432 HULTSMAN V. CARROLL. [177 HULTSMAN V. CARROLL. Opinion delivered May 28, 1928. 1. CONTRACTS—WHEN. CONTRARY TO PUBLIC p oLIc y —A contract: is. against public policy if it is injurious to the interests of the public, or contravenes some established interest of society or some public statute, or is against good morals, or tends to interfere with the public welfare. • 2: CONTRACTS—FREEDOM OF coNTRACT.—Public poliey requires that every man shall be at liberty to work for himself, and shall not • be at liberty to deprive . himself or the State of his labor, skill-or talent by any contract that he enters into. 3. CoNTRACTS—coNTRAcT• PRECLUDING CO MPETITION.—When one.haS by skill or other means obtained something which . he wants to sell, he should be at liberty to sell it in the most advantageous way in the market, and to do so he may preclude himself from entering into competition with the purchaser, and may enter, into any stipulation not unreasonable in view of the subjeci-matter
ARK.] IILLTSMAN V. CARROLL. 433 4. PLEADING-ADMISSIONS BY DEMURRER.-A demurret to a corn-, -plaint admits the allegations thereof to be true. 5. CONTRACTS-RESTRAINT OF TRADEL-A contract entered into be-. • tween a purchaser and vendor of a filling station, whereby the vendor agreed not to engage in competition at the place of business across the street by the sale of gasoline at an equal or .lower price than the purchaser, held not against public polic • y •_ . 6. INJUNCTION—VIOLATION OF CONTRACT.-Equity will restrain violation of a contract preventing the vendor of an oil filling station from competing with the purchaser at a place of business across the street, where violations of the contract continued from day to .day. 7. INJUNCTION—VIOLATION • ' OF CONTRACT - SUFFICIENCY OF COM- PLAINT.-A. complaint for injunction against a- breach of contract preventing a vendor of an oil filling station from competing at a place of business rnacross the street, alleging that plaintiff purchased in consideration of the vendor's agreement not . to compete, held to state a Cause . of action. Appeal from Pulaski Chancery Court; Frank H. Dodge, Chancellor ; reversed. Owens cf Elirman and " St. Clair- Hultsman, for appellant. Torn F. Digby, for appellee. MEHAFFY, J. The apPellant, in July; 1927, purchased a gasoline filling station from the appellee, paying there, for $6;000. Appellant brought this suit, and alleged that, at the time he purchased the property, he informed the appellee that he intended to sell gasoline at a priee less than the prevailing prices . at other-filling stations in' the - city. That, in all probabiliq-, the other companies would try to freeze him out of business by selling gasoline at a - nearby station for less Than the price set by the appellant.- He told appellee that he would not purchase the' property unless appellee would agree not*to enter-into any such combination or sell gasoline -at a price equal to . or less than the price charged by appellant. The appellee-, stated that he did not care anything about the gaSoline business, and if appellant would give him $6,009 he -Would lef him have the -:property whiCh- was located acress•the.- street from appellee's garage, and apliellee would not sell gasoline at a price equal- to or - less than -the -price
434 HULTSMAN V. CARROLL., [177 charged by appellant. Appellant alleged that, yelying on this statement, he paid appellee -the money,:and began selling gasoline four cents cheaper than the generally prevailing prices. About: two Months later appellee started selling gasoline one cent cheaper per: gallon than the price charged by the -plaintiff. This suit was then filed, in the chancery court, asking that appellee be enjoined from a further breach 6,f his contract, and for'damages: A demnrrer- was filed-to the complaint, which was by the 'chancellor AnStained, -04 to reverse the order sustaining the demurrer and dismissing: the complaint, ihis appeal is.prosecuted. , The demurrer was as follows : (I) That the -.complaint did not state'a cause of action in equitY. (2) _That the alleged contract upon which the Otion waS based was on its face void and unenforceable. (3) 'That plaintiff had an adequate remedy at laW. : ' The appellee first contends , that • the dontia et 