My Laundry Co. v. Schmeling

• Citation: 129 Wis. 597,109 N.W. 540
• Parties: MY LAUNDRY CO. v. SCHMELING.
• Decision Date: 07 November 1906
• Court: United States State Supreme Court of Wisconsin

129 Wis. 597

109 N.W. 540

MY LAUNDRY CO.

v.SCHMELING.

Supreme Court of Wisconsin.

Nov. 7, 1906.

Appeal from Circuit Court, Milwaukee County; E. Ray Stevens, Judge.

Action by My Laundry Company against August W. Schmeling. From a judgment for plaintiff, and from an order adjudging defendant guilty of contempt, defendant appeals. Modified and affirmed.

Action to restrain defendants from violating a contract not to engage in or be concerned in the laundry business.

The differences between the parties, as indicated by the complaint, answer and reply, are shown with sufficient clearness for the purposes of this appeal by the following summary of the findings:

(1) Plaintiff is a duly organized corporation engaged in general laundry business in the city of Milwaukee. (2) Defendant for the last twenty years has been a resident of said city. (3) For some time prior to October 3, 1903, defendant and Eugenie M. Comstock were copartners in the laundry business in said city of Milwaukee, said defendant spending most of his time in outside work and the success of the business being largely due to his ability to secure customers. (4) On said date by mutual consent such copartnership was dissolved and defendant sold his interest in the copartnership property for $3,500.00, the agreement in that regard being reduced to writing. (5) As part of the sale contract defendant agreed, in these words, not to enter the laundry business:

“The said August W. Schmeling does further promise and agree and covenant to and with the said Robert W. Mueller and to and with the said Eugenie M. Comstock and their assigns, that he, the said Schmeling, will and shall not, for a period of five (5) years from the date hereof, engage in any manner in the laundry business in the city of Milwaukee, either by conducting a laundry establishment on his own behalf or in conjunction or jointly with any other persons, or by entering the employ of any other person, firm or corporation engaged in such business, in the capacity of an officer, manager, solicitor or any other capacity whatsoever.”

(6) The contract was read to the defendant and he examined it with care and signed it. He was not induced to do so by any fraud or misrepresentations. Previous to the commencement of this action he entered the employ of the Badger Laundry Company, a concern engaged in carrying on laundry business in the city of Milwaukee. (7) After the commencement of this action and while a temporary injunctional order granted in the case restraining defendant during the litigation from violating his agreement as to being concerned in the laundry business, was in full force, he built on lands owned by him in the city of Milwaukee a building peculiarly adapted to such business, borrowing $3,000.00, for that purpose, and refused to rent the building to a laundry concern desirous of securing the same, but leased it to one Piehler, who was not of sufficient means to conduct a laundry business without assistance from the former's wife. Defendant bought the machinery with which to equip the building and business and paid partly therefor by checks on his own bank account and prepared the premises for such business. He conducted the negotiations leading up to the partnership relations between his wife and Piehler and subsequently participated in negotiations resulting in the formation of the Sanitary Laundry Company, a corporation formed to carry on laundry business in the city of Milwaukee, which corporation was composed of defendant's wife, Piehler and W. A. Hayes. After the laundry was started defendant was in and around the same and took part to some extent in its management. His wife had no knowledge of such business and relied on him in the matter. The said laundry business was started by the assistance of defendant's wife as a subterfuge for the purpose of avoiding the order of the court and the provisions of defendant's contract aforesaid. The said laundry company has hired help employed by the plaintiff company and taken customers from plaintiff through the association of the defendant with the said laundry company and the use of his name in the business. (8) After the making of said agreement between the defendant and R. W. Mueller a copartnership was formed between the latter and Eugenie M. Comstock to which was transferred the property, assets, stock in trade and the good will formerly owned by the defendant and said Comstock, and thereafter plaintiff company was formed and all such property was sold thereto including the benefits of the contract made by defendant as aforesaid, which benefits were necessary to protect the good will of the business in the possession of the new owner as successor to defendant and Eugenie M. Comstock. (9) Plaintiff now owns the beneficial rights under such contract which has been violated by defendant to plaintiff's damage.

