Knowles v. Jones

• Decision Date: 15 May 1913
• Citation: 62 So. 514,182 Ala. 187
• Parties: KNOWLES et al. v. JONES et al.
• Court: Alabama Supreme Court

62 So. 514

182 Ala. 187

KNOWLES et al. v. JONES et al.

Supreme Court of Alabama

May 15, 1913

Appeal from Chancery Court, Geneva County; L.D. Gardner, Chancellor.

Suit by W.L. Jones and another against H.A. Knowles and another. From a decree for complainants, defendants appeal. Reversed and rendered.

C.D Carmichael, of Geneva, and Espy & Farmer, of Dothan, for appellants.

W.O Mulkey, of Geneva, for appellees.

ANDERSON J.

This bill is filed by W.L. Jones and J.C. Johnson against H.A Knowles and the Chrystal Pharmacy Company, a corporation, to keep them or either of them from engaging in the drug business in the town of Samson, for the reason that the said complainants had purchased the good will of Knowles, who had contracted with them not to engage in the drug business in said town of Samson for three years. There is no averment that said Jones and Johnson are now in the drug business individually, but the bill alleges that they were succeeded by a corporation in which they are the sole stockholders. Therefore the good will purchased from Knowles went to their assignee or successor in business, the corporation, and it, and not these complaints individually, is the one to complain of Knowles' attempt to re-enter the drug business in the town of Samson.

It is not unusual for the seller of the good will of an established business to enter into an agreement with the buyer to refrain from entering into competition with him within specified territorial limits or for a specified time. So long as the purchaser continues in the business, and the stipulation remains in force, the vendor cannot lawfully enter into competition with him either on his own account or as the agent and business manager of another. Neither is it lawful for him to take stock in and help to arrange or manage a corporation formed to compete with the purchaser. 20 Cyc. 1280. In the case of Kramer v. Old, 119 N.C. 1, 25 N.E. 813, 34 L.R.A. 389, 56 Am.St.Rep. 650, it was held that neither the corporation nor those interested in it other than the vendor could be enjoined.

It also seems settled that an agreement to refrain from entering into competition with the purchaser is not personal, unless specially made so, but inures to the benefit of one to whom it is assigned with the business. Haugen v Sundseth, 106 Minn. 129, 118 N.W. 666, 16 Ann.Cas. 259. See, also, note for a full and more thorough discussion of this question. In the case of Fleckenstein v. Fleckenstein, 66 N.J.Eq. 252, 57 A. 1025, it was held that the contract by a vendor of the business not to engage in a similar business for a certain time within a specified territory might be assigned by the purchaser to a corporation subsequently formed by them to carry on the business, although the contract did not run to the assigns of the first purchaser. "One who sells out to a partnership and consents not to engage in a similar business in a certain place is not released from the obligation of his...