McKay Properties, Inc. v. Alexander & Associates, Inc.
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McKAY PROPERTIES, INC. v. ALEXANDER &
ASSOCIATES, INC.
CA 97-659___ S.W.2d ___
Court of Appeals of Arkansas
Division II
Opinion delivered July 1, 1998
1. Appeal & error -- review of chancery cases -- when reversed. -- Appellate review of chancery decisions is de novo, and the
appellate court does not reverse the findings of a chancellor
unless they are clearly against the preponderance of the
evidence.
2. Equity -- appellant opened competing firm with confusingly
similar name -- appellant not entitled to have insurance
benefits paid for by appellee. -- The appellate court
concluded that appellant could not breach the contract with
the appellee by using a prohibited trade name and
simultaneously claim entitlement to additional payments under
the agreement; the record clearly showed that appellant opened
a competing residential real estate firm using a trade name
that was confusingly similar to the trade name that he sold to
appellee under their agreement; under whatever notion of
equity one applied, after appellee had satisfied all other
purchase obligations, appellant was precluded from entitlement
to payments for insurance benefits because he had worked to
undermine the very trade name that he sold to appellee.
3. Contracts -- provision for payment of insurance benefits not
specific as to time -- chancellor properly construed
obligation as one to provide benefits for reasonable time. --
The chancellor determined that because the parties were under
no further obligation under the terms of the contract, the
provision for the payment of insurance premiums had expired;
the parties did not specify a time period during which
appellee was to provide life and medical insurance benefits
for appellant; therefore, the chancellor was entitled to
construe the agreement to require that the obligation to
provide those benefits was for a reasonable time; there was no
requirement that the chancellor indicate the precise date when
appellee's obligation to pay the insurance premiums expired.
4. Contracts -- obligation to provide life and medical benefits -- twelve years was reasonable time. -- The chancellor's
conclusion that the parties had fulfilled their obligations
under the agreement so that appellee's obligation to provide
the life and medical insurance benefits for appellant expired
when appellee made the final payment on the purchase price,
twelve years after the parties executed their agreement, was
not clearly erroneous; the appellate court found no basis in
the record to hold that twelve years was not a reasonable
time.
5. Contracts -- appellant's argument without merit -- assertion
not supported by evidence. -- Appellant's argument that he was
entitled to receive life and medical insurance payments of up
to $6,000 per year for as long as the company trade name was
used by appellee, his heirs, or assigns, was without merit;
nothing in the agreement supported appellant's assertion; the
contract was silent regarding the duration of time for the
insurance payments; no ambiguity arose from the parties'
failure to specify how long the insurance payments were to be
made; silence concerning time meant that no time was specified
at all, not that arguably different time periods were
contemplated by the contract; the chancellor's application of
a reasonable-time analysis was not clearly erroneous.
Appeal from Pulaski Chancery Court, Fourth Division; Robin
Mays, Chancellor; affirmed.
John T. Harmon and Howell, Trice & Hope, P.A., by: William H.
Trice III, for appellant.
Williams & Anderson, by: Timothy W. Grooms, John E. Tull III,
and Katharine R. Cloud, for appellee.
Wendell L. Griffen, Judge.
McKay Properties, Inc., has appealed the decision of the
Pulaski County Chancery Court, Fourth Division, which denied
counterclaims asserted by McKay Properties against Alexander &
Associates, Inc., arising from provisions of a purchase and sale
agreement concerning a residential real estate brokerage business.
McKay Properties argues that the chancellor committed reversible
error by ruling that all obligations between Randy Alexander and
John P. McKay, Jr., the principals of the two companies, had been
fully performed and that Alexander's obligation to provide John
McKay with life and medical insurance had expired. After
conducting a de novo review of the record, we find no reversible
error and affirm the chancellor's decision.
In 1982, Randy Alexander negotiated to purchase the
residential real estate brokerage firm known as McKay and Companyfrom John P. McKay, Jr. An agreement was signed on February 1,
1982, that documented the general terms of the sale, and a
"Purchase and Sale Agreement" was executed by McKay and Company,
Inc., McKay, and Pine Tree Properties (collectively referred to in
the agreement as the "Seller") and Alexander (the "Purchaser") for
the sale of the assets of McKay and Company to Alexander on March
6, 1982. Under the agreement, the parties stipulated that
Alexander would pay McKay $350,000 according to repayment terms
prescribed in the agreement, and that McKay would sell to Alexander
the exclusive right to use the McKay and Company trade name for
thirty years. Paragraph 3 of the agreement provided for assignment
of the McKay and Company trade name or any confusingly similar
derivatives thereof for thirty years. The consideration for this
assignment was stipulated to be $25,000, and the agreement further
provided that Alexander could extend the exclusive use by paying
$100 per year thereafter. Paragraph 4 of the agreement provides
for a two-year prohibition (from the closing date for the
agreement) on McKay being employed by or associated with a
residential real estate brokerage firm in Little Rock, with one
exception not pertinent to this litigation. Paragraph 10(i) of the
agreement provides that Alexander is to provide life and medical
insurance for John McKay, but does not specify the period of time
during which the insurance is to be provided. Paragraph 10(i) of
the agreement states:
The Purchaser [Randy Alexander] agrees to provide life
insurance to John P. McKay, Jr. in the amount equal to the
coverage currently in force and to maintain medical insurance
on John P. McKay, Jr. providing coverage substantially similarto the coverage provided by the McKay and Company, Inc.
