Kaplan v. Nalpak Corp.

HERNDON, J.

J.Appeal from a declaratory judgment which determines the territorial limits within which appellant is legally bound to refrain from competitive business activity under the term of a covenant contained in a contract whereby appellant Kaplan sold to respondent Freedman all his shares in respondent Nalpak Corporation.

The cause was submitted to the trial court upon a stipulated statement of facts. Appellant and respondent Freedman, hereinafter referred to as “respondent,” each owned oneJialf the issued and outstanding shares of respondent Nalpak Corporation, hereinafter referred to as the “corporation.” The corporation was engaged in the manufacture and sale of hand trucks, dollies and other industrial equipment. Pursuant to a written agreement of sale dated March 21, 1956, respondent purchased all of appellant’s stock. By the terms of the contract, appellant, the selling shareholder, promised as follows : “5. Kaplan further agrees not to re-establish, reopen, or in any manner become interested, directly or indirectly, either as an employee, owner, partner, agent, stockholder, director or officer of a corporation, or otherwise, in any business, trade, or occupation, the same as, similar or competitive to the business of Nalpak Corporation, within, California and/or Arizona, for a term of Five (5) years from the date of this Agreement [continuing with exceptions not in issue] ...”

It appears from the stipulation that both parties were represented by counsel in the negotiation of this agreement. In

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August of 1956, five months later, appellant filed his complaint for declaratory relief alleging the existence of several controversial issues. During the trial, however, the dispute was narrowed to the single issue as to the extent of the territory within which the noncompetition covenant was valid and enforceable.

With respect to the geographical extent of Nalpak’s operations, the parties stipulated as follows: . . that the defendant Nalpak Corporation has and prior to March 21, 1956, has had customers and sells and has sold to these customers in substantial amounts in the following counties of the State of California: Alameda, Contra Costa, Fresno, Humboldt, Imperial, Inyo, Kern, Kings, Los Angeles, Marin, Mendocino, Merced, Monterey, Orange, Kiverside, Sacramento, San Bernardino, San Diego, San Francisco, San Joaquin, San Louis [sic] Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Tulare, and Ventura. The defendants concede that they had no plant, physical structure, or other place of business from which it either manufactured, or shipped merchandise other than in Los Angeles at the time of the agreement, March 21, 1956; and that since the agreement the defendant Nalpak has a warehouse in San Francisco for which they pay $75.00 a month and have one employee, which warehouse was opened in April, 1956.”