C.H. Batchelder & Co., Inc. v. Batchelder

• Court: Supreme Judicial Court of Massachusetts
• Writing for the Court: BRALEY, J.
• Citation: C.H. Batchelder & Co., Inc. v. Batchelder, 220 Mass. 42, 107 N.E. 455 (Mass. 1914)
• Decision Date: 31 December 1914
• Parties: C. H. BATCHELDER & CO., Inc. BATCHELDER; BATCHELDER v. BATCHELDER; BATCHELDER v. C. H. BATCHELDER & CO., Inc.

220 Mass. 42

107 N.E. 455

C. H. BATCHELDER & CO., Inc. BATCHELDER; BATCHELDER v. BATCHELDER; BATCHELDER v. C. H. BATCHELDER & CO., Inc.

Supreme Judicial Court of Massachusetts, Suffolk.

December 31, 1914

COUNSEL

Whipple, Sears & Ogden, of Boston (Ralph E. Tibbetts, of Boston, of counsel), for C. H. Batchelder & Co., Inc.

Hutchins & Wheeler, of Boston, for Chas. H. Batchelder.

OPINION

BRALEY J.

A corporation chartered as the C. H. Batchelder Company was organized by Charles H. Batchelder, hereafter referred to as the defendant, to take over and carry on the business conducted by him under the same name. Its capital stock was divided into preferred and common shares although no part of the preferred stock ever was issued. The vote of the board of directors to take over the business and to assume all outstanding liabilities, followed by his acceptance and receipt of the entire common stock of the company in payment, operated as a transfer and sale of the personal property therein enumerated. The presiding judge having found upon evidence not reported that the vendor also intended as part of the consideration to include the good will, the corporation succeeded to a going commercial enterprise, with a recognized line of patronage, as if the transfer had been effected by a formal bill of sale. Tufts v. Plymouth Gold Mining Co., 14 Allen, 407; Beacon Trust Co. v. Souther, 183 Mass. 413, 67 N.E 345.

In less than two years the corporation passed into the hands of a receiver, who under the decree carried on the business for nearly 2 1/2 years more, when he sold the assets including the 'business, good will and trade-names of the C. H. Batchelder Company.' The purchasers organized the plaintiff corporation to which they transferred their purchase and since then it has carried on at the old stand business of the same general nature and character as that which formerly had been conducted by the defendant and the C. H. Batchelder Company.

After the receiver's sale, but not before, the defendant, having set up at his dwelling house a similar business of making, repairing and storing awnings, solicited the patronage of those who previously had traded with him or with the former company. As a result of the competition the plaintiff, by its bill, asks for injunctive relief, and for an accounting of profits, while in the second bill, which is really in the nature of a cross-bill, the defendant seeks to have the plaintiff restrained from the further use of his name and for an accounting of profits or for damages.

The title acquired by the purchasers at the receiver's sale, which was confirmed by the court, and of the plaintiff who claims under them, is in effect the same as if the corporation had wound up its affairs and made the transfer. Tobin v. Vermont Central Railway, 185 Mass. 337, 70 N.E. 431; Eastern Structural Co. v. Worcester Auditorium Co., 216 Mass. 426, 103 N.E. 913; Duplex Printing Press Co. v. Clipper, 213 Pa. 207, 62 A. 841. And the rights of the parties are commensurate with the scope of the defendant's contract with the company which he organized. A sale of the good will imposes upon the vendor an obligation to refrain from doing anything which deprives the buyer of the benefit and advantages of the purchase. Foss v. Roby, 195 Mass. 292, 81 N.E. 199, 10 L. R. A. (N. S.) 1200, 11 Ann. Cas. 571. But if a competing business is set up by the vendor, whether an agreement not to compete, where none has been expressed, is to be implied, is a question of fact. Old Corner Bookstore v. Upham, 194 Mass. 101, 105, 80 N.E. 228, 120 Am. St. Rep. 532. The question is before us on the record, which states that this court by agreement of parties may draw inferences of fact from the findings reported. The purpose of the defendant as the founder and organizer of the corporation, over whose affairs as its president and treasurer he exercised unrestricted control until the receivership, was plainly to enable him to do business in corporate form. The findings of the judge leave no doubt that he treated the business as being essentially the same as if it were his own. The corporation was his creature or instrumentality and in reality the business remained his personal business, which he transacted under the corporate name. Montgomery v. Forbes, 148 Mass. 249, 253, 19 N.E. 342; Ginn v. Almy, 212 Mass. 486, 505, 506, 99 N.E. 276.

The possibility that the company might become insolvent, or the probability that his connection with it might be severed, or that it would go out of business, does not appear to have been contemplated by the contracting parties. It doubtless is true that if by any chance he had retired and the corporation went on, he could not have engaged in a similar business where the circumstances as to locality and the sources of trade showed that it would be in derogation of his grant. Gordon v. Knott, 199 Mass. 173, 178, 85 N.E. 184, 19 L. R. A. (N. S.) 762, and cases cited.

What the parties understood and intended is to be ascertained as of the date of the contract. Smith v. Vose & Sons Piano Co., 194 Mass. 193, 80 N.E. 527, 9 L. R. A. (N. S.) 966, 120 Am. St. Rep. 539. The assumption that he ever intended to compete with himself, or that either he or the directors in any way considered whether upon his retirement the business should be sold is unwarranted. It is fairly to be inferred that the defendant's implied obligation was never understood or intended to go beyond the business life of the corporation, and the contract cannot be held as embracing an implied restriction which the parties never had in mind. Hanson & Parker v. Wittenberg, 205 Mass. 319, 327, 328, 91 N.E. 383. The cases of Marshall Engine Co. v. New Marshall Engine Co., 203 Mass. 410, 89 N.E. 548, and Myott v. Greer, 204 Mass. 389, 90 N.E. 895, to which the plaintiff refers as supporting its contention that the undertaking was unlimited in time and unrestricted as to persons or locality, are upon their facts plainly distinguishable. If instead of organizing a corporation the defendant had formed a partnership, it is settled, that when the partnership ended upon a winding up by a receiver each partner would have been at liberty to do any kind of business, and could solicit customers of the former firm even if its good will had been sold by the receiver as part of the partnership assets. Hutchinson v. Nay, 183 Mass. 355, 67 N.E. 601; Moore v. Rawson, 185 Mass. 264, 70 N.E. 64; Id., 199 Mass. 493, 85 N.E. 586.

We are unable to perceive any distinction in principle. The corporation as a business concern ceased to exist, although until dissolved it is a technical legal entity. United Zinc Cos. v. Harwood, 216 Mass. 474, 103 N.E. 1037.

Its winding up with this exception does not differ from the winding up of a partnership by a receiver. In either event the good will is an...