insurance on the date hereof; provided, however, the
obligations of the Seller [sic] hereunder to pay for life
insurance and medical insurance shall not in any year exceed
the sum of $6,000.00 for all such coverage. The parties agree
to work diligently to obtain like coverage at as low a cost as
possible.
Alexander made the final payment under a promissory note that
he made in connection with the purchase and sale agreement in
January 1994. Insurance payments on behalf of McKay were then
discontinued. In 1995, McKay opened a residential real estate firm
using the name McKay Properties. He promoted that firm by using a
green and white sign with a pine tree logo similar to the one sold
to Alexander under the agreement. Alexander's firm, Alexander &
Associates, then sued McKay and McKay Properties, Inc., for breach
of contract, unfair competition and trademark infringement, and
McKay filed counterclaims against Alexander for breach of contract
concerning the insurance agreement mentioned at Paragraph 10(i).
The chancellor held a preliminary injunction hearing on the
prayer of Alexander and Associates for injunctive relief to prevent
McKay from using a green and white sign with a pine tree logo. A
full trial and several other hearings were conducted before the
chancellor found that John McKay breached the purchase and sale
agreement by using a sign that was "confusingly similar" to that
sold to Alexander under the trade name provision of the agreement.
The chancellor entered a permanent injunction against John McKay
and McKay Properties enjoining them from using any confusingly
similar trade name and design to that sold to Alexander, awarded
attorney's fees to Alexander & Associates, and denied McKay'scounterclaims against Alexander for breach of contract arising from
the insurance provision of the agreement, for tortious interference
with a contractual relationship, and for trademark infringement.
Appellate review of chancery decisions is de novo, and the
appellate court does not reverse the findings of a chancellor
unless they are clearly against the preponderance of the evidence.
Stewart v. First Commercial Bank, 59 Ark. App. 47, 953 S.W.2d 592
(1997). Because this appeal involves a contractual dispute, we
are obliged to follow the longstanding Arkansas law holding that a
contract is to be construed, if possible, by giving meaning to all
terms contained in it. First Nat'l Bank of Crossett v. Griffin,
310 Ark. 164, 832 S.W.2d 816 (1992).
Although appellant contends that the chancellor erred in
ruling that the obligations of the parties in the agreement were
fulfilled so that he was not entitled to further payments for
insurance, we hold that the chancellor's decision was not clearly
erroneous. The March 6, 1982, agreement required Alexander to pay
the purchase price of $350,000 by delivery of a promissory note in
that amount at closing. The note was satisfied in January 1994.
Although appellant argues that the agreement obligated Alexander to
pay for insurance on behalf of McKay for thirty years, the time
period for initial use of the McKay and Company trade name, nothing
in the agreement supports that argument.
We also agree with the chancellor that McKay cannot breach the
contract with Alexander by using a prohibited trade name and
simultaneously claim entitlement to additional payments under theagreement. Whether one proceeds from the maxim that equity regards
as done that which ought to be done, or the maxim that he who seeks
equity shall do equity, or the maxim providing that he who comes
into equity must come with clean hands, the record in this case
clearly shows that McKay opened a competing residential real estate
firm using a trade name that was confusingly similar to the trade
name that he sold to Alexander under their agreement. Under
whatever notion of equity one applies, McKay should be precluded
from entitlement to payments for insurance benefits after Alexander
had satisfied all other purchase obligations when he had worked to
undermine the very trade name that he sold Alexander. See John
Pomeroy, Equity Jurisprudence § 363 (5th ed. 1941).
