Axford v. Price

• Decision Date: 17 October 1950
• Docket Number: No. 10272,10272
• Citation: 134 W.Va. 725,61 S.E.2d 637
• Court: West Virginia Supreme Court
• Parties: AXFORD, v. PRICE et al.

Page 637

61 S.E.2d 637

134 W.Va. 725

AXFORD, v. PRICE et al.

No. 10272.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 26, 1950.

Decided Oct. 17, 1950.

Syllabus by the Court.

1. The test in determining the validity or invalidity of a contract of sale of an established business which purports to bind the seller not to set up a rival business 'is the reasonableness of the restraint imposed, and it will be enforced as to time and space only to the extent necessary to protect the rights of the parties and the interest of the public therein, if any.' Boggs v. Friend, 77 W.Va. 531, Pt. 2 syl., 87 S.E. 873.

2. A purchaser of an established business under a contract containing a covenant whereby the seller agrees not to set up a rival business is entitled to an injunction which will give reasonable protection to the purchaser, where the seller, in violation of the restrictive covenant, engages in business in competition with the purchaser to the latter's damage.

3. Where no better measure is available, the measure of damages for the breach of a covenant of the seller of an established business not to reengage therein in competition with the purchaser, is the value of the business lost to the latter and not the net profit of the seller resulting from such breach of the restrictive covenant.

4. A court of equity in awarding, at the instance of the purchaser of an established business, an injunction restraining the seller from the further breach of a restrictive covenant, whereby the seller agreed not to reengage in a rival business, may, as ancillary thereto and in furtherance of complete justice between the parties, award damages for loss of profits to the purchaser, which reasonably result from the seller's breach of the restrictive covenant.

A. Maurice Foose, Huntington, for appellants.

Okey P. Keadle, Huntington, for appellee.

RILEY, Judge.

Vincent Axford filed his bill of complaint in the Circuit Court of Cabell County against C. S. Price and Phil Price, husband and wife, respectively, praying that an injunction issue restraining the defendants from further violating a certain provision of the contract between the parties for the sale of the 'Famous Market', located at 418 Third Avenue in the City of Huntington, whereby the defendants agreed not at any time to enter into competition with the plaintiff in the same business and in the same territory, in which the plaintiff operates, or will operate, in the continuance of the business of the Famous Market. Further the bill of complaint prays that damages resulting from the alleged violation of the contract of sale be ascertained, and a decretal judgment be entered therefor.

The trial chancellor, after considering the pleadings and the evidence, found that the defendants had breached their contract, and on the basis of this finding enjoined and restrained the defendants from 'selling meats at wholesale to jobbers or retailers doing business in the trade area of the City of Huntington;' and entered a decretal judgment in favor of plaintiff for damages in the amount of eight thousand dollars. The decree, after reciting that it further appearing to the court that plaintiff has discontinued his business in view of defendants' alleged violations, ordered 'that if the plaintiff shall not reenter upon and engage in the wholesale meat business within the period of sixty days' from the date of the entry of the decree, the defendants may apply for a vacation of such injunction. From this decree the defendants prosecute their appeal and supersedeas.

The contract under appraisement bears date November 16, 1943, and is signed by the defendants, C. S. and Phil Price. It provides that in consideration of the sum of fifteen thousand dollars, cash in hand paid, the Prices did 'sell, assign, grant and set over unto the said Vincent Axford' certain listed personal property, including trucks, scales, office equipment and 'the trade mark 'Famous Market', being the majority or major portion of the personal property used by the Vendor [the defendants] in and about the business of wholesale meats and produce conducted under the trade name of Famous Market, and located at #418 Third Avenue: With the agreement that the Vendor will not at any time go into competition with the Vendee in the same business in the same territory in which the Vendee [the plaintiff] operates or will operate in the continuation of the business aforesaid of the said Famous Market.' By the same contract all saleable merchandise then on hand was to be sold and set over to the plaintiff Axford for a sum to be determined by an inventory. For the foregoing merchandise plaintiff paid the additional sum of seven thousand dollars.

At the time of the sale defendants had four drivers or salesmen, namely, T. C. Thornburg, H. W. Edwards, Tracy Jones and Mack Fowler, who operated eight routes covering portions of West Virginia and Kentucky for the purpose of selling meats for the defendants at wholesale directly from the truck to certain retail outlets. These drivers or salesmen had conducted the trade on the routes, and they continued on with plaintiff in the same capacities after the contract was made as they had been doing with the Prices.

In 1943, as well as in preceding years, the Prices did a gross business of more than five hundred thousand dollars a year. For the years 1944 and 1945, plaintiff did a gross business of four hundred fifty thousand dollars a year. In 1946, due to the operation of the O. P. A. and the consequent scarcity of meats, plaintiff's business decreased materially. Two of the drivers were taken off their routes, and the remaining two worked most of their time at plaintiff's store at 418 Third Avenue. With the discontinuance of the O. P. A. in October, 1947, meat supplies became more plentiful.

During 1946 Mack Fowler left Axford's employment, telling the latter that he had another job. Tracy Jones also left about that time, Thornburg and Edwards stayed on, and Mack Fowler returned in the fall. Dayton Thomas was hired to fill Jones' place. Thomas went into the army, and J. E. Thornburg took over Jones' route. Mack Fowler left plaintiff's employment in January, 1948, and went into the wholesale meat business for himself, covering the same territory that he had worked for the Prices and later for Axford. T. C. Thornburg talked to Axford about quitting in April, 1948, but agreed to stay on until July 1, 1949, when he also left. Edwards quit the last of June, 1949. The two last-mentioned men also went into the wholesale meat business for themselves, and worked the routes formerly covered by them. At this time Axford ceased to sell meat by trucks. The record rather clearly discloses that the good will having been built up by the respective driversalesmen, plaintiff was not in a situation to obtain drivers who could complete with his former employees.

The record likewise discloses that at least some of these former drivers, after going into business for themselves, worked the same routes which they had followed during their employment with plaintiff and defendants.

In 1946 plaintiff's business netted him between twelve and thirteen thousand dollars; in 1948, 1948 and 1949 his net business profits were $17,311.00, $14,890.00, and $4,383.00, respectively.

The record discloses, and the defendants admit, that for the years 1941 and 1942 they did a gross yearly business in excess of four hundred thousand dollars. At that time defendants did not cater to wholesalers, although if a wholesaler was short they would furnish the item as an accommodation or courtesy. In the fall of 1947, as heretofore stated, defendants began to sell to jobbers and wholesalers, and the several drivers who had formerly carried on business for the Famous Market, while under the control of both defendants and plaintiff, having gone into business for themselves began purchasing their meats from the defendants, notwithstanding the contract in evidence.

In February, 1946, defendants erected a cold storage plant in the rear of their residence, designed especially for the handling of frozen foods. The plan of handling such foods was later given up, and in the fall of 1947 defendants began to sell some sausage, smoked meats, and like merchandise, but by 1949 they had virtually entered into the business of selling meats at wholesale to retail dealers.

Defendants' volume of gross business for 1949 was $374,000.00. C. S. Price testified that the profit was ordinarily between three and four per cent. On the basis of three and one-half per cent of the gross business, the Prices' net profit in 1949 was $13,090.00. In view of this evidence the trial court set plaintiff's damages at eight thousand, or four thousand dollars for each of the years 1948 and 1949.

...