Legg v. Hood , 154 Ga. 28 ( 1922 )

Atkinson, J.

1. Where a proprietor sells out a given business, and as a part of the contract covenants not to engage in a similar business in a particular locality, if such covenant is reasonable and otherwise proper it will not be set aside as "void on the ground that it is in restraint of trade and contrary to public policy. Swanson v. Kirby, 98 Ga. 586 (26 S. E. 71); McAuliffe v. Vaughan, 135 Ga. 852 (3), 857 (70 S. E. 322, 33 L. R. A. (N. S.) 255, Ann. Cas. 1912A, 290), and cases cited. Such covenant will be reasonable and proper if it only affords a fair protection to the party in whose favor it is made, and is not injurious to the public. 6 R. C. L. 798, § 200, and cases cited in notes 20 and 1; and where it is of such character, it may extend to all the territory covered by the business the good will of which has been sold. 6 R. C. L. 795 et seq., § 195; Fleckenstein v. Fleckenstein, 76 N. J. L. 613 (71 Atl. 265, 24 L. R. A. (N. S.) 913); Harbison-Walker Refractories Co. v. Stanton, 227 Pa. 55 (75 Atl. 988); Cowan v. Fairbrother, 118 N. C. 406 (24 S. E. 212, 32 L. R. A. 829, 54 Am. St. R. 733); Joyce on Monopolies, 142, § 109; Prame v. Ferrell, 166 Fed. 702 (92 C. C. A. 374).

(a) The rulings here made are in accord and do not conflict with Holmes v. Martin, 10 Ga. 503; Jenkins v. Temples, 39 Ga. 655 (99 Am. D. 482); Spier v. Lambdin, 45 Ga. 319; Ellis v. Jones, 56 Ga. 504; Goodman v. Henderson, 58 Ga. 567; Newman v. Wolfson, 69 Ga. 764; Swanson v. Kirby, 98 Ga. 586 (supra); Rakestraw v. Lanier, 104 Ga. 188 (30 S. E. 735, 69 Am. St. R. 154); Bullock v. Johnson, 110 Ga. 486 (35 S. E. 703); Jefferson v. Markert, 112 Ga. 498 (37 S. E. 758); McAuliffe v. Vaughan, 135 Ga. 852 (supra); Holtman v. Knowles, 141 Ga. 613 (81 S. E. 852); Busk v. Wolf, 143 Ga. 18 (84 S. E. 63); Shirk v. Loftis, 148 Ga. 500 (97 S. E. 66); Wells v. First National Exhibitors’ Circuit, 149 Ga. 200 (99 S. E. 615); Manning v. Marchman, 150 Ga. 309 (103 S. E. 795), cited in the brief of the attorney for the plaintiff in error, applying- principles stated above in eases where the prohibited locality was confined to towns, cities, or counties.

2. Ordinarily he who knowingly accepts and retains any benefit under a contract which he has been induced to make by fraud, after he has knowledge of such fraud, affirms the validity of the contract and will not be heard thereafter to repudiate it. 6 R. C. L. 932 et seq., § 316; Civil Code, § 4305; Couch v. Crane, 142 Ga. 22 (7), 29 (82 S. E. 459); Tuttle v. Stovall, 134 Ga. 325 (67 S. E. 806, 20 Ann. Cas. 168).

(a) Under application of this principle, even if the defendants under the circumstances of the case were damaged by the false statements by Stoner that he was not buying for Hood, the defendants, having retained the advantages flowing to them under the contract after knowledge of such false statements, will be held to have elected to affirm the validity of the contract.

3. The contract was assignable, and Hood as assignee of the contract and owner of a portion of the stock in the corporation had such interest as would authorize him to bring a suit to enjoin violation of the covenant. Swanson v. Kirby, 98 Ga. 586 (2) (supra); Holtman v. Knowles, 141 Ga. 613 (supra).