We also are not persuaded by appellant's argument that the
chancellor erred by not determining the duration for Alexander to
pay McKay's insurance benefits pursuant to Paragraph 10(i) of their
agreement. Contrary to appellant's argument, the chancellor
determined that "since the parties are under no further obligation
under the terms of the contract, the provision for the payment of
insurance premiums has expired" (See Conclusion of Law No. 11 in
the Chancellor's November 18, 1996, Order for Permanent
Injunction, infra). The chancellor's reasoning is consistent, by
analogy, with the Uniform Commercial Code. Arkansas Code Annotated
section 4-1-204(2) (Repl. 1991) provides that what is a reasonable
time for taking any action depends on the nature, purpose, and
circumstances of such action. Subsection (3) of that statute
provides that an action is "taken seasonably" when it is taken ator within the time agreed or, if no time is agreed, at or within a
reasonable time. The parties did not specify a time period during
which Alexander was to provide life and medical insurance benefits
for McKay, therefore the chancellor was entitled to construe the
agreement to require that the obligation to provide those benefits
was for a reasonable time. We cannot conclude that the
chancellor did not determine the duration of the period during
which Alexander would be liable to provide life insurance premiums
for McKay when "Conclusion of Law" No. 11 states, in pertinent
part:
Plaintiff [Alexander] is under no further obligation to
Defendant John McKay, Jr., for insurance payments. Plaintiff
contends that the insurance provision of the contract was only
in effect during the period of time that Plaintiff was
obligated under the terms of the Note for the Purchase Price
in the contract. The note was satisfied in January of 1994,
and Plaintiff ceased making insurance payments. There is
nothing in the contract to support Plaintiff's argument that
the insurance payments were only to be paid during the
duration of Plaintiff's obligation on the Note, nor is there
anything in the contract to support Defendants' argument that
the term of payment for insurance was 30 years, the period for
initial use of the Trade Name. There is no provision in this
section of the contract regarding time.
All the obligations of this contract have been fulfilled,
including the transfer of real property and tangible assets,
the payment of the purchase price, the expiration of the non-competition periods, and the entitlement to use of the trade
name. Accordingly, since the parties are under no further
obligation under the terms of the contract, the provision for
the payment of insurance premiums has expired. (Emphasis
added.)
Although the chancellor did not indicate the precise date when
Alexander's obligation to pay the insurance premiums expired, there
was no requirement that she do so. The relevant inquiry is whether
the chancellor's conclusion comports with a reasonable time forfulfillment of that contractual obligation.
It is understandable that McKay would want to ensure that his
ability to obtain life and medical insurance would be protected
after he gave up his primary income source at McKay and Company.
That concern would certainly have been reasonable when one
considers that McKay was precluded from working in the residential
real estate field for two years under the terms of the purchase and
sale agreement. The agreement also prohibited McKay from
advertising, publishing or displaying his name or picture in
conjunction with any entity engaged in the residential real estate
business unless plain and conspicuous reference was made that McKay
was exclusively engaged in the commercial real estate business
(Paragraph 3(c)). The chancellor concluded that the parties had
fulfilled their obligations under the agreement so that Alexander's
obligation to provide the life and medical insurance benefits for
McKay had expired when Alexander made the final payment on the
purchase price in January 1994, twelve years after the parties
executed their agreement. We find no basis in the record to hold
that twelve years was not a reasonable time. For ten of those
years McKay could have engaged in the residential real estate
business without violating the non-competition provision of his
agreement with Alexander, to include owning his own residential
real estate brokerage firm. If McKay and Company had provided for
the life and medical insurance benefits during the time that McKay
was associated with that firm and McKay had the right to open his
own firm as early as two years after closing the sale to Alexander,it is quite reasonable to conclude that McKay had adequate time and
opportunity to arrange for life and medical insurance coverage by
1994.
We are also unpersuaded by appellant's third argument that
McKay is entitled to receive life and medical insurance payments of
up to $6,000 per year for as long as the McKay and Company trade
name is used by Alexander, his heirs, or assigns. We have already
indicated that the chancellor's conclusion of law on this point is
not clearly erroneous. We agree that the purchase and sale
agreement is silent as to how long the insurance payments were to
continue. Nothing in Paragraph 10(i) supports McKay's assertion,
and the remainder of the agreement lends no support to that
argument which is tantamount to a claim for payment of life and
medical insurance benefits for the balance of McKay's lifetime. It
is true that a contract provision is ambiguous if it is susceptible
to different interpretations. Western World Ins. Co. v. Branch,
332 Ark. 427, ___ S.W.2d ___ (1998). But the chancellor correctly
observed that the contract is silent regarding the duration of time
for the insurance payments. No ambiguity arises from the parties'
failure to specify how long the insurance payments were to be made.
Silence concerning time means that no time was specified at all,
not that arguably different time periods were contemplated by the
contract. We hold that the chancellor's application of a
reasonable time analysis was not clearly erroneous.
Affirmed.
Stroud and Crabtree, JJ., agree.
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