117 Va. 739 | Va. | 1915
delivered the opinion of the court.
The bill in this cause was filed by Dwight M. Pratt, against Isaac Klaff to have specifically enforced by injunction an alleged agreement in writing between the parties, filed with the bill as “Exhibit A” and bearing date the 9th day of August, 1913. This agreement, under seal, sets out that in consideration of one dollar and other good and valuable considerations, paid to Klaff by Pratt, of Lowell, Massachusetts, Klaff for himself, etc., covenanted, promised and agreed to and with Pratt, his personal representatives, etc., that he, Klaff, for seven years from the date of the agreement, would not, “either alone or jointly, directly or indirectly, with any other person or persons or corporations, excepting the said Dwight M. Pratt, carry on, conduct, continue or engage in the business of rendering tallow, bones, grease, or dead animals, or the purchase and sale of hides, skins, furs, and wool, in the city of Norfolk, Virginia, or within a radius of forty (40) miles of said city of Norfolk. In case of my failure herein, I, the said Isaac Klaff, bind myself and agree to pay as liquidated damages the sum of five thousand dollars ($,- 000.00) to the said Dwight M. Pratt, or his personal representatives or assigns, as aforesaid.”
The bill then sets out that the plaintiff, on the date of said agreement, for some time prior and at the institution of this suit, was largely interested and had a considerable investment in the business of the Virginia Hide and Fur Co., Incorporated, under the laws of Virginia, and in the Norfolk Tallow Co., unincorporated, which two companies have their respective places of business in the city of Norfolk, the Virginia Hide and Fur Co., then and theretofore for several years past having been engaged principally in dealing
The bill then alleges the breach of said agreement on the part of the defendant to be that he, on or about the 1st day of November, 1913, did engage either alone or jointly, directly or indirectly, with some other person, persons or corporations, excepting the plaintiff, in the conduct or carrying on of the business of purchasing and selling of hides, etc., in the city of Norfolk, and was at the filing of the bill in this cause so engaged in said business at a certain number in said city, where the defendant had an office or place of business for the purpose of carrying on or conducting the business referred to. It is further alleged that the object of the agreement filed with the bill was to prevent the defendant, who was familiar with the methods and manner of conducting the businesses in which the plaintiff was interested as aforesaid, from engaging in a like business, and that the true intent and meaning of the agreement is that the defendant would not engage in or carry on, or conduct, or continue, any one or more of such businesses either alone or jointly, directly or indirectly, with any other person or persons, etc., except the plaintiff, in the city of Norfolk or within a radius of forty (40) miles thereof for a period of seven (7) years from and after the date of the agreement, and that the plaintiff had been reliably informed that the defendant, either alone or jointly, or with some other person or persons, etc., anticipated or was about to engage in the city of Norfolk, or within a radius of forty miles from the city, in the business of rendering tallow, bones, grease and dead animals, in further violation and disregard of his said agreement, etc.
“That your orator upon ascertaining the violation by the said Isaac Klaff of his said agreement, brought a suit at law in this honorable court, returnable to the first November rules, 1913, for the purpose of recovering in said suit a judgment for five thousand dollars ($5,-000.00), the amount of damages which the said Klaff agreed to pay to your orator in case of his violation of the terms and conditions of the said agreement. Since the bringing of the said suit, however, your orator has been informed, and therefore charges and alleges that, if a judgment in said suit were obtained in his favor for the said sum of five thousand dollars ($5,000.00) against the said Isaac Klaff, he Would be unable to collect the said judgment from the said Isaac Klaff, and that the said Isaac Klaff being unable to pay the said judgment, would be insolvent. Under these circumstances, your orator has had dismissed the said suit above referred to and the said suit is no longer pending or on the docket of this honorable court.”
It is further alleged that unless the prayer of the bill be granted, the. plaintiff would sustain irreparable damage and the relief prayed is that the defendant be, pending this litigation and perpetually, restrained and' enjoined from the violation of the terms and conditions of said agreement of August 9, 1913, and from carrying on, conducting, continuing or engaging in the business of rendering tallow,i bones, grease and dead animals, or the purchase and sale of hides, skins, furs and wool, or any or either of them, in the city of Norfolk, or within a radius of forty miles of said city, for a period of seven years from and after the date of said agreement, either alone or jointly, etc.
The defendant demurred to the bill upon a number of grounds stated in writing, which demurrer was overruled
It is further claimed in his answer that defendant had not violated any of the. provisions of the alleged contract with the plaintiff; that the agreement, if enforceable at
On the 19th of May, 1914, the cause came on for hearing in the Court of Law and Chancery of Norfolk city, upon the pleadings therein and depositions that had been taken and filed on behalf of the respective parties, and was argued by counsel and submitted to the court for decision, but before the court rendered its decision and during the same term of the court, the defendant asked leave to amend the eighth paragraph of his answer theretofore filed in the cause, the proposed amendment being for the purpose of pleading that plaintiff’s action at law theretofore in the same court to recover the liquidated damages stipulated for in the agreement “A,” having been dismissed by an order of the court reciting that, “By agreement of parties this case is dismissed,” the said order had the force and effect of a case dismissed agreed and operated as a perpetual bar to any further action or proceeding upon the said agreement either at law or in equity, so that if the plaintiff ever had any cause of action under or by virtue of said alleged agreement, which is denied, the same was then barred by reason of said order dismissing plaintiff's common law action on the agreement; but the court refused to allow the defendant to so amend Ms answer and entered its final decree in the cause, from which the defendant appeals, and which enjoins and restrains the defendant for a period of seven years from August 9, 1913, “from carrying on, conducting, continuing or engaging, either alone or jointly, directly or indirectly, with any per
The defendant in his petition for this appeal assigns as error: (1) The action of the court in overruling the demurrer to the plaintiff’s bill; (2) the refusal of the court to allow the defendant to amend the eighth paragraph of his answer (above mentioned) ; and (3) the ruling of the court in deciding the cause on the final hearing in favor of the plaintiff, and enjoining and restraining the defendant, as prayed in plaintiff’s bill.
