf Ry. Co. v. Swindle, 2 Ga. App. 550 (59 S.E. 600).

4. A petition alleging a contract, a breach thereof, and resultant damages, proof of which would entitle the plaintiff to recover some amount, is not subject to general demurrer. See Cothran v. Witham 123 Ga. 190 (51 S.E. 285); Crane v. Massey, 181 Ga. 482 (183 S.E. 59).

DECIDED OCTOBER 29, 1947. ADHERED TO ON REHEARING DECEMBER 18, 1947. On June 11, 1946, Mrs. Mary Carusos and Nick Carusos filed their petition for a breach of contract against Briarcliff Inc. and Briarcliff Plaza Inc. Omitting formal parts, the petition alleged: On October 9, 1939, Nanasa Investment Company entered into a lease agreement with the plaintiffs for the lease of certain store properties in Briarcliff Plaza for a period of fifteen years, a copy of said lease contract being attached to said petition. Paragraph 30 of said contract provided: "Lessor agrees not to lease another store for the purpose of dry cleaning or pressing where such work is to be done in any of the premises at Briarcliff Plaza." The plaintiffs under said lease agreement entered into possession of the premises and established a lucrative business. On or about December 30, 1942, Nanasa Investment Company consolidated with other named corporations under the name of "Briarcliff Inc.," and by reason of such consolidation, the defendant, Briarcliff Inc., became the owner of the leased premises and the lease contract and received the monthly rental provided therein. On or about November 24, 1944, Briarcliff Inc. entered into a lease agreement with E. J. Matthews for a store in Briarcliff Plaza for a period of two years, with the right of renewal, and provided in said lease that the property would be used as a dry-cleaning business and laundry pick-up. The latter lease was in violation of the terms and conditions of the plaintiffs' lease, as hereinbefore set forth.

As a result of the breach of the plaintiffs' contract by Briarcliff Inc., Matthews opened a new dry-cleaning business in the most desirable location on Briarcliff Plaza, and was soon taking most of the plaintiffs' customers and business away and left them with only a small part of the business which they had for five years labored and expended a large sum of money to establish. The newly established business was an immediate success to the extent of getting business amounting to $3000 a month or more, all of which was taken from the plaintiffs' business and was the business and income which was contemplated and anticipated by the parties to the original lease contract made with the plaintiffs, and which the lessor knew would be the result. By reason of the breach of contract, the amount of business taken from the plaintiffs, reduced to the present value, during the remaining term of the lease, of $242,954.31, for which the plaintiffs allege they are entitled to recover against the defendant by reason of the breach of their contract.

The petition further alleged that on January 16, 1945, a new corporation, known as Briarcliff Plaza Inc., was chartered; and that on January 20, 1945, Briarcliff Inc. made and delivered its deed conveying the Briarcliff Plaza property to Briarcliff Plaza Inc. for a consideration expressed in the deed and the assumption by the new company of a large outstanding indebtedness. The petition also recited other facts and acts between the named defendant corporations, attempting to show a conspiracy to breach the contract set forth in the petition.

Each of the named defendants employed separate attorneys and filed separate demurrers to the petition, consisting of both special and general grounds.

