Kradwell v. Thiesen

131 Wis. 97 | Wis. | 1907

Cassoday, C. J.

The principal controversy in this case is as to whether the written agreement of June 23, 1903, “is absolutely void as a matter of law.” The contents of the agreement are sufficiently set forth in the foregoing statement. Counsel for the defendant is undoubtedly right in claiming that “a contract in restraint of trade is presumably void as against public policy.” The general rule, as deduced from the English adjudications, seems to be:

“A contract in general restraint of trade is illegal and void as being against public policy; but a particular restraint of trade within reasonable limits, having regard to the protection of the interests of the party contracted with, is valid.” Mallan v. May, 11 M. & W. 653, 6 Eng. Rul. Cas. 392.

The adjudications of this court are in harmony with the rule stated. Washburn v. Dosch, 68 Wis. 436, 32 N. W. 551; Richards v. Am. D. & S. Co. 87 Wis. 503, 512, 58 N. W. 787; Palmer v. Toms, 96 Wis. 367, 369, 71 N. W. 654; Cottington v. Swan, 128 Wis. 321, 107 N. W. 336; My Laundry Co. v. Schmeling, 129 Wis. 597, 109 N. W. 540, 545, 546. As stated by Mr. Justice Potitby in the Richards Case, cited, such contract is not void in case it is “founded upon a valuable consideration and limited, as regards time, space, and the extent of the trade, to what is reasonable under the circumstances of the case.” There is no ground for claiming that the contract in question is general or unlimited. On the contrary, it is by its terms expressly limited to the business of selling drugs or conducting a drug store in Racine during tbe five years mentioned. Tbe argument seems to be that the only legitimate basis for the agreement was to protect the good will of the business, which belonged to the Kradwell Drug Company and not to its stockholders; and hence, as Thiesen was a mere stockholder, the sale of his stock to the Kradwells did not include any interest in the good will or other property of the corporation to be thus protected. Two cases are cited in support of such contention. Merchants’ Ad-Sign Co. v. Sterling, 124 Cal. 429, 57 Pac. 468, 46 L. R. A. 142; Dodge S. Co. v. Dodge, 145 Cal. 380, 78 Pac. 879. In respect to these cases it is enough to say that they were based upon the statutes of that state, which declare that “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.” One of such sections provides that “one who sells the good will of a business may agree with the buyer to refrain from carrying on a similar business within a specified county, city, or part thereof, so long as the buyer, or any person deriving title to the good will from him, carries on a like business therein.” Those cases simply held that as there had been no sale of the good will, within the meaning of such statute, the contract in restraint of trade was expressly prohibited by the statute. We are governed by no such statute. The test which has repeatedly received the sanction of this and other courts was expressed by Tindal, C. J., in these words:

“We do not see how a better test can be applied to the question whether reasonable or not, than by considering whether the restraint 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 interests of the public. Whatever restraint is larger than the necessary protection of the party can be of no benefit to either, it can only be oppressive; and if oppressive, it is, in the eye of the law, unreasonable. Whatever is injurious to the interests of the public is void, on the grounds of public policy.” Horner v. Graves, 7 Bing. 735, 743. See Trego v. Hunt [1896] A. C. 7; Richards v. Am. D. & S. Co. 87 Wis. 503, 513, 58 N. W. 787; Milwaukee M. & B. Asso. v. Niezerowski, 95 Wis. 129, 134, 135, 70 N. W. 166; Diamond M. Co. v. Roeber, 106 N. Y. 473, 482, 13 N. E. 419.

The facts in the case at bar are quite similar to those in a recent Michigan case wherein it is held that “the purchase by an individual of a stockholder’s interest in a corporation affords a sufficient consideration for a contemporaneous agreement by the seller not to engage in the business carried on by the corporation.” Up River Ice Co. v. Denler, 114 Mich. 296, 72 N. W. 157, 68 Am. St. Rep. 480. The Kradwells owned the stock of the corporation. As such they were interested in the success of the corporation. They bought Thiesen's stock and paid him his price. They were entitled to the protection given by the agreement. We must hold that the agreement in question is valid and binding between the parties.

Among other things, the original complaint alleges, ás a breach of the contract, in effect, that said Thiesen, at the procurement of the defendant Red Gross Drug Company and with full knowledge on its part of the terms and conditions of said contract, engaged with that company as manager or managing agent or superintendent in charge of the stores of that company at Racine. It seems to be conceded that a short time prior to the commencement of this action the defendant Thie-sen was employed by the Red Cross Drug Company, and, among other things, had “also assisted in the management of the business of said company.” We do not feel called upon to go into details. They will he revealed upon a full hearing upon the merits. The matter of granting a preliminary injunction was necessarily addressed to the sound discretion of the trial court. Upon the facts stated we cannot say that there was any abuse of such discretion in granting the injunc-tional order appealed from.

Tbe amended complaint states facts sufficient to constitute-a cause of action for the breach of such contract, not only against the defendant Thiesen but also against the Red Cross Drug Company.

By the Court. — Each of the three orders of the circuit court appealed from is affirmed.