ARK. I ROBBINS V. PLANT. 639
ROBBINS V. PLANT. Opinion delivered July 4, 1927. 1. CONTRACTS—RESTRAINT OF TRADE.—Whether a contract is void, as in restraint of trade, depends on the facts of each case, there being no hard and fast rule as to what contracts are void. CONTRACTS — REST RAINT OF TRAbE. — A person may legally purchase a business of another for the purpose of removing competition, with an agreement on the part of the seller not to carry on the same business in the same place for a limited period of time. 3. CONTRACTS — PREVE NTING COMPETITION.—A contract whereby the seller of a business is prevented from re-engaging in such business, so as to protect the buyer in the enjoyment of what he has purchased, and to enable the seller to get the full value of his • property, including the good will of the business, does not prevent other persons from entering the business and does not injure the public. 4. DAMAGES—LIQUIDATED DAMAGES.—Where the damages for breach of a contract are in their nature uncertain and difficult of ascer-tainment, the amount to be paid may be stipulated for by the terms of the contract. 5. DAMAGES — WHEN LIQUIDATED.—The contract between the buyer and seller of the business, binding the seller in the sum of $10,000 not to re-enter or assist any one in entering into the same business for 20 years, held intended to provide for stipulated damages, and not for a penalty. 6. DAMAGES—REASONARL ENES S OF LIQUIDATED DAMAGES. — The reasonableness tlf stipulated damages must be determined by the facts and circumstances at the time the contract was entered into, and not when the contract was breached. 7. DAMAGES—RIGHT TO RECOVER LIQUIDATED DAMAGES. — Where a con-_ tract provides for a definite sum as the liquidated or stipulated amount to be paid upon a breach thereof, the amount so fixed may be sued for in case of a breach and it is not necessary for the plaintiff to prove any actual loss by reason of such breach, as the contract substitutes the amount agreed upon *for actual damages resulting from the breacii. 8: DAMAGES--STIPU L ATEO DAMAGES NOT PENALTY WHEN. — In a purchase of a gin plant for $10,000, half of which was for the value of the plant, and half for good will, stipulated damages of $10,- 000 in case of breach by the seller of his covenant not to re-enter or_ to assist any one in entering into competitive business for a _period of 20 years in the same place, held not so disproportionate - to the damage which might result from the competitive business
640 ROBBINS V. PLANT. [174 as to show that the parties intended a penalty and not liquidated damages. 9. CO NTRACTS — BREACH—SUFFICIENCY OF EVIDENCa—In an action to recover stipulated damages for breach of the contract by the seller of a business not to enter into competition of the buyer, or to aid any one else in so doing, evidence held sufficient to warrant a finding that the seller aided and assisted another in setting up a rival gin in the territory embraced in the contract, entitling the buyer to recover stipulated damages. 10. TRIAL—INSTRUdTION SINGLING OUT FACTS.—In an action to recover damages for breach of a contract for sale of a business, in which the seller agreed not to assist any one in entering into competition with the buyer, a requested instruction that the use, by the person aided in constructing a competitive business, of a public well on the seller's land, consented to by the buyer, would not 1 constitute a breach of contract by the seller, held properly refused, as singling out facts and making recovery dependent thereon. Appeal from White Circuit Court; E. D. Robertson, Judge; affirmed. STATEMENT OF FACTS. W. E. Plant sued E. A. Robbins, W. L. Robbins and E. Blackburn to recover $10,000 damages for the alleged breach of contract by the defendants not to enter into competition with the plaintiff in the gin business or to aid or assist any one else in doing so for a period of twenty years in Kentucky Township, White County, Arkansas. The defendants denied aiding and assisting any one to operate a gin in competition with the plaintiff at the place mentioned in the complaint, and denied tbat there was any consideration for said contract. The defendants also claimed that the amount named in the contract was intended as a penalty and not as liquidated damages. W. E. Plant was the principal witness for himself. According to his testimony, on the 17th day of February, 1923, he purchased a gin from E. A. Robbins, W. L. Robbins and E. E. Blackburn, under their firm name of E. A. Robbins & Company, and received a deed from t be rr, for the gin and lands on which it was situated, in the town o • f Rose Bud, in Kentucky Township, White County, Arkansas. He paid $1,000 in cash and executed
