American Laundry Co. v. E. & W. Dry-Cleaning Co.

• Court: Alabama Supreme Court
• Writing for the Court: MAYFIELD, J.
• Citation: American Laundry Co. v. E. & W. Dry-Cleaning Co., 199 Ala. 154, 74 So. 58 (Ala. 1917)
• Decision Date: 01 February 1917
• Docket Number: 6 Div. 447
• Parties: AMERICAN LAUNDRY CO. v. E. & W. DRY-CLEANING CO.

74 So. 58

199 Ala. 154

AMERICAN LAUNDRY CO. v. E. & W. DRY-CLEANING CO.

6 Div. 447

Supreme Court of Alabama

February 1, 1917

Appeal from Chancery Court, Jefferson County; A.H. Benners Chancellor.

Bill by the E. & W. Dry-Cleaning Company, a corporation, against the American Laundry Company, to enjoin the violation of contracts. From a decree overruling demurrers to the amended bill, respondent appeals. Reversed, rendered, and remanded.

The substance of the original bill sufficiently appears. The amendment is as follows:

Complainant further avers that it was organized for the purpose of engaging in the dry-cleaning business in the city of Birmingham, and was incorporated March, 1912; that prior to said incorporation the terms of said contract had been practically agreed upon between said laundry company including respondent and complainant's incorporators, and that the moving consideration causing complainant's incorporation and the establishment of its dry-cleaning plant was the execution of said contract by said laundry company that said laundry company at said time did not do any dry-cleaning work, and did not have any equipment or plant for such work, but they did have wagons and agents covering the city of Birmingham and Jefferson county collecting laundry, and said wagons and agents afforded a reasonable means for complainant through such companies to get dry-cleaning-work, and to collect dry-cleaning work without the expense of maintaining wagons and agents; and that in fact complainant could not, out of its business, have maintained such wagons and agents. Complainant further avers that its incorporators realized such fact, and realized that a large business could likely be built up by diligent application with the aid of said laundry company upon the faith of said contract, and it was so incorporated thereafter complainant, upon the faith of said contract, and relying thereupon, invested the sum of $10,000 in dry-cleaning machinery and equipment, and erected a modern up-to-date dry-cleaning plant in the city of Montgomery, all of which could not have been done without the aid of said laundry company as agreed upon in said contract; that among its said incorporators and stockholders were the owners of all the said laundry companies executing said contract, including respondent, and that said laundry companies, or their owners, are part of complainant's stockholders to-day. Complainant further avers that to have established the laundry during the life of said contract would have seriously interfered with its dry-cleaning establishment, as it was designed that its dry-cleaning business should be of large volume as it had been, and that all of complainant's time and attention should be required by said dry-cleaning business, as it had been. Complainant further avers that all of said laundry companies have continuously advertised that complainant did their dry-cleaning work for them, and have printed signs to that effect upon their windows at their places of business. Complainant further avers that at the time of the execution of said contract there were other laundries operating in Birmingham and Jefferson county. and that there were and had been numerous other establishments carrying on a dry-cleaning business, with which concern your complainant has had no connection whatever.

Morris Loveman, of Birmingham, for appellant.

Stokely, Scrivner & Dominick, of Birmingham, for appellee.

MAYFIELD J.

The equity of appellee's bill is to specifically enforce a contract set out in the bill by injunction, or, more definitely speaking, to enjoin breaches of this contract. The prayer of the bill is that:

"Upon the final hearing of this cause your honor will make and enter a decree permanently enjoining respondent from the violation of said contract during the life of the same, and permanently restraining respondent from delivering over to dry-cleaning and dyeing establishments other than complainant the cleaning and dyeing work obtained by it, which under said contract, respondent is bound to turn over to complainant."