'or, agreement is void because it .is in restraint of trade, and therefore contrary to public policy. A contraCt i of course, is against public policy if it is in , any way injurious to the interest, of the public or :contravenes some established interest of society,, or if it contravenes a public. statute,: or is against good morals, or tends to inter-" fere with the public . welfare. . ...:` Public policy:requires that every 'man shall be at liberty to work for himself, and shall not. be ;at liberty to:deprive; himself or the -State of his labor,:skill, or talent, by any . contract that he enters into.; On .the other hand, public policy requires that: When a, man has, by, skill or 'by. any lother, means, .obtained something 'which -he wants to sell, he should be at liberty, to sell it in the-most adVantageous way in the market ;: and in order td enable him to sell it advantageously in the market, it is neces-sarT that he should:, be , able to preclude himself from entering into competitiOn with the !purchaser. In .such a poliey-that enables him to do 'this does not restrain him from alienating that which he wants to alienate, and therefore ,enables him to enter into any
ARK.] •}ItiLTsiviAN V. CARTiOlL. .435 Stipulation H whieh,' in the' judgMent of the Cmirt, is not thireasoliabie; . having'' regard to the • Subject•matter of the ' . coritract: . ' There"are seVeral reasOns 'for upholding aeoVenant on the pare of the'vendor in -all such -cases to .deSist . 'frem the bUSiness . competition' with . the put-chaSer, Whibh do . het obtainiri Other 'Cases. In the first place;"the I restraint is . partial,. in the Sense that it Covers Only the time and lecality'during : and in which the Vendee •carries?' bri ' ; the" blisiness-pUrchasea; and beyond theSe liniitatiori§ the- seller -is at liberty to carry on the same Then, 'too; the vendor redeiVes An eqUivalent "for 'his -'pai. tial abstention .. from: that' business in the .inereaSed' priCe 'paid him for it on 'acCount of his coVe.- nant ;*. and his entering inte a-rid' observanCe Of 'the -cove-riantnbfonly do notiendto:hiS pauperi$tion to . the detri-: Merit *Of the publiC,''but, , on the contrary, by securing to hiin'thC'fiIll'-va-luedf his buSiness and its good will; a value • Which• :he 'has an- absolute righf to' seCure in this WaY;"the' . 6evenant ' operates . tO his affirmativel' pecuniary 'benefit and against-hiS- impoverishMent, in that, while being paid 'for- desisting 'froni : the particular -business in the locality covered 'by' it;- he 'may still enter upon other pursuits'of:gain in'the,-sathe locality; or up:in this one. •in . Other localities.. 'Finally; while Such coVenants pre-Chide lhe 'coMPetitiOn the • CoVenantor, it i ordinarily .neither' their PurpOse- nor effect to Stifle comPetition geri-erallY: iri the locality, nor'-to preVent it at all' in a way oy to aril extent* injurithis 'to • the 'public, for - the business -in thwhands of 'the prfrchaSet 'is- carried on just as • it Was 'in : thethands of' the yonder.; the fermer merely takes the place-Of' the t latter;'the cOminodities of the trade . are as open'to thopriblica:s they were- before, the same conipeti-' tioni-exiStS as existed'befdre, there is the same 'employ-. , trient" fil y niShed Others: • after uS . -before, ;the profits of .the busineSs go as they did , before to swell . the sum of wealth, the publiO has the Same opiwitnnities of • nut:chasing, if it is a Mercantile . buSineSs, 'and produé-tion is' not lessened if ft 'is a manufacturing plant. ' " - 6 79 ,3. ?-
436 .11uLTsmAN v. CARROLL. [177 .The demurrer, of course, admits that appellant paid $6,000 for the land because the appellee promised that he would-not engage in competition with him in his place of business across the street. According to the allega-.tions of the complaint, appellee made this agreement, and would not have been able to sell his place for the $6,01)0 to . appellant if he had not made it. It does not undertake to prohibit him from selling gasoline anywhere ..else, except at the place across the street, at any price :l ; r iemay wish to sell it. It does not seek to prohibit or :interfere with ,the sale of any-other person at any locality, .but it alleges :that appellant desired to purchase it for the purpose of