
    Union Mills, Respondent, v. William A. Harder and Harder Manufacturing Company, Appellants.
    Third Department,
    November 14, 1906.
    Contract not to engage in business or use corporate name — injunction modified and sustained — evidence — when agreement by stockholders not modified by subsequent agreement signed by some of them.
    When upon the sale of. the property and business of a corporation, the directors and all the stockholders execute an instrument whereby they agree not to engage in that line of business in a certain county and not to use the corporate name, the vendee may restrain the stockholders signing the agreement from violating the covenant not to do business, but the use of the corporate name.in other lines of business should not be enjoined. ,
    In such an action for an injunction, a subsequent unilateral agreement signed by only three of the stockholders containing similar covenants against doing business, though for a shorter period, and agreeing not to use the corporate name, which instrument’ was found in the possession of the vendee, is not evidence sufficient to show an intention of the parties to abrogate the prior agreement signed ■ by all the stockholders if tjie subsequent agreement contains nothing indicating that intention.
    Appeal by the defendants, William A. Harder and another, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Columbia on the Tth day of February, 1906, upon the decision of the court, rendered after a trial at-the Rensselaer Special Term granting an injunction restraining -the "defendants, among other things, from "manufacturing shirts •and‘ "drawérs in the "bounty tif Columbia' ‘ with certain exception's, and from using the name “ Harder Manufacturing' Company ” in any business, " V
    
      
      Brownell & Tilden [D. Cady Herrick of counsel], for the appellants.
    
      J. Rider Cady for the respondent.
   Kellogg, J.:

By agreement of October, 1901, the Harder Knitting Company and the five stockholders and directors of said company, the parties of the first part, sold its property and business and the capital stock of said company to one “ Holsapple * * * or any person or corporation that he may designate ” as party of the second part, and agreed, among other things, not to engage in the manufacture of shirts or drawers in the county of Columbia, with certain exceptions, or to use the corporate name “ Harder Knitting Company.” Thereafter Holsapple contracted with Kidder, Peabody & Co. to sell to them said, business and property and also the Union Knitting Company and property, and to turn over to said firm, or a corporation formed by it for .such' purposes, all the property and benefits secured to him by the October agreement.. The plaintiff is the corporation formed to succeed to the rights of Kidder, Peabody & Co. and said Holsapple under said October agreement, and upon the day fixed for the conveyance a transfer of the Harder Knitting Company property and business and capital stock was made to the plaintiff and the consideration paid therefor. The October agreement was signed by the defendant Harder, who was the manager and principal stockholder of the knitting Company, and by two of the other stockholders; the two other stockholders did not sign the agreement, but participated in the benefits of it. The evidence fairly shows that the defendant Harder and the defendant corporation, of which he is the principal owner, have violated said agreement, and the evidence fully sustains the judgment in that respect and justifies ‘an injunction against them'. So far as the judgment restrains the Harder Manufacturing Company from using that name in any business, it is too broad, as the defendant has the right to use that name in any other business excepting the manufacture of shirts and drawers. The judgment should, therefore, be modified in that respect.

The principal question requiring further consideration arises upon defendant's Exhibit A, which bears date November fourteenth, thes sfiffie date illé' dééd atid hill Of sale bear-.. The deed, hill of Sálé and stock were delivered and the money paid November fifteenth* tire day- fixed by the October agreement. Exhibit A is a unilateral agreement, signed by the defendant Harder and Pitcher and Johnson, three of the parties to the October agreement, and they agree with the plaintiff; among other things,, hot- to manufacture shirts or drawers iti said county, with certain exceptions,., for the space of six years-;' -Sisé; that they will not usé the name “ Harder Knitting OétiipMy p” .6166) that they will protect the. plaintiff from all lien» ' or liabilities against the' knitting company. By special finding upon the trial- the bah-ft,-while refusing to find that this agreement was éxe'6'utéd find delivered to the plaintiff as a part of the transaction when the conveyances and transfers and payments Were made, found that the paper was prepared by representatives of the-plairi tiff, -the hlfiiik Bpabe's i-ii-which the six years aiid other provisions ocCñ-r were filled "ifl By the partner of MivITolsapple, who is ati attorney,- and that tíié pápéTwfis retained, by the plaintiff and produced by it upon the trial find introduced in evidence by the defendants. It is claimed' that this finding really shows that Exhibit A was executed and delivered fit- the time the transfers w.ére infido,- became fi part of tjie tiMsfietibii, find merged the provision -in the October agreement byWhieh file 'defendants were -restrained from- carrying -On that ibtifeiñéss n,f -any time; find limited, the restraint -t-0 a period of. si-x years. Thé October agreement did contemplate that -at the "time of the. cóáv'éyfinéé á Separate agreement should he signed by -the five 'stockholders • protecting the purchaser from- -all claims -arid liabilities figa-inst -the knitting Company. By -the terms of the October agreement the provision therein by which the defendants were not--to-engage in that-business was to survive the execution of the -transfers and whs intended'tO Cóntinne indefinitely* There were id addition s'évéral 'ótlíér -provisions in -the Original 'agreement which were filsd tó Cóútintíe arid survive the transfers Of title* It did net contend plfit'é' ihát any btli’ér terms were to be -in the separate figreémCnt-guaranteeing against liability. The October agreement was apparently to fix the rights Of the parties in all other respect».

