Pittsburg Valve, Foundry & Construction Co. v. Klingelhofer

60 A. 161, 210 Pa. 513, 1904 Pa. LEXIS 916

• Court: Supreme Court of Pennsylvania
• Decided: December 31, 1904
• Docket: Appeal, No. 198
• Status: Published

Opinion

Opinion by

Mr. Justice Dean,

Certain partnerships and companies engaged in the foundry, machine, valve and pipe fitting business at Pittsburg in the year 1900 entered into negotiations with a view to consolidating all their concerns into a single company. One VanTine was the active party in promoting this effort at consolidation. The different companies all signed this consolidation agreement on a separate-blank, prepared for that purpose, in which each stipulated for the sale of its plant to the new company for an ample consideration, and that neither the firm nor company nor any member of it would engage in a similar business to that then carried on for a period of ten years. The Pitts-burg Valve & Machine Co., Limited, made one of these agreements with VanTine; these three defendants were partners in that company and all three formally ratified it. The Van-Tine consolidation was not carried out, but the next year, 1901, the matter was again taken up and the VanTine negotiations were adopted as the basis for a new company. Many meetings were held and at each one of them the defendants’ company was represented by George E. Klingelhofer who acted as secretary and who was authorized to act for his brothers the other two defendants. It was finally agreed, that a now company should be formed thereafter to be incorporated ; the old companies to be taken over by the new according to the terms of the VanTine agreement. There were five separate companies or partnerships which agreed to become members of the new one, among them the Pittsburg Valve & Machine Company, then carried on by defendants. Each company was to contribute its leasehold and other property in payment for their shares in the new. The Valve & Machine Co., Limited, transferred its property to the new company at the price of $165,000 to be paid in the new company’s stock. On receiving the stock the Pittsburg Valve & Machine Company signed a written agreement in which is this stipulation: “ The parties further agree that they will not nor shall any members of said parties concerned, engage in a similar business to that carried on by said parties except with the written consent of said corporation for the period of ten years from October B, 1900, within the United States of America east of the Mississippi river.” This agreement was signed by the Pittsburg Valve & Machine Company, per G. E. Klingelhofer, Chairman, A. Glamser, Secretary.

It was agreed orally about the same time that all these separate contracts should inure to the benefit of the new company ; it was not shown that this contract was signed by Charles T. and W. L. Klingelhofer, the other two defendants. Upon its incorporation and commencement of business, George E. Klingelhofer was appointed its general manager and Charles T. foreman of the pattern department. In July, 1901 George E. had. some difficulty with the officers of the company and resigned. Early in 1902, the American Foundry Construction Company was organized to carry on a business similar to that of the valve company and all three of the defendants were employed in the several departments, George E. as foreman and general manager. This company became a competitor of the plaintiff company in the same business. The plaintiff then filed this bill against the three defendants to enjoin them and each of them from continuing in the employment of the competing company for ten years in the territory east of the Mississippi. The court below after a full hearing directed that an injunction issue against George E., but for the reason that the evidence failed to show that Charles T. and W. L. were bound by the company agreement signed by their brother, dismissed the bill as to them. Thereupon George E. brings this appeal.

The principal error complained of, at least the one most earnestly argued here, is the first, that: “ There was no proof sufficient to enable a chancellor to frame and make the agreement not to engage in business on the part of the individuals which was the subject of the discussion of the parties so far as George E. Klingelkofer is concerned, there being no evidence of what he understood the agreement to be, its terms, exceptions, conditions or provisions.”

It will be noticed that this point really turns on the capacity of George E. Klingelhofer’s understanding. A court of equity will not enforce an agreement against a child nor against one not compos mentis on the ground of mental incapacity; it may even under particular circumstances refuse to enforce what is called a hard bargain against a very ignorant man, or one much enfeebled mentally' by age, on this ground of non-understanding. But a chancellor never requires affirmative proof that a grown man understood the meaning of a particular contract to accord with his own interpretation of it; he will conclusively presume that such a contracting party understood it in its natural, obvious meaning to the chancellor, in view of the subject of the contract and the surroundings of the parties at the making of it. Here was the defendant, presumably an intelligent man, capable of supervising and managing a large manufacturing business; the subject of the contract was the very business in which he had long been engaged; his purpose was to sell it, if not at a very high price at a very full one ; he and his fellows in the same business had been discussing their purpose at meetings both under the VanTine proposition and the one which was consummated; this last one, signed by the Valve Company, per G. E. Klingelhofer, chairman, stipulates that neither George E., who affixed his signature, nor the firm, should engage in a similar business for ten years. These words in large part expressed exactly the proposed purpose of the consolidation. Neither the companies nor any member of the companies, were to engage in a similar business. As the evidence shows, this was the intention of all the members and a question which entered into their preliminary discussions. It is argued by appellant that the agreement signed by George Klingelhofer was understood by him to be executed by the company alone; that while agreements were perhaps to be made in the future and signed by the individuals composing the partnership, such agreements never were made and signed by the individual members of the Valve Company, therefore he never understood that as an individual he was bound not to engage in a similar business. The agreement which his company executed by him as chairman did not state that another agreement was to be executed in the future signed by the individuals of the partnership, in fact it says the very reverse; it says that: “ The said parties further agree that they will not nor shall any members of said parties concerned engage in a similar business to that now carried on by said parties.”

To what extent the company could bind the individual members of the partnership who did not sign this agreement or who had no knowledge of its terms we do not now decide, but surely on every principle of equitable estoppel this leading member of the partnership who framed the partnership agreement which professed partnership authority to bind the individuals of the partnership, and expressly undertook to bind himself and them as individuals cannot be heard to deny that the agreement bound him. He signed it, suggested its language and delivered it to the new company which on the strength of it paid the full consideration. If George E. did not then understand it bound him individually, it was his duty to speak out, or forever after hold his peace. Not having spoken when it was his duty to speak he will not be heard now when equity demands that he keep silent. Then after acting for his partnership he personally received the partnership share of the stock $162,600 and $22,000 cash. He now argues, that he never understood, the agreement which- he signed for the company as binding upon him as an individual and therefore boldly disregards it. Even if the precedent agreement was unauthorized, nevertheless, the subsequent conduct of the company, as found in the sixth finding of fact, was a full ratification of it. The company and all its members with knowledge of the agreement are bound by it after accepting the consideration. There is nothing of such merit in the remaining assignments of error as calls for discussion; they are all overruled and the decree is affirmed.