Brown v. Childers

• Citation: 254 S.W.2d 275
• Decision Date: 12 January 1953
• Docket Number: No. 21799,21799
• Parties: BROWN et al. v. CHILDERS.
• Court: Court of Appeal of Missouri (US)

Page 275

254 S.W.2d 275

BROWN et al. v. CHILDERS.

No. 21799.

Kansas City Court of Appeals, Missouri.

Jan. 12, 1953.

Walter A. Raymond, Kansas City, M. Fairlee Tegarden, Independence, for appellant.

Harvey Roney, Kansas City, Virgil A. Julian, Independence, for respondents.

BOUR, Commissioner.

This is an appeal by defendant, A. Layle 'Petey' Childers, from a decree in favor of plaintiffs, Frank R. Brown, Jr., and Damon A. Bogart, in an action to enforce by injunction a negative covenant in a contract of sale, by which defendant agreed not to engage in the retail drug and prescription business for a stated period and within a certain area. Since this is a suit in equity, we will review the case upon the law and the evidence and reach our own conclusion, giving due regard to the opportunity of the chancellor to judge of the credibility of the witnesses.

The defendant, his brother William H. Childers, and Ralph S. Thomas are registered pharmacists. From 1933 to 1944 or 1945, defendant and his brother owned and operated a retail drug store known as the Childers Prescription Shop and located in the First National Bank Building in Independence, Missouri. In 1944 or 1945, Ralph S. Thomas became a member of the partnership and the three partners operated the shop until May 11, 1950. On April 29, 1950, the defendant and his two partners entered into a written contract with plaintiff Frank, R. Brown, Jr., wherein they agreed to sell and convey to Brown 'on May 11, 1950, all their right, title and interest in and to the Childers Prescription Shop, the same to include all merchandise and stock, furniture and fixtures, equipment, stationery, supplies, and good will,' together with three delivery cars and certain accounts receivable, for the sum of $100,000, to be paid as follows: $10,000 on the signing of the contract, the receipt of which was acknowledged by the sellers; $50,000 on May 11, 1950, and the balance of $40,000 'to be represented by a note signed by the buyer and secured by a chattel mortgage covering the property conveyed, said note to bear interest at the rate of five per cent and payable One Thousand Dollars ($1,000.00) monthly, principal and interest; * * * with privilege of prepayment at any time.' The contract provided that 'the buyer may continue to use the name of Childers Prescription Shop.'

The contract also contained the following provision: 'For and in consideration of Thirty Thousand Dollars ($30,000.00) of the purchase price, the sellers hereby warrant to the buyer that they will not within five years from this date re-enter the retail drug or prescription business in the City of Independence, Missouri, or in Jackson County, outside of Kansas City, Missouri, nor are they to be employed in such business with any other firm, in the above described territory, other than the Childers Prescription Shop, so long as owned by Frank R. Brown, Jr., in part or whole, and it is understood that they will accept employment of the buyer on terms to be agreed upon, from time to time; and that William H. Childers and Ralph S. Thomas will continue in such employment for a reasonable time.' The other provisions of the contract are not material here.

Defendant testified as follows:

'Q. What was the consideration paid to you and your partners for the sale of this Childers Prescription Shop? A. One Hundred Thousand Dollars. * * *

'Q. Isn't it true that the physical assets were perhaps around $30,000.00 altogether and that $40,000.00 was paid for the established business and good will and $30,000.00 for a covenant not to re-enter the business? A. That is it, I think. * * *

'Q. At the time you sold the Childers Prescription Shop did you have a lease on the building where it is operated? A. No, sir.

'Q. Just renting from month to month? A. Yes, sir.'

While Damon A. Bogart is one of the plaintiffs in this case, his name does not appear in the written contract referred to above, and he did not sign that contract. Bogart did not testify at the trial and the testimony in the record does not show when he acquired an interest in the prescription shop. It would seem, however, that he acquired an interest in the business at the time of the sale. The petition alleges that 'on the 29th day of April, 1950, the plaintiffs purchased the Childers Prescription Shop' from defendant and his partners and 'that plaintiffs paid the parties aforesaid' the sum of $100,000, 'for the Childers Prescription Shop, together with established business, good will and a covenant and agreement from the Sellers aforesaid that the Sellers would not re-enter the retail drug or prescription business in the City of Independence or in Jackson County, Missouri, outside of Kansas City for a period of five years from the date of the sale.' (Italics ours.) These averments were admitted by defendant in his answer.

