Tyson v. U.S. Pipe & Foundry Co.

• Decision Date: 05 November 1970
• Docket Number: 8 Div. 407
• Citation: 240 So.2d 674,286 Ala. 425
• Parties: Jerry W. TYSON v. UNITED STATES PIPE AND FOUNDRY COMPANY, a Corporation.
• Court: Alabama Supreme Court

Page 674

240 So.2d 674

286 Ala. 425

Jerry W. TYSON v. UNITED STATES PIPE AND FOUNDRY COMPANY, a Corporation.

8 Div. 407.

Supreme Court of Alabama.

Nov. 5, 1970.

Dieter J. Schrader, Huntsville, for appellant.

Bell, Richardson, Cleary, McLain & Tucker, and L. Tennent Lee, III, Huntsville, for appellee.

BLOODWORTH, Justice.

Appellant Tyson (cross-respondent) appeals from a final decree enjoining him from engaging in competition with appellee U.S. Pipe (cross-complainant) in certain named counties in Alabama and Tennessee.

The chronology of the case is as follows: On August 20, 1968, a written agreement was executed between Specialty Fasteners of Huntsville, Inc., an Alabama corporation (as 'seller'), J. Wallace Nall, Jr., W. D. Upton and appellant Jerry W. Tyson (as 'warrantors'), on the one hand, and appellee, U.S. Pipe, a New Jersey corporation (as 'Buyer') on the other hand, for the purchase of Specialty Fasteners' assets and business by U.S. Pipe. The consideration for the sale was the transfer of 2,000 shares of U.S. Pipe's common stock to Specialty Fasteners. It was agreed that Specialty Fasteners would be dissolved and it would distribute the 2,000 shares of U.S. Pipe stock to its shareholders Nall and Upton (who owned 8,400 shares each) and Tyson (who owned 3,200 shares).

The agreement contained the following paragraph, the enforcement of which is the crux of this case.

'8. For a period of five (5) years from the date hereof Seller and the Warrantors jointly and severally agree that they shall not directly or indirectly, engage, whether alone or as a partner, stockholder or creditor of any enterprise, partnership, association, corporation, joint venture or any other entity (other than as a holder of not more than ten percent (10%) of the outstanding capital stock or outstanding long-term indebtedness of a corporation whose stock is listed on a stock exchange or is regularly traded in the over-the-counter market), in any business in the States of Alabama, Tennessee or South Carolina, of manufacturing, distributing and/or selling any merchandise, commodity or item of the kind or type now being manufactured, distributed and/or sold by Seller. In the event this covenant is deemed unenforceable with respect to any particular product or any particular trade area, such unenforceable provision shall be deemed separable from the enforceable provisions of this covenant and the enforceable provisions shall thereby be binding upon Seller and the Warrantors. Seller and the Warrantors agree that a breach of this covenant will result in irreparable and contingent damage to the business of Buyer for which Buyer will have no adequate remedy at law, and that in the event of any breach of this covenant Buyer, its successors and assigns, will be entitled to injunctive relief and such other further relief as may be proper in the premises.'

The sale contemplated by the agreement was consummated and Tyson, Nall and Upton, sole stockholders in Specialty Fasteners, were given the stock in U.S. Pipe in exchange for their stock in Specialty Fasteners.

Appellant Tyson then became employed with U.S. Pipe on August 20, 1968, as manager over the facilities formerly owned by Specialty Fasteners in Huntsville. Subsequently, on October 31, 1969, Tyson's employment was terminated, ostensibly because U.S. Pipe contended that he was soliciting its other employees to work for him in competition with it.

On November 17, 1969, Tyson filed a bill for a declaratory judgment in the Madison County circuit court seeking the court's declaration that paragraph 8 of the agreement (the 'non-competition' agreement) is null and void as to him. Demurrer to the bill was sustained on January 26, 1970. No amendment was ever filed.

