Harris v. Theus

• Citation: 43 So. 131,149 Ala. 133
• Parties: HARRIS ET AL. v. THEUS.
• Decision Date: 14 February 1907
• Court: Supreme Court of Alabama

43 So. 131

149 Ala. 133

HARRIS ET AL. v. THEUS.

Supreme Court of Alabama

February 14, 1907

Appeal from Chancery Court, Geneva County; W. L. Parks, Chancellor.

Action by R. L. Theus against W. H. Harris and another. From a decree for plaintiff, defendants appeal. Affirmed.

This was a bill filed by Theus against the Harrises for an injunction to restrain the said Harris from engaging in or carrying on the business of buying crude gum and distilling turpentine within 10 miles of the town of Geneva. The bill is based on a contract wherein Theus purchased of Harris certain leases of pine land for turpentine purposes and erected a distillery for the manufacture of turpentine, and a covenant in said contract that said Harris would not engage in the naval stores business within 10 miles of the town of Geneva so long as Theus should be engaged in said business at Geneva. The allegations of the bill and of the answer together with the pleadings in the cause, are sufficiently set out in the bill of exceptions. The chancellor declined to dismiss the bill for want of equity, overruled the demurrer thereto, and on a final hearing decreed that complainant was entitled to the relief prayed for. From this decree respondents appeal.

C. D Carmichael and W. R. Chapman, for appellants.

W. O. Mulkey, for appellee.

DENSON J.

It may be conceded as being the general rule in all the states, as well as in England, that contracts in general restraint of trade are void as against public policy. 24 Am. & Eng. Ency. Law (2d Ed.) 842; 3 Am. & Eng. Ency. Law (1st Ed.) p. 882; 9 Cyc. 525; 2 Pom. Eq. Juris. § 934; McCurry v. Gibson, 108 Ala. 451, 18 So. 806, 54 Am. St. Rep. 177; Brewer v. Marshall, 19 N. J. Eq. 537, 97 Am. Dec. 679; Mitchell v. Reynolds, 1 P. Wims. 181; Trenton Potteries Co. v. Oliphant (N. J. Eq.) 43 A. 723, 46 L. R. A. 255, 78 Am. St. Rep. 612. "In determining what is the public policy in this regard, we have to take into account certain contracts which restrain trade. It is of public interest that every one may freely acquire and sell and transfer property and property rights. A tradesman, for example, who has engaged in a manufacturing business, and has purchased land, installed a plant, and acquired a trade connection and good will thereby, may sell his property and business, with its good will. It is of public interest that he should make such a sale at a fair price, and that his purchaser shall be able to obtain by his purchase that which he desired to buy. Obviously, the only practical mode of accomplishing that purpose is by the vendor's contracting for some restraint upon his acts, preventing him from engaging in the same business in competition with that which he has sold. His contract to abstain from engaging in such competitive business is a contract in restraint of trade, but one which has been recognized as not inimical to, but permitted by, public policy. Therefore, while the public interest may be that trade in general shall not be restrained, yet it also permits and favors a restraint of trade in certain cases. Contracts of this sort, which have been sustained and enforced by courts, have been generally declared to be such as restrain trade, not generally, but only partially, and no more extensively than is reasonably required to protect the purchaser in the use and enjoyment of the business purchased, and are not otherwise injurious to the public." This is the doctrine recognized in the courts of many of the states, including our own court. 9 Cyc. 529, and cases cited in note 70; 24 Am. & Eng. Ency. Law (2d Ed.) p. 850; McCurry v. Gibson, 108 Ala. 451, 18 So. 806, 54 Am. St. Rep. 177; Tuscaloosa Ice Co. v. Williams, 127 Ala. 110, 28 So. 669, 50 L. R. A. 175, 85 Am. St. Rep. 125; Trenton Potteries Co. v. Oliphant, supra.

Without indulging in comments on, or making a review of, the many cases in which contracts in partial restraint have been upheld and enforced, we will mention some of them, with a bare statement of the nature of the contract or covenant upheld: An agreement on the sale of a magazine not to publish a similar one (Ainsworth v. Bentley, 14 Wkly. Rep. 630); an agreement not to engage in the business of a gasfitter within 20 miles of a certain place (Wood v. Whitehead, 165 N.Y. 545, 59 N.E. 357); an agreement not to carry on the business of a soap manufacturer within 40 miles of Lockport, N. Y., for 10 years (Ross v. Sadgbeer, 21 Wend. 166); an agreement not to do business as a banker in a certain place for 10 years (Hoagland v. Segur, 38 N. J. Law, 230); an agreement not to engage in the coal or fish business for a term of 10 years ( Hitchcock v. Anthony, 83 F. 779, 28 C. C. A. 80); a contract by the owner of an exclusive ferry franchise between two points, on the sale of it to another, never to establish a rival ferry on his own land while the other shall maintain the one sold (West-fall v. Mapes, 3 Grant, Cas. [ [Pa.] 198; 9 Cyc. p. 531 [second agreements held valid]; 24 Am.