Allit.] ROBBfNs. V. PLANT: 641 notes for the deferred Payments, ail • of which have been paid. Five thousand dollars* of the purchase: price waS intended- fo be for the :value of the gin plant -and the remaining $5,000 for the good will of the business. • On the same day, and aS, a Part of the contract for the purchase of the gin, the 'defendants executed to the plaintiff a•contract which is thcbasis of this suit„and which reads as follows • - • • • " Contract. made and entered into -on the 17th day of- FebruarY, 1923; between E. A. Robbins .& Company, parties kif the first part; and W. E. Plant; party of the seCond part, as •follows: •" The parties of tbe -first •part have : this day sold to the- party .of the : second part their entire 'gin outfit and gin right in Kentucky ToWnship,• White County, Arkan-sas, for the sum of : $10,000, payments of sat& being described in deed of even date of this contract. If the party of the second part makes all, payments when due as prescribed 'in said- deed, then and in that event the parties: of -the fifst part bind themselves in the above mentioned suin to the party of the second part- riot sto enter in the ginning: business or aid or assiSt any one in entering into sarae for a term of twenty years from" the dater of this contract. !: . "E. A. Robbins & Company, . "By W. L. Robbins." Some time in the spring 'of- 1925 0..L. Thompson built a gin in Rose Bud within an eighth of a mile of the' gin of the plaintiff, and, in the fall of that year, entered into competition with . the plaintiff. The land on whih-Thompson'huilt bis gin was . bounded on two sides • by the land of the : defend : ants. Thompson' built his gin throe : or four feet Ttom hiS boundary line next to the defendant's land. Frequently, -in : unloading cotton, the horSeS would have to stand on the land of the defendants. Thompson, also used water in operating his giri from a well on the land of the defendants. The only access had to Thomp-son's land --Was through A . park belonging *to the defend-. ants: Prior to the 'erection of the gin- by ThomPson,
642 ROBBINS. V. PLANT: [174 this park ha.d been closed,. but . the -defendantS opened.it just prior to the time that Thompson built his gill'. Sand and rock used in • erecting the : gin were hauled from the land of the defendants. Thompson stacked .wood which was used in the operation of his -gin upon the land of the defendants. Plaintiff valued his gin property at. $5,000 when he bought it from *the defendants and valued the good will of the business at not less than $5;000.. Other witnesses corroborated the-testimony of .the.plainT tiff to the effeet that there -was- no access :to Thompson's land except through the park belonging to the:defendants,. and that this park had been closed until just prior to,the erection of the gin by Thompson. : Various' witnesses-also testified that, after. the gin had been-erected .by Thomp-son, one of -the defendants- advised them .to haul :their: cotton there, and told them that Thompson ginned the cotton cleaner than Plant.- W. J. Walters was a Witness for the plaintiff, and testified that he worked for . ThomPson-sixteen or sev-,- enteen days while he was erecting his gin: He saw a A. Robbins there twice a day while he worked- there..::Rob--, bins came in the morning- and once in the- afterno6n dur-, ing the sixteen or seventeen daysiWalters Worked-there.: Material for building the gin was assembled in the. park .belonging to the defendants. -The park was closed until about the time the : gin was built. The gin could not be reached except by going through the park belonging to the defendants. Sometimes • Robins : on. and ' Thompson • would talk thirty minutes while:the work of erecting. the, gin was going on. .. According to tbe testimony of the defendants,:;they were not interested directly or indirectly in the: erection of the gin by Thompson. They only allowed him to use the. water from . their well because they understood .that: the plaintiff did not object -to it. - They did not . grant Thompson permission to : haul material from their land to be used in erecting : his gin nor did they- know .o.r allow, him to Assemble material there for . the, purpose-of erecting his : gin. They were -not interested . in another
