Caraway v. Flagg, 14912

• Decision Date: 11 March 1955
• Docket Number: No. 14912,14912
• Citation: 277 S.W.2d 803
• Court: Texas Court of Appeals
• Parties: B. M. CARAWAY, Appellant, v. W. M. FLAGG, Appellee.

Page 803

277 S.W.2d 803

B. M. CARAWAY, Appellant, v. W. M. FLAGG, Appellee.

No. 14912.

Court of Civil Appeals of Texas, Dallas.

March 11, 1955.

Rehearing Denied April 22, 1955.

Alexander D. McNabb, Dallas, for appellant.

De Shazo & Hyde and Ernst T. Foree, Dallas, for appellee.

CRAMER, Justice.

This was a suit on a $2,500 note given as part consideration for a taxidermy business in the City of Dallas, sold by Caraway to Flagg. Appellee Flagg, material to this appeal, pled that Caraway under the terms of the sales contract bound himself not to thereafter, for a period of five years, work as a taxidermist in Texas; and, if he violated such restriction, the note would be forfeited and considered paid; that appellant had violated such covenant or agreement and did work as a taxidermist in Texas within such five years. Appellant Caraway asserts that the restrictive covenant was too severe; was too exclusive in territory; was in restraint of trade; against public policy; would reduce appellant to a state of peonage, and therefore void and unenforceable.

Trial was had to a jury but, at the close of the evidence, the trial court being of the opinion that the facts were undisputed and that appellant should recover nothing on his note, discharged the jury and entered judgment for Flagg. Caraway has duly perfected this appeal and briefs ten points of error.

Point 1 asserts error in overruling his motion for summary judgment. Appellee's counter point is that the trial court was correct in such action.

The contract contained the following provisions: '(V) Subject to seller's right to finish unfilled orders now on hand, the seller agrees that he will not re-engage in the taxidermy business in the State of Texas, either as an individual or as an employees, except as an employee of the buyer, and that he will not own shares of stock or any interest in any such business in such state until the termination of five years from this date. If this agreement is violated, the balance due on the notes hereinafter mentioned shall be forfeited and considered paid.'

The material question raised by the briefs is whether or not such provision which barred Caraway from engaging in the taxidermy business, in the either State of Texas, for a period of five years, is legally valid or void. It is not asserted in the pleadings of Caraway that he did not violate the provision; on the contrary he admitted he had engaged in such business before the note was due. There is no controversy between the parties as to the validity of the time (five years) provision, but the question is limited in the briefs to the space (State of Texas) provision.

The general rule is that a contract unlimited, (1) as to time and space is void; (2) as to time, but not as to space, is ordinarily void; and (3) as to space, but not as to time, is valid only if reasonable. 17 C.J.S., Contracts, §§ 242 to 244 inclusive, page 624.

Our cause here is within the third provision above, with the additional element that the restriction must not be broader than the business sold.

The Texas rule is stated in 8 Tex.Law Review 422-423:

'* * * The courts recognize that restriction is a necessary part in the absolute sale of any business, that there is a definite social interest in the freedom of an individual to sell his property absolutely. that good will is a definite property having a salable value, and that these considerations outweigh the social interests that individuals should be free to enter whatever business they please. * * * Consequently a promise imposing a restraint in trade or occupation which is reasonable, which is not wider than is necessary for the protection of the convenantee is some ligitimate interest, which does not impose a harsh burden on the covenantor with no corresponding benefit to the covenantee, where the restrictive promise is ancillary to some permissible transaction, and where the contract is made on a good and adequate consideration, is held valid. * * * Hence covenants in partial restraint of trade are generally upheld as valid when they are agreements by the seller of property not to complete with the buyer is such a way as to derogate from the value of the property or business sold. Such restrictions must be reasonably necessary, however. * * * Such contract must not be characterized by any oppression. * * * The rule is sometimes stated that the restriction must not be broader than the business sold. * * * In situations such as the instant case where the sale is made to one who was not formerly a competitor, there is no diminution in competition by the covenant. Hence it constitutes but a minor restraint of trade. An express stipulation is included to allow the enforcement of the restraint which may not be created by implication. * * * Yet under the Sherman Act (15 U.S.C.A. §§ 1-7, 15 note) a restrictive covenant accompanying the sale of a business is valid. * * * Such a contract has been held legal in Texas. Gates v. Hooper, 90 Tex. 563, 39 S.W. 1079 (1897). * * *.'

Authorities in Texas directly on this question are few. The Galveston Court of Civil Appeals held, in a case involving a weekly newspaper, The Houston Informer that an agreement not to publish the newspaper in the State of Texas for a period of five years, except for the purchaser, was reasonable and valid and that a threatened violation of the agreement was sufficient to authorize the injunction there involved. Richardson v. Webster-Richardson Pub. Co., 46 S.W.2d 384, no writ history.

We are, unless the facts here are distinguishable, inclined to follow the reasoning and holding in that case. The record shows taxidermy is a specialty and the patrons of such a business are ordinarily those who have the heads, etc., of animals killed by them as a result of recreation, sport, etc.; in other words, those who desire the mounted heads, or the whole animal, as trophies. The record also shows that while most of the customers are residents of the City of the Dallas, some come from other points in and out of the State of Texas,...