The setting forth of the detailed grounds of the special demurrer of the defendant Briarcliff Plaza Inc. is deemed unnecessary to this decision. The defendant, Briarcliff Inc., demurred by special ground 1 to part of paragraph 11 of the petition, as follows — "each of which helped to support the others (different branches of the business operated by plaintiffs on leased premises) by bringing business of like kind to each department, (a) by the customers for dry cleaning and pressing getting shoe shines or repair job done, or (b) getting a hat cleaning job done, so that customer could get all desired work done at the one place; that the petitioners immediately began the task of building up and establishing the business contemplated and which was known and understood by the owner of the property, and evidenced by the lease contract, which granted to petitioners the exclusive rights therein stipulated" — on the grounds: (a) that said allegations are immaterial and irrelevant to any cause of action that the plaintiffs might have; (b) said allegations are not germane to any cause of action set forth in said petition; (c) said allegations are prejudicial, in that they attempt to attract the sympathy of the jury to the plaintiffs and to inflame the jury against the defendant; (d) said allegations attempt to lay the basis for a measure of damages that is not the true legal measure of damages for any cause of action set forth in the petition. Special grounds 2, 3, 5, 6, 7, 8, 9, and 17 of the demurrer to the whole of paragraphs 12, 13, 16, 17, 21, 22, 23, and 32 are the same as the sub-grounds to part of paragraph 11 as herein set forth. Grounds 10, 11, 12, 13, 14, 15, and 16 of the special demurrer of said defendant interposed to paragraphs 24, 25, 26, 27, 28, 30, and 31 of the petition contain the same sub-grounds as hereinbefore set forth, with the additional ground, (e) that the allegations of said paragraph constitute mere conclusions of the pleader and are not in any way sustained by any facts set forth in the petition. Grounds 18, 19, and 20, interposed to the whole of paragraphs 33, 34, and 35 of the petition, contain the same sub-grounds designated as (a), (b), (c), (d) and (e) hereinbefore set forth with the additional sub-ground, (f) that the damages sought to be recovered by the allegations are too remote and speculative to be the basis of a legal recovery in favor of the plaintiffs and against this defendant. Special ground 4 of the special demurrer of said defendant is interposed to the whole of paragraph 14 of the petition, for the reason that the allegations thereof are redundant and repetitious of the allegations set forth in paragraph 4 of the petition. Special grounds 21 and 22 of said special demurrer are interposed to paragraphs (b) and (c) of the prayer of the plaintiffs' petition, said prayers calling for the production of certain records of transactions between the defendants, Briarcliff Plaza and Briarcliff Inc., and said demurrer being based upon the grounds of irrelevancy and prejudice to the defendants in the eyes of the jury. Grounds 23 and 24 of the demurrer to the whole petition — on the grounds that the petition fails to allege the proper measure of damages, and that the items sought to be recovered as damages are too remote and speculative to be the basis of any legal recovery in favor of the plaintiffs and against the defendant — were not passed upon by the trial court.

Upon the hearing of said demurrers, the trial court sustained the general demurrer interposed on behalf of the defendant, Briarcliff Plaza Inc., and dismissed the petition as to it. This judgment is assigned as error on behalf of the plaintiffs. With reference to the demurrers of the defendant, Briarcliff Inc., the trial court entered an order as follows: "The above and foregoing demurrer coming on to be heard, and after hearing argument, it is considered, ordered, and adjudged by the court that all the grounds and sub-grounds set out in paragraphs 1 to 22 inclusive should be, and they are, hereby sustained, and the paragraphs of the petition and the language of the petition referred to are stricken from the petition. The above grounds of demurrer being sustained, it follows, as a matter of course, that ground 25 of the demurrer, which is a general ground, should be, and is, hereby sustained. Plaintiff is given twenty days in which to amend his petition. Unless so amended, ground 25 will be sustained and the petition dismissed. The other grounds of the demurrer, namely 23 and 24, are not passed upon."

To this judgment and order, the plaintiffs filed their exceptions pendente lite, and thereafter on May 22, 1947, the judge passed the following order: "The plaintiffs having filed no amendment to their petition as required by the order on the defendant's demurrer, dated the 14th day of April, 1947, the plaintiffs' petition is dismissed." Subsequently the plaintiffs filed their bill of exceptions, and bring the case to this court that the errors alleged may be considered and corrected. 1. The contract sued upon was made October 9, 1939, and the alleged breach thereof occurred on November 24, 1944. Briarcliff Plaza Inc. was not chartered until January 16, 1945, almost two months after the cause of action accrued. The petition did not allege that the defendant, Briarcliff Plaza Inc., had any connection with the making of the alleged contract or induced Briarcliff Inc. to break the contract. The court therefore properly sustained the general demurrer of the defendant Briarcliff Plaza Inc. SeeMoore v. Diamond Match Co., 182 Ga. 438, (185 S.E. 814).

Peoples Loan Co. v. Allen, 199 Ga. 537 (34 S.E.2d 811), cited by the plaintiffs, is not applicable to the facts in the instant case, because there the conspiracy continued after the charter was granted to said corporation. In the instant case, the cause of action accrued prior to the granting of the charter.

