Summary
In Palmer v. Prunty, 168 Ohio St. 573, 156 N.E.2d 831, 832, the Supreme Court of Ohio in a per curiam opinion held the husband of the owner of the business sold who devoted full time to its operation, was instrumental in the sale and joined in signing as seller was bound by the covenant not to compete.
Summary of this case from Uptown Food Store, Inc., v. GinsbergOpinion
No. 35585
Decided March 11, 1959.
Contracts — Sale of retail merchandise store — Agreement not to engage in competitive business — Wife owner and seller of business — Husband joining in agreement of sale — Bound by covenant not to engage in competitive business — Purchaser's liability for purchase price — Damages.
APPEAL from the Court of Appeals for Franklin County.
This is an action on a cognovit note, in which defendants James and Ruth Prunty filed an answer and a cross-petition for damages for breach of contract and for injunctive relief.
The plaintiff, Gladys A. Palmer, was the owner of a used-merchandise store, operated under the name of "Palmer Bargain Store" (variously referred to throughout the record and briefs as "Palmer," "Palmer's," and "Palmers," Bargain Store) and managed by her husband, W.E. Palmer. Plaintiff sold the business to the Pruntys. Part of the purchase price was paid in cash and the balance is evidenced by a cognovit note payable in weekly installments.
This action was brought against the Pruntys to recover the balance due on the note. The Pruntys, in their answer and cross-petition, name plaintiff's husband as a party defendant, admit the execution of the agreement to purchase the store and the execution of the note, allege a breach of contract on the part of the Palmers not to engage in a competitive business and that no sum is now due on the note, and seek damages for breach of contract and an order restraining the Palmers from engaging in the same or a similar business for a period of five years from the date of the agreement.
In the Court of Common Pleas, a jury was waived and the case was tried to the court, resulting in a judgment for the plaintiff for the balance due on the note, with interest and costs, and for the Pruntys, on their cross-petition, enjoining W.E. Palmer from operating a business which is competitive with the business of the Pruntys. The court found that plaintiff had no connection or interest in the business which W.E. Palmer was conducting and dismissed the cross-petition as to her. The court found further that there was no substantial showing of damages as alleged in the cross-petition and in that respect dismissed it.
On appeal, the Court of Appeals affirmed that part of the judgment in favor of plaintiff for the balance due on the note, reversed that part of the judgment against W.E. Palmer, and dismissed the action as to him, on the ground that he never owned the business, received no consideration from the sale and is not a party to an enforceable contract preventing him from entering into a business of his own choosing.
The allowance of a motion to certify the record brings the cause to this court for review.
Mr. Robert R. Shaw, for appellee.
Mr. Milton L. Farber, for appellants.
It appears from the record that the plaintiff was the owner of the store, and that her husband devoted full time to its operation and was instrumental in its sale to the Pruntys. The vendor's license to operate the store was in the name of the plaintiff, and she signed all papers relative to the sale. W.E. Palmer joined with her in signing, as "seller," the agreement of sale, in which it is agreed as a part of the consideration to allow the purchasers to retain the name of "Palmer Bargain Store" and to retain the goodwill of the business, and in which "the seller also agrees not to compete or enter into a business under the name `Palmer Bargain Store' in the city of Columbus, Ohio, for a period of five years from the date of the execution of this agreement."
After a considerable portion of the cognovit note had been paid, W.E. Palmer began running advertisements in a local newspaper for the sale and purchase of merchandise, some of the same kind as sold in the Prunty's store. At this point the Pruntys discontinued the weekly payments on the note, which resulted in the instant action. It is the contention of W.E. Palmer that he inadvertently signed the agreement as a party thereto instead of as a witness.
The evidence is clear that plaintiff had no connection or interest in the business her husband was running in competition with the Pruntys, and the trial court was correct in dismissing the cross-petition as to her. Since the defendant W.E. Palmer signed, as "seller," the agreement of sale containing the above-quoted provision against competition, he is bound thereby, the trial court was correct in restraining him from continuing in a competitive business, and the Court of Appeals was in error in reversing that part of the judgment. However, the Court of Appeals was correct in affirming that part of the judgment in favor of plaintiff for the balance due on the note.
The judgment of the Court of Appeals is affirmed so far as it affirms the judgment of the trial court and is reversed so far as it reverses such judgment.
Judgment affirmed in part and reversed in part.
WEYGANDT, C.J., ZIMMERMAN, STEWART, TAFT, MATTHIAS, BELL and HERBERT, JJ., concur.