Thompson Optical Institute v. Thompson

• Decision Date: 21 July 1925
• Parties: THOMPSON OPTICAL INSTITUTE v. THOMPSON. [*]
• Court: Oregon Supreme Court

237 P. 965

119 Or. 252

THOMPSON OPTICAL INSTITUTE v. THOMPSON. ^[*]

Supreme Court of Oregon

July 21, 1925

Department 2.

Appeal from Circuit Court, Multnomah County; Robert A. Tucker Judge.

Suit by the Thompson Optical Institute against R. A. Thompson. Decree for plaintiff, and defendant appeals. Affirmed.

This is an appeal from a decree restraining the defendant from the violation of the terms of an alleged contract, whereby he agreed to refrain from engaging in the business of the manufacture and sale of optical goods, and from carrying on an optical institute.

Wilber Henderson, of Portland (John P. Hannon, of Portland, on the brief), for appellant.

W. P La Roche and J. B. Ofner, both of Portland, for respondent.

BROWN J.

Robert A. Thompson, defendant herein, R. A. Thompson, and Dr Thompson are one and the same person. The defendant, by his counsel, has carried on a vigorous defense to plaintiff's suit. He has asserted the invalidity of the organization of the plaintiff corporation known as "Thompson Optical Institute," and also avers the illegality of the contract upon which this suit is founded.

A knowledge of the facts is essential to a solution of the questions involved herein. For a number of years prior to the organization of the corporation, defendant Thompson had carried on an optical business under the name of "Thompson Optical Institute." On August 2, 1916 the defendant and two others associated themselves together for the purpose of forming a corporation to be known as the "Thompson Optical Institute" under the laws of the state of Oregon, and subscribed to articles of incorporation for such purpose. The enterprise in which the corporation proposed to engage was "to buy, sell, manufacture, and deal in eyeglasses and optical goods of every kind, nature, and description; to fill prescriptions for eyeglasses and optical goods; to operate an optical institute where eyes are examined and glasses fitted and furnished"; and to make and carry out contracts pertaining to such business. The capital stock of the corporation was placed at $20,000, divided into 200 shares of the par value of $100 each.

The first meeting of the stockholders of Thompson Optical Institute was held at its principal place of business in Portland, Or., on January 30, 1917. The following stockholders, being the subscribers to all the capital stock of the corporation, were present at the meeting in person: R. A. Thompson, 197 shares; E. B. Wheat, 1 share; Bessie A. Rusco, 1 share; Charles A. Rusco, 1 share. Thompson, the defendant herein, was elected chairman of the meeting. A board of directors was elected and the following resolution was unanimously adopted:

"Resolved: That the board of directors enter into an agreement with R. A. Thompson, wherein and whereby this corporation purchase from said R. A. Thompson the business now being conducted by him and known as "Thompson Optical Institute" carried on in the Corbett building of the city of Portland, Or., together with the good will thereof, including all copyrights, stock on hand, and chattels, together with an assignment of the lease, said agreement to contain a clause to the effect that said R. A. Thompson is not to engage in the same line of business in the state of Oregon for a period of 20 years in the event he disposes of his stock in the within corporation, and issue unto the said Thompson therefor 197 shares of the capital stock of the said corporation fully paid up."

To this resolution is affixed the signature of Thompson himself as president, that of B. A. Rusco, secretary, and all the stockholders signed the minutes. On the same day defendant, Thompson, made and entered into a contract for the sale of his optical business that he called the "Thompson Optical Institute" to the corporation, likewise known as the "Thompson Optical Institute." The contract recites:

"Whereas said first party (defendant) has for a number of years past, in the city of Portland, Oregon, engaged in the business of buying, selling, manufacturing, and dealing in eyeglasses and optical goods, and filling prescriptions for eyeglasses and optical goods, and operating an optical institute where eyes are examined and glasses fitted and furnished; and

"Whereas said first party (defendant, Thompson) has subscribed for 197 shares of the capital stock of Thompson Optical Institute, a corporation, second party herein; and