The substance of the contract was that appellee was to establish in Birmingham, Ala., a dry-cleaning business and plant, and that five laundry companies in the city should not for a period of ten years engage in the dry-cleaning business, and that appellee for the same period should not engage in the laundry business in Jefferson county, Ala.; that the five laundry companies mentioned should deliver to the dry-cleaning company all dry-cleaning work which they received from their customers, and that the work should be done by appellee and returned to the offices of the laundry company from which it was received, to be by the latter returned to the customers; that the laundry company should receive 25 per cent. of the price paid by the customer for the dry cleaning, which price should be fixed exclusively by the dry-cleaning company; that the garments or work so dry-cleaned and delivered to the customers should bear the mark and brand of the laundry company, and not that of the dry-cleaning company, which did the work and fixed the price, the laundry company to collect such price from the customer and be directly responsible to the dry-cleaning company for 75 per cent. of the schedule price so fixed by the dry-cleaning company.

It is alleged that the laundry companies, including appellant, each advertised the fact that appellee did its dry-cleaning business, but that appellant has recently breached, and continues to breach, its contract, by refusing and failing to deliver the work so collected by it from its customers to complainant, but has delivered and continues to deliver the work so collected by it to other dry-cleaning companies, and allows such other dry-cleaning companies to advertise to the public that appellant is collecting work for them.

The bill was demurred to on the ground that the contract set out therein, and which is sought to be specifically enforced by injunction, was void because in restraint of trade and because it tended to create a monopoly in the dry-cleaning and laundry business in Jefferson county, Ala. The demurrer was sustained to the original bill, but the bill was subsequently amended. The reporter will set out the amendment. The demurrer was reinterposed to the bill as amended, and was overruled; and from the decree overruling the demurrer, appellant appeals.

We do not see that the amendment cured the defect in the original bill, nor that it shows that the contract set out was valid or that it should be enforced by the injunctive relief sought. The contract in question, we think, falls clearly within the class of that construed in the cases of Tuscaloosa Co. v. Williams, 127 Ala. 110, 28 So. 669, 50 L.R.A. 175, 85 Am.St.Rep. 125, and Arnold & Co. v. Jones Cotton Co., 152 Ala. 501, 44 So. 662, 12 L.R.A. (N.S.) 150, and cases there cited, and not within the class of the contracts upheld and enforced in the cases of Smith v. Webb, 176 Ala. 596, 58 So. 913, 40 L.R.A. (N.S.) 1191, McCurry v. Gibson, 108 Ala. 451, 18 So. 806, 54 Am.St.Rep. 177, Moore v. Towers Co., 87 Ala. 206, 6 So. 41, 13 Am.St.Rep. 23, Robbins v. Webb, 68 Ala. 393, Harris v. Theus, 149 Ala. 133, 43 So. 131, 10 L.R.A. (N.S.) 204, 123 Am.St.Rep. 17, and Pearson v. Duncan & Son, 73 So. 406.

Doubtless there is some, if not much, conflict in the authorities, text-books, and decisions of America and England as to the extent to which courts of equity may or should go to restrain by Injunction breaches of contracts in partial restraint of trade. Mr. High, in his work on injunctions, says that the law upon this subject has gone through three distinct stages of transition, and states the three doctrines announced in the development of the law. Volume 2, § 1167.

The doctrine prevailing in this state may be found in the Alabama cases above referred to in the authorities therein cited, and in the notes thereto when reported in American State Reports and Lawyers' Reports Annotated. Some of the propositions as settled by this and other courts may be summarized as follows:

Contracts in restraint of trade are in themselves, if not shown to be reasonable, bad in the eye of the law.

Whatever restraint is larger than the necessary protection of the party with whom the contract is made is unnecessary and void, as being injurious to the interest of the public, on the ground of public policy. General restraints are all void, whether by bond, covenant, or promise, with or without consideration, and whether it be of the party's own trade or not. A contract not to carry on any business whatever is unreasonable, and not enforceable, however limited the time or space may be; and likewise a contract which makes one party the sole judge as to whether or not one business competes with another.

There is a well-recognized tendency in the English and American cases of recent date to modify the ancient strictness touching contracts in restraint of trade. Those unlimited as to time and space, and in total restraint of trade, are void as against public policy. One limited as to space, but unlimited as to time, is not illegal, and may continue for the life of the party restrained; but one limited as to time, but unlimited as to territory, is void. Bowser v. Bliss, 7 Blackf. (Ind.) 344, 43 Am.Dec. 93; Wiley v. Baumgardner, 97 Ind. 66, 49 Am.Rep. 427.

If however, the contract for restraint is in...