• AR /K.] BOBBIi■TS PIA. 643 gin being located in' Rose Bud, except that they wished the farinerS to have a . gin which wobld gin:their cotton 'clean. • '1 • 'Other faCts will 'ISO stated 'under appropriate headings inthe opinion.' 's The ,jury retUrned. a verdict•in favor of the plaintiff in the Sum of $10,000, and from the judgMent rendered the defendants' have du . lY prosecuted an appeal to this court. •Yingling & -Taylor -an& Brundidge & Neelly,.for appellant. . . Jahn E;Mille*r. and Culbert Pearce, for appellee. -11ARt;'C.'..T., (after stating the facts). There is no hard-and-fast rule in this' State' as to what contracts are 'void . aS being ih restraint of , trade, and each case must -be jUdged'aceording to-its . own facts and circumstances. al g o well'settled that' a person may legally purchase the business of anOthet for the purpose of removing com-vetitioh; vith a:n agreement on the Part of the seller' not to 'carry on the 'same businesS in 'the' smite 'place for a limited 'period of tithe. Covenants of this kind operate to prevent' the seller from engaging in a business which he sells, so as to protect the buyer in the enjoyment of -What helaS purchased and to enable the seller to get the full Valie of- his property, inciuding' the good will of 'his business. , In general this. does not injtire the public, because the . business . i g open' to all other persons, and 'there i little-danget thatit suffer harm, if the hitSi-mess is profitable. 'The agreement 'could in' no §ense'prevent other -persons fron . il entering the business, 'if they 'should see it Was a-profitable one. Shapard v. Lesser, '127. Ark. 590, 193S. W '262, : and cases cited ; Wakenight v. -Spear & Rogers; 147 'Ark. 342, 227 S. W. 419; . awl MbSpadden v.-Leonard, 159 Ark. 193, 251 S. W. 694.' - • The closest queStion in the 'case at bar is whether or .not the' $10,000 ' Mentioned the contract should be treated as a Penalty or as liquidated damages. It is the Settled* law . of this State that, 'where the damages for .breach : of' . contract are in their nature uncertain and
644 ROBBINS V. PLANT. [174 difficult of ascertainment, the amount . to be paid may be stipulated -for by the terms of the contract. In the.early case of Williams v. Green, 14 Ark: 315, the court said that parties mAy stipulate the amount • of .damages for breach of an agreement "not to carry on a rival trade or business, within certain limits, where the breach may consist in acts of frequent recurrence, and the damages are in some degree conjectural." The case of Nilson v. Jonesboro, 57 Ark. 169, 20 S. W. 1093, is a leading case on the difference between liquidated damages and a penalty. fn discussing the question the court said: " The authorities, however, . show that; where the intention to liquidate the damages' is not obvious, the stipulated sum will be given.the effect. of a penalty if .it exceeds the measure of a. just compensation and the .actual damage sustained is capable of proof. (Citing authorities). But, where the contract is of such.a nature that the damage caused by its breach would be uncertain and difficult of proof, the ,sum named by the parties is generally held to be liquidated damages, if the form and language of the instrument are not unfavorable to that construction and the magnitude of the sum does not forbid it." As said in Blackwood v. Liebke, 87 Ark. 545, 113 S. W. 210, "But the question is not as to the status of the parties at the time when the contract terminated, but as to the status of the parties at the time _they made the contract. It may be, as the contract works out, that it would be easy to ascertain the damages for the breach of it, or to prove ' that there were none. But, if the .status of the parties at the time of the contest was such that it would be difficult or impossible to have anticipated the damage for a breach of it, and there was a positive element of damage, then, _under the authorities, there is no reason why that may not be anticipated and contracted for in advance." 'To the same effect see . Wait v. Stanton, 104 Ark. 9,
147 . S. W. 446 ; W . eibourn v. Kee, 134 Ark. 3(11, 204 S. W. 290 ; Suter v. Mason., 147 Ark, 505, 227 S. W. 782; Foran
v. Wisconsin & Arkansas Lwinber Co., 156 Ark. 346, 246
ARK.] ROBBINS V. PLANT. 645 S. W. 848 ; and McSpadden v. Leonard, 159 Ark. 193, 251 S. W. 694. The same rule has been adopted by the Supreme Court of the United States, and the rule itself and the reasons for it are clearly stated in Wise v. United States, 249 U. S. 361, 39 S. Ct. 303, 63 L. Ed. 805. Mr. Justice 'Clarke, who delivered the opinion of the court, said: " The result of the modern decisions was determined to be that, in such cases, courts will endeavor, by a construction of the agreement which the parties have made, to ascertain what their intention was when they inserted such a stipulation for payment of a designated sum or upon a designated basis, for a breach of a covenant of their contract, precisely as they seek for the intention of tbe parties _ in other respects. When that intention is clearly ascertainable from the writing, effect will be given to the provision, as freely as to any other, where the damages are uneertain in nature or amount, or are difficult