On March 8, 1915, Harry Lesser, doing business under the firm name of the Marianna Cotton Oil Mill, brought suit in the circuit court against T. L. Shapard for $876.65, alleged to be due upon an open account. The plaintiff stated that the Marianna Cotton Oil Company, a corporation, had conveyed this account together with all of its other property of every kind to him, and that shortly thereafter it surrendered its charter to the State of Arkansas, and lost its legal entity as a corporation.
In April, 1915, A. D. Goldman, Blanche L. Goldman, J. L. Isaacs, W. B. Mann and Jim Thompson filed a motion in the cause, stating that at the time the Marianna Cotton Oil Company surrendered its charter they were stockholders in it and owned all the shares of stock issued by it. They stated that Blanche Goldman owned 796 shares, Harry Lesser, 797 shares, J. L. Isaacs, four shares, and the rest of them one share each and asked to be made parties plaintiff to the action. The motion was granted over the objection of the defendant.
The plaintiff alleged that the balance due was for hulls and meal set out in the account sued on.
The defendant answered and admitted that he had received the hulls and meal set out in the account sued on, but stated that he had purchased same from the Marianna Cotton Oil Company, and denied that plaintiffs had any right to recover on said account. The material facts are as follows :
In January, 1915, the Marianna Cotton Oil Company* by deed duly executed, pursuant to resolution unanimously passed by its stockholders, conveyed all of its property of every kind to Harry Lesser, and the consideration was that Harry Lesser should pay all the debts of the corporation. The corporation then, by resolution duly passed by its stockholders, surrendered its charter to the State of Arkansas. It was solvent at the time Harry Lesser took possession of its property under the conveyance to him. He paid its debts and thereafter conducted the business under the style of Marianna Cotton Oil Mill. The account sued on came intq his possession along with the other assets of the corporation. Other facts will be stated or referred to in the opinion.
The jury returned a verdict for the plaintiff for $876.65 with accrued interest. The defendant has appealed.
The defendant in his amended answer, sets up the following :
“That on the..........day of................, 1912, he entered into an agreement with the Arkansas Cotton Oil Company, of Helena, Ark., by the terms of which he and the said Cotton Oil Company were to erect and operate a cotton gin at Rondo, Arkansas; that the Marianna Cotton Oil Company at that time and for a long time prior thereto owned and operated a cotton gin and bought cotton seed at said town of Rondo; that as soon as the Marianna Cotton Oil Company learned that it was to have competition in the gin business and in buying cotton seed at Rondo, it immediately began negotiations with the defendant for the purpose of inducing him to rescind his agreement with the Arkansas Cotton Oil Company (which was competitor of the Marianna Cotton Oil Company), and proposed that if he would do so, it would pay him $400 annually for his goodwill and influence in staying out of the gin business and cotton seed business at Rondo in competition with Marianna Cotton Oil Company; that thereupon by mutual agreement he rescinded his said agreement with the Arkansas Cotton Oil Company, and accepted the proposition of the Marianna Cotton Oil Company, and has ever since abided by and faithfully lived up to said agreement and has not been in any wise connected with the gin or cotton business at Rondo in opposition to or competition with the Marianna Cotton Oil Company or its assigns.”
It is insisted that the judgment should be reversed because the court refused to allow the defendant the $400 annually as set out in that part of the answer just quoted.
(1-2) Contracts in partial restraint of trade with reference to a business or profession where ancillary to the sale of the business or profession and the good-will thereof, are valid and enforceable to the extent reasonably necessary for the protection of the purchaser. Hampton v. Caldwell,
(3) According to its allegations the Marianna Cotton Oil Company executed the contract in question with the defendant in order to prevent him and another oil company from erecting and operating a cotton gin at Rondo, and thus becoming its competitor in buying cotton seed. The avowed object of the contract, according to the allegations of the answer, was to stifle competition and to promote a monopoly in the cotton seed business to the manifest injury of the public. The contract was not entered into for the purpose of protecting the oil mill company in a legitimate use of something which it acquired by it; for nothing was conveyed to the oil mill corporation. The purpose and effect of the contract was to enable the oil mill corporation to enjcy an illegitimate use of something which it already had. The contract was against public policy and the court correctly refused to allow defendant to use it as a set-off against the account sued on. Clemmons v. Meadows (Ky.),
(4) In Jett v. Maxfield Co.,
(5) In the present case the corporation before it surrendered its charter sold and transferred all its assets to Harry Lesser. It is urged that the judgment should be reversed because Harry Lesser did not bring himself within the above rule. After the corporation had surrendered its charter to the State, all the stockholders came in and asked to be made parties plaintiff to the action which was done. It is conceded that they had a right to surrender the charter of the corporation to the State under the authority of State ex rel. Atty. Gen. v. Arkansas Cotton Oil Co.,