Sineath v. Katzis
| Decision Date | 08 January 1941 |
| Docket Number | 241. |
| Citation | 12 S.E.2d 671,218 N.C. 740 |
| Parties | SINEATH et al. v. KATZIS et al. |
| Court | North Carolina Supreme Court |
[Copyrighted Material Omitted]
Civil action (a) to restrain defendant, Katzis, from violating a noncompetitive agreement; (b) to restrain defendants, Letha White and White's Laundry & Cleaners, Inc., from conspiring or participating with Katzis in breach of said agreement; (c) to cancel, because of failure of consideration and breach of contract, certain notes executed by plaintiffs in which defendants, banks and trustee, claim an interest and (d) to recover of defendants, Katzis, White and White's Laundry & Cleaners, Inc., damage for breach of contract.
The action was originally instituted by the plaintiffs against Nick J. Katzis, Letha White, White's Laundry & Cleaners, Inc., and Bank of Wayne, trustee. Later the Mechanics & Farmers Bank and R. L. McDougald, trustee, were made parties defendant.
The uncontroverted facts pertinent to both appeals are these:
On February 5, 1937, Goldsboro Dry Cleaners & Hatters, Inc., a corporation of which defendant Katzis was president, and defendant Letha White was secretary, for the recited consideration of $30,200, by deed and bill of sale combined, duly recorded, conveyed and transferred to W. P. Sineath and A. G. Hearon, plaintiffs herein, all of its assets, real, personal and mixed, owned and used by it in connection with the operation of its dry cleaning and laundry business theretofore conducted in the city of Goldsboro, North Carolina, together with its trade name and good will. Of the purchase price $10,000 was paid in cash and the balance of $20,200 was evidenced by a series of notes of W. P. Sineath and A. G. Hearon in the sum of $300 each, except the last which was for $400, payable one each month until September, 1942, and secured by deed of trust, duly recorded, as lien on property so conveyed and transferred.
Contemporaneously with the transfer and conveyance above described, Goldsboro Dry Cleaners and Hatters, Inc., a corporation, and Nick J. Katzis, who owned 98 per cent. of the capital stock of the corporation, on the one hand, and W. P. Sineath and A. G. Hearon on the other, with the written approval of Letha White and H. B. Parker, minority stockholders of said corporation, entered into a trust agreement, in which it was agreed, briefly stated, that all debts of the corporation, a list of which was attached thereto, except a mortgage indebtedness of $15,000 to Nick J. Katzis individually, should be paid, in the manner prescribed, out of the $10,000 cash payment, and the balance paid to Katzis in cash; that Katzis would accept the purchasers' notes in settlement of the notes and security held by him and cancel the lien of record; that the notes evidencing the balance of purchase price should be executed and delivered by W. P. Sineath and A. G. Hearon to the corporation and immediately endorsed by it and transferred to Nick J. Katzis, who should thereupon immediately deliver same, and deed of trust securing same, to the Bank of Wayne, as trustee, which should proceed to collect the notes, with interest thereon, as and when each became due, and, after deducting commissions therefrom, to remit to Nick J. Katzis, subject to a provision for paying out of proceeds of notes any other debts of the corporation not known and listed; that the trust agreement should remain in full force and effect for a period of three years from the date thereof, unless terminated by written consent as provided; and that at the end of said three-year period said Bank of Wayne should surrender and deliver to Nick J. Katzis, or his legal representative, any and all of said notes then remaining unpaid.
The Bank of Wayne, upon conditions and agreements, inter alia, "that all duties and liabilities of said bank shall cease and terminate upon the expiration of three years from the date of this agreement", accepted the trust.
Pursuant to this trust agreement W. P. Sineath and A. G. Hearon paid the sum of $10,000 cash and executed and delivered the promissory notes and deed of trust securing same, as they agreed to do, and in accordance with the agreement the cash and the notes, endorsed as required, and the deed of trust were turned over to the Bank of Wayne, as trustee.
When this action was instituted, September 21, 1939, the bank held uncollected $10,900 in face value of said notes, consisting of thirty-five in the sum of $300 each, due monthly beginning with October 1, 1939, and one in the sum of $400, September 1, 1942, interest on all of which had been paid through February 5, 1939.
