Moore & Handley Hardware Co. v. Towers Hardware Co.

• Decision Date: 30 April 1889
• Citation: 87 Ala. 206,6 So. 41
• Court: Alabama Supreme Court
• Parties: MOORE & HANDLEY HARDWARE CO. v. TOWERS HARDWARE CO.

6 So. 41

87 Ala. 206

MOORE & HANDLEY HARDWARE CO. v. TOWERS HARDWARE CO.

Supreme Court of Alabama

April 30, 1889

Appeal from chancery court, Jefferson county; THOMAS COBBS Chancellor.

This was a bill by the Towers Hardware Company against the Moore &amp Handley Hardware Company, to enjoin the violation of a contract alleged to have been made between complainant and the partnership of Moore, Moore & Handley. On the 27th day of May, 1887, the partnership of Moore, Moore & Handley and the complainant corporation were each engaged in the general hardware business in the city of Birmingham. A part of the business of each was the sale of plow stocks and blades; and the business extended over all that part of the state which lies north of the city of Birmingham, and including the city itself; and the business was conducted by sales from their respective stores in Birmingham by filling written orders from customers, and through traveling agents. On the 27th of May, 1887, the partnership of Moore, Moore & Handley, stating that "it had found the business of dealing in plow stocks and blades very unsatisfactory, and was anxious to discontinue the same," proposed to the Towers Hardware Company that if the latter would buy all the stock of that kind which the firm had on hand "they would bind themselves not to handle or deal in plow-blades or plow-stocks again in opposition to, or in competition with the Towers Hardware Company's said business." This proposition was accepted. On the bill of the goods thus sold the firm of Moore, Moore & Handley indorsed the following agreement: "In consideration of the above sale we agree not to handle any more plow-stocks or plow-blades, except railroad plows," etc. After this sale and agreement, the members of the firm of Moore, Moore & Handley organized themselves into a corporation. Plow stocks and blades to fill such orders as were incidentally received by said firm and the new corporation were furnished by the Towers Hardware Company, under an agreement between the parties to that end. In March, 1888, Moore, Moore & Handley became duly incorporated under the name of the Moore & Handley Hardware Company, one Wimberly having previously thereto, as shown by the answer, become a member of the firm of Moore, Moore &amp Handley, and with the other members of the firm subscribed to and paid for the stock of the corporation. In August, 1888, Wimberly sold his stock to the other shareholders. In November, 1888, the Moore & Handley Hardware Company received a stock of plow blades and stocks, and made known its purpose to deal in the same in the territory covered by and embraced in the previous agreement made by and between the former partnership of Moore, Moore & Handley and the Towers Hardware Company. It further appears that the business carried on by the Moore & Handley Hardware Company was substantially the same as that previously conducted by the firm of Moore, Moore & Handley, that the shareholders in the new corporation were the same persons who composed the original partnership firm; and that these same persons, and partners in the previous firm, have all the time had entire control of the said corporation. The bill contains no direct allegations of fraud in the formation of the corporation, or on the part of its officers, but only that the effect of the threatened dealings by the corporation would be to perpetrate a fraud on the complainant. On this state of facts a motion to dissolve the injunction issued by the chancellor to prevent the defendant corporation from engaging in the business which the partnership had contracted not to engage in was overruled; and on the allegations of these facts, with others denied by the answer, the chancellor overruled the demurrer of defendant to the equity of the bill. From these decrees of the chancellor on the motion and on the demurrer of the defendant corporation the present appeal is taken.

Smith & Lowe, for appellant.

Cabaniss & Weakley, for appellees.

MCCLELLAN J.

The equity of the bill, so far as the injunction is concerned, and the sufficiency of those of its allegations which are not denied by the answer to sustain the injunction depend, primarily, on two questions: First, whether the contract relied on is void, as being in unreasonable restraint of trade; and, second, whether a negative undertaking entered into by persons who subsequently organize, and for the time constitute a corporation for the prosecution of the business with respect to which the contract was made, can be enforced by injunction against the corporation.

1. It is insisted that the agreement of Moore, Moore & Handley "not to handle any more plow-blades or plow-stocks" is an unreasonable restriction on trade, in that it contains no limitation as to the place or locality at or in which they are to refrain from carrying on the specified business. It is true that such contracts must be limited as to the space they are intended to cover, or they cannot be supported. The meaning of a contract of this character, however, is not to be found solely from a consideration of its expressed terms. Courts look to all the circumstances surrounding the parties and attendant upon the transaction, and from a consideration of these circumstances, in connection with the expressions of the undertaking, they will first construe the contract, and then proceed to pass upon its reasonableness as thus construed. In the case at bar the facts were that both parties were engaged in a certain business in and covering that part of the state of Alabama which embraces and lies north of the city of Birmingham. It was a character of business, as conducted by them, which could reasonably and naturally be carried on throughout this territory. Over this space they were dealing in competition with each other, and presumptively the operations of each were detrimental to the trade of the other, and the agreement of either to desist from those operations redounded to the advantage of the other. The bill alleges, and the answer does not deny, that the written agreement copied above was made with respect to the trade thus carried on in the territory including and north of Birmingham, in Alabama. The contract will therefore be construed with reference to these facts, and held to mean that Moore, Moore & Handley would not handle plow stocks and blades in competition with or opposition to the Towers Hardware Company within the territory covered by their previous competition,...