Olmstead v. Rosedale Bldg. & Supply, Inc., 5-1568
| Decision Date | 19 May 1958 |
| Docket Number | No. 5-1568,5-1568 |
| Parties | F. H. OLMSTEAD et al., Appellants, v. ROSEDALE BUILDING & SUPPLY, Inc., et al., Appellees. |
| Court | Arkansas Supreme Court |
Frank J. Wills, Little Rock, for appellants.
H. B. Stubblefield, Little Rock, for appellees.
Appellants are F. H. Olmstead Company, Inc., and Frank H. Olmstead, its president and principal stockholder. Appellees are Rosedale Building & Supply Company Inc., and C. C. Hudgens, its principal stockholder. On April 1, 1954, appellants bought certain assets of a building supply business from appellees located at 8108 Asher Avenue in Little Rock, Arkansas, executing secured notes for the greater portion of the purchase price. In the sales contract appellees agreed, as a part of the consideration for said sale, not to engage directly or indirectly in any business competition with appellants in the Rosedale Area of Pulaski County, as defined in the contract, for a period of three years.
A suit brought by appellants on August 12, 1955, for alleged breaches of the non-competitive agreement resulted in a decree entered May 2, 1956, enjoining appellees until April 1, 1957, from 'directly or indirectly furnishing any building materials for the erection of, or erecting, any structures on any lands' in the restricted area and from engaging in any business competition with that of appellants in the area during said period. The cross-complaint of appellees seeking judgment against appellants for $1,470 in damages was ordered dismissed. We affirmed the decree in Hudgens v. Olmstead Manufacturing Company, Ark., 300 S.W.2d 26.
Appellants defaulted on the monthly payments due on the purchase money notes which had been paid down to approximately $8,000 on July 12, 1957, when appellees brought the instant suit to foreclose their liens on the assets of the building supply business securing the payment of said balance. In their answer and counterclaim, appellants claimed actual and punitive damages in excess of the unpaid balance of said purchase money notes on account of alleged breaches of the non-competitive agreement by appellees, and asked for cancellation of said notes and the mortgages executed to secure them. The reply of appellees contained a general denial and affirmatively pleaded the former suit and decree as res judicata and a complete bar to all matters alleged and relief sought against them in the counterclaim. By agreement, appellants paid $8,500 into the registry of the court and the liens held by appellees on the business assets were transferred to said fund and the assets released. This appeal is from a decree dismissing appellants' counterclaim and directing that their indebtedness to appellees in the amount of $8,366.80 be paid from the funds in the registry of the court.
It is first contended that the chancellor erred in holding that the prior suit between the parties precluded appellants from introducing evidence of breaches of the non-competitive agreement by appellees which occurred prior to May 2, 1956, the date of the former decree. This proof was offered in support of appellants' plea that such breaches resulted in a partial failure of consideration for the purchase money notes sued on. In this connection it was shown on the former trial that C. C. Hudgens was the principal stockholder in two building material businesses at the time of the sale of the assets of Rosedale Building & Supply Co., Inc., to appellants; and that the other corporation was then inactive but was reactivated by Hudgens shortly after the sale when he began constructing and selling homes on lots he owned in the restricted area, the materials being furnished by the reactivated corporation. Appellants' offer of proof in the instant suit related to the same alleged breaches of the agreement which were fully explored and enjoined in the prior suit. Appellants insist that since there was no specific prayer for damages in the former suit as to such breaches, they were entitled to litigate that issue here.
This presents a question upon which there is a sharp division of authority, particularly where the second suit is one at law for damages. A statement by the textwriter in 28 Am.Jur., Injunctions, Sec. 309, indicates that most courts favor the proposition that, where damages are not sought as incidental to an injunction, the decree granting the injunction is not a bar to an action at law for past damages on account of the thing enjoined. However, other courts hold that an injunction decree is a bar to an action at law for past damages regardless of whether the plaintiff in the injunction suit pleaded damages, and regardless of whether there was an attempt to recover damages in that suit. The textwriter's statement as to the majority rule is based upon an annotation in 14 A.L.R. 543. A more recent annotation on the question in 26 A.L.R.2d 446 indicates that most courts, including our own, hold that a decree deciding an injunction suit is res judicata in a subsequent action for damages of all issues determined in the injunction proceeding. Our own cases go further and hold that the decree in the injunction suit is also res judicata of all issues in a subsequent action for damages which could have been interposed in the injunction suit.
In Gosnell Special School Dist. No. 6 v. Baggett, 172 Ark. 681, 290 S.W. 577, this court reversed and dismissed a circuit court judgment awarding damages to plaintiffs for breach of their contract to teach school and sustained the defense of res judicata interposed by the school district by virtue of a former injunction suit involving the same contract. In so doing, the court said it was unimportant that the plaintiffs did not ask the affirmative relief of damages for breach of the contract in the injunction suit and reaffirmed the following statement from Taylor v. King, 135 Ark. 43, 204 S.W. 614, 615: 'The rule has been often announced in this court that the judgment or decree of a court of competent jurisdiction operates as a bar to all defenses, either legal or equitable, which were interposed or which could have been interposed in the former suit.' The court also approved the following statement in 15 R.C.L. Judgments, Sec. 439: ...
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