Bloom v. Home Insurance Agency

• Decision Date: 12 July 1909
• Citation: 121 S.W. 293,91 Ark. 367
• Parties: BLOOM v. HOME INSURANCE AGENCY
• Court: Arkansas Supreme Court

121 S.W. 293

91 Ark. 367

BLOOM v. HOME INSURANCE AGENCY

Supreme Court of Arkansas

July 12, 1909

Appeal from Jefferson Chancery Court; John M. Elliott, Chancellor affirmed with modification.

STATEMENT bye THE COURT.

The Home Insurance Agency, one of the plaintiffs below instituted this suit against the defendant, E. B. Bloom, and in its complaint prayed for an injunction restraining the defendant, either for himself or for others, from soliciting insurance in Jefferson County, Arkansas, for five years from November 1, 1905. Subsequently W. Z. Tankersley, F. M Rosenberg, George M. Wells, and Russell Hollis were made parties plaintiff to the action. Prior to September 16, 1905 W. Z. Tankersley, the Bell-Vernon Company, represented by F M. Rosenberg, George M. Wells & Company, a firm composed of said Wells and Hollis, and the Travellers Insurance Company of Pine Bluff, were the owners of four separate local insurance agencies in the city of Pine Bluff, Arkansas, and were engaged in the business of soliciting insurance as agents for general insurance companies that wrote and executed policies of insurance. The defendant was the secretary of the Travellers Insurance Company of Pine Bluff, Arkansas, which was engaged in the business of writing fire and tornado insurance and issuing policies of insurance therefor, in addition to owning a local agency in said city which acted as an agent in soliciting insurance business. The defendant also owned 400 shares of the capital stock of said Travellers Insurance Company of the par value of $ 10,000, and was actively engaged for that company in soliciting insurance. There were a number of other insurance agencies in Pine Bluff engaged in the same business. The plaintiffs and defendant on September 16, 1905, entered into negotiations for forming a corporation to be known as the Home Insurance Agency, for the purpose of engaging in the business of conducting an insurance and real estate agency at Pine Bluff, which would be capitalized at $ 17,000, and would be actually incorporated on November 1, 1905. On September 16, 1905, the parties entered into written agreement, by which the above named four local agencies did sell and transfer to said Home Insurance Agency "the entire insurance business of their respective agencies, together with all the expirations therein, including good will, life insurance only excepted." In consideration of the sale and transfer, each of the agencies was to receive such proportion of the capital stock of the corporation, the Home Insurance Agency, as was represented by the amount of the expirations of the business of each agency, with adjustments, so that each of the four agencies should own one-fourth of the entire capital stock. The contract also provided that the parties thereto would associate in the same office for the purpose of conducting the said agency business, and would deliver to the Home Insurance Agency upon its incorporation all the "books, registers, supplies and other papers relating or belonging to the insurance business of the several agencies."

The following provision, which forms primarily the basis of this action, was made a part of said written contract: "That the said W. Z. Tankersley, George M. Wells, Russell Hollis and F. M. Rosenberg, beginning with said first day of November, 1905, obligate and bind themselves to render their personal service in good faith to the carrying on of the business of the aforesaid Home Insurance Agency for the term of at least two years, at and for such salary as the board of directors may fix and determine, which salary, however, we suggest and recommend to be $ 150 per month to each of said parties; and the said above last-named parties, together with E. B. Bloom and the Travellers Insurance Company, agree to and among themselves and with the said Home Insurance Agency, that they will not, either directly or indirectly, for themselves or as employees for others, for the term of five years from the said first day of November, 1905, within the limits of Jefferson County, Arkansas, engage in any line of insurance mentioned and contemplated in the articles of incorporation, except life, save only in the employ of the said Home Insurance Agency."

This contract was executed by the defendant E. B. Bloom individually and also by the Travellers Insurance Company by E. B. Bloom, its secretary.

In pursuance of said contract the Home Insurance Agency was incorporated on November 1, 1905, and the capital stock thereof issued to the parties. For the Travellers Insurance Company there were issued 169 shares to E. B. Bloom, trustee, and one share of said capital stock to E. B. Bloom; but all these 170 shares were actually owned by the Travellers Insurance Company. In consideration of said shares of capital stock, the separate agencies, including E. B. Bloom for the Travellers Insurance Company, delivered to the Home Insurance Agency all the properties and business set out in the above contract of September 16, 1905. On May 25, 1907, the Home Insurance Agency paid a dividend of $ 7.50 to said E. B. Bloom on the one share of stock in his name and on the stock in his name as trustee the sum of $ 1,267.50. In July, 1908, these 170 shares of the capital stock of the Home Insurance Agency, issued as above and owned by the Travellers Insurance Company, were sold by that company to the Home Insurance Agency for the sum of $ 5,000.