2. Sub-ground (d) of grounds 1 to 3 inclusive and 5 to 20 inclusive of the demurrer of the defendant, Briarcliff Inc., it will be recalled is in the following language: "said allegations attempt to lay the basis a measure of damages that is not a true legal measure of damages for any cause of action set forth in the petition." In Maggioni v. Postal Telegraph-Cable Co., 28 Ga. App. 55 (110 S.E. 309), the language of the special demurrer therein, with reference to the measure of damages, was as follows: "because the allegations as to the amount of damage suffered by the plaintiffs are not sufficient, under the law, to show that the amount prayed for is the lawful measure of damage, or that said amount could be lawfully recovered herein." In headnote 2 (a) of said case it was held that this ground was not sufficiently specific and that the court erred in sustaining it. A comparison of the language of the demurrer in the instant case and in the Maggioni case, supra, indicates a possible lack of specificness of the demurrer in the instant case. However, in view of the importance of a decision on the merits of the instant case with reference to the proper measure of damages, and inasmuch as the language in the two cases is not sufficiently identical to require a holding against the demurrer in the instant case, the same is being given consideration. The measure of damages recoverable for a lessor's breach of covenant not to rent other stipulated premises for a competing business is the difference in value between the plaintiffs' leasehold with the covenant against competition unbroken and the same leasehold with the covenant broken. The value of said leasehold is not controlled by the stipulated rental therefor, nor the profits which the tenant could have realized from the operation of his business without the adjacent competing business. However, allegations and evidence of loss of profits are material to show the damage sustained by the lessee, in accordance with the rule herein stated. See 32 Am. Jur. 163; Sturgis v. Frost,56 Ga. 189 (5); Juchter v. Boehm, 67 Ga. 535 (5); Parkerv. Levin, 285 Mass. 125; Hayes v. Atlanta, 1 Ga. App. 26 (6). A covenant contained in a lease, binding the landlord not to rent adjacent property to another to conduct a competitive business, is placed in such lease for the benefit of the lessee who first rents from the landlord for the purpose of conducting a specific business upon the premises leased without competition within a close proximity of such business. Such a provision contained in a lease is binding on the landlord and his violation thereof constitutes a breach of the contract. See Rosen v.Wolff, 152 Ga. 578 (110 S.E. 877). We have been unable to find a decision of either of the appellate courts of this State directly in point fixing the proper measure of damages in such cases. However, it appears that the weight of authority fixes the rule as herein stated. Although in the instant case the plaintiffs seek to lay a basis for recovery on the loss of future profits, which is not the true legal measure, nevertheless evidence thereof is admissible and pleadings in support thereof proper in order that the jury may properly estimate the value of the leasehold estate before and after the covenant is broken. Therefore, a recovery for loss of profits occasioned by a breach of contract when properly pleaded and proved may indirectly be had. Evidence of the rental value would also be admissible in order to determine the value of the leasehold for whatever weight the jury trying the case might see fit to give it, but the same does not control the value of the leasehold. See Hayes v.Atlanta, supra; Brunswick c. R. Co. v. Hardey, 112 Ga. 604 (37 S.E. 888, 52 L.R.A. 396). In Bass v. West,110 Ga. 703 (36 S.E. 244), Mr. Justice Cobb speaking for the court stated: "If a person is wrongfully deprived of the use and occupancy of premises in which an established business is being carried on, he may recover damages for the injury done his business. He cannot, however, even in such a case, recover for loss of profits and the value of the good-will of his business as such, but evidence as to these may be introduced to throw light on the value of his leasehold estate. Where the amount of the profits lost and the value of the good-will of the business can be ascertained with a reasonable degree of certainty, they should be allowed in estimating the value of the lease for the purpose for which it was being used."