Thereafter, on May 8, 1970, U.S. Pipe filed a cross-bill against Tyson. In paragraph 2, the cross-bill alleges that on August 20, 1968, an agreement was entered into between Specialty Fasteners of Huntsville, Inc., U.S. Pipe, and J. Wallace Nall, Jr., W. D. Upton and the appellant, Jerry W. Tyson. Paragraph 2 further alleges that Nall, Upton and Tyson warranted that they were all the stockholders of Specialty Fasteners with Tyson owning 16% Of the stock. Paragraph 3 alleges that on August 22, 1968 the sale was consummated and that Tyson, along with Nall and Upton, were given stock in U.S. Pipe in return for their stock in Specialty Fasteners. Paragraph 4 contains the terms of paragraph 8 of the agreement, which we have previously set out. Paragraph 5 alleges that at the time the agreement was consummated Specialty Fasteners was selling and distributing bolts, nuts, screws, washers, masonry anchors, powder actuated tools; electric power tools, air tools, cutting tools (drill bits, taps, milling cutters, etc.); automatic stapler and nailing machines; nails and staples; rivets, saw blades, abrasive blades and products; all thread rod; fastening systems (Uni-Strut, spring steel fasteners); special manufactured rods; assemblies and made-to-order bolting and anchoring devices; rental and repair of tools; and core drilling and accessories in the following counties in the State of Alabama: Lauderdale, Limestone, Madison, Jackson, Colbert, Franklin, Lawrence, Morgan, Marshall, DeKalb, Cullman, Etowah, Jefferson, Blount, Mobile, Dallas, Marion, Winston, and the Tennessee counties of Wayne, Lawrence, Giles, Lincoln, Franklin, Marion, Hardin, Bradley, Bedford, Marshall, Moore, Lewis, Coffee, Maury, Cannon, Hickmon, Perry, Rutherford, Warren, Grundy, Williamson and Knox. Paragraph 6 alleges that Tyson is presently engaged in the business of distributing and selling merchandise, commodities or items of kind or type previously being distributed and sold by Specialty Fasteners in violation of the agreement. Paragraph 7 alleges that unless Tyson is enjoined from such competition U.S. Pipe will be permanently injured in its rights under said agreement, that its damages by such competition on the part of Tyson are impossible to estimate, that the injury occasioned by such competition will greatly lessen the value of its business and that the damage is irreparable and continuing.

By his amended answer Tyson admitted the allegations of paragraphs 1, 4, 5 and 6 of the cross-bill and admitted all of paragraph 2 except the allegation that Nall, Upton and he warranted that they were all of the stockholders of Specialty Fasteners and that he owned 16% Of such stock. Tyson further admitted, with respect to paragraph 3, that the sale as contemplated by the agreement and plan of reorganization was consummated and that he, Nall and Upton were given stock in U.S. Pipe in return for their stock in Specialty Fasteners, but stated that they received their stock in U.S. Pipe from Specialty Fasteners. He specifically denied the allegations of paragraph 7.

Tyson then filed a cross-bill to U.S. Pipe's cross-bill praying again for a declaration of rights under the agreement and plan of reorganization. In his paragraph 6, he admitted that he became 'engaged in selling and distributing merchandise, commodities and items, in competition with respondent (U.S. Pipe).' In paragraph 8, Tyson alleged 'that Specialty Fasteners * * * and * * * U.S. Pipe * * * were never engaged in the manufacture of the merchandise, commodities, or items described in paragraph 5 of the respondent's cross-bill, nor were either of the corporations engaged in the sales or distribution of said described merchandise, commodities, or items in any area other than northern Alabama and southern Tennessee, save for isolated sales on extremely rare occasions.'

U.S. Pipe filed a demurrer and an answer to Tyson's cross-bill. Apparently, the demurrer was never ruled on, and the case was set down for the taking of oral testimony before the trial court. The cause was thereafter submitted to the trial court for final decree on U.S. Pipe's cross-bill, Tyson's answer thereto, Tyson's cross-bill, U.S. Pipe's answer thereto, exhibits, and testimony taken in open court.

The trial court's final decree of July 13, 1970 found: that Tyson was engaged in competition with U.S. Pipe in violation of paragraph 8 of the agreement; that U.S. Pipe was not guilty of laches in asserting its cross-bill; that paragraph 8 of the agreement is supported by a valid consideration and the 'non-competition' agreement is reasonable as to both time and area in seeking to bar Tyson's competition in the counties set out in U.S. Pipe's cross-bill; that U.S. Pipe is entitled to an injunction. A writ of injunction was thereafter issued. On July 23, 1970, this appeal was taken. The case was submitted on oral argument November 2, 1970.

There are nine assignments of error.

Assignment of error 1, is 'For that the Respondent's (U.S. Pipe's) cross-bill fails to state a cause of action since it failed to plead that it was doing business in those counties in which it sought to enjoin the Appellant from doing business.'

As appellee U.S. Pipe aptly points out, this assignment of error is insufficient because no adverse ruling is complained of. Only adverse rulings of the trial court are subject to assignments of error and are consequently reviewable on appeal. Thornton v. Tutt, 283 Ala. 72, 73, 214 So.2d 425 (1968); Stapleton v. Stapleton, 282 Ala. 62, 64, 209 So.2d 202 (1968). See also, Ala.Dig., Appeal & Error, k718. Additionally, we observe...