of ascertainment, or where the amount stipulated for is not so extravagant, or disproportionate to the amount of the property loss, as to show that compensation was not the object aithed at or as to imply fraud, mistake, circumvention or oppression. There is BO sound reason why persons competent and free to contract may not agree upon this subject as fully as upon any other, or why their agreement, when fairly and understandingly entered into with a view to just compensation for the anticipated loss, should not be enforced." We are of the opinion that, tested by. this rule, the agreement of the amount of $10,000 named in the contraCt in the case at bar should be treated as stipulated damages and not as a penalty. It is true that, according to the evidence for the defendants, the contract in question was not executed until after the deed for the land and the gin plant had been executed and delivered, and was entirely an afterthought on tbe part of the purchaser, and there was no consideration for it. On the other band, according to the testimony of the plaintiff, the contract not to enter into the gin business in competition with
646 ROBBINS V. PLANT. [174 him was a part of the consideration for the purchase of the gin plant from the defendants. The gin was an 'old one, and the plant itself was not wOrth more than $5,000. The'' plaintiff valued the good will of the business at $5,000, and, for this reason, agreed to pay $10,000 for the gin plant. The contrad -Was to last for twenty years, and breach of it, in the very nature 'of things, might be 'of frequent recurrence, and damages would be to some degree conjectural. The defendants . might encourage or assist some one to enter into the gin business in competition with the plaintiff for a certain year, and the actual daMage'suffered might be small. However, if the plaintiff should bring suit for a breach of _the contract, that would end the matter, and he could not bring a second suit if the defendants should, the next year or any subsequent year, induce others tO set up a rival gin in the mine place. As pointed out by this court, the status of the parties must be considered as df the date when they made the contract and not when it was breached. For this reason the reasonableness of the damages stipulated must be determined by the factS and circumstances at the time the contract was entered into, and the fact that no •oss has in fact resulted from the breach of the contract does not affect the plaintiff's right to recover. ks pointed out above, in making contracts in partial restraint of trade and stipulating for damages for a breach thereof, the seller has in view the obtaining the full value of the good will of his business in making the sale, arid the purchaserlias in view the right to protect himself in buying the good will by preventing the seller from entering into , competition with him. It is App arent that the good • will would be at least mathrfally lessened in value if the seller was at liberty to at once establish a riVal business in the same place: Other caSes holding that the amount -stipulated in tbe contract as liquidated damages for a • breach thereOf which may be recovered in the event of a .loreach • of the contract, even though no actual damages are suffered as a consequence of such breach, may be found Cited in a case-note to 34 A. L. •R. 134. Among
ARN.] ROBBINS .V. PLANt.' 647 the cases cited . is that of the United States v. B'ethleheni. Steel Ca., 205 17. S. 105, 2,7 S: Ct. 450,, 51 L. Ed. 731,. where the court approved the rule coMprehensively stated :and-discussed in Sun , Printing & , PUblishing* AssociatiOnt v.! Moore, 183 U. S. 642, 22 S. Ct. 240, 46 L. Ed. 366. ,,t These cases hold that, if the Contract .provides. for a, definite sum as the liquidated Or stipulated amount ito. be paid upon a breach thereof,:then the amount so fted upon by the parties may be sued for ;: and it is not necessary for the plaintiff to prove ,any actual loss by reason of the defendants' breach of the contract. AU that- is necessary to entitle the plaintiff, in such a case, to recover, the stipulated sum, iS to show the ,breaCh of the contract, upon which the payment thereof depends. In other, words, the effect of a clause Tor stipulated damages is tO substitute the amount agreed . npon as-liquidated damages, for the actual . daMages resulting from:the breach Of the, contract, and. thereby : preVent a contrOversy betWeemthe. parties as to the amount of 'damages: - The 'damages' for a breach of a contract Of this kind' eitend over a period of twenty years, and are.uncertain, and; when the surrounding . circumstances are censidered,, together With the purPose sought tO be accomplished, the sum of $16,000 not so extraVagantly