"Whereas said Thompson Optical Institute is desirous of purchasing and acquiring said business of Robert A. Thompson and issuing therefor to said Robert A. Thompson 197 shares of the capital stock of said corporation; and

"Whereas said Robert A. Thompson is desirous of paying for said 197 shares of said stock by transferring to said Thompson Optical Institute said business:

"Now, therefore, in consideration of the issuance to said first party (of) 197 shares of the capital stock of the Thompson Optical Institute, fully paid up, to said first party, said first party does hereby sell, assign, and transfer to said second party said optical business and the good will and benefits thereof, together with all the fixtures, furniture, books, surgical and optical instruments, stock, apparatus, and appliances, and the prescriptions belonging to said first party acquired in conducting said business, also all prints, electrotypes and advertising matter, also the right to use all of said cuts and plates, including the photograph of said first party and his name, as fully and to the same extent as the same have been used by said first party in carrying on his said business; also the full use of all copyrights, names and phrases, and all copyrights owned or possessed by said first party, either in his own name or in the name of 'Thompson Optical Institute.' "

The next paragraph provides that the defendant, Thompson, will introduce and recommend the Thompson Optical Institute to his patients, friends, and others, and will endeavor to promote the prosperity of the vendee. The succeeding paragraph provides that the defendant, Thompson, shall not, directly or indirectly, engage in the above-described business, or in any similar business in this state, for a period of 20 years from January 30, 1917.

At about the same time, the defendant sold and transferred his 197 shares of stock to Charles A. Rusco, the present manager and president of the corporation.

The testimony shows that, after the expiration of about 5 years, the defendant returned to Portland and established an office in the Morgan building to carry on optical work, and that, in furtherance of his plan, he began an advertising campaign in certain newspapers of general circulation throughout the state. Illustrative of the character of the advertising matter we copy the following:

"(Photograph.)

"Dr. R. A. Thompson.

"Just to let you know that I am now in my new location in suite 327, Morgan building. To those who have gone elsewhere for their optical work during my absence, or those of limited financial means, every kindly consideration will be extended. Thirty years' continuous practice in this one specialty, with European clinical training and experience, places me in a position to guarantee an absolute, accurate diagnosis in the most complicated cases. You are assured of a personal service that is exceptional in its conception and completeness. Nothing has been left undone to make my work for the conservation of human vision a hundred per cent. efficient. I will be pleased to see again the familiar faces of former days."

In announcing his return and his expectation to re-enter business in part, he advertised:

That he had been "doing optical and research work in the Hawaiian Islands and the principal European capitals. * * * I have labored hard and diligently, learning all that the brightest minds of England, France, and Germany had to offer. At present I am in no way connected with any business using my name, having sold my entire interest before leaving Portland."

Charles A. Rusco, president and general manager of the Thompson Optical Institute, testified to the following conversation had with defendant, Thompson, after he had received information that Thompson was again engaging in business:

"Q. Just repeat the conversation. A. I says, 'I see by the papers * * * that you started in business again, in the optical business.' He says, 'Yes, I have.'

"* * * I said, 'You had those ads put in?' He said, 'I did.' I says, 'You mean to say that you are fitting glasses and examining eyes and fitting glasses?' He says, 'I am, very much so.' He says, 'And all my old customers are coming back to me, and inside of 90 days you will be damned glad to sell out to me.' * * * I said, 'Do you know we have a contract where you agreed not to go into the optical business?' * * * He said, 'To h______ with the contract. We have no contract.' "

C. L. Bender, an eye specialist and registered optometrist of Oregon, testified that he was in the employ of the plaintiff, and that, prior to the sale of defendant's optical business to the plaintiff, he had been in the defendant's employ. He testified that on one occasion, after the defendant had sold to the plaintiff and a short time before the institution of this suit, defendant came to his residence, requested him to leave the employment of the plaintiff, Thompson Optical Institute, and offered him a large salary to go into business with him.

The truth of the allegation that defendant has violated his covenant not to engage in the optical business in the state of Oregon is conclusively proved. But, the defendant says the contract is not legal and the plaintiff corporation was not properly organized. That construction should be given to a contract which will make it legal,...