Southwest Pump & Machinery Co. v. Forslund

• Decision Date: 26 May 1930
• Docket Number: No. 16795.,16795.
• Citation: 29 S.W.2d 165
• Parties: SOUTHWEST PUMP & MACHINERY COMPANY, RESPONDENT, v. O.A. FORSLUND, APPELLANT.
• Court: Missouri Court of Appeals

29 S.W.2d 165

SOUTHWEST PUMP & MACHINERY COMPANY, RESPONDENT, v. O.A. FORSLUND, APPELLANT.

No. 16795.

Kansas City Court of Appeals. Missouri.

May 26, 1930.

Appeal from Circuit Court of Jackson County. — Hon. Ben Terte, Judge.

AFFIRMED.

Burns & White for appellant.

Charles M. Blackmar and Robt. E. Colebird for respondent.

BOYER, C.

Suit for injunction. The parties will be referred to as plaintiff and defendant. The petition alleges the corporate capacity of plaintiff; that it has a paid-up capital of $25,000; that defendant is a stockholder and director, and prior to April 1, 1929, was the president and principal officer of said company; that the principal business of plaintiff was the selling of pumps, temperature regulators and other similar articles of machinery; that during a long period and by the expenditure of time and money, it built up a favorable business name in Kansas, Oklahoma, and the western half of Missouri; that by advertising, personal solicitation and otherwise, at great expense, it acquired many customers and established profitable trade relations in said territory; that the good will of the business is a valuable asset and the company has operated at a profit; that the value of the good will and business of the company cannot be definitely stated; that plaintiff has acted as agent and distributor for many companies in disposing of their products in this territory, and had valuable contracts and licenses with said companies for the sale and disposition of their products; that prior to April 1, 1929, defendant, while still president and a director of said company, and in violation of his duty as such officer and director, entered into a scheme to deprive plaintiff of its contracts with the companies represented by it and to acquire and secure them for himself, as well as the business of plaintiff; that he communicated with said companies in order to induce them to cancel their contracts and licenses with the plaintiff and to cease business with plaintiff; that defendant falsely represented to each of said companies that plaintiff was about to cease business in Kansas City, and that each and all of the companies doing business with plaintiff were about to cancel their contracts and sever trade relations with plaintiff; and represented that he was resigning as president and director, and without the benefit of his services the plaintiff would cease to function; that defendant took from the files of the company lists of plaintiff's customers, specifications, and other valuable papers showing plaintiff's methood of conducting business and future prospects for business, and that defendant is now using said information to the detriment of plaintiff's business and to obtain for himself business which was created and developed while he was an officer and director of the company, and that he has solicited business from plaintiff's customers; that defendant has expressed his intention to use such information which he obtained as an officer and director of plaintiff company to obtain the business which rightfully belongs to the plaintiff and thus destroy the good will of plaintiff and its value as a going concern. It is further alleged that plaintiff is a going concern and has been transacting business at a profit and that the damages which will be suffered are incapable of accurate ascertainment; and that unless defendant is restrained, plaintiff will suffer irreparable injury. The prayer was for an injunction restraining the defendant from in any way interfering directly or indirectly with the trade relations and contracts which the plaintiff has with the companies for which it has acted as distributor, and to restrain defendant from in any way using any of the information which he obtained while president and director of plaintiff for the purpose of obtaining business from plaintiff's customers, and to restrain defendant from selling or offering to sell any pumps or heat regulators to plaintiff's customers in the states of Kansas and Oklahoma and the western half of the State of Missouri, and to restrain defendant from in any way interfering with the plaintiff's business, its good will, its trade name, its customers, its agents or its employees; and further prayed for general relief. The answer was a general denial.

The trial began on the 22d day of April 1929, upon the conclusion of which, and after holding the case under advisement, the court on the 28th day of April 1929, found the issues in favor of plaintiff and against defendant and decreed that for a period of three years from the entrance of the decree that defendant, his agents, servants, and employees be enjoined and restrained from interfering with the trade relations, contracts and accounts which the plaintiff has with certain named companies for which the plaintiff is the distributor; and restrained from making use of or disclosing any knowledge or information gained or obtained from plaintiff by said defendant while president and director of the company. And the third paragraph of the decree, about which defendant specially complains, is in these words:

"That the defendant, his agents, servants and employees be and are hereby enjoined and restrained from soliciting orders, either directly or indirectly, for pumps, pumping equipment and accessories, heat regulators and other similar machinery from the plaintiff's customers which it had prior to this date."

Defendant has duly appealed and assigns as errors that (1) the judgment is contrary to law in that it restrains defendant from soliciting customers of the plaintiff acquired subsequent to February 18, 1928, (2) that it interferes with the rights of other persons or firms not parties to this suit to contract with the defendant, (3) that the decree is broader than the pleadings, and (4) that the injunction was granted for an unreasonably long period of time.

The evidence tends to show that in 1924, a partnership known as the Southwest Pump & Machinery Company was formed by the defendant in association with one Widener and one Landeck, and engaged in selling mechanical equipment at Kansas City. Defendant was experienced in the business. He contributed no capital to the partnership, but this was furnished entirely by Widener and Landeck. The partnership had the accounts of and represented Yeomans Brothers, Fulton Sylphon Company, Goulds Pumps, Westco-Chippewa Pump Company, the Skidmore Corporation, and others, all of which companies were engaged in the manufacture and sale of pumps and like products thru their distributors such as the plaintiff. The business of the partnership prospered and in February, 1928, the partners incorporated their business under the name they had been using, and by bill of sale conveyed to the corporation all property of the partnership which included the "assets, good will, contracts, franchises, chattels, goods, wares, merchandise, furniture, fixtures and bills and accounts receivable belonging or pertaining to said business of sellers."

An equal amount of common stock of the corporation was issued to the defendant and his associates. Defendant was elected president and was also elected a director of the company. The corporation then continued the business formerly conducted by the partnership. The defendant was the active manager of the selling portion of the business, Landeck arranged the finances, credit and banking, and Widener assisted in selling.

At the time of the trial the total assets of the company amounted to approximately $35,000. The business had been promoted and built up by calling on architects, engineers, and prospects and by advertising and in various other ways.

Prior to January, 1929, Widener and Landeck devoted most of their time to another company engaged in a different business in which the plaintiff corporation owned stock. That business was disposed of and about the first of the year 1929, Widener and Landeck came more actively into the business of the corporation and were voted equal salaries with that of defendant. The defendant joined them in passing such a resolution. Shortly thereafter, however, defendant became dissatisfied and early in the year, expressed the view that there was not enough business and enough profits for all three. The corporation earned a net profit of about $7000 in 1928. It was estimated that defendant would earn in 1929, about $8500. He claimed this was not enough and wanted $15,000. Propositions were made back and forth between these men to buy or sell their stock in the company. Finally Widener and Landeck made a proposition to defendant to sell their stock to him on a basis of the actual value of the physical assets of the company, plus $5000 for their interest in the good will of the company. Defendant held this proposition under advisement for some period for the alleged purpose of ascertaining whether he could raise the funds to finance the purchase. Early in March, and about the 10th of that month, he went to Chicago to confer with one of the Yeomans Brothers and also with a representative of one of the other companies whose agency was...