& Eng. Ency. [2d Ed.] p. 842 [restraint of trade]). Coming to our own cases: In the case of Moore & Handley Hardware Co. v. Towers Hardware Co., 87 Ala. 206, 6 So. 41, 13 Am. St. Rep. 23, a contract was made between the parties, by which Moore & Handley Hardware Company sold to the Towers Hardware Company their entire stock of plow stocks and plow blades for a fixed amount, and covenanted not to handle any more plow stocks or plow blades, except railroad plows. It was held that, notwithstanding the covenant contained no express stipulation as to territory, the contract might be construed with respect to the territory over and in which the contracting parties were competitors at the time the covenant was made, which the allegations of the bill showed was all that part of Alabama lying north of the city of Birmingham; and, so construing the contract, it was there held that the covenant was a reasonable and valid one, citing numerous cases decided by the courts of other jurisdictions in support of the holding. The case of McCurry v. Gibson, 108 Ala. 451, 18 So. 806, 54 Am. St. Rep. 177, involved a contract by which a physician who had built up a practice in the city of Anniston sold his business to another physician, and covenanted not to practice his profession in that city for two years. In an able opinion by Head, J., in which the doctrine of illegality of contracts in restraint of trade is discussed and gone over, the covenant was held valid, and relief by injunction was granted the covenantee.

The sum of these cases is that, though there can be no general restraint of trade, yet to a certain extent it may be regulated, and by consequence to some extent restrained, within a prescribed territory not unreasonable in extent. "To the rule that the restraint must be limited, and only so great as to afford adequate protection to the covenantee, it is a corollary that the covenant must be incidental to and in support of a contract or a sale by which the contractee acquires some interest in the business needing protection. A man cannot, for money alone, where he has no interest in the matter, procure a valid contract in restraint of trade, however limited may be the circle of its operation." 24 Am. & Eng. Ency. (e), p. 851, and cases cited in note 1 on page 852. It is on this principle, in part, that the contract in the case of Tuscaloosa Ice Co. v. Williams, 127 Ala. 110, 28 So. 669, 50 L. R. A. 175, 85 Am. St. Rep. 125, was held invalid as against public policy. In that case the covenant was that the covenantor, a competitor of the covenantee in the same city in the manufacture and sale of ice, for a sum to be paid, was not to run his ice machine in the city of Tuscaloosa for five years. No business or property was sold or purchased. So that case is easily distinguishable from the one at bar, and is not authority for striking down the contract we are considering. It was there said, among other things: "When the contractor surrenders his trade or profession, an equivalent is given the public, because ordinarily, as a part of the transaction, the contractee assumes and carries on the trade or profession. Nothing is abandoned, and only a transfer is accomplished. The same occupation continues. The same number of mouths are fed. And these considerations obtain where one already engaged in a business in good faith, for the purpose of enlarging and increasing his business, purchases the stock in trade or practice or plant of a rival, and incident thereto takes the covenant of the seller not to engage in the same business within the territory covered by the consolidated enterprise, and in all such cases the covenant in restraint of trade is a reasonable one and valid."

It is made to appear by the averments of the bill that crude gum is an article that is purchased by those engaged in the naval stores business, and that one engaged in the business at or near Geneva may obtain, and does purchase, the gum from persons within a radius of 10 miles from the town of Geneva and that leases of lands or the pine timber thereon located some distance from Geneva are made for the purpose of obtaining gum to be worked in the distillery, so that the place fixed by the covenant, within 10 miles of Geneva, considered in connection with the nature of the business and the purpose of the contract, seems to afford only a fair protection to the interests of the covenantee, without being so large as to interfere with the interests of the public. McCurry v. Gibson, supra; Robbins v. Webb, 68 Ala. 393; 24 Am. & Eng. Ency. Law (2d Ed.) p. 844, and cases cited in note 3. In respect to the time stipulation, such contracts are not rendered invalid by a failure to specify any limit of time for its duration. McCurry v. Gibson, 108 Ala., bottom of page 455, 18 So. 806, 54...