3. The exact verbiage of the sub-grounds (a to d) inclusive and as to a number of the paragraphs of the petition, also (e) and (f), has been set forth in the statement of facts, and these sub-grounds are now being more fully discussed. It will be noted that these sub-grounds of the special demurrer of the defendant Briarcliff Inc. are interposed to the whole of each paragraph of the petition under attack except paragraph 11, wherein only a part of the paragraph is demurred to, but even in that case the same part of said paragraph is attacked by each sub-ground of the demurrer contained in (a to d) inclusive. The rule is well established in this State that a special demurrer goes to the structure merely, not to the substance; it must distinctly and particularly specify wherein the defect lies, and the party thus demurring is obliged to lay his finger on the very point contended to be defective. See Martin v. Bartow Iron Works,35 Ga. 323; Douglas, Augusta Gulf Ry. Co. v. Swindle,2 Ga. App. 550 (59 S.E. 600). Therefore it follows, for example, where a part of the language of the petition demurred to is subject to the criticisms contained in a sub-ground, and a part not so subject, and said sub-ground fails to point out the particular part of the petition claimed to be subject to these criticisms, such demurrer is itself defective and not sufficient for consideration. Paragraph 12 of the petition relates to the struggle of the plaintiffs in establishing their business on the leased premises. Said allegation is immaterial. Paragraphs 21, 22, 23, 24, 25, and 27 relate to alleged connections between the defendants Briarcliff Inc. and Briarcliff Plaza Inc. These paragraphs are immaterial, as held in headnote 1 and division 1 of this decision. Therefore, the judgment of the trial court sustaining grounds 2 (a), 7 (a), 8 (a), 9 (a), 10 (a), 11 (a), and 13 (a) of the demurrer to the foregoing enumerated paragraphs of the petition is without error. The whole of paragraph 28 constitutes conclusions of the pleader, which are not sustained by any facts set forth in the petition. The whole of paragraphs 33 and 35 attempts to lay a basis for a measure of damages that is not the true legal measure of damages in this case. For the foregoing reasons, the judgment of the trial court sustaining grounds 14 (e), 18 (d), and 20 (d) was without error.

Books and records showing transactions between the defendants Briarcliff Inc. and Briarcliff Plaza Inc., as well as the identity of the stockholders of each of said corporations are irrelevant. Therefore the judgment of the trial court sustaining grounds 21 and 22 to paragraphs (b) and (c) of the prayer of the petition was without error.

The trial court erred in sustaining ground 1 to paragraph 11 of the petition, because (a) said part of said paragraph is material to show the value of the leasehold; (b) the same is germane because it is material; (c) since the same is material and germane, even if its effect is prejudicial, the plaintiffs are entitled to plead it; and (d) the language of said part of said paragraph is not subject to the criticism of sub-ground (d), because the same language would fit perfectly into a petition predicated upon the true ground to show profits incident to establishing the value of the leasehold.

Parts of paragraphs 13, 16, 17, 26, 30, 31, 32, and 34, which are attacked by grounds 3 (a to d inclusive), 5 (a to d inclusive), 6 (a to d inclusive), 12 (a to e inclusive), 15 (a to e inclusive), 16 (a to e inclusive), 17 (a to e inclusive), and 19 (a to f inclusive), are material, germane, and are properly pleaded allegations. Other parts of the same are subject to one or more of the criticisms contained in the sub-grounds of said demurrer attacking said pleadings. However, since the sub-grounds of said demurrer failed to point out what parts of said paragraphs are defective, and since parts of the same are not subject to the attacks thus made, said grounds of demurrer are insufficient in that the same do not distinctly and particularly specify wherein the defect lies. The party demurring has failed to lay his finger on the very point contended to be defective. Therefore the trial court erred in sustaining these grounds of the demurrer.

The trial court erred in sustaining ground 4 of the demurrer to paragraph 14 of the petition, because the allegations contained therein are material to show the connection of the defendant Briarcliff Inc. prior to and at the time of the alleged breach of the contract.

4. With all parts of the petition to which special demurrers were interposed stricken, and all parts of the petition restored where the same should have been overruled, the petition sets out a contract and a breach thereof. Although the petition alleged the wrong measure of damages, and said allegations have been stricken, under the allegations of the petition as it now stands the plaintiffs would be entitled at least to nominal damages. The court, therefore, erred in sustaining the general demurrer. SeeCothran v. Witham, 123 Ga. 190; Crane v. Massey,181 Ga. 482; Southern Railway v. Birch, 66 Ga. App. 270;Liberty Lumber Company v. Silas, 181 Ga. 774 (184 S.E. 286).

The petition having failed to set forth a cause of action against the defendant, Briarcliff Plaza Inc., the judgment of the trial court sustaining the demurrer of said defendant to said petition is without error. The petition having set forth a cause of action against the defendant, Briarcliff Inc., the court erred in sustaining the general demurrer and in dismissing the petition. The court also erred in respect to the sustaining of certain of the special demurrers, as set forth in this decision.

Judgment affirmed as to Briarcliff Plaza Inc., and reversedas to Briarcliff Inc. MacIntyre, P. J., and Gardner, J., concur.