Klein v. Buck & Markham

Cooper, C. J., delivered the opinion of the court. The appellees sought and secured an injunction against the appellant restraining him from engaging in the business of insurance agent, solicitor, etc., in Vicksburg or elsewhere in the — 140 — territory covered by the business of certain agencies of which he had formerly had control, as will more fully hereinafter appear. From the decree perpetuating the preliminary injunction, this appeal is taken. The facts upon which the controversy turns are as follows: For several years prior to September 14,- 1893, the appellant was the agent in Vicksburg of several fire insurance companies, to some or all of which he had become indebted. The aggregate of such indebtedness exceeded $13,000. On September 14, the appellant entered into a written contract with C. E. Armstrong for the transfer of his insurance business to Armstrong for the agreed price of $13,000, of which sum Armstrong was to pay, on October 2, the sum of $4,000 in cash, and was then to execute two notes, one for $4,000 and one for $5,000, due, respectively, in one and two years, with interest at six per cent, per annum from date, which notes wei e to. be made payable to said Klein or his order. The second paragraph of this contract, on which this proceeding rests, is as follows: ‘ ‘And the party of the first part [Klein] covenants and agrees with the party of the second part [Armstrong] that, in addition to maintaining for him the good will of said business and its patronage, in so far as his influence may extend, he will not, either directly or indirectly, as the agent of any insurance company, or solicitor for such company, nor on behalf of any other agent than the party of the second part, or his assigns, engage in the insurance business in the city of Vicksburg, or elsewhere in the territory covered by the business of his own agencies, for the full term of five years from this date; nor will he, during that term, assist as clerk, secretary or otherwise, in any other insurance office in said city or within the territory aforesaid.” It was recited in the contract that it was entered into upon the representations made by Klein that the average volume of business which had been done by his agency for the past three years was $59,958; and, also, upon his engagement to secure — 141 — from the companies he had represented, and which are named in the contract, a transfer of their respective agencies to Armstrong; and it was stipulated that, if, upon full investigation of the books, the average annual receipts should appear not to have been as much as represented by Klein, or if he should fail to secure the transfer of its agency by any of the companies, then Armstrong should, at his option, either rescind the contract or make a reduction from the price he was to pay, in certain proportion fixed by the terms of the contract. On September 19 Klein addressed to Armstrong the following writing: “Vicksburg, Miss., September 19, 1895. ‘ ‘ Charles E. Armstrong, Esq.: “Please pay the following sums to the following companies, payment to be made on terms and conditions of our contract for sale of my insurance agency — viz.: To the Phoenix Insurance Co. of New York________$ 5,139 00 To the Insurance Co. of N. A.____________________ 199 00 To the Southern Insurance Co. ofN. 0____________ 537 00 To the Mechanics’ & Traders’ Ins. Co. of N. O_____ '1,099 00 To the Home Insurance Co. ofN. Y_______________ 730 00 To the New Orleans Insurance Assn. _____J_______ 335 00 To the Crescent Insurance Co. ofN. O_____________ 3,186 93 $11,185 93 “And, after paying $814.08 to the Royal Insurance Co. of Liverpool, which you have accepted, pay the balance due me of the $13,000 purchase money to the Liverpool, London & Globe Insurance Co., it being understood that the acceptance of said amounts by the respective companies is to be in full discharge of my indebtedness to them up to August 31, 1893, inclusive, except the Liverpool, London & Globe, and that all unpaid bills for insurance prior to this month are turned over to me, and, as fast as collected, I am to appropriate proceeds to payment of balance due to said Liverpool, London & Globe Insurance Co., and to retain any balance after paying same; but this is not to release the trust deed given them until their claim is fully paid. (Signed) J. M.- Klein. ’ ’ — 142 — On which order Armstrong indorsed the following: £ ‘ The within order is accepted so far as the payments by cash and notes are concerned, subject to the conditions of contract between J. M. Klein and myself of date September- 14, 1893. With the other portions, relating to release by companies and the collection and appropriation of bills prior to September 1, 1893, etc., I am in no way concerned or responsible. £ £ (Signed) C. E. Armstrong. ’ ’ Armstrong was never called upon by Klein to execute notes, as he had agreed to do in his contract of purchase from Klein. He paid the sum of $4,000 cash, as he had agreed to do, but, finding, as he says, that the representations made by Klein as to receipts from the agency were not correct, because a part of the receipts were derived from companies whose agencies were not transferred to him, and a part from reinsurance, on which full commissions