Russell v. Birmingham Oxygen Service, Inc.
| Decision Date | 23 December 1981 |
| Citation | 408 So.2d 90 |
| Parties | Jerry RUSSELL, et al. v. BIRMINGHAM OXYGEN SERVICE, INC., et al. 79-607. |
| Court | Alabama Supreme Court |
The original opinion in this case is withdrawn and the following corrected opinion is substituted in its place.
Defendants Jerry Russell and James Edwards were partners in a home respiratory therapy business located in Madison County, Alabama, known as J&J Respiratory Service Company (J&J). Primarily, J&J rented respiratory equipment, oxygen equipment and oxygen. Approximately one-half of J&J's business related to the service of providing oxygen to patients and the other half of J&J's business related to the renting of other respiratory equipment such as IPPB (intermittent or immediate positive pressure breathing) machines.
Russell and Edwards d/b/a J&J sold the half of their business relating to the service of providing oxygen to their patients, to Birmingham Oxygen Service, Inc. (Birmingham Oxygen) in May of 1977. This transaction consisted of a series of three interrelating contracts. The first contract (purchase agreement) consisted of the sale of J&J's oxygen business (including the equipment and names of patients) to Birmingham Oxygen for: (1) The payment of $3,260.38 so that Russell and Edwards could pay off a bank note in that amount and (2) a $1,220.96 credit against the amount J&J owed Birmingham Oxygen for previously purchased merchandise. The second contract (non-competition agreement) provided that Russell and Edwards would "not compete with the business of Birmingham Oxygen Service, Inc., for a period of ten years ...." The second contract further provided that Russell and Edwards would exert "their 'best efforts,' to obtain patients for Birmingham Oxygen Service, Inc., in order to build the business and enable the said Birmingham Oxygen Service Inc., to recover the expense and cost of this purchase." The third and final contract in this series gave Birmingham Oxygen a right of first refusal if J&J decided to sell the remainder of its business.
In June of 1977, J&J decided to sell the remainder of its business and Birmingham Oxygen desired to purchase the business. While the contract expressing the terms of this transaction designated Russell as the sole owner of the remaining assets of J&J, testimony during the trial showed that the partnership still existed on the date of the contract; that Edwards could not make it to the meeting concerning the sale; and that the Russell as sole owner designation was simply for convenience. Edwards did receive one-half of the proceeds of the sale and did give his consent to the sale of the remaining assets of J&J. Russell and Barney Eller, the President of Birmingham Oxygen, were the only individuals signing the agreement. Birmingham Oxygen paid to Russell (one-half going to Edwards) approximately $11,200 for the respiratory business of J&J. This included J&J's equipment, and accounts receivable. Russell also agreed not "to engage in or become interested, either directly or indirectly ... in any corporation, partnership, sole proprietorship, association, or any business in competition with Birmingham Oxygen in the home care respiratory therapy field (in Madison County)." Edwards, however, did not sign any agreement relating to the second transaction. Russell testified that part of the "deal" was an offer of employment to him by Birmingham Oxygen. Birmingham Oxygen denies this.
Russell's wife, Maggie Waddell Russell, and her brother started a business during the summer of 1977 known as Respiratory Rental Company. Respiratory Rental engaged in the business of providing oxygen services to its patients. Russell admitted that he did the majority of the work of Respiratory Rental. Sometime during the fall of 1977, Russell and Edwards created a partnership that rented hospital equipment, including respiratory equipment. This business was known as E&R Rental Company. It was undisputed that the combination of the services offered by Respiratory Rental and E&R Rental Company equated the services previously offered by J&J.
Birmingham Oxygen never engaged in the business of oxygen services or respiratory services purchased from J&J in Madison County. However, Birmingham Oxygen's wholly owned subsidiary, Southeastern Medical, Inc. (Southeastern Medical), did engage in the business purchased from J&J.
On April 18, 1979, Birmingham Oxygen filed suit against Jerry Russell, Jerry Russell d/b/a J&J Respiratory Service Co., and Jerry Russell d/b/a Respiratory Services. The complaint was later amended to include as defendants James Edwards, Maggie Waddell Russell, Maggie and Jerry Russell d/b/a Respiratory Rental Co., and Jerry Russell and James Edwards d/b/a E&R Hospital Rental Company. Birmingham Oxygen sought damages for breach of contract and injunctive relief. On April 23, 1980, the trial court granted an injunction...
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