Burchell v. Capitol City Dairy Inc

• Decision Date: 24 March 1932
• Parties: BURCHELL. v. CAPITOL CITY DAIRY, Inc., et al.
• Court: Virginia Supreme Court

163 S.E. 81

BURCHELL.

v.CAPITOL CITY DAIRY, Inc., et al.

Supreme Court of Appeals of Virginia.

March 24, 1932.

Appeal from Corporation Court of City of Alexandria.

Suit by the Capitol City Dairy, Inc., and others against Michael H. Burchell. From a decree for complainants, defendant appeals.

Reversed, and bill dismissed.

Argued before CAMPBELL, C. J., and HOLT, EPES, HUDGINS, and CHINN, JJ.

Albert V. Bryan and Wm. S. Snow, both of Alexandria, for appellant.

Charles Henry Smith, of Alexandria, for appellees.

EPES, J.

The bill in this case prays for an injunction against Burchell. It contains no other prayer for relief, not even a prayer for general relief. The salient facts determinative of this appeal are as follows:

Michael H. Burchell and Clarence V. Horner had organized, and were operating, the Loudoun Farms Dairy Company, Inc., which was doing a dairy business in the District of Columbia. They owned all its outstanding capital stock, each owning one-half of the stock.

They entered into a written contract, dated October 2, 1929, with F. L. Oyster, by which they agreed to sell to Oyster all the outstanding capital stock (3, 000 shares) of this corporation for $26,055 and certain other considerations. In this contract Burchell and Horner each covenanted that he would not, directly or indirectly, engage in the dairy business in, or within fifty miles of, the city of Washington for a period of ten years.

In making purchase of this stock, Oyster was acting for an undisclosed principal, the Capitol City Dairy, Inc., which was engaged in the dairy business in the District of Columbia. Oyster immediately assigned all his rights in and under this contract to Capitol City Dairy, Inc., which soon thereafter caused the Loudoun Farms Dairy, Inc., to be dissolved.

In April, 1930, Burchell accepted employment as manager of the Alexandria Dairy Products Company, Inc., a corporation doing a dairy business in the city of Alexandria, Va., and was so engaged when the bill in this cause was filed.

In September, 1930, Capitol City Dairy, Inc., and F. L. Oyster filed their bill in this cause to enjoin Burchell from breaking his covenant above mentioned.

On January 26, 1931, Burchell filed his an-swer in which he set up the defense that his covenant not to engage in the dairy business was unenforceable by either Oyster or his assignee, the Capitol City Dairy, Inc., because it constituted an unlawful restraint of trade.

The answer also alleged, and the stipulation of facts upon which the cause was heard established, these further-facts:

The Capitol City Dairy, Inc., had sold all its corporate assets, including its good will, to the Chevy Chase Dairies, Inc. (a Delaware corporation), incorporated to do a retail and wholesale dairy business in the city of Washington, whose stockholders are persons other than the stockholders of Capitol City Dairy, Inc. Though it is not expressly so stated, the inference from the record "is that this sale had taken place after the institution of this suit. The Capitol City Dairy, Inc., still exists as-a corporation, but is not engaged in the dairy business; and is preserving its corporate existence "purely for the purpose of winding up pending suits and other unfinished litigations." The business done by the Chevy Chase Dairies, Inc., is "identical with" that formerly done by Capitol City Dairy, Inc.

So far as the record discloses, Chevy Chase Dairies, Inc., has never become or been made a party to this suit in any way, or taken any part in the prosecution thereof, nor have the pleadings been indorsed to show that the suit is being prosecuted by it or on its behalf. The record does not show that Oyster guaranteed to Capitol City Dairy, Inc., that the covenant of Burchell was enforceable or assumed any obligation to enforce or procure the enforcement thereof, or that Capitol City Dairy, Inc., made any such guaranty or assumed any such obligation when it made the sale to Chevy Chase Dairy, Inc.

On February 12, 1931, the court entered its decree permanently enjoining Burchell from engaging in the dairy business in, or within fifty miles of, the city of Washington, during the period of ten years from October 2, 1929; and therein ordered him to cease all connection with the Alexandria Dairy Products Company, Inc. From this decree Burchell has appealed.

There are several assignments of error; and most of the argument of counsel is addressed to the question, Is the covenant of Burchell here sued upon an enforceable covenant? But it can serve no useful purpose to discuss this question here, and in the state of the record here before us the court should not undertake to pass upon this question, because, at the time the final decree was entered, there was no person before the court who was then entitled to have the covenant...