were not received, and having reason, as he supposed, to believe that Klein had, in contravention of his covenant, engaged in the insurance business in Vicksburg, he declined to execute notes to some of the companies who requested him so to do. It also appears that Armstrong notified Klein that he would elect to rescind the contract of purchase, and demanded the return of the money he had paid out. Whereupon Klein demanded that Armstrong should restore the agency as he had received it — i. e., with all the companies represented in it. But, as one of the companies had withdrawn, and Armstrong could not, as he supposed, control the others, and not recognizing any duty on his part to endeavor so to do, this attempted rescission was abandoned. In January, 1894, Armstrong sold the agency to Buck & Hackett, who assumed the payment of the nine thousand dollars for which Armstrong had given his acceptance, under an arrangement satisfactory to the companies, and which released Armstrong, but which bound only the receipts of the agency, and not Buck & Hackett personally. Afterwards Hackett sold — 143 — out his interest in the agency to Markham. In the transfer from Armstrong to Buck & Hackett he assigned, in terms, the covenant of Klein not to engage in the insurance business, as above set forth. Klein having engaged in the business of insurance at Vicksburg, Buck & Markham sued out the injunction in this cause. It is contended for appellant that the injunction ought not to have been decreed, (1) because Armstrong did not execute the notes for the deferred payments, as he, by the contract, was bound to do; (2) because Armstrong exercised his right of rescission of the contract, of which the covenant was a part; (3) because, the covenant was with Armstrong personally, and not with him and his assigns, wherefore it was not assignable. None of these contentions can be maintained. 1. By giving to the companies an order upon Armstrong for the purchase price of the agency, Klein, of course, absolved him from the duty of executing the notes payable to himself, and if it be conceded that the companies, by virtue, of the transaction, had the right to call upon Armstrong for the notes, it was a right pertaining to them which they could and did waive by assenting to the transfer of the agency by Armstrong to Buck & Hackett, and by accepting, in lieu of Armstrong’s personal liability on his acceptance, the security afforded them by the obligation assumed by Buck & Hackett. 2. The so-called rescission was never consummated, nor so understood by Klein. The right of rescission imported the restoration to Armstrong of the $4,000 he had paid in cash, and this Klein refused to repay. Armstrong clamored for rescission, and declared that he would and had exercised his option to rescind. But Klein had control of the situation, and refused to execute his part of the contract by restoring the money paid, and neither party thereafter acted as though there had been a rescission. Klein did not return to the possession of the agency, nor repay the money paid out by Armstrong, nor relieve him from his obligation on the acceptance he had given the com — 144 — pañíes, and Armstrong continued in the business until it was sold, by him to Buck & Hackett. The court, looking at what was done, and not to what was said only — to the substance, and not to the shadow under which Klein now seeks shelter — can readily perceive the truth that there never was a rescission of the contract. 3. Counsel’s contention that the covenant of Klein not to engage in the. insurance business was personal to Armstrong, and not assignable, rests upon the decision of this court in Anderson v. Faulconer, 30 Miss., 145. In that case, Faulconer had sold to Anderson & Stith a newspaper outfit, including the subscription list, good will, etc., and entered into the following-covenant: £ £And the said Faulconer also hereby agrees with the said Anderson & Stith that he will not set up or establish, in the town of Holly Springs, any printing: establishment in opposition to the said Anderson c6 Stith as proprietors of the Holly Springs Gazette. ’ ’ The- court, in construing this covenant, held that, by reason of the words we have italicized, the covenant was personal to Anderson & Stith, and did not inure to the benefit of a purchaser from the administrator of Anderson, who, in his lifetime, had bought out the interest of Stith. We are not called upon to say whether the court in that case did or did not convert a covenant intended and understood by the contracting parties to' be one for the protection of the good, will of the business sold into one personal to the purchasers, for the covenant now under consideration contains no words restricting its usual and pertinent construction. There can be no doubt that its purpose was to give value to the business assigned, and, as such, its benefit passed- to the assignees of Armstrong,. who were entitled to the remedy of injunction to prevent its breach. The authorities cited in the brief of appellee’s counsel sufficiently support this view, and need not be supplemented by the citation of the many other cases which may be found, a number 'of which are referred to in the authorities cited by counsel. The decree is affirmed.