Brown v. Stough

• Decision Date: 10 January 1956
• Docket Number: No. 36801,36801
• Citation: 292 P.2d 176
• Parties: George M. BROWN, Jr., et al., Plaintiffs in Error, v. A. R. STOUGH, Defendant in Error.
• Court: Oklahoma Supreme Court

Page 176

292 P.2d 176

1956 OK 3

George M. BROWN, Jr., et al., Plaintiffs in Error, v. A. R. STOUGH, Defendant in Error.

No. 36801.

Supreme Court of Oklahoma.

Jan. 10, 1956.

Syllabus by the Court.

1. A member of a partnership has an existing interest in the good will of the firm's business, and an agreement not to engage in a competing business made by a retiring partner who sells his interest to the remaining partners, stands on the same footing as a sale of good will by a merchant or manufacturer.

2. One who sells the good will of a business may agree with the buyer to refrain from carrying on a similar business within a specified county, city or part thereof, so long as the buyer, or any person deriving title to the good will from him carries on a like business therein. 15 O.S.1951 § 218.

3. Record examined and held: Provisions of partnership agreement of a medical clinic providing for sale of interest of partner voluntarily withdrawing from firm to remaining partners and continuation of partnership by remaining partners and containing covenant that partner voluntarily withdrawing should not practice medicine for a period of two years within county in which clinic was located, were not void as against public policy but were valid and enforceable.

Appeal from the District Court of Pittsburg County; W. A. Lackey, Trial Judge.

Action by a group of doctors against a former partner to enjoin defendant from practicing medicine in violation of contract. From a judgment for defendant, plaintiffs appeal. Reversed.

Arnote, Arnote & Bratton, McAlester, for plaintiffs in error.

Robert J. Bell, W. S. Horton and A. James Gordon, McAlester, for defendant in error.

WILLIAMS, Vice Chief Justice.

This action was instituted by a group of doctors and surgeons doing business as the McAlester Clinic, hereinafter referred to as plaintiffs, seeking to enjoin Dr. A. R. Stough, hereinafter referred to as defendant, from the practice of his profession as a physician and surgeon in Pittsburg County, Oklahoma, for a period of two years.

Plaintiffs' petition alleged that plaintiffs and defendant entered into a written partnership agreement on July 1, 1954, wherein it was provided, among other things, that in the event any member of the partnership should voluntarily withdraw or be dismissed from the partnership, such member should not practice medicine or surgery within the bonds of Pittsburg County, Oklahoma, for a period of two years from the date of his withdrawal; that defendant voluntarily withdrew from the partnership on August 31, 1954, and in violation of said agreement opened an office in the City of McAlester, Oklahoma, for the practice of medicine and surgery within the bonds of Pittsburg County, Oklahoma, and continues to so practice medicine and surgery in violation of said agreement.

Defendant answered admitting the existence of the partnership and the execution of the partnership agreement, denying that he voluntarily withdrew from the partnership, alleging that the withdrawal was involuntary and the result of a premeditated design to force his withdrawal on the part of two of the partners, alleging that the partnership agreement is contrary to public policy and void in its entirety, alleging that the restrictive clause in said agreement is void as being in violation of public policy and for lack of mutuality and consideration, and alleging that plaintiffs themselves have failed and refused to carry out the terms and conditions of the agreement and are therefore not entitled to maintain the action.

Plaintiffs replied by a general denial and upon the issues so formed the cause was tried to the court without the intervention of a jury.

The trial court, after making findings of fact and conclusions of law, rendered judgment for defendant denying the injunction sought, and plaintiffs appeal.

Plaintiffs contend, as their only assignment of error, that the judgment is not sustained by sufficient evidence and is contrary to law. Since the trial court's judgment was based on a conclusion that the contract in question is against public policy and therefore unenforceable, the question presented appears to be one of law rather than fact.

Contracts such as the one here involved do not seem to be particularly unusual. The reported opinions in cases involving such contracts are numerous and a great many of them involve contracts between physicians. They have been uniformly upheld by the courts of the several states, where they have not been controlled by statutory provision, and equity has always granted relief by injunction to restrain a breach thereof. An excellent example of such case is Threlkeld v. Steward, 24 Okl. 403, 103 P. 630, 138 Am.St.Rep. 888, which involved a contract executed in Indian Territory prior to statehood, where the common law relating to contracts governed. But regardless of the common law or the rule in other states, we have a statute which governs such contracts in this state. 15 O.S.1951 § 217, provides:

'Every contract by which any one is restrained from exercising a lawful profession, trade or business of any kind, otherwise than as provided by the next two sections, is to that extent void. R.L.1910, 978.'