One Vance and wife traded lands- with one Dickihsófi-, and in tll'e exchange' were to transfer to. him a bond and mortgage held By -Vánee Upon which ■- he. -arid his wife covenanted the amount unpaid. When the deeds were executed-an assignment was delivered signed by Vanee* in which he guaranteed the amount due on the mortgage. Thereafter it turned out that there was not that amount due* and it was held that the original agreement was not merged, but remained in force* the court saying: “ It is urged that the acceptance of the- assignment of the bond and mortgage by Dickinson with knowledge of the agreement Arthur Vance had made with the Schaeffers amounted to a merger of the preliminary executory agreement. .The rule is certainly not invariable that the executed agreement merges in it ail the covenants of the preceding executory contract.- It depends Upon the intention of. the parties, and if there is nothing to show it was the design to surrender or extinguish the preceding covenants the- presumption is they will remain in force.” (Dickinson v. Vance, 31 App. Div, 464, 467.)

The view that it is purely a matter of, intention whether the provisions in the executory agreement- remain in force, and that the burden rests upon the party so claiming is sustained by Schoonmaker v. Hoyt (148 N. Y. 425, 429) and Disbrow v. Harris (122 id. 362, 365).

There was no evidence before the court explaining Exhibit A,, ór accounting for its existence, except that recited in the special finding ; and that finding* read with the evidence, does not destroy the effect of the refusal to find that the paper was not executed and delivered at the time as a contract. When the transaction Was' closed we have the four contracting parties, each of whom apparently had interests to protect as against the others, viz., the Harder Knitting Company and its stockholders; Mr, Holsapple, the purchaser from that company; Kidder, Peabody & Co., the purchaser from Mr, Holsapple, and the plaintiff* the purchaser from Kidder, Peabody & Co. Mr, Holsapple was the only person participating in that transaction who was sworn as a witness concerning Exhibit A. He thought it must have been prepared by the Boston attorneys for Kidder, Peabody & Go. for the reason fhat it was 'apparently not written on the typewriter in his office. He swears lie never saw it or heard of it at the time nor until a long time after-wards, and about the timé this action was brought. He is the manager of .the plaintiff corporation, and by the agreement trans-. ferring liis interest in the 'October agreement to Kidder* Peabody & Co. lie agrees to "enter the' service of the company and devote his timé to its interests. After the transaction was closed the Boston attorneys became and now1 áre the attorneys for the plaintiff. This paper afterwards was. sent' by. the Boston attorneys tó the local attorney,, with the other papers belonging to the plaintiff referring to this case. There is nothing to show when the blanks were filled in, when the paper was received by the plaintiffs, if at all, or. that the plaintiffs ever accepted it as a ■ contract.. There is an entire absence- of evidence tending tó show for what purpose the paper was executed, or when or how it came into the plaintiff’s possession.

By the October contract the defendants had deprived themselves of the. right to engage further in the manufacture of shirts and drawers in that county except as stated therein, and they have not the right to' resume that business unless in some way they show affirmatively that that provision of the contract has been destroyed. The mere showing that a paper signed by some of the contracting parties is found: in the possession of one of the Other contracting parties, or its attorneys, does not show an intention to abrogate the first agreement. There is nothing in the terms of the second paper tending to indicate that ■ it was intended to destroy the first, By the original agreement all the .five stockholders were not to engage in such business at any time. While two of the stockholders did not sign the agreement, they had the benefit of it and apparently ratified its terms;. at least the agreement stands, as an agreement of the three assuring the plaintiff-that no one Of the five will'engage in such business-. Exhibit A purports to agree only that three of the parties will refrain from the business, and for a period of six years only. It cannot be assumed that such limited agreement,: signed by three parties,, was intended and Understood to. merge and destroy the agreement that .none of the five parties should engage in such business at aiiy time. The defendant has failed to establish any change of the original agreement with respect to the time of the limitation. If there was any understanding, or .any circumstances which would tend to show that the .original agreement was abrogated, it was the duty of the defendant to produce the evidence and explain the circumstances and the purpose for which Exhibit A was executed, and .the titile and the manner of its execution, delivery and acceptance.

The judgment should be modified by striking therefro'm the, provision restraining the defendant corporation from using its corporate name in any business, and as so modified affirmed, without costs.

All concurred; Cochrane, J., not voting.

Judgment modified- as per opinion, and as modified affirmed, without costs. ,  