It is also not controverted by any of the parties hereto, except Mechanics & Farmers Bank, and R. L. McDougald, trustee, that contemporaneously with the said transfer and conveyance by the Goldsboro Dry Cleaners & Hatters, Inc., defendant, Nick J. Katzis, as party of the first part, entered into an agreement with the plaintiffs, W. P. Sineath and A. G. Hearon, as parties of the second part, in which after reciting: "That Whereas, the said party of the first part, who is the owner of the majority of the outstanding capital stock of Goldsboro Dry Cleaners & Hatters, Inc., and which said corporation has this day sold and conveyed to the said parties of the second part all of its real and personal property; and whereas, in the purchase of the said real and personal property belonging to the said Goldsboro Dry Cleaners & Hatters, Inc., it was part of the consideration and was agreed between the parties to this agreement that the said Nick J. Katzis would retire for the period of fifteen years from the dry cleaning, pressing, dyeing, cleaning and laundering and/or towel and linen supply business in Wayne County, North Carolina, and not be connected for said period of time with any such business; and whereas, the said parties of the first and second parts desire to reduce said agreement to writing", it was agreed, "in consideration of the premises and in further consideration of the mutual covenants, agreements and promises herein contained", among others "That the said Nick J. Katzis will not at any time hereafter, for the period of fifteen years, engage, directly or indirectly, or concern himself in carrying on or conducting the business of pressing, dyeing, laundering, cleaning or dry cleaning, and/or towel and linen supply, in Wayne County, North Carolina, for the period of fifteen years from the date of this instrument; nor will the said Nick J. Katzis conduct, maintain or carry on or engage in, for said period of time, in Wayne County, North Carolina, any cleaning, pressing, dyeing, laundering or dry cleaning and/or towel and linen supply of any kind or nature whatsoever, either as owner, manager or agent for any such designated business, or as a partner in any such designated business, or as a share holder in any corporation engaged in any such business, nor will he be employed in any capacity whatsoever for any such business for said period of time in Wayne County, North Carolina."
This agreement was not recorded in the public records.
Plaintiffs in their complaint allege the agreement of defendant Katzis that he would not for a period of fifteen years from February 1, 1937, "engage, directly or indirectly, in Wayne County *** in the business of pressing, dyeing, laundering, cleaning or dry cleaning, either as owner, manager, agent *** or as a partner in any such designated business or as a share holder in any corporation engaged in any such business, nor will he be employed in any capacity whatsoever in any such business".
Plaintiffs further allege as against the original defendants that about March or April, 1939, defendant Katzis "fraudulently connived and conspired with the defendant, Letha White, and the defendant, White's Laundry, to organize a corporation by which the defendant, Katzis, could indirectly engage in the business of pressing, dyeing, laundering, cleaning or dry cleaning *** in Wayne County"; that the defendants White and White's Laundry "are merely a sham and subterfuge used by the defendant Katzis to enable him in a fraudulent and surreptitious manner to breach his contract"; that defendant Katzis "through the defendants, White's Laundry and Letha White, started the operation" in Wayne County of the designated business and "carried on the same actively up to the date of the filing of the complaint; that defendant, Katzis, has been "the owner, manager and agent of the White's Laundry, and has been actively conducting the business of said laundry, *** has made contract for the equipment of the laundry, has supervised its operations, has controlled its employees, has dealt with its customers and has collected and applied money for said White's Laundry "and has engaged in the designated businesses", "both as owner, manager and agent, and also as partner and a real share holder" in White's Laundry; that the defendants, White and White's Laundry, "acting pursuant to a common purpose and design and a fraudulent conspiracy between themselves and the defendant, Katzis, have deliberately and purposely interfered with the contract rights of the plaintiffs and have encouraged and aided and assisted in the violation of said contract on the part of the defendant, Nick J. Katzis; and that by reason thereof plaintiffs have been damaged".
The defendant, Nick J. Katzis, while admitting in answer filed that the White's Laundry & Cleaners, Inc., started operation in the city of Goldsboro, engaging in the business of pressing, dyeing, laundering, cleaning and dry cleaning, denies the material allegations of the complaint. And by way of cross-action, defendant, Nick J. Katzis, avers in substance that, by reason of the failure of plaintiffs, Sineath and Hearon, to pay the notes due ...
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