selling gasoline to the public at four • cents below the prevailing prices„ and expected compe-_tition from others, and expected that they would try to destroy his husiness by selling cheaper than he could afford to .sell. -He therefore contracted with the appellee . that appellee . would not engage in this competition at his . place of business just across the street from the property . _ Purchas . ed. The contract, if enforced, would in no way injure . the public, and is not against public policy. , • . This court very recently said : 6 There is no -hard: and fast rule in this State as . to _what contracts . are void as being in restraint of. trade, and each case must- be judged according to its own facts , and circumstances. It is also well settled that a person .inay legally purchase the 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 sanae -place for a limited period of time. Covenants of , this l(ind operate to prevent the seller from engaging in _ a business which he •sells, 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 his business: In general this does not ',injure the public, because his business is open to all other • persons, and there is little danger that it will suffer harm, :if -the , b . usiness is . profitable. The agreement could in no sense prevent other persons from entering the business,
HULTSMAN V. CARROLL. 437 if, they should see it was a profitable, one." Robbins. v. Plant, 174 Ark. 639, 297 S. W. 1027 ;,Shapard, v. Lesser, 127 Ark. 590, 193 SI W. 262, 3 A. L. R. 247, and cases:cited ; WakenfighP v. Spear .(f Rogers, 147 Ark. 342, 227 S. 419 ; McSpaciden v. Leonard, 159 Ark. 193, 251 S. W. 694 ; : Bloom v. Home Ins. Agency, 91 Ark. 367, 121 S. W. 293. It is not contended that the contract involved is either in violation of law or immoral, but the contention is that l it LS contrary to public policy: The apPellee calrs attention to arid relies on the , case of Anderson v: Shawnee Compress N., 17 Okla. 231, 87 P. 315, 15 L. , R. A. (N. S;) , 846. In that case .the court said that the priblie welfare is the first consideratimi tO which the courts will look; and then : the qUestioU of whether the 'restraint Updn the one party is or is not greater than the protection' of the other requires. And the court further said: . " The. real, , the veritable, pu , rpose -actuating the Mt-cers of ,the, Gulf, Compress Company, as disclosed by its plan of 'organization rind ,mode of operation, and as manifested by the cirCumstances surrounding the conduct: of its buSinesS, and the results of its management by them, beyond reasonable ,question„ to.„ place within their pOwer the cOntrOl of the . compreSs industry, : by purchasing , or leasing tlicise :plants:„Which ,are . advantageously located in each of the : hauling districts : or territories established by the carriel ; s in their ' co4on tariffs.' * It may be true; as declared ‘ upon the witness ;stand : by its pr_e.sident,:thafsuch is not the : Purpose ,of this organization; then the intention- of its officers, as evinced in the declarations , which„fall from their lipS, is at wide ilar1- ance frOm the Purposes evidenced by the resUltS:.they have brought about.!' The facts in that case-are so different : that the-quota-,,tion from, it by appellee has no application here.; - But we think, a reading ,of. the Oklahoma case:will .convince one, not only of the difference between the two 'cases, but that, according to the principlesy' announced by the
438 •ifoursmAN V. CARROLL. [177 Supreme . COurt of Oklahoma; the contract in the instant case is not contrary to public policy. • Appellee calls 'attention also tO the : case ''of National Phonograph Go. v: Schlegel, 117 Fed. 624. In that case the defendants filed a Stipulation agreeing to an` injUnction.