Consolidated Photographic Industries, Inc. v. Marks

MOORE, P. J.

By the judgment herein Eobert Marks was “enjoined and restrained until November 1, 1952, from engaging in the photo finishing business in the County of Los Angeles.” Atlas Photographic Industries, Inc. was enjoined from employing Marks “as an officer, agent or otherwise” and from servicing specified photographic accounts in Los Angeles County. Both have appealed on the grounds that Mr. Marks’ covenant not to compete with his vendee is void, and that section 16601 of the Business and Professions Code does not protect respondents’ prior business from competition by Marks or his codefendants.

On October 27, 1947, appellant Marks as the sole owner of a photofinishing concern operating under the fictitious name of Twentieth Century Photo Laboratories entered into a written agreement for the sale of such business including

[312]

its tangible assets and good will to Twentieth Century Photo Laboratories, Inc., a corporation, hereafter referred to as Twentieth Inc. In that agreement Marks also covenanted not to engage in the photofinishing business in Los Angeles County for a period of five years.

Twentieth Inc. was formed for the specific purpose of acquiring Marks’ business including his good will. Its outstanding stock is held in equal shares by respondents Griffith Photo Service and Monarch Photo Service. Both Griffith and Monarch at that time were copartnerships. Bach group had been separately engaged in the photofinishing business in Los Angeles County for many years.

Shortly after the sale was completed it was determined that Twentieth’s facilities were inadequate for the proper operation of its business and thereafter all processing of Twentieth’s accounts was done at the plants of Griffith and Monarch. About March 1, 1948, Twentieth discontinued entirely operations under its own name and sold all its assets to Griffith and Monarch. Such assets including photofinishing accounts were divided equally between the two shareholders.

Until August, 1950, Marks engaged in related business enterprises outside Los Angeles County. For a portion of this period he was in Monarch’s employ servicing out-of-town accounts. On the last-mentioned date, however, Marks caused defendant Atlas to be organized, and at the time of suit was an officer. Also, he was owner of 50 per cent of its outstanding stock. Atlas immediately commenced operation of a photofinishing business in Los Angeles County in direct competition with Monarch and Griffith.