Edward L. Krielow, Inc. v. Broadhurst, Sikes & Gardes, Inc.

509 So. 2d 1029, 1987 La. App. LEXIS 9756
CourtLouisiana Court of Appeal
DecidedJune 26, 1987
DocketNo. 86-649
StatusPublished
Cited by1 cases

This text of 509 So. 2d 1029 (Edward L. Krielow, Inc. v. Broadhurst, Sikes & Gardes, Inc.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Edward L. Krielow, Inc. v. Broadhurst, Sikes & Gardes, Inc., 509 So. 2d 1029, 1987 La. App. LEXIS 9756 (La. Ct. App. 1987).

Opinions

LABORDE, Judge.

This suit involves the interpretation of certain provisions of a purchase contract. The contract was for the sale of an accounting practice located in Crowley, Louisiana. The plaintiffs, Edward L. Krielow, Inc., and Hamilton & Hamilton, allege that Article 6 of the contract was breached by the defendants, Broadhurst, Sikes & Gardes, E. Larry Sikes, J. Stephen Gardes, Danny P. Frederick and Marcel J. Bulliard, Jr. through the actions of a third party defendant, James R. Faulk. The trial court, in written reasons, held that the defendants had not breached Article 6 of the purchase contract. We affirm.

FACTS

On August 5, 1983, plaintiffs entered into a purchase contract with defendants to purchase the assets of the accounting practice of Broadhurst, Sikes & Gardes, a corporation of Certified Public Accountants located in Crowley, Louisiana. The purchase contract was signed by shareholders E. Larry Sikes as president and in his individual capacity, J. Steven Gardes, Danny P. Frederick, and Marcel J. Bulliard, Jr., all acting in their individual capacity. An alleged shareholder, James R. Faulk, was not asked to sign the purchase contract. On August 8, 1983, Faulk redeemed all of his shares of stock to Broadhurst, Sikes & Gardes in exchange for cash and forgiveness of debt. Included within the stock redemption agreement was a covenant not to compete between Faulk and Broadhurst, Sikes & Gardes.

Under the terms of the purchase contract, defendants agreed under Article 6 that:

“For a period of three (3) years from the date of closing, neither the Seller nor any of its present Shareholders shall, except insofar as the restrictions are for the benefit of the Purchasers:”
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“c. Directly or indirectly establish an office for the purpose of engaging in the public accounting business within a fifteen (15) mile radius from the office of the Purchasers maintained in Crowley, Louisiana.
“d. The Seller will provide the Purchasers with complete copies of covenants not-to-compete, and any referenced documents thereto, from Earl J. Blackwell and James R. Faulk, or in lieu of these covenants, Seller will provide covenants from these individuals stipulating that they will not establish an office within a fifteen (15) mile radius from the office of the Purchasers maintained in Crowley, Louisiana for the period stipulated in their covenants with Seller or three (3) years, whichever is lesser.”

Under Article 10 of the purchase contract, stipulated damages of $35,000 were agreed to be paid if the provisions of Article 6 were violated.

On June 22, 1984, plaintiffs filed suit for breach of contract against the defendants alleging that defendants breached Article 6(c) of the purchase contract. The plaintiffs further allege that on August 5, 1983, James R. Faulk was a shareholder of Broadhurst, Sikes & Gardes, and that Faulk directly or indirectly operated an office within a fifteen mile radius of the office plaintiffs had purchased. Defendants answered the petition denying that James R. Faulk was a shareholder on August 5, 1983, and denying that he was directly or indirectly operating an office within a fifteen (15) mile radius of the [1031]*1031office plaintiffs had purchased. Defendants also filed a third party demand against James R. Faulk.

The trial court, in written reasons, held that the only question to be resolved was whether James R. Faulk opened a C.P.A. office in Crowley. The trial judge interpreted the allegations of the plaintiffs’ petition as charging defendants with Faulk opening an office. The trial judge found that under Article 6(d), the defendants were only responsible to secure a certain covenant with Faulk. The trial court found this condition to be satisfied thereby ending the responsibility of the defendants. In addition, the trial judge found that Article 6(d) of the purchase contract was not a covenant not-to-compete, but simply an agreement not to establish an office in the Crowley area. The question as to whether an office was established in the Crowley area was answered by the trial court in finding that:

“This Court feels Mr. Faulk did not establish a C.P.A. office in Crowley. He took a full-time job in Lafayette, and whatever work was accomplished in Crowley, was done out of his home, or out of the place of employment or home of the client. He had no office set-up, had no listed C.P.A. phone, and had no C.P.A. sign. He even operated out of various rooms in his home and did not have an ‘office’ set-up in his house. About the best Plaintiff could show is that Mr. Faulk had some stationary with his name and the C.P.A. designation thereon, which contained his home address.
The Court does not believe Mr. Faulk set up what was designated as an ‘office’ in the agreement.”

On appeal, plaintiffs urge two assignments of error: (1) the trial court erred in reaching its conclusion that the defendants had not breached Article 6(d) of the purchase contract when, in fact, the plaintiffs never alleged that the defendants breached Article 6(d) of the purchase contract; and (2) the trial court erred in failing to decide whether or not the defendants breached Article 6(c) of the purchase contract.

The only issue for review, plaintiffs’ charge, is whether James Faulk, as a shareholder under Article 6(c) of the purchase contract, directly or indirectly established an office for the purpose of engaging in the public accounting business within a (15) mile radius from the office of the purchasers maintained in Crowley, Louisiana. Plaintiffs urge that James Faulk, because he clearly owned stock in Broad-hurst, Sikes & Gardes until August 8,1983, was a “present shareholder” under Article 6 at the time of the sale on August 5,1983. As a shareholder under Article 6(c), a mere showing that Faulk directly or indirectly established an office in Crowley would constitute a breach of contract by defendants. But such an interpretation would give no effect to Article 6(d) which specifically requires defendants to procure a covenant not-to-compete from James Faulk. It is undisputed that Faulk in fact owned stock in Broadhurst, Sikes & Gardes at the time of the sale, but this is only part of the story. Faulk had decided to have his shares redeemed by Broadhurst, Sikes & Gardes in May of 1983. Faulk testified that in the latter part of June or early July of 1983, all financial terms were agreed upon for the redemption of his stock. Defendants, Larry Sikes and J. Stephen Gardes testified that one reason James R. Faulk did not sign the stock redemption agreement until August 8, 1983, was because the sellers wanted to make sure that' the language of the stock redemption agreement tracked the language of the purchase contract.

All parties to this suit knew James R. Faulk was leaving Broadhurst, Sikes & Gardes. James Faulk did not sign the purchase contract, nor was he requested to do so by any of the parties. Broadhurst, Sikes & Gardes nimbly, if somewhat indelicately, negotiated two diametric sales at the same time. Unfortunately, the timetables crossed. Where the purchase agreement, for the sale of Broadhurst, Sikes & Gardes, contemplated Faulk to have already redeemed his shares, no such redemption had occurred.

[1032]*1032The trial judge found that under Article 6(d), the only responsibility of the sellers was to obtain covenants not-to-compete from James R.

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Related

Krielow, Inc. v. Broadhurst, Sikes & Gardes, Inc.
514 So. 2d 134 (Supreme Court of Louisiana, 1987)

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509 So. 2d 1029, 1987 La. App. LEXIS 9756, Counsel Stack Legal Research, https://law.counselstack.com/opinion/edward-l-krielow-inc-v-broadhurst-sikes-gardes-inc-lactapp-1987.