Mckinnon v. Benedict

Heffernan, J.

. . . The facts in this case must be examined in light of these accepted principles of equity.

The bargain between the McKinnons and the Benedicts has proved to be a harsh one indeed. If the terms of the agreement of August 31, 1960, are to be enforced literally, the Benedicts have for a period of twenty-five years stripped themselves of the right to make an optimum and lawful use of their property. The agreement provides that no improvements can be constructed closer to the McKinnon property than those buildings and improvements that were in existence in 1960. [This was agreed to in exchange for a $5000 interest free loan and the promise to help promote the resort]. This limits any possible expansion to the precise lakeshore area occupied by the buildings of Bent’s Camp on that date. While the restriction does not apply to the area beyond the road to the west of county trunk B, that area is at the farthest point of the property from the lake and is the least desirable for any resort or camp purposes. McKinnon by this agreement sought the maintenance of the exact status quo for a period of twenty-five years. Even though additional cottages of the type presently existing were desired, they could not under this agreement have been erected except in the narrowly defined area. . .

[At trial Mckinnon was granted injunctive relief]

. . .The question posed . . . is whether the agreement was enforceable against the Benedicts. No action at law has been commenced for damages by virtue of the breach of the restrictions; and, in fact, the plaintiffs in their complaint claim that they have no adequate remedy at law. We are thus not confronted with the question of damages that may result from the breach of this contract and confine ourselves solely to the right of the plaintiffs to invoke the equitable remedy of specific performance, in this case the enjoining of the defendants from the breach of the contract. . .

The great hardship sought to be imposed upon the Benedicts is apparent. What was the consideration in exchange for this deprivation of use? The only monetary consideration was the granting of a $ 5,000 loan, interest free, for a period of seven months. The value of this money for that period of time, if taken at the same interest rate as the 5 percent used on the balance of the land contract, is approximately $ 145; and it should be noted that this was not an unsecured loan, since McKinnon took a mortgage on the cottage property of the Benedicts in Michigan. In addition, McKinnon stated that he would “help you try” to reach a solution of the problem posed by Mrs. Vair’s occupancy of one of the cottages on a fifty-year lease at $ 5 per year. His one attempt, as stated above, was a failure; and McKinnon’s promise to generate business resulted in an occupancy by only one group for less than a week. For this pittance and these feeble attempts to help with the operational problems of the camp, the Benedicts have sacrificed their right to make lawful and reasonable use of their property.

In oral argument it was pointed out that the value of the $ 5,000 loan could not be measured in terms of the interest value of the money, since, without this advance, Benedict would have been unable to purchase the camp at all. To our mind, this is evidence of the fact that Benedict was not able to deal at arm’s length with McKinnon, for his need for these funds was obviously so great that he was willing to enter into a contract that results in gross inequities. . .

We find that the inadequacy of consideration is so gross as to be unconscionable and a bar to the plaintiffs’ invocation of the extraordinary equitable powers of the court.

While there is no doubt that there are benefits from this agreement to McKinnon, they are more than outweighed by the oppressive terms that would be imposed upon the Benedicts. McKinnon testified that he and his wife spend only the summer months on their property. Undoubtedly, these are the months when it is most important that there be no disruption of the natural beauty or the quiet and pleasant enjoyment of the property; nevertheless, there was testimony that the trailer camp could not be seen from the McKinnon home, nor could the campsite be seen during the summer months of the year, when the leaves were on the trees. Thus, the detriment of which the McKinnons complain, that would be cognizable in an equity action, is minimal, while the damage done to the Benedicts is severe.

Considering all the factors — the inadequacy of the consideration, the small benefit that would be accorded the McKinnons, and the oppressive conditions imposed upon the Benedicts — we conclude that this contract failed to meet the test of reasonableness that is the sine qua non of the enforcement of rights in an action in equity. . .

A fair reading of the transcript indicates no sharp practice, dishonesty, or overreaching on the part of McKinnon. However, there was a wide disparity between the business experience of the parties. McKinnon was a man of stature in the legal field, an investment counsellor, a former officer of a major corporation, and had held posts of responsibility with the United States government, while, insofar as the record shows, Benedict was a retail jeweler and a man of limited financial ability. He no doubt overvalued the promises of McKinnon to assist in getting the operation “well organized” and to solve the lease problem and to “generate business.” These factors, in view of Benedict’s financial inability to enter into an arm’s-length transaction, may be explanatory of the reason for the agreement, but the agreement viewed even as of the time of its execution was unfair and based upon inadequate consideration. We, therefore, have no hesitancy in denying the plaintiffs the equitable remedy of injunction.

[Judgment of trial court, granting the injunction, is hereby reversed]