Martin v. Hawley, 11256.

• Decision Date: 28 May 1932
• Docket Number: No. 11256.,11256.
• Citation: 50 S.W.2d 1105
• Parties: MARTIN v. HAWLEY.
• Court: Texas Court of Appeals

50 S.W.2d 1105

MARTIN v. HAWLEY.

No. 11256.

Court of Civil Appeals of Texas. Dallas.

May 28, 1932.

Appeal from District Court, Dallas County; T. A. Work, Judge.

Suit by A. D. Martin against J. W. Hawley. From a jugment dismissing the suit, plaintiff appeals.

Affirmed.

Dallas C. Biggers and Roy W. McDonald, both of Dallas, for appellant.

D. A. Frank, of Dallas, for appellee.

JONES, C. J.

This is an injunction suit instituted by appellant, A. D. Martin, in a district court of Dallas county, Tex., seeking to enjoin appellee, J. W. Hawley, from engaging in any manner, or becoming connected in any manner, with a competitive business of the Electrified Water Company of Dallas, a corporation, for a period of time extending to May 15, 1935, and to recover damages in the sum of $5,000. A general demurrer was sustained to appellant's petition and a final judgment of dismissal of the suit was entered when appellant declined to amend his petition. The facts alleged in the duly verified petition become, in effect, a statement of the facts in this case. The facts so alleged are:

On August 1, 1928, appellee with two associates organized a corporation named the Electrified Water Company of Dallas, with a capital stock of $14,000; such stock being owned equally by the three organizers, who were named as directors. The city of Dallas was named in the charter as the place of business. The purpose of the corporation was to produce and sell mechanically purified water for drinking purposes.

Appellee was made vice president and general manager of the corporation, and it at once began the production and sale of mechanically purified water, confining its territory to the city of Dallas and its suburbs. Appellee is especially skilled and experienced in the purifying of drinking water by mechanical means. From the time of its entry in business until May 15, 1930, appellant was its manager, and through his efforts there was built up and maintained a growing number of customers, and there was established, largely through appellee's exertions, a valuable good will among customers and prospective customers in the city of Dallas and its suburbs. That as manager of the corporation appellee was in possession of and knew the names and addresses of its customers and prospective customers, and by communication with such customers, as well as by personal contact with them, he became identified in their minds with the business of selling and distributing mechanically purified water within the above-named territory. That a list of the customers and prospective customers of the business was kept under his supervision and control. That under the management, control, and work of appellee the value of the corporation's stock became materially enhanced, and that this was largely the result of the skill, experience, and special fitness of appellee as the manager of such business.

On May 15, 1930, appellant and appellee entered into a written contract, under the terms of which appellee sold and transferred his shares of stock in the corporation to appellant for the sum of $6,000, partly paid in cash, partly paid by the assumption of described indebtedness owed by appellee, and the remainder to be paid in future installments. It is alleged that at the time of the execution of this contract both appellant and appellee knew that the business of the corporation had been confined to the territorial limits of the city of Dallas and its suburbs, and that at such time appellant and appellee both knew that the value of the stock of the corporation would be materially affected if appellee should engage in a competing business.

The following paragraphs of the written contract are deemed material:

"I (appellee) will remain on as manager if you (appellant) so desire, as long as my services are satisfactory, and in the event that you, at any time, want to get a new manager for my place, I will stay on for a period of not more than two months in a supervising capacity at no pay and lend my best efforts to the proper instruction of the new manager and the proper carrying on of the business.

"I also agree not to engage in a competitive business or in any way become connected with a competitive business for a period of five (5) years.

"As long as I remain manager of this company I will give it all of my time and will not engage in any other line of work that requires any of my time. My salary under this arrangement, and as long as I am employed by you, is to be $200 per month plus a ten per cent (10%) bonus of the net profits of the company after depreciation."

Appellant alleged that the paragraph of the contract binding appellee "not to engage in a competitive business, or in any way become connected with a competitive business, for a period of five years" was intended by the parties only to apply to the territory of the city of Dallas and its suburbs, the territory in which the corporation was then transacting the business of selling mechanically purified drinking water; that appellant has fully performed all of the conditions imposed upon him by the contract, and would not have entered into the contract to purchase appellee's stock in the corporation if appellee had not promised, agreed, and contracted not to engage in a competitive business, or become connected with a competitive business, in competition with the business of the corporation; that appellant paid a valuable consideration for the execution by appellee of the restrictive clause in the contract, in that, the value of appellee's stock at the time of the purchase would have been much less than the sum of $6,000 paid by appellant, but for such restrictive covenant.

On September 15, 1931, appellee leased from the owners the plant of the Dallas Distilled Water Company of Dallas, and became the manager of such company, as well as of the right to share in its profits, and is continuing in such business; that the only difference between the product of the Electrified Water Company and that of the Distilled Water Company is purely technical, being based upon a difference in the mechanical process to which the water is subjected for purification; that the product of both companies is mechanically purified drinking water, and the Distilled Water Company is in direct competition with appellant's company for the sale of drinking water to the Dallas public; that appellee has induced customers of appellant corporation to purchase their drinking water from the Distilled Water Company instead of from appellant's company; that, by reason of appellee's breach of the restrictive clause in his contract of sale and his management of the Distilled Water Company, the sale of electrified water has materially diminished, the value of the stock purchased from appellee has materially decreased, and appellant has been damaged in the sum of $5,000.

It is alleged that appellee is insolvent and has no property subject to execution; that by reason of the premises appellant has no adequate legal remedy; and he prays both for a temporary and a permanent writ of injunction, restraining appellee for a breach of the restrictive covenant.

The question for decision is, Do these facts show, as a matter of law, that appellant is not entitled to the equitable relief of an injunction restraining appellee from continuing his connection with the Dallas Distilled Water Company, or to form any business connection with any similar business, for the period named in his sales contract with appellant?

This is not a case in which the owner of a business sells the entire business and its good will to another,...