In the view that we take of the case, it is only necessary to consider (1) whether or not the agreement in question is reasonable as between the parties; and (2) if so, whether or not the agreement is injurious to the public interest by reason of its effect upon trade and, therefore, void. These questions may be considered together.
“Whether or not the restraint is reasonable is to be determined by considering whether it is such only as to afford a fair protection to the interests of the party in favor of whom it is given, and not so large as to interfere with the interest of the public.” Merriman v. Cover, 104 Va. 428, 51 S. E. 817, and authorities cited.
The opinion in the case just cited further says: “The general rule is that a party who seeks to enforce a contract in restraint of trade must show that it is reasonable 99
The authorities generally are to the effect that where the tendency of the agreement between the parties is to lessen competition or raise the price of goods or commodities, it is injurious to the public, 9 Cyc. p. 535, where a number of the authorities are cited, and this authority
“Valid agreements in restraint of trade must be established by clear and satisfactory proof in order to justify a court in restraining their breach by injunction. There must be no doubt or uncertainty in regard to their terms or the consideration' upon which they are founded.” 9 Cyc., at p. 541.
We have set out in this opinion, perhaps at greater length than was necessary, the allegations of plaintiff’s bill as to what was the consideration for and the purpose and intent of the agreement which he seeks to enforce by injunction, and as to what interests he had to protect in the business of the purchase and sale of hides, skins, furs and wool, in the city of Norfolk, Va., or within a radius of forty miles thereof, the purpose of this extended statement being to show that the allegations of the bill are indefinite, not only as to the consideration upon which the defendant signed the agreement, but as to what interests the plaintiff had to protect by the agreement.
The agreement is that the defendant, a citizen of Norfolk, Va., agrees with a citizen of the State of Massachusetts that he will not for a period of seven years from the date of the agreement, engage in either of two different kinds of business in the city of Norfolk, Va., or within a radius of forty miles thereof; there being nothing in the agreement to show that the restraint imposed upon the defendant is necessary to protect the interests of the plaintiff, and nothing to show that the plaintiff had interests in said business to protect. When we come to examine the evidence in the case, it fails to show that the restraint sought by the agreement to be imposed upon the defendant is such only as is necessary to afford a fair protection to the interests of the plaintiff, but it does show, as we think, that the agreement is injurious to the public by
“Q. A corporation of the State of Maine? A. Yes, sir.
“Q. And it is doing business in the city of Norfolk under the name of the Norfolk Tallow Company? A. Yes, sir.
“Q. You have testified that the Virginia Hide and Fur Company and the Norfolk Tallow Company are now owned and operated by the same interests? A. Yes, sir.
“Q. And that has been true ever since your purchase of the Virginia Hide and Fur Company in 1912, has it not? A. Yes, sir.
“Q. Prior to that time these two concerns were competitors in Norfolk, were they not? A. Yes, sir.”
We have found no case holding valid a contract in favor of a mere stockholder in a corporation designed to prevent another from engaging in business in competition with the corporation; but even if this were permissible, one asserting such a contract must, under the rule of law recognized in this jurisdiction, show that the restraint is not only reasonable, but does not go beyond what is necessary to afford a fair protection to his own interests. Certainly it is the plaintiff’s interest that is to be protected, not that of the corporation. In this case all that the evidence shows
The decree of the trial court complained of excludes the defendant from engaging in or even accepting employment for seven years within a territory embraced in a radius of forty miles of Norfolk city in a business for which he is perhaps best fitted, by which he can best provide for his family, and in which it may be that he can be most useful in the community, when the evidence in the case, as it appears to this court, shows that such restraint upon the defendant is wholly unnecessary to the protection of the plaintiff or the business of the corporation in which he claims an interest merely as a stockholder. Unquestionably, there is abundant authority for upholding and enforcing contracts that operate in restraint of trade where they are reasonable and afford only a fair protection to the interests of the party to whom it is given and not so large as to interfere with the interest of the public, but
Elliott, in his work on Contracts, vol. 2, sec. 814, says: “The general rule to the effect that a contract in restraint of trade will be enforced where the restraint is no more extensive than is reasonably required to protect the interests of the party in whose favor it is given and not so large as to interfere with the interest of the public, has already been stated. This rule implies that the contract must be one in which the main purpose is to secure the covenantee that measure of protection needed by him, the covenant in restraint of trade being merely ancillary or incident to this main purpose.. The agreement restraining trade must be incidental to and. in support of the contract or sale by which the one in whose favor it runs acquired some interest in the business he seeks to protect. One cannot make a valid contract in restraint of trade, no matter how limited as to space or time, where he does not purchase the good will or any interest in the matter and the main object of which is to stiflle competition.”
In the light of the authorities cited, applied to the evidence in this record, we are of opinion that the decree of
Reversed.