Wright v. Scotton

• Decision Date: 16 January 1923
• Citation: 13 Del.Ch. 402,121 A. 69
• Parties: GEORGE D. WRIGHT AND GEORGE HARVEY WRIGHT, trading as George D. Wright and Son, Defendants below, Appellants, v. GEORGE P. SCOTTON, GEORGE C. SCOTTON AND LYMAN J. SCOTTON trading as George P. Scotton & Sons, and also trading as Smyrna Nash Motors Company, Complainants below, Appellees
• Court: Court of Chancery of Delaware

121 A. 69

13 Del.Ch. 402

GEORGE D. WRIGHT AND GEORGE HARVEY WRIGHT, trading as George D. Wright and Son, Defendants below, Appellants, v. GEORGE P. SCOTTON, GEORGE C. SCOTTON AND LYMAN J. SCOTTON trading as George P. Scotton & Sons, and also trading as Smyrna Nash Motors Company, Complainants below, Appellees

Court of Chancery of Delaware

January 16, 1923

APPEAL FROM COURT OF CHANCERY. This is an appeal from a decree of the Court of Chancery, and the facts are so fully and clearly stated in the opinion of the Chancellor, ante p. 214, it is deemed unnecessary to repeat them at length here.

It is sufficient to say that George D. Wright and Son, the appellants, being engaged in the automobile business in the town of Smyrna, sold to George P. Scotton, on the nineteenth day of January, 1920, all their garage property, garage business, and goodwill, tools, mechanical equipment, and fixtures situated in their place of business in said town for the sum of $ 10,000.

The agreement of sale included the following provisions:

"It is agreed that the parties of the first part reserve the right to sell Buick cars, parts for Buick cars and to repair Buick cars in the town of Smyrna, and this reservation is a limitation of the sale of the good will above expressed.

"And the parties of the first part undertake, covenant, and agree to and with the party of the second part or his heirs executors, administrators, and assigns that they or either of them will not hereafter operate a garage or service station or engage in the sale of automobiles or the supplies or repairs or accessories for same except by and according to the above and foregoing reservation anywhere in or adjacent to the town of Smyrna any time after the 2d day of February A. D. 1920."

In accordance with said agreement the appellants' garage business, good will, tools, etc., were transferred on the second day of February, A. D. 1920, to George P. Scotton, who immediately engaged in the garage business, and associated with himself in said business James L. Scotton, George C Scotton and Lyman J. Scotton.

James L. Scotton withdrew from the business about September 1 1920, and thereafter the complainants below, trading as George P. Scotton and Sons, and trading also as Smyrna Nash Motors Company, conducted the said garage business purchased from George D. Wright and Son, the respondents below.

In the summer of 1920, George D. Wright and Son erected a garage along the state highway leading from Dover to Wilmington, and less than half a mile south of the corporate limits of the town of Smyrna. This highway passes directly the place of business purchased by Scotton from the Wrights. The garage of the appellants is two thousand and ten feet from the limits of the town of Smyrna, and is situated on the only street or road which runs into that town north and south. Practically all the traffic through Smyrna goes north and south on Main street and east and west on Commerce street, which two streets intersect in the center of the town about one-half mile from the town limits. The first incorporated town on said highway south of Smyrna is Dover, eleven miles distant, and the first one north is Odessa, which is about the same distance away. Clayton is about two miles west of Smyrna.

It appears from the evidence that the respondents below, appellants here, opened their new garage in August, 1920, and conducted it for several months as a Buick agency. But in March 1921, they took over the Ford agency, and have since conducted their place of business as a general garage or service station, where they engage in the general sale of automobiles, supplies, repairs, and acsessories, and sell, among other things, gasoline, oils, and Ford motor vehicles and parts.

On October 13, 1921, the appellees, complainants below, filed their bill in the Court of Chancery to enjoin further breaches of the above-mentioned agreement, and to recover damages sustained by the alleged wrongful and unlawful competition of the respondents.

The Chancellor on the eighteenth day of May, 1922, granted the injunction prayed for, and directed an issue of quantun damnificatus to be tried at the bar of the Superior Court in and for Kent County.