15 O.S.1951 § 218, provides:

'One who sells the good-will of a business may agree with the buyer to refrain from carrying on a similar business within a specified county, city or part thereof, so long as the buyer, or any person deriving title to the good-will from him carries on a like business therein. R.L.1910, § 979.'

15 O.S.1951 § 219, provides:

'Partners may, upon or in anticipation of a dissolution of the partnership, agree that none of them will carry on a similar business within the same city or town where the partnership business has been transacted, or within a specified part thereof. R.L.1910, § 980.'

The provision of the contract in question sought to be enforced here is as follows:

'It is specifically agreed by and between all the members of this partnership that in the event any partner shall voluntarily withdraw or be dismissed from the organization that such member shall not practice medicine or surgery within the bonds of Pittsburg County, State of Oklahoma, for a period of two years from the date of his withdrawal. This provision does not apply to any member retiring under Section Fourteen of this contract on account of age.'

It is apparent that the above quoted provision of the contract is one by which one is restrained from exercising a lawful profession within the purview of 15 O.S.1951 § 217, supra, and therefore void unless it falls within one of the two exceptions allowed by 15 O.S.1951 §§ 218 and 219, supra.

Similar contractual provisions have been involved in a number of cases previously considered by this court and in every case the provision was upheld as being valid and enforceable and within the provisions of the statutory exceptions. See Wall v. Chapman, 84 Okl. 114, 202 P. 303; Key v. Perkins, 173 Okl. 99, 46 P.2d 530; Herrington v. Hackler, 181 Okl. 396, 74 P.2d 388; Clare v. Palmer, 201 Okl. 186, 203 P.2d 426; Moore v. Snodgress, 203 Okl. 572, 223 P.2d 1080; Griffin v. Hunt, Okl., 268 P.2d 874. The case of Herrington v. Hackler, supra, is more nearly analogous to the case at bar than any of the others cited. In that case plaintiff and defendant, who were both physicians, had entered into an agreement whereby plaintiff bought from defendant a hospital and equipment and plaintiff and defendant agreed to enter into a partnership for the general practice of medicine. The agreement provided that in the event the partnership should prove unsatisfactory or be dissolved, the defendant would repurchase the hospital from the plaintiff for the sum originally paid by him, or that defendant would refrain from the practice of his profession within a specified area for a period of five years. The partnership was later dissolved by mutual consent, but after dissolution defendant failed to repurchase the hospital and continued to practice medicine within the specified area. Plaintiff instituted an action to enjoin defendant from practicing medicine in violation of the agreement. In approving the granting of the injunction sought, this court used the following language [181 Okl. 396, 74 P.2d 391]:

'By express provision of section 9493 and 9494, O.S.1931 (15 Okl.St.Ann. §§ 218 and 219), one selling the goodwill of a business may agree with the buyer not to engage in a similar business in a specified county, city, or part thereof, within a reasonable period of time.

'The defendant contends that the foregoing statutes are inapplicable for the reason that the contract in the present case contains no provision for the sale of the goodwill of defendant's business, and that such sale was not contemplated by the parties. We cannot agree with this contention. The rule is stated in 12 R.C.L. p. 985, as follows: 'Where a contract for the sale and transfer of a business omits to mention the goodwill, the presumption is that it was the intention of the parties that the goodwill should pass with the other assets. This necessarily results from the fact that the goodwill cannot exist except in connection with the business.'

'Adhering to this rule, this court, in the syllabus in Wall v. Chapman, 84 Okl. 114, 202 P. 303, held:

"Section 946, Rev.Laws 1910 (15 Okl.St.Ann. § 152) provides: A contract must be interpreted as to give effect to the mutual intention of the parties, as it existed at the time of contracting, so far as the same is ascertainable and lawful.

"The obvious intent of a contract for the sale of all tools, furniture, and equipment of the office of a dentist to another dentist, coupled with an agreement by the seller not to enter into a like business in the...