Scotton v. Wright
| Citation | 13 Del.Ch. 214,117 A. 131 |
| Parties | GEORGE P. SCOTTON, GEORGE C. SCOTTON and LYMAN J. SCOTTON trading as George P. Scotton & Sons, and also trading as Smyrna Nash Motors Company, v. GEORGE D. WRIGHT and GEORGE HARVEY WRIGHT, trading as George D. Wright and Son |
| Decision Date | 12 May 1922 |
| Court | Court of Chancery of Delaware |
[Copyrighted Material Omitted]
BILL FOR INJUNCTION AND ACCOUNTING. The defendants on January 19 1920, for the consideration of $ 10,000, agreed to sell and convey to George P. Scotton, one of the complainants "all the garage property, garage business and good will tools mechanical equipment and fixtures situated at their place of business in Smyrna, Delaware." It was provided in the agreement that settlement should be made on February 2, 1920. On or about that date transfer of the real estate which constituted the garage property and delivery of the business, good will, tools, etc., were duly made to George P. Scotton, the purchaser, who paid the price stipulated therefor.
The contract between the parties contained inter alia the following clauses:
The bill in its fifth paragraph alleges, and the answer admits:
"That after the said sale and delivery, as aforesaid, your orator, George P. Scotton, immediately engaged in the said garage business and associated with himself in the said business James L. Scotton, George C. Scotton and Lyman J. Scotton."
It is further alleged and admitted that James L. Scotton withdrew from the business on September 1, 1920, since which time the complainants, trading as George P. Scotton & Sons, and also trading as Smyrna Nash Motors Company, have conducted the business so purchased from the defendants by George P. Scotton.
The bill also charges that in the summer of 1920, the defendants erected a garage about three-tenths of a mile south of the corporate limits of the town of Smyrna where, prior to the time of the filing of the bill and ever since, they have conducted a general garage or service station and engaged in the general sale of automobiles, supplies, repairs and accessories, and have sold among other things gasoline and oils and Ford motor vehicles, contrary to and in violation of their covenant and agreement above set out. The answer admits the engaging in the business described from August 1, 1920, avers that the defendant's garage is eight-tenths of a mile from complainants' garage, denies that the conducting of their business at their present location is in violation of their said covenant, and avers that their intention to engage in such business was known to the complainants as early as April, 1920; that complainants gave no notice that they would regard the conducting of business by the defendants in the new place as a violation of their covenant until the present bill was filed on October 15, 1921, and, in substance, the garage would not have been erected, nor would the business have been begun, if the defendants had known that the complainants considered the same as in violation of the restrictive covenant. The answer further avers that the defendants have built up a new business for themselves in their new location, and have established a good will of considerable value; and that the court has no jurisdiction to grant relief for any damages, if any the complainants may have suffered, because of the failure of the complainants to give notice of their objection, their allowance of fifteen months of time to run before instituting suit, circumstances which, they aver, constitute laches. The defendants also aver in their answer that these circumstances, combined with the further fact that complainants have from time to time during the period from August 1, 1920, to October 15, 1921, dealt with the defendants at their new place of business, constitute in law a practical construction of the contract in favor of the defendants by the parties interested, which construction the complainants are not now at liberty to controvert.
The relief asked is that the defendants may be enjoined from continuing to conduct their said business except to the extent allowed by the covenant with respect to Buick cars, and that the respondents account for and pay to the complainants their profits and damages for the alleged breach of the restricted covenant.
William M. Hope and James I. Boyce, for the complainants.
William H. Boyce, Arley B. Magee and Daniel O. Hastings, for the defendants.
OPINIONA question is first made as to parties. The covenant having been made with George P. Scotton individually, has the firm of George P. Scotton, George C. Scotton and Lyman J. Scotton, trading as George P. Scotton & Sons, and also trading as Smyrna Nash Motors Company, any right to relief because of breach thereof?
The covenant in terms is in favor of George P. Scotton, his heirs, executors, administrators and assigns. There is no evidence showing a formal assignment by the covenantee of the benefits of the covenant to the partnership. It is admitted, however, that when George P. Scotton took possession of the garage property on February 2, 1920, and undertook to conduct the business which he had purchased, he associated with himself his three sons, one of whom withdrew from the business about September 1, 1920, since which time the other sons have continued with their father in the business. The evidence shows the father and sons to have been associated in the business as partners. It is clear that whatever may have been the manner in which the partnership was organized, whether by formal articles and written assignments and transfers to it of the assets, the partnership did as a matter of fact take over from George P. Scotton, conduct and carry on the business which George P. Scotton had purchased from the defendants.
Does the fact that there is no evidence of a formal assignment by George P. Scotton, the purchaser, to the partnership of the covenant on the part of the defendants not to engage in a similar business, operate to prevent the granting of relief to the partnership which George P. Scotton formed? I think not.
The purpose of the covenant was to protect the purchaser in the enjoyment of the business and its good will. Such a covenant "is not personal, but inures to the benefit of one to whom it is assigned with the business." 20 Cyc. 1281. And where the business is transferred, the agreement not to compete goes with it even though not specially mentioned. Palmer v. Toms, 96 Wis. 367, 71 N.W. 654; Knowles, et al., v. Jones, et al., 182 Ala. 187, 62 So. 514; Public Opinion Publishing Co. v. Ransom, 34 S.D. 381, 148 N.W. 838, Ann. Cas. 1911A, 1010; Gompers v. Rochester, 56 Pa. 194. If, therefore, the case is otherwise a proper case for relief, the fact that the bill is filed by the partnership, the transferee of the purchaser from the defendants, cannot serve to defeat it.
The next inquiry is: Does the bill set forth a case calling for equitable relief?
The reservation referred to is the right on the part of the defendants "to sell Buick cars, parts for Buick cars and to repair Buick cars."
The population of the town of Smyrna numbers about 1,800 or 1,900. It is a square mile in area. The center of the town is at the intersection of Main and Commerce Streets, and the town limits extend a half mile from this intersection along the two streets in a north, south, east and west direction. The garage erected by the defendant, George D. Wright, where he and his son, the other defendant, carry on the general garage business about which the bill complains, is located on the north and south highway running through Smyrna, two thousand and ten feet south of the southern line of the town, less than three-tenths of a mile, making a distance from the center of the town of about four thousand six hundred and fifty feet. The garage which defendants sold to the complainant, George P. Scotton, is located on the same highway (Main Street) between the center of the town and its southern boundary line. So that the distance between the two garages is less than the distance from the center of the town to the garage of the defendants. The north and south traffic through Smyrna goes on Main Street, passing both garages. The towns nearest Smyrna on the north and south highway are Odessa on the north, a small village some twelve or fourteen miles distant, and Dover, which is eleven miles to the south. To the west of Smyrna is Clayton, a fair size town, two miles distant. Cheswold off the main highway to the south, is an incorporated town between Smyrna and Dover.
One of the points to be passed on is whether, or not, the business...
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