AEE-EMF, Inc. v. Passmore
| Decision Date | 30 May 1995 |
| Docket Number | No. WD,INC,AEE-EM,WD |
| Citation | 906 S.W.2d 714 |
| Parties | , et al., Plaintiffs, and Randy L. Spring, Respondents, v. Daniel P. PASSMORE, and Aircraft Electrical Electronics, Inc., et al., Appellants. 48885. |
| Court | Missouri Court of Appeals |
Larry M. Schumaker, Carla D. Barksdale, Shook, Hardy & Bacon, Kansas City, for appellants.
Kelly C. Tobin, Joe A. Harter, McDowell, Rice & Smith, Kansas City, for respondents.
Before ULRICH, P.J., and LOWENSTEIN and HANNA, JJ.
Daniel P. Passmore, Aircraft Electrical, Inc. (AE), and Aircraft Electrical Electronics, Inc. (AEE) appeal from the permanent injunction enforcing a five-year noncompetition agreement entered into between Mr. Passmore, Randy Spring and AEE-EMF, Inc. (AEE-EMF), a Missouri Corporation, and an aircraft electrical component repair business. 1 Mr. Passmore and Mr. Spring each owned fifty percent of AEE-EMF's stock. The injunction restricts Mr. Passmore from owning, operating, managing, or participating in "the ownership, operation or management of a rewinding and repair of aircraft components business for a period of five years within the continental United States." The injunction also prohibits AE and AEE "from using or disseminating to any other person or entity the confidential information of" Mr. Spring and AEE-EMF. The judgment of the trial court is affirmed as modified.
Daniel P. Passmore and Randy Spring formed AEE-EMF in 1985. The corporation was engaged in the business of "rewind and repair" of aircraft electrical components. Mr. Passmore owned AEE and Mr. Spring owned EMF Control, Inc. (EMF). The two companies engaged in the business of "rewinding" (repairing) aircraft electrical components provided by airline customers. The profits of AEE-EMF went to the separate corporations owned by Mr. Passmore and Mr. Spring.
In October 1988, Mr. Spring, Mr. Passmore and AEE-EMF entered into a contractual agreement. The principal purpose of the agreement was to provide for acquisition of life insurance to provide for a buyout and to permit the corporation to continue in business in the event one of the two men died. The agreement also provided for the purchase of a stockholder's stock if he desired to quit the company and dispose of his stock. The contractual agreement provided for sale of the stock owned by either of the two men to the company, or if that option were not executed, by the other stockholder if he desired to purchase the stock, if one of the men invoked the disability provisions of the agreement. The noncompetition clause within the agreement provided that the person selling his stock pursuant to the agreement would not compete "for a period of five years from the date of the exercise of the option or from the time of the declaration of disability." Thus, the relevant portions of the agreement included (1) a provision for "key man" life insurance to purchase the shares from a decedent shareholders estate; (2) the company's right of first refusal to purchase the stock of a quitting shareholder and, should the company decline the purchase, the other shareholder's right to purchase the stock; and (3) a noncompetition clause restricting a quitting shareholder.
In 1993, Mr. Spring and Mr. Passmore entered negotiations for the sale of Mr. Spring's interest in the corporation to Mr. Passmore on terms which were not in accordance with the agreement. Negotiations were unsuccessful, and the agreement was never modified, terminated or abandoned.
Mr. Passmore resigned his positions as officer and director of AEE-EMF, surrendered his stock in the corporation, and the corporation, on November 2, 1993, was compelled to vacate its place of business in the facility owned by Mr. Passmore. Mr. Passmore then began a new business, defendant AE, which repaired aircraft electronic parts. Most of the employees of AEE-EMF resigned and began working for AE.
Prior to November 1, 1993, Mr. Spring, Mr. Passmore, and AEE-EMF had accumulated approximately 800 one-page documents known in the aircraft electrical maintenance business as "data sheets." These documents contained specifications for repairing various aircraft electric components. After Mr. Passmore tendered his resignation and surrendered his stock, Mr. Spring demanded that Mr. Passmore return all of the data sheets in his possession. Mr. Passmore refused this demand until he made copies of the data sheets.