disproportionate-to the damage which might result from the defendantg entering into ot aiding . any one else to enter into the gin' bnsiness in the 'territory 'named . in the contraet . in' cora-; petition with the plaintiff, as to show that the parties must have intended a : penalty and cOuld not have Meant liquidated damages. It is next' cOntended that the evidence is.not sufficient t6 show that the defendants aided and assisted. ThOmpson in setthig up a riVal gin in the tOwn of ROse Bud, Kentucky Township': The testimony on thiS' point-was conflicting, but the 'question was snbmitted to - the jury on proper -instructions. The evidence for the plaintiff, if believed by the jury, was legally' snfficient to war,: rant a finding that the defendants aided and assisted Thompson in setting up a, rival gin in the territory
648 ROBBINS V. PLANT. [174 embraced in the contract. According to the evidence adduced for the plaintiff, the defendants allowed Thomp-son to assemble 'his building material on their hind and to pile upon their land the wqod which he used in operating the gin. The gin plant was erected within three or four feet of Thompson's boundary line, and that it was apparent that the land of the defendants, which was next to it, must necessarily be used in unloading cotton at the gin. One of the defendants was there at the gin twice each day for fifteen or sixteen days during the erection of the gin. The jury might have inferred that he must have known these facts. In addition, he was seen to have frequent extended conversations with Thompson at the place where the gin was being constructed during the time of its erection. After the gin was put in operation, the defendants advised various persons to have their cotton ginned with Thompson, and said that it would be ginned cleaner by Thompson than by Plant. The jury was instructed that the burden of proof wa g upon the plaintiff to show that the defendants in some substantial way aided or assisted Thompson in entering the gin business in the 'town of Rose Bud, and that, unless it should find these facts by a preponderance of the evidence, the verdict should . be for the defendants. The evidence for the plaintiff is legally sufficient to sustain a finding by the jury that the defendants aided and assisted Thompson in setting up his gin and operating it, in violation of the contract. The court also instructed the jury that, if the contract sued on was executed after the sale of the gin plant was consummated and was no part of it, then such contract was void, and the verdict should be for the defendants, in accordance with the principles of Kintbro v. Wells, 112 Ark: 126, 165 S. W. 645. The respective theories of the parties to this lawsuit were fully and fairly submitted to the jury under proper instructions. It is urged, however, by counsel for the defendants, as a reason for a reversal of the judgment, that certain instructions asked for by the defendants
ARK.] BOBBINS V. PLANT. 649 were refused by the court. We do not deem it necessary to review . these instructions or to discuss them separately, for the reason that, as above stated, in the instructions given at the request of the plaintiff and of the defendants, their respective theories were fully covered; and all disputed questions of fact were fairly submitted to the jury. It is earnestly insisted, however, that the court erred in refusing to give instruction No. 7 at the request of the defendants. The instruction reads as follows : "You are instructed that, if you find from the testimony that C. L. Thompson had used water from a public well that was open to the public, though situated upon the lands of the defendants, or either of them, in the construction and building of his gin, and if you further find that the same was used by and with the consent of the plaintiff and without objection from him, then this fact would not constitute a breach of the contract sued on herein, and your verdict should be for the defendants." There was no error in refusing to give this instruction. This court has frequently said that the trial court is not required to single out facts and make the verdict of the jury dependent upon whether they are true or not. The jury might have found that the plaintiff did not object to Thompson using water from the well situated in the park of the defendant and still thought that the contract had been breached in other ways, as testified to by the witnesses for the plaintiff, and that, on -this account, the plaintiff was entitled io recover the damages stipulated, if there was a breach thereof. We find no prejudicial error in the record, and the judgment will therefore be affirmed. KIRBY, J., dissents.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.