RNH, Inc. v. Beatty
| Decision Date | 26 October 1990 |
| Citation | 571 So.2d 1039 |
| Parties | RNH, INC., et al. v. Billy M. BEATTY. 89-1105. |
| Court | Alabama Supreme Court |
Michael S. Jackson of Beers, Anderson, Jackson & Smith, Montgomery, for appellants.
Ira De Ment and Donald E. Fazekas, Montgomery, for appellee.
This case involves the sale of stock in a corporation operating a drugstore in downtown Montgomery, Alabama. On November 7, 1988, the plaintiff, RNH, Inc., and the defendants entered into an agreement whereby RNH, Inc., bought and the defendants sold all of the outstanding shares of stock of Price Drug Company, Inc., an Alabama corporation.
On December 13, 1988, RNH, Inc., Price Drug Company, Inc., and Robert N. Holden sued Billy M. Beatty, a former owner of stock in Price Drug Company, Inc., alleging that Beatty had breached the stock purchase agreement by relocating another downtown drugstore, City Drug, which he owned. 1 RNH, Inc., sought damages from Beatty based on fraud and misrepresentation. Additionally, the plaintiffs sought to enjoin Beatty from operating City Drug and to rescind the stock purchase agreement. The trial court entered a summary judgment for Beatty, and denied the plaintiffs' motion for summary judgment. The plaintiffs appeal. We affirm.
Rule 56, A.R.Civ.P., sets forth a two-tiered standard for determining whether to enter a summary judgment. In order to enter a summary judgment, the trial court must determine: 1) that there is no genuine issue of material fact, and 2) that the moving party is entitled to a judgment as a matter of law. Turner v. Systems Fuel, Inc., 475 So.2d 539, 541 (Ala.1985). Rule 56 is read in conjunction with the "substantial evidence rule" (§ 12-21-12, Code 1975) for actions filed after June 11, 1987. See Bass v. SouthTrust Bank of Baldwin County, 538 So.2d 794, 797-98 (Ala.1989). In order to defeat a properly supported motion for summary judgment, the plaintiff must present "substantial evidence," i.e., evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala.1989).
We first look at whether the trial court erred in entering the summary judgment for Beatty on the plaintiffs' claim that Beatty violated the stock purchase agreement by relocating City Drug. We also look at whether the trial court erred in entering the summary judgment on the plaintiffs' claims of fraud and misrepresentation.
The evidence reflects that prior to 1986 Beatty worked as a pharmacist for Laddie Price, who then owned Price Drug Company. After 10 years, Beatty became a stockholder in Price Drug Company. On December 1, 1986, Beatty purchased City Drug, a competing drugstore in downtown Montgomery. He retained his stock in Price Drug Company. Beatty is the sole stockholder of City Drug and, since purchasing it, has operated it in competition with Price Drug Company.
After Laddie Price died, Robert N. Holden, the president of RNH, Inc., sought to acquire all of the stock of Price Drug Company, including that held by Beatty. The evidence before the trial court reflects that a memorandum of understanding was executed by the shareholders of Price Drug Company. Subsequently, a 91-page stock purchase agreement was presented to Beatty's attorney, Clyde Smith, on November 4, 1988. Smith advised Beatty that he could not sign the contract because of the "non-solicitation" clause in paragraph 17 and the "preservation of organization" clause in paragraph 19. Those clauses read as follows:
(C.R. 40.) Smith testified by deposition that he called both George Kent, Holden's banker, and Howard Neiswender, Holden's attorney, and advised them that Beatty could not sign the contract because, as the owner of City Drug, he was already in direct competition with Price Drug Company and planned to continue in competition.
On the morning of the scheduled closing date, a telephone conference was held between Smith, Kent, Neiswender, and a third party. Smith testified that during that telephone conference Neiswender informed him that the contract was being amended to delete the provisions Beatty found objectionable. The two clauses were amended as indicated by this emphasized wording:
(C.R. 41.) Ultimately all sellers, including Beatty, executed the stock purchase agreement as presented by the plaintiffs' attorney, with the amended paragraphs 17(b) and 19.
Smith testified that he recalled asking Neiswender at the closing what was intended by the language in paragraph 17 stating that the sellers would not "directly solicit the customers of Price Drug Company, excluding all casual contacts and advertising in the normal course of business." He said that Neiswender said, as an example, that the language would prohibit the sellers from standing in front of Price Drug store with an armful of fliers and passing them out to customers entering the store.
There is no dispute that plaintiff Holden and his attorney knew at the time the agreement was drafted and signed that Beatty was operating City Drug in direct competition with Price Drug Company. Further, Holden testified that no one ever represented to him that the City Drug store would never be moved from where it was located when Price Drug Company was sold. Nor was there any evidence that Holden expressed any concern to Beatty or to Beatty's attorney over a change in the location of City Drug.
At some point after the sale of Price Drug Company, Beatty moved City Drug to another building in downtown Montgomery, one and a half blocks from its original location. Beatty said that this move was made because the City Drug building was deteriorating and that it was made after his landlord had refused to make the premises suitable.
The plaintiffs sued, alleging that the relocation of City Drug violated the terms of the agreement. Plaintiff Holden testified that the new City Drug store was larger than the old store and, consequently, in his opinion, violated the agreement. Holden further testified as follows:
To continue reading
Request your trial
-
Deerman v. Federal Home Loan Mortg. Corp.
...(11th Cir.1990) (liability under fraud statute for non-disclosure by insurance company accompanied by misrepresentation); RNH, Inc. v. Beatty, 571 So.2d 1039 (Ala.1990) (stating that duty to disclose arises when parties are not dealing at arm's length); Chavers v. Nat'l Sec. Fire & Casualty......
-
Whitney Bank v. Murphy
...562 (Ala. 1945)). The Court emphasized that "[t]here must be active concealment or misrepresentation." (Id.). See alsoRNH, Inc. v. Beatty,571 So.2d 1039, 1042 (Ala. 1990) (providing that "a duty to disclose exists in circumstances where parties are not dealing at arm's length[]").Vision Ban......
-
BANK v. ALGERNON LAND Co.
...550, 562 (1945). The Court emphasized that "[t]here must be active concealment or misrepresentation." (Id.). See also RNH, Inc. v. Beatty, 571 So.2d 1039, 1042 (Ala. 1990)("a duty to disclose exists in circumstances where parties are not dealing at arm's length."). Cf. Cedar Heights Plantat......
-
Barton v. American Red Cross
...parties, the value of the particular fact, the relative knowledge of the parties, and other circumstances." See, e.g., RNH, Inc. v. Beatty, 571 So.2d 1039, 1042 (Ala.1990); Jim Short Ford, 384 So.2d at 86. Although a direct relationship between the parties will usually be present, no direct......