On November 15, 1993, Mr. Spring and AEE-EMF filed their petition in this lawsuit. Count VII of Mr. Spring's petition sought to enjoin Mr. Passmore and AE from competing against AEE-EMF and prohibiting them from using or disclosing the "data sheets" in their possession. The trial court conducted a one-day hearing on December 21, 1993, and permanently enjoined Mr. Passmore and AE from engaging in the business of repairing aircraft electrical components in competition with AEE-EMF pursuant to the noncompetition clause in the agreement signed by Mr. Passmore, Mr. Spring and AEE-EMF. Mr. Passmore and AE appeal the trial court's permanent injunction.
Review of the trial court's action is pursuant to Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). Therefore, the judgment will be affirmed unless it is not supported by substantial evidence, is against the weight of the evidence, or erroneously declares or applies the law. Id. at 32.
(I)
Mr. Passmore asserts four points on appeal. In point one, Mr. Passmore claims that the trial court erred in enjoining him from competing because, he asserts, he did not breach an enforceable noncompetition agreement. Specifically, he claims that the parties to the 1988 agreement were not bound by its provisions; his actions did not implicate the noncompetition clause; and the noncompetition clause was never effected because neither Mr. Spring nor AEE-EMF timely exercised the purchase option to buy his stock, a requirement to effect the agreement.
Mr. Passmore's initial contention is that the parties rescinded or abandoned the agreement they entered into in 1988. The trial court found that the agreement was never modified, terminated, or abandoned; and the parties made no express rescission or new agreement. Mr. Passmore contends that through "words and acts" the parties abandoned the agreement. "Abandonment can be shown by acts and conduct consistent with the intent to abandon." Land Improv., Inc. v. Ferguson, 800 S.W.2d 460, 464 (Mo.App.1990). Mutual abandonment "must be clearly expressed, and acts and conduct ... must be positive, unequivocal, and inconsistent with the existence of the contract." In re Estate of Reed, 414 S.W.2d 283, 286 (Mo.1967) ).
Mr. Passmore argues that Mr. Spring's own testimony shows Mr. Spring abandoned the agreement. He claims Mr. Spring testified that he did not consider himself bound by the agreement when he made written proposal to Mr. Passmore in September and October of 1993 to terminate their business relationship. Additionally, Mr. Passmore argues that Mr. Spring's attorneys did not refer to the agreement in a November 1, 1993, letter discussing potential ways to end Mr. Passmore's and Mr. Spring's business relationship. Mr. Passmore contends that these words and acts along with Mr. Passmore's surrendering his stock without financial remuneration allow an inference of mutual rescission or abandonment of the written agreement.
Mr. Spring's counter argument asserts that the parties never abandoned or rescinded the agreement. Mr. Spring admits he made proposals different than those specified in the written agreement, but he contends his proposals were made because Mr. Passmore was attempting to force him to sell his interest. Therefore, asserts Mr. Spring, his words and conduct were not inconsistent with the provisions of the agreement, and the parties remain bound by it.
Although Mr. Spring made proposals not included in the terms of the agreement, the parties never agreed to terms different from those in their formal binding agreement. The evidence supports the trial court's finding that the parties, intending to effect the agreement, acted on it. For example, pursuant to the agreement, AEE-EMF maintained life insurance on the lives of the two men to finance a buyout if one of them died. Although the parties negotiated change, the binding agreement was never explicitly rescinded, modified, or abandoned.
Next, Mr. Passmore argues that the trial court erroneously applied the noncompetition clause in the agreement because he received no consideration for his stock when he surrendered it, a condition precedent to invoking the noncompetition clause. However, the trial court found that "Passmore's actions prevented the corporation [AEE-EMF] and Spring from exercising their rights and duties under the agreement," thereby preventing AEE-EMF from exercising its right to buy Mr. Passmore's stock if it chose to. Thus, the trial court determined that although Mr. Passmore could have received remuneration for his stock from AEE-EMF in exchange for imposition of the restrictions he agreed to if the corporation exercised the purchase option, his conduct, which was tantamount to rejecting the remuneration to which he was entitled, did not negate imposition of the restrictions provided by contract because he prevented AEE-EMF from exercising the option to purchase the stock.
Mr. Passmore claims that the noncompetition clause was expressly tied to the optional purchase terms of the agreement which were not activated because he merely surrendered his stock to AEE-EMF as opposed to selling it to the corporation. By the terms of the agreement, a "shareholder who desires to dispose of his shares during his lifetime shall first offer, in writing, all of his shares for sale to the company at a price...
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