The appellants filed the following assignments of error:

(1) That the Court of Chancery erred in holding that the appellees, the complainants in the bill, could maintain the suit, it appearing that the contract on which the suit was based was made with George P. Scotton, one of the complainants in the bill, and no assignment having been made by him to the other members of the partnership who were parties complainant.

(2) That said court erred in holding that James L. Scotton, one of the original partners with the other complainants in the bill, was not an indispensable party.

(3) That said court erred in holding that the contract on which the suit was based was partnership property, or that it inured to the benefit of the complainants, as partners, in any manner so as to enable the complainants, as partners, to maintain any suit thereon.

(4) That said court erred in holding that the defendants in the bill had violated the contract which is the subject of the suit.

(5) That said court erred in holding that the complainants in the bill were not guilty of such laches as defeated their right, if any they had, to an injunction.

(6) That said court erred in holding that the complainants in the bill were not guilty of such laches as defeated their right, if any they had, to recover damages.

(7) That said court erred in holding that the complainants were entitled both to an injunction and to damages.

(8) That said court erred in holding that there had not been such a construction by the parties themselves of the contract sued upon, as defeated the right of the complainants, or any of them, to maintain the action.

(9) That said court erred in directing that an issue of quantum damnificatus be submitted to jury.

Decree of the Chancellor affirmed.

William H. Boyce, Daniel O Hastings, and Arley B. Magee, for the appellants.

William M. Hope, and James I. Boyce, for the appellees.

PENNEWILL, C. J., and RICE, HARRINGTON, RICHARDS, and RODNEY, JJ., sitting.

OPINION

PENNEWILL, C. J.

The first, second and third assignments of error go to the question of parties. It is contended by the appellants, that the covenant sued on, having been made with George P. Scotton, one of the complainants, individually, and no assignment of the covenant having been shown, the other complainants who became partners with George P. Scotton in the garage business, are not entitled to any relief for the breach of said covenant, and cannot, therefore maintain this action.

Whether George C. Scotton and Lyman J. Scotton, two of the complainants, are proper parties to the suit, and entitled to relief therein, depends, of course, upon their relation to the restrictive covenant in question. Did that covenant, made by Wright and Son with George P. Scotton, inure only to the benefit of George P. Scotton and other persons to whom it might be formally assigned, or to George P. Scotton and other persons who might be associated with him in the business he purchased from Wright and Son, even though there was no formal assignment? It is admitted by the appellants, that after the sale of their garage business to George P. Scotton, he (the said George P. Scotton) immediately engaged in the garage business with James L. Scotton, George C. Scotton, and Lyman J. Scotton. There was formed between them an association or partnership, and the business which one of the partners had bought from Wright and Son became the business of all the partners.

When George P. Scotton purchased from Wright and Son their garage business, he purchased also the good will, and secured from Wright and Son an agreement that they would not engage in any competitive business. This agreement or covenant was necessarily and inseparably connected with the business that George P. Scotton bought from the Wrights, and passed to the firm or association that was immediately formed, of which George P. Scotton was a member, and which took over his garage business.

No formal assignment of the agreement was required, any more than a formal sale or transfer of the personal property which constituted a part of the garage business was required to vest it in all the partners. The covenant not to engage in any competitive business followed the business bought by the covenantee, and inured to his benefit as well as the benefit of any person associated with him as a partner in the same business. When the covenantee entered into a partnership with others, to carry on the business he had bought, he by that very act transferred to his partners everything that constituted a part of the business, which he could transfer without writing. Such transfer included the restrictive covenant for the breach of which this suit was brought.

There is no doubt that the benefit of the covenant may be assigned with the business, and the assignee's rights will be protected. 4 Pom. Eq. Juris., § 1715. This is not denied.

Such being the case, we think that any act of the covenantee which transfers the business and property, also transfers or assigns the covenant. Knowles v. Jones, 182 Ala. 187, 62 So. 514; Haugen v. Sundseth, 106 Minn. 129, 118 N.W. 666, 16 Ann. Cas. 259, and note.

The appellees admit their inability to find any case that supports their contention respecting the parties complainant and we think none can be found. Perhaps there is no case that is exactly in point, but we are satisfied that sound reason, well settled principles of equity, and the following cases, which are somewhat analogous in principle to the present one, support our...