For the sake of brevity, that part of Jackson County outside of Kansas City, including Independence, will sometimes be designated as the 'prohibited' territory or area.

Plaintiffs took charge of the prescription shop on or about May 11, 1950, and they were operating the shop at the time of the trial. As we understand the evidence, plaintiff Brown was the manager of the business. On June 18, 1951, defendant opened a retail drug store, known as the Professional Pharmacy, at 8516 Winner Road, Kansas City, Missouri. This pharmacy is located about a block and a half from the eastern limits of Kansas City and fvie or six miles from the Childers Prescription Shop in Independence. Defendant sent telegrams to fifteen or twenty doctors residing in the prohibited territory, the telegrams reading as follows: 'Announcing opening of the Professional Pharmacy 8516 Winner Road June 18th. Telephone Independence 4340--Petey Childers.' Defendant testified that he paid $39 a month for the 'Independence telephone' and that he had it installed so that persons living in Independence and eastern Jackson County could call his store in Kansas City without paying the usual charge for such service. He also circulated business cards which carried his name, the address of the Professional Pharmacy, and the following: 'Have your Physician call Indep. 4340 for Prescriptions. Free Delivery.'

The evidence further shows that defendant advertised his Kansas City store in the Jackson County Democrat, the Independence Examiner, the Daily News, the Inter-City News, and the Pictorial Shopper, all of which were published and circulated in the prohibited territory. These full-page advertisements carried pictures of the interior and exterior of the Professional Pharmacy, gave the location of the store, and contained the following statements: 'Operated by 'Petey' Childers'--'Have your Physician call IN. 4340 for Prescriptions'--'Free Delivery in all of Independence, E. Independence, Golden Acres, Beverly Hills, Sugar Creek, and all of the Inter-City District,' all such places being within the prohibited area. Two of the advertisements carried this statement: 'We Call For and Deliver your Prescriptions'; and one read: 'Prescriptions Delivered or Mailed Free Anywhere.' Lettering on defendant's delivery car advertised the free delivery service. Defendant admitted that he accepted orders from persons living within the prohibited area and made deliveries within such area until a temporary injunction was granted in this case. Other evidence will be stated in the course of the opinion.

This suit was instituted on June 20, 1951, and a temporary injunction was granted on July 6, 1951. A trial was had on the merits of the case on January 20, 1952, resulting in a decree enjoining 'the defendant, A. Layle 'Petey' Childers, his agents, servants or employees from soliciting or accepting orders or delivering orders of retail drugs or prescriptions in Independence, Missouri, or in Jackson County, Missouri, outside of Kansas City, Missouri, for a period of five years from the 29th day of April, 1950, or until some further order be made by the court in the premises.'

Defendant-appellant does not question the validity of the restrictive covenant in the contract of sale; nor does he deny that he re-entered the drug and prescription business in competition with plaintiffs. Instead, he seeks to justify his action, and relies upon the pleaded defense that 'supplementary to the written contract of sale * * * and as a part of the consideration for said sale and transfer of said business the plaintiff, Frank R. Brown, Jr., orally agreed to employ defendant as a pharmacist in said drug store'; that plaintiffs have 'refused in employ defendant in said drug store in accordance with said oral agreement and understanding; that defendant was at all times ready, able and desirous of having such employment; * * * that because of their breach of their agreement as aforesaid plaintiffs do not come into this court of equity with clean hands nor are they willing to do equity by furnishing defendant the employment agreed upon and are therefore not entitled to relief in a court of equity.'

It will be noticed that defendant alleged in his answer that 'plaintiff, Frank R. Brown, Jr., orally agreed to employ defendant as a pharmacist in said drug store,' and then charges that the 'plaintiffs' breached 'their agreement as aforesaid.' The evidence shows that defendant and his partners dealt with Brown throughout the negotiations which culminated in the sale of the Childers Prescription Shop; but as pointed out above, the petition alleged and defendant admitted that 'plaintiffs' purchased the prescription shop from defendant and his partners, and that 'plaintiffs' paid the sellers $100,000 for said shop. It would seem, therefore, that Brown acted for plaintiff Bogart, as well as for himself, in his dealings with the sellers. In fact, the name of 'Frank R. Brown, Jr.,' and the word 'plaintiffs' are used interchangeably in the briefs.

As we have seen, the contract of sale contained the following provision: '* * * and it is...