4. It was not alleged in so many words that the damages were irreparable because of the disability of ascertaining the amount thereof, but such was alleged in substance, and there was evidence to support such allegations. Under such circumstances the judgment granting an interlocutory injunction should not be reversed on the ground that it was not specifically alleged that the plaintiff was irreparably damaged. Bullock v. Johnson, 110 Ga. 486 (2) (supra).

5. It would be a violation of such a covenant for J. H. or L. N. Legg, individually or jointly or in collusion with H. L. B. Legg, Miss E. D. Legg, and the Plainville Brick Company, in the described territory to engage in the manufacture or sale of brick in competition with the Legg Brick Company. Jefferson v. Markert, 112 Ga. 498 (supra); Manning v. Marchman, 150 Ga. 309 (supra).

6. In the act of Congress of July 2, 1890, c. 647, § 1, 26 Stat. 209 (9 Fed. Stat. Ann. (2d ed.) 644, 17. S. Comp. St. § 8820), it is declared: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal.” Other portions of the act provide penalties for violation of the law. It has been held that the sale of a business, and the surrender of the good will pertaining to that business, and an agreement thereunder, within reasonable limitations as to time and territory, not to enter into competition with the purchaser, when made as part of the sale of the business, and not as a device to control commerce, is not within this act. Camors-McConnell Co. v. McConnell, 140 Fed. 412, 987 (72 C. C. A. 681); Darius Cole Trans. Co. v. White Star Line, 186 Fed. 63 (108 C. C. A. 165); Harbison-Walker Refractories Co. v. Stanton, 227 Pa. 55 (supra); Fleckenstein v. Fleckenstein, 76 N. J. L. 613 (supra); Cowan v. Fairbrother, 118 N. C. 406 (supra); Joyce on Monopolies, § 109.

(a) The judge was authorized to hold that the contract above mentioned was not void as being violative of this act.

7. In section 3 of the Clayton anti-trust act, approved October 15, 1914, c. 323, 38 Stat. 731 (9 Fed. Stat. Ann. (2d ed.) 733, U. S. Comp. St. § 8835c), it is declared: “That it shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies or other commodities, whether patented or unpatented, for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce.” This act relates to transactions whereby a vendor or lessor covenants with his vendee or lessee that the latter shall not buy or lease from such vendor’s competitor, and condemns such covenants. The contract under consideration is not of this character, and the judge was authorized to hold that it was not void as violative of this provision of the statute.

8. In Brown v. Jacobs’ Pharmacy Co., 115 Ga. 429 (41 S. E. 553, 57 L. R. A. 547, 90 Am. St. R. 126), it was held: “ The act approved Dec. 23) 1896 (Acts 1896, p. 68), commonly known as the ‘ anti-trust act,’ is unconstitutional, as section 4 thereof, declaring that the provisions of the act ‘ shall not apply to agricultural products or live stock while in the possession of the producer or raiser,’ makes the act repugnant to that provision of the fourteenth amendment of the constitution of the United States which declares that ‘ No State shall deny to any person within its jurisdiction the equal protection of the laws.’ ” Even if the act so held to be unconstitutional should be construed as prohibiting a contract of the character involved in this case, it could not be ground for holding the contract to be invalid.

No. 2833. August 16, 1922. Rehearing denied September 20, 1922.

9. The contract reserved the right of J. H. and L. N. Legg to construct brick plants, and consequently it was not a violation of the contract for them or their codefendants to engage in the construction of such a plant.

10. Under the pleadings and evidence the judge was authorized to enjoin temporarily, or until the final hearing of the case, all of the defendants from engaging in the manufacture and. sale of brick or other clay products within the described territory; and to this extent the judgment of the trial court is affirmed. But he was not authorized to enjoin them from the mere construction of the Plainville Plant; and to this extent the judgment granting the injunction is reversed.

Judgment affirmed in part and reversed in part.

All the -Justiees concur, except Gilbert, J., absent. M. B. Eubanlcs, J. O. B. Erwin, and Maddox & Boyal, for plaintiffs in error. Bryan & Middlebroolcs, A. L. Henson, and F. A. Cantrell, contra.