As conclusions of law the court found that the restraint upon the liberty of the defendant provided for in his contract was fairly protective only of the interests of the plaintiff and not so large as to interfere with the interests of the public; that the contract was valid, and that an interlocutory judgment should be, therefore, entered in accordance with the findings, reserving the question of damages till the coming in of the report of the referee to be appointed to take evidence and ascertain the same.

The judgment so provided for was accordingly entered and the matter of ascertaining the damages recoverable was referred to Hon. Fred. Scheiber.

Proceedings were commenced in due form to punish the defendant for contempt in having violated the temporary injunctional order, as set forth in the foregoing findings, in which he was in due form found guilty and the matter of ascertaining the sum necessary to indemnify plaintiff for the actual loss caused to him by the defendant's said contemptuous conduct and the amount necessary to indemnify plaintiff for costs and expenses in the contempt proceedings were referred to said Scheiber, and it was ordered as punishment for the defendant's conduct that immediately upon the referee's report being confirmed, defendant should pay plaintiff's attorney the sum finally determined to be necessary for indemnity, as aforesaid. Special proceedings were instituted on behalf of defendant to vacate the reference to Mr. Scheiber on the ground of prejudice. The application was denied. Thereafter Mr. Scheiber resigned his position as referee and later at a term of court subsequent to that of his appointment, on application of the plaintiff, the orders in that regard were formally vacated and the matters involved were referred to Hon. W. J. McElroy, who subsequently performed the duties of referee in the matter and reported the evidence taken by him and his conclusions to the court. Such conclusions were to this effect: By reason of the breach of the agreement set forth in the complaint plaintiff was compelled to incur extra expense for an engineer to the amount of $66.00, $8.00, extra expense for filling the place of another employé and $95.00, for services of an attorney. By reason of the violation of the temporary injunctional order plaintiff was damaged to the extent of $19.25, for a copy of the testimony and $409.84, for attorney's services. There was a motion to set aside such report, which was denied. Thereafter, on application of plaintiff, the report was modified by striking out the item of $95.00, and as so modified was confirmed. Judgment was thereafter perfected in the main action, the recoverable damages therein being placed at $74.00, and judgment was also perfected in the contempt proceedings, defendant being required within 10 days to pay plaintiff's attorney $429.09, as indemnity for actual loss and injury to plaintiff by defendant's violation of the temporary injunction, and to satisfy its costs and expenses arising out of such misconduct.

Exceptions were taken on behalf of the defendant to preserve for review the questions referred to in the opinion. The defendant appealed from the judgment in the main action and in the contempt proceedings and from various orders affecting such judgments.W. A. Hayes, for appellant.

C. H. Hamilton for respondent.

MARSHALL, J. (after stating the facts).

There is no assignment of error that the findings of fact or any of them are contrary to or not supported by the evidence. Some branches of the appellant's argument refer to that subject, but as there is no assignment of error, specially, in respect thereto we shall not examine any question in that regard, except where it is deemed to be necessarily called for by some assignment of error as to rulings on motions.

I. The first four assignments of error relate to the subject of whether the complaint states a cause of action. The various propositions suggested for consideration, so far as they seem material, will be treated in their order.

1. There is no allegation in the complaint that the restraint sought to be imposed on the defendant is necessary to the protection of plaintiff's business.

The complaint contains this allegation: “Notwithstanding said agreement, and contrary to the terms thereof, the said defendant has nevertheless again engaged in the laundry business in the city of Milwaukee by associating himself with the Badger Laundry, * * * and that the inevitable result of said connection, if the same be permitted to continue, * * * will be a large diminution in the value of the good will of said business.” That seems to sufficiently negative the proposition. Moreover, when a person sells out his interest in an establised business and agrees not to enter into the same kind of business or be concerned in it in competition with that so sold, by necessary implication, such agreement is material to the protection of such business.

2. There is nothing in the complaint showing that defendant before the commencement of the action breached the agreement by doing anything injurious...