On June 9, 1908, the defendant became a member of the firm of Banks, Bloom & Company, and later, of the firm of Bloom, Hanf & Bloom; and these firms and the defendant himself thereafter engaged in the business of soliciting fire insurance in Jefferson County, Arkansas, and in violation of the above provision of said written contract.

The chancellor decreed that defendant be enjoined from soliciting fire insurance in Jefferson County, Arkansas, for five years from the first day of November, 1905, either for Banks, Bloom & Company, or for Bloom, Hanf & Bloom, or for any other person, firm or corporation, or for himself personally; and from engaging in any line of insurance, except life, in said county for said period of time; and the firms of Banks, Bloom & Company and Bloom, Hanf & Bloom were enjoined for said period from engaging in or conducting any insurance business, save life, within the limits of Jefferson County as long as said E. B. Bloom was a member of said firms or directly or indirectly interested therein, or his name connected with said firms.

From that decree the defendant has appealed to this court.

Decree affirmed.

Young & Rowell, White & Altheimer and W. B. Alexander, for appellant.

1. The contract was executed by Bloom without consideration, and without the sale of a good will or a business, and is in restraint of trade. 2 Beach, Cont. 1575; 6 L. R. A. (N. S.), 850; 10 Id. 268; 28 C. C. A. 492; 29 Id. 211; 62 Id. 487; 24 A. & E. Enc. Law (2 Ed.) 851; 62 Ark. 105; 46 L. R. A. 142; 4 Id. 154.

2. The contract is not enforceable for want of mutuality. 85 Ark. 153; Beach. Mod. Law of Const. § 980; 6 A. & E. Enc. Law (2 Ed.), p. 730; 9 Cyc. 541. Contracts in restraint of trade are construed strictly. 9 Cyc. 541; 73 Ark. 338; 74 Id. 41.

3. The Home Insurance Company had no cause of action, and the complaint could not be amended by making others plaintiffs. 34 Ark. 144; 56 Id. 167; 18 Ala. 395; 57 Id. 168; 49 Me. 536; 51 Cal. 154.

4. The combination formed is clearly against the antitrust laws of Arkansas. Acts 1905, p. 5; 65 L. R. A. 347; 52 Id. 262; 139 N.Y. 251; 223 L. R. A. 221; 40 Ark. 266; 193 U.S. 352; 36 Ohio 666.

Bridges, Wooldridge & Gantt and Taylor & Jones, for appellees.

1. The contract is not in restraint of trade. 62 Ark. 101; 48 Id. 145; 48 Id. 216.

2. It was not executed to violate the anti-trust law, and was based upon a valuable consideration. 78 Am. St. Rep. 613; 74 Am. Dec. 746; 48 Am. Rep. 269; 60 Id. 464; 24 Ark. 201; 64 Id. 637; 62 Id. 108.

3. There was mutuality of promise. Page on Const. § 1615; 44 L. R. A. 258. Appellant and the Travellers Insurance Agency received the benefits accruing to them by accepting the contract, and ultra vires cannot be pleaded. 70 Ark. 238; 6 L. R. A. (N. S.) 870; 63 Ga. 103; 10 Cyc. p. 1156, note 35 and pp. 1157-8-9-10; 74 Ark. 377; Ib. 190; 77 Id. 109; 77 Id. 128.

4. The contract was ratified by the Home Insurance Agency, and it cannot take advantage of its own acts or omissions to escape liability. 21 Am. St. 110; 10 Cyc. 1071; 44 Ark. 383; 2 Nev. 257; 35 Ark. 365.

5. The complaint was properly amended. Kirby's Dig. § 6148. The court's discretion will not be controlled unless clearly abused. 26 Ark. 360; 58 Id. 504; 64 Id. 257; 26 Id. 465.

OPINION

FRAUENTHAL, J., (after stating the facts.)

The defendant admits the execution of the above contract, by which he agreed that he would not engage in the insurance business mentioned in said contract at the place and for the time therein set forth. He contends, however, that this is a contract in restraint of trade, and is therefore invalid. The doctrine that is invoked to avoid a contract in restraint of trade is based upon a public policy. But a contract is not against a sound public policy that only partially limits a person's business, and leaves open to him practically an unlimited field of industrial activity, and which does not injuriously affect the interest of the public, where it only prevents a person from carrying on a particular business. In such case there is no good reason for restricting the freedom of contracts. The rule with reference to such contracts is thus stated in the case of Leather Cloth Co. v. Lorsont, L. R. 9 Eq. 353, quoted with approval by the Supreme Court of Michigan in the case of Up River Ice Co. v. Denler, 114 Mich. 296, 72...