Yost v. Patrick

• Court: Alabama Supreme Court
• Writing for the Court: BOULDIN, Justice.
• Citation: Yost v. Patrick, 245 Ala. 275, 17 So.2d 240 (Ala. 1944)
• Decision Date: 24 February 1944
• Docket Number: 4 Div. 322.
• Parties: YOST v. PATRICK

17 So.2d 240

245 Ala. 275

YOST v. PATRICK

4 Div. 322.

Supreme Court of Alabama

February 24, 1944

Henry C. Meader and Fred S. Ball, Jr., both of Montgomery, for appellants.

Powell Albritton & Albritton, of Andalusia, and Calvin Poole, of Greenville, for appellee.

BOULDIN, Justice.

The appeal is from a decree in equity denying an application for a temporary writ of injunction after hearing under the statute. Code, Title 7, § 1057.

The objective of the bill is to enforce by injunctive process a contract binding the seller of a business with its good will not to engage in a competing business, etc.

The hearing was had upon a sworn bill and exhibits and supporting affidavit of Walter J. Yost, one of complainants, and on the demurrer and sworn answer of the respondent, Albert I Patrick. The facts so disclosed so far as deemed essential to the proper disposal of this appeal are in substance as follows:

Prior to and on December 3, 1940, Ewell Lumber Corporation was engaged in the lumber business at Ewell in Dale County Alabama. It owned and operated a planing mill and finishing plant for resale of its products. Its lumber supply was acquired through the purchase of rough green lumber produced by local sawmills operating in timber areas within trucking distance. This green lumber was stacked upon lumber yards and dried, then milled, processed and finished for resale.

To facilitate the procurement of rough lumber, the Ewell Company at times made advances to local sawmill men, enabling them to buy timber and otherwise forward their operations, with agreement to deliver their output at agreed prices.

On December 3, 1940, this Ewell Lumber Corporation entered into a contract with McGowin Saw Mill Company, Inc., a corporation, looking to the sale of its plant and business reciting: "Vendor agrees to sell, convey, transfer and deliver to purchaser, at the price and upon the terms and conditions hereinafter stated, vendor's planing plant and properties, including all vendor's plant, structures, machinery, tools and appliances, at Ewell, Dale County, Alabama, said plant consisting of:" Here follows the list of the main items of machinery connected with the plant. The contract covered all real estate leases. The contract further recited as follows: "This sale and transfer of the planing mill and equipment is to be as of March 1st, 1941, or earlier in the event vendor has manufactured, sold and shipped out all its lumber now owned by it and on its yards prior to that date." The seller was not to buy more lumber.

Meanwhile, the buyer was authorized to begin acquiring and assembling a stock of lumber on the yards preparatory to the operation of the plant, and began to do so on the date of the contract.

The complainants, Walter J. Yost, et al., were at the time and still are engaged in a like business under the name of Pine Plume Lumber Company, their plant being located at Ozark, Dale County, some five miles from Ewell. On December 12, 1940, being within ten days after the contract above noted, McGowin Saw Mill Company, Inc., entered into a contract, also made exhibit to the bill, wherein the McGowin Saw Mill Company, Inc., assigned to Pine Plume Lumber Company its contract with the Ewell Company with the further stipulations that the assignee should do and perform all the obligations of the assignor. The contract was signed by McGowin Saw Mill Company, Inc., by W.M. McGowin, its president. As addenda to this contract was incorporated the following covenant: "1. It is a part of the consideration for this agreement that neither McGowin Saw Mill Company, Inc., nor W.M. McGowin will purchase any rough lumber or timber for the purpose of manufacture, remanufacture or finishing within a radius of fifty (50) miles from Ewell, Alabama, for a period of five years from this date."

The contract between Ewell Corporation and McGowin Corporation contained the following covenant: "It is further agreed and understood that vendor is not to purchase any rough lumber or timber for the purposes of manufacture, remanufacture or finishing within a radius of fifty (50) miles from Ewell, Alabama, for a period of five (5) years from this date."

