Riverview Floral, Ltd. v. Watkins
| Decision Date | 02 June 1988 |
| Docket Number | No. 8550-3-III,8550-3-III |
| Citation | 754 P.2d 1055,51 Wn.App. 658 |
| Parties | RIVERVIEW FLORAL, LTD., a Washington corporation, Respondent, v. Jasper T. WATKINS and Oletta M. Watkins, his wife, and the marital community thereof, Appellants. |
| Court | Washington Court of Appeals |
Rodney Reinbold, Mansfield, Reinbold & Gardner, Okanogan, for appellants.
Michael Howe, Omak, for respondent.
This action was commenced in December 1985 by Riverview Floral, Ltd., against Jasper and Oletta Watkins to enforce the provisions of a covenant not to compete and to recover damages for its breach. Following a bench trial, the court found a breach, enjoined future breaches, and awarded damages to Riverview. The Watkins appeal.
These issues are presented: (1) Are the findings of fact supported by substantial evidence? (2) Based on those findings, did the court properly conclude there was a breach of the covenant not to compete? (3) Was the scope of the injunction and the amount of damages appropriate?
Construing the evidence in the light most favorable to Riverview, as we must do, we conclude the findings are supported by substantial evidence and reveal the following facts. Riverview Floral is a corporation engaged in the growing, harvesting, processing and selling of floral products, principally gypsophila, commonly known as baby's breath. In April 1982 the corporate stock of Riverview was owned by Douglas Sapp and Mike Baker, two of the incorporators, and the Watkins. Prior to September 1984, Riverview made a cash disbursement of $10,000 to each of the shareholders which was treated as a loan and was so understood by the Watkins.
Riverview thereafter purchased the shares owned by Mr. Baker and in September 1984 purchased the stock owned by the Watkins. The agreement between Riverview and the Watkins provided for a purchase price of $30,000 cash, cancellation of the shareholder loan and the Watkins' promise "not [to] enter into any business which deals in or with gypsophelia [sic ] plants commonly known as 'babies [sic ] breath' for a period of five years from the date of this agreement." The court found it was the intent of Riverview to buy out the Watkins' interest and to prohibit them from competing in baby's breath in Okanogan County for a period of 5 years, and this was also the intent of the Watkins.
The court then found the Watkins violated the terms of the covenant not to compete enabling Don Marsh and Pat Descoteaux, and their respective spouses, to engage in the baby's breath business. The Watkins provided them with financial backing, made available real property on which to harvest baby's breath, and provided them with equipment including a pickup, tractor and trailer, and certain buildings in which to process, dry and package baby's breath. In return, the Watkins were to receive certain percentages of the profits from the sharecropping business.
The court further found the Watkins entered into the baby's breath business and competed with Riverview in the purchase of prime baby's breath real property to the detriment of Riverview. As a result, Riverview lost profits because it was unable to obtain sufficient quantities of baby's breath to fill its orders. The court also found the combined efforts of the Watkins, Marshes and Descoteauxes produced quantities of baby's breath from the Watkins' property and other properties, which if available to Riverview would have increased its net profit by $100,747 in 1985 and $107,956 in 1986. The court then found it is not known exactly how much of this quantity would have been available to Riverview but for the breach of the covenant; however, Riverview, while not showing damage with absolute certainty, provided data upon which to estimate lost profits with reasonable certainty. Riverview had the capacity in the years 1985 and 1986 to market additional baby's breath if it had been available.
The court concluded the Watkins breached the agreement, enjoined future breaches and entered judgment against them for $30,000 damages, $619.85 costs and $6,730.40 attorney fees, for a total judgment of $37,350.25.
First, the Watkins contend the court erred by reading into the agreement a provision prohibiting them from selling or leasing their property to anyone engaged in the baby's breath business and from providing assistance in the form of equipment, capital, funds or facilities to such persons unless the product was sold to Riverview. They contend this was error, citing Armstrong v. Taco Time Int'l, Inc., 30 Wash.App. 538, 635 P.2d 1114 (1981). On the other hand, Riverview contends the intent and understanding of the parties and the actions of the Watkins, which led the court to find a breach, are factual determinations not to be disturbed if supported by substantial evidence. Thorndike v. Hesperian Orchards, Inc., 54 Wash.2d 570, 343 P.2d 183 (1959). 1
Absent a contractual provision to the contrary, a party who covenants not to compete in a particular business is not precluded from merely leasing property or loaning money to others engaged in that business. The covenantor is precluded from having a connection with the business or deriving a profit therefrom. Management, Inc. v. Schassberger, 39 Wash.2d 321, 235 P.2d 293 (1951); McKeighan Wachter Co. v. Swanson, 138 Wash. 682, 245 P. 10, aff'd on reh'g, 141 Wash. 694, 250 P. 353 (1926). See Wineteer v. Kite, 397 S.W.2d 752 (Mo.Ct.App.1965); Midlands Transp. Co. v. Apple Lines, Inc., 188 Neb. 435, 197 N.W.2d 646 (1972); Foyer Key Sung v. Ramirez, 121 Misc.2d 313, 467 N.Y.S.2d 486 (1983); Annot., Rendering Financial or Other Assistance to Another as Breach of Covenant Not to Compete, 1 A.L.R.3d 778 (1965).
Here, the agreement contains no provision precluding the Watkins from merely leasing property or loaning money to persons engaged in the baby's breath business. Therefore, the court is precluded from reading such a provision into the agreement, Armstrong v. Taco Time Int'l, Inc., supra, and that portion of the judgment which enjoins the Watkins "[f]rom making any real property available by sale, lease or otherwise to anyone engaged in the babies [sic ] breath business" is in error and must be reversed.
McKeighan and Schassberger indicate a connection with the business, including deriving profits therefrom, is...
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