* Thq agreed: to be enjoined. But the Court said: "Why do defendants agree to be enjoined? Is it simply to; save costs G . ? , Is not the contract one that stifles trade? And if it is such a contract, should this court enforce it by ;the great writ of injunction? Are the parties to the cantraa alone concerned in its enforcement?" Then the cOurt further said: , "Injunctions are not granted as of course, and should not be grantedwhen it . is believed, as I do,beli+, that such a writ: would be 'improperly used. As . ,an injunction is not required to . coerce the defendants in this case, they, in effect,' having agreed to cOmply with complainant's. demands, for what . can the writ be ,cused? Unddubtedly to intiMidate Or ' terrorize otherS engaged "in the like bUsiness., Used to hold up to others that this CoUrt haS recognized the validity -of the Contract. The decree of this conrt will be used for advertising literature; and, before a decree should be so Used, it should be ciuith e'er-fain that such a' decree is reqUired as between the partieS' to the record. Believing that such a decree is not required' as between the parties to the record herein on such grounds, the writ, although agreed to by the parties, should be denied." ' In that case the court found, not only that the 'par-tieg agreed to an injUnction, hut they Were already cora-'plying with the contract, and that, so far as the parties themselves were concerned, there was no occasion Whatever for an injunction, but it was sought for the purpose of terrorizing others and compelling others to comply with the wishes of the cornplainant. ; But there is no intimation or suggesiion in the above ca g b that an injunction would not be granted to iirevent the violation of a contract which was entered into by the parties and was not in restraint of trade.
ARK.] , '• IfoLTsAw V. CARROLL.. • Appellee . next calls . attention, to, 22 Cyc. 866. It is true that it is there stated that, before a,court will enjoin a breach, there must be no doubt about the validity of the contract and its terms must be clearly proved and the fact of breach established beyond doubt. But we have the, facts here stated in the complaint and admitted to be true so far as the demurrer is concerned. . "Where one has. made' a valid contract reStricting the use to which he may put his land, a Violation of such restriction by 'him will be' restrained hy injunction; such covenants , are usually made at ihe time of a conveyance, the grantee agreeing not to use the land:ConVeyed in certain ways, or the grantor limiting his use of other land retained by him." 22 Cyc. 859. If the contract is not contrary to public policy and the violations of the contract are continued from day to day, like the selling of gasoline, and the contract is not unreasonable, a court of equity will restrain the violation of the contract. "The complainants are therefore entitled to a decree restraining the defendant from carting over any of the avenues in the park any stone taken from his lot for any purpose, except such loose Stones as it . is necessary remove for the purpose of fitting his lot for building and occupation." • Haskell v. Wright, 23 N. J. Eq. 389.. • The Suprethe Coiirt of MiChigan, where the Contract involved wns alleged to he . , t in yestraint of trade where it is, sought to restrain one from . carrying on the ice business, said: "The rule is that contracts of this nature will be- enforced in' equity where the restraint is* only pdrtial, being limited as to time , and place,- and where . reasonable grounds exist for , 'the reStraint, 'arid , where ' , it is founded on a good conSideration." Up Riper Ice Co. v. Denier, 114 Mich. 296,-72 N..W. 157, 68,A, S. R. 480. The court in• the above case : also- held- thdt-the fact that there was no time limit for which ` the' seller must refrain from carrying on the ,business,would not render the agreement invalid. , . _ ,
440 [177 While, acco'rding to tbe allegations of the comPlaint, there iS--no . tithe linnt in the contract involved in the inslant case; yet the restrictions were especially limited by the contract to the lot across the street from the one pfirchased : by appellant. The contract does not under-. take to prevent any other p .ersons from engaging in competition with appellant; hor to prohibit appellee from selling gasoline:wherever he may wish, and at.any price for Which he . thay" wish to sell, except at his place of business across the street from the lot purchased by appellant. • We think the complaint states a cause of action, and the decree is•therefore reversed, - and remanded with directions- to overrule the demurrer, and for further proceedings not inconsistent with this opinion.
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.