Segall v. Loeb

• Decision Date: 28 June 1928
• Docket Number: 3 Div. 838
• Parties: SEGALL et al. v. LOEB et al.
• Court: Alabama Supreme Court

118 So. 633

218 Ala. 433

SEGALL et al. v. LOEB et al.

3 Div. 838

Supreme Court of Alabama

June 28, 1928

Rehearing Granted Oct. 25, 1928

Rehearing Denied Nov. 30, 1928

Appeal from Circuit Court, Montgomery County; Walter B. Jones Judge.

Bill for specific performance by Victor Loeb and others against Nathan Segall, H.H. Green, and others. From a decree overruling a demurrer to the bill, respondents Segall and Green appeal. Reversed and remanded.

Hill Hill, Whiting, Thomas & Rives, of Montgomery, for appellants.

Steiner Crum & Weil, of Montgomery, for appellees.

BROWN J.

To state the substance of the averments of the bill as pertinent to the questions presented for decision: On October 16, 1925 Fleming-Green Company, Inc., and for some time prior thereto, was engaged in the business of manufacturing and selling mayonnaise and other like products, under the trade-name of "Piknik," and had established an extensive business and good will with customers in several of the states; its products being sold to retail merchants for resale to their customers.

The appellants Nathan Segall and H.H. Green owned the entire capital stock of the corporation, consisting of 45 shares of the par value of $100, and, up to the time the contract now involved was entered into, were in full control, as officers of the corporation, of the corporate business, and the corporation under their management had incurred certain liabilities, recognized to be just by the appellants.

On the date above mentioned appellants, for a valuable consideration, sold the stock of the corporation to the complainants, Victor Loeb, Raphael J. Loeb, and Milton J. Winter, the contract for the sale of said stock being evidenced by written contract, attached to, and made an exhibit to, the bill. Attached to the contract and made a part thereof is a schedule of the assets of the corporation and its liabilities as then recognized by the appellants, and certain provisions in the contract are made for full liquidation and settlement of these recognized liabilities.

The contract which designates appellants as the parties of the first part and the Loebs and Winter as parties of the second part stipulates:

"Parties of the first part, as officers of the corporation, have caused the books of the corporation to be closed and a trial balance taken as of October 10, 1925, and there is attached hereto and made a part hereof said trial balance which is marked Exhibit D. There is also attached hereto, marked Exhibit F and G respectively, itemized statements showing the bills payable and accounts payable by the corporation. Parties of the first part represent to parties of the second part that the said trial balance is a true and correct one, and shows the true and correct condition of the business of the corporation as of October 10, 1925, and they represent that the total amount shown to be due and owing by the corporation, to wit, accounts payable, $5,044.81, notes or bills payable, $3,300, and discount due, $281.87, is all of the indebtedness and liability owing or due or incurred by the corporation at that time; and they further represent that the corporation has no indebtedness or liability other than as so shown. If said corporation has at this time any other indebtedness or liability than as so shown, whether it be for taxes, license income tax, claims for reclamations on account of goods shipped and not complying with contract, or any other liability whatsoever, either in tort or contract, they will pay and discharge the same, and hold the corporation and parties of the second part harmless as against the payment thereof." (Italics supplied.)

"It is further agreed, however, that nothing contained as to the payment of the indebtedness and liabilities of the corporation, as shown by the exhibits, shall be construed to relieve parties of the first part of their undertaking and guaranty set forth that said exhibits show all the debts and liabilities of the corporation, and their agreement to pay any other liability or indebtedness, however evidenced, not shown by said books of said corporation or said exhibits."

"Parties of the first part agree that they will each lend their good will to the future of the business of the corporation, and will give to its new officers such information they may have regarding the conduct of the business while administered by them, it being understood, and parties of the first part agree that in making the sale and transfer of said stock, it is done with the intent and purpose that parties acquire and take over the good will of the business and that neither of the first parties will do anything to prevent the full enjoyment of such good will by parties of the second part in carrying on said business in the future."

The bill avers:

That, since the purchase of said stock and the management of said corporate business has been taken over by the Loebs and Winter, numerous customers named in the bill, who had been doing business with said corporation under the management of appellants, have made claims against the corporation, and insist that said corporation is indebted to them, and are threatening suits thereon against the corporation, and it is being continually annoyed and harassed by said claimants; that other customers to whom it has sold goods, since said contract was made, have, over the protest of the corporation, deducted the amount of claims, asserted to have arisen while appellants were in charge, from the price of the goods so sold, and refuse to pay the full amount due for the goods sold since said contract was made; that substantially all of said claims "are asserted to be for the reclamation on account of goods shipped by the corporation, and not complying with the contract of purchase, none of which were listed in said agreement as debts or liabilities of the corporation.

"Complainants further aver that it appears from the wording of said agreement so entered into between complainants and said Segall and Green, and it was so intended by the parties, that complainants Victor Loeb, Raphael J. Loeb, and Milton J. Winter would continue to conduct the business of said corporation in order to reap the benefit of the good will of said corporation, and said Segall and Green knew that a large number, if not all, of the said persons, firms, or corporations above named were making claims against said corporation, and that, if the corporation continued to deal with them, the several claimants, or some of them, would deduct the amount claimed from the purchase price of any goods shipped to them respectively by the

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