Glantz v. Willow Supply Co., 147/168.

• Decision Date: 21 March 1947
• Docket Number: 147/168.
• Citation: 53 A.2d 346
• Parties: GLANTZ et al. v. WILLOW SUPPLY CO. et al.
• Court: New Jersey Court of Chancery

53 A.2d 346

GLANTZ et al.

v.WILLOW SUPPLY CO. et al.

147/168.

Court of Chancery of New Jersey.

March 21, 1947.

Suit by Nathan Glantz and another against Willow Supply Company and others to restrain violation of a covenant in restraint of trade.

Bill dismissed.

Fast & Fast and Herman L. Fast, all of Newark, for complainants.

Koehler, Augenblick & Freedman and Bernard Freedman, all of Newark, for defendants.

BIGELOW, Vice Chancellor.

This is a suit to restrain violation of a covenant in restraint of trade. The complainants and the defendant Willow Supply Company in 1942 were competitors in the business of selling materials for use in making and repairing advertising and other signs. Louis Perr was the president and practical owner of the company, and his wife, who is also a defendant, was the company's secretary. Due to war-time conditions, the defendants decided to get out of the business. On August 17, 1942, complainants bought from the Willow Supply Company for $6,481 all its stock in trade but not its fixtures, accounts receivable or good will. Complainants removed the materials they had bought to their own store, and continued to conduct business there in the same manner as formerly and not as successors of the Willow Supply Company. The company discontinued operations.

Contemporaneous with the sale and as part of the same transaction, the three defendants covenanted that they would not ‘for a period of three years after an Armistice shall be declared between the United States of America and its present enemies (but in no event shall the period of this restriction exceed ten years from the date hereof), engage, or become interested, in the sign supply business anywhere in’ several named counties of New Jersey, ‘either directly or indirectly, for themselves, or in partnership, corporation or Association with any other person, or as employee, agent, stockholder or otherwise.’

In 1943, the defendant Louis Perr reestablished himself in the business of selling supplies used in making neon signs, and on April 23, 1946, complainant began this suit.

It is likely that the parties intended that their covenant would be in force from the date of its execution until the third anniversary of the ‘Armistice’, but the strict construction which is applied to such contracts (Stanley Fabian Corporation v. H. J. Theatrical etc. Co., 115 N.J. Eq. 5, 169 A. 291) leads to the conclusion that the defendants were free to engage in the sign supply business until an Armistice was made and are precluded only for a three-year period beginning with the Armistice. Defendants charge that complainants do not come into court with clean hands, since one of them, Edwin B. Glantz, told sundry persons in 1944 that Perr was violating the covenant, when in fact he was not. Glantz testifies that he did not then realize the covenant was not yet in operation, and the correspondence between the attorneys in November and December, 1944, shows the same state of mind. The conscience of complainant is clear.

Defendants also allege laches-that if complainants believed the covenant was in force in 1943, they should have begun their action shortly thereafter and not waited nearly three years. But the suit was not maintainable until after the Japanese had surrendered in August, 1945. Complainants' delay until the following spring did not prejudice defendants.

Defendants also argue that there has not been an ‘Armistice’, and so the covenant has not yet come into play,-and never will. The parties knew that business operations were much affected by the fact that our country was engaged in a tremendous war effort; they anticipated that upon the cessation of actual military operations, conditions would begin to return to normal. In the first World War fighting had ended with the Armistice, and so the parties used that word in their contract to denote the formal conclusion of military operations. The circumstances that our enemies surrendered and that there was no armistice, in a technical sense, is immaterial. The Japanese surrender marked the beginning of the period during which the covenant is in force.

Perr denies that he is engaged in the sign supply business; he says he sells neon supplies. Beginning perhaps 20 years ago, neon lights have become more and more common in signs on store fronts and other advertising signs. Some dealers specialize in materials used in making neon signs; some specialize in materials for other types of signs. The defendants, before they closed their store in 1942, handled both kinds of supplies. Over half the inventory they sold complainants consisted of neon supplies. The business of selling supplies for making or...