So far as appears, the Ewell Company and McGowin Saw Mill Company, Inc., lived up to their obligations and the plant passed over to Pine Plume Lumber Company in due time, whereupon this company dismantled the plant, sold out or removed the machinery, and there were no further operations at Ewell in the name of any of the three companies. The complainants never operated in either the name of Ewell Company or the McGowin Company at Ozark, but merely sought to consolidate the two businesses at Ozark. From the supporting affidavit it appears the primary purpose of the Pine Plume Lumber Company was to have an open field in the purchase of rough lumber for its plant, disclaims any lowering of the price of green lumber or restricting the market therefor, but alleges it was difficult for both plants to obtain sufficient lumber supply to meet their needs.

Section 8 of the bill reads: "That some time prior to November 8, 1941, the respondent, who was a son-in-law of W.M. McGowin, the chief owner of the stock of McGowin Saw Mill Company, Inc., either by purchase, gift, or otherwise, became the owner of all or substantially all of the assets of McGowin Saw Mill Company, Inc., and having full knowledge of the fact that McGowin Saw Mill Company, Inc., could not as a corporation purchase rough lumber or lumber for manufacture or re-manufacture or finishing within a radius of fifty miles from Ewell, Alabama, for a period of five years from December 12, 1940, and in order to evade the restrictions existing against said McGowin Saw Mill Company, Inc., the respondent caused the McGowin Saw Mill Company, Inc., to be dissolved on November 8, 1941, and thereupon began to do business individually under the name of McGowin Saw Mill Company and did and still does continue to, purchase rough lumber or lumber for re-manufacture or finishing within a radius of fifty miles of Ewell, Alabama, and particularly at Ewell, Alabama, contrary to the restriction set out in said assignment of December 12, 1940."

The bill prayed "that a temporary restraining order be issued after such notice and hearing as may be prescribed by the court restraining and enjoining the respondent from purchasing any rough lumber or lumber for the purpose of manufacture or re-manufacture or finishing within a radius of fifty miles from Ewell, Alabama."

The sworn answer of respondent Patrick disclosed he was a minority stockholder in the McGowin Saw Mill Company, Inc.; that he bought out all of its assets and paid for them; that thereupon the corporation was dissolved by action of the stockholders; that he had no connection with the operation of any plant at Ewell; that in fact the corporation never operated the plant in its own name or in the name of the Ewell Company, having sold out to the complainant company before the McGowin Corporation took over. He denies that he was bound by the contract with the complainants which was signed by the corporation and W.M. McGowin, who was the chief stockholder; that he is not now purchasing and has never purchased rough lumber or lumber for the purpose of manufacture, remanufacture or finishing within a radius of fifty miles of Ewell, Alabama, or at Ewell, Alabama, but that he has purchased and is still purchasing rough lumber or lumber within a radius of fifty miles of Ewell, Alabama, or at Ewell, Alabama. He admits having knowledge of the covenants, supra.

The bill is aimed at the protection of the good will of the business said to have passed from Ewell Corporation to McGowin Corporation, thence to Pine Plume Lumber Company.

Appellant's argument in brief begins: "1. Is the agreement unlawful?

"The Alabama statute (Title 9, Section 23) makes agreements of this nature valid when made in connection with the sale of the good will of a business."

In considering the transactions here presented, and the measure of relief sought by the bill, we deem it important to consider our entire statute dealing with contracts not to engage in any lawful business. This statute first appeared in three sections, 6826, 6827 and 6828, of the Code of 1923, reading as follows:

"6826. Contract in restraint of trade, void.--Every contract by which any one is restrained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided by the next two sections, is to that extent, void.

"6827. Exception in favor of sale of goodwill.--One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business within a specified county, city, or a part thereof, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein.

"6828. Exceptions in favor of partnership arrangements.--Partners may, upon or in anticipation of a dissolution of the partnership, agree that none of them will carry on a similar business within the same county, city or town where the partnership business has been transacted, or within a specified part thereof."

Section 6827 was amended by Act of 1931, General Acts 1931, page 647, to read: "One who sells the good will of a business may agree with the buyer, and one who hires as an agent, servant, or employee may agree with his employer, to refrain from carrying on or engaging in a similar business and from soliciting old customers of such employer within a specified county, city, or part thereof, so long as the buyer or any person deriving title to the good will from him, and so long as such employer carries on a like business therein."

This act added after the words "from carrying on" in the...