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DON MORRIS AND TINA MORRIS, AND GREENVILLE MEN'S WEAR, INC. DOING BUSINESS AS THE COUNTRY GENTLEMAN v. JOE MACIONE

JUNE 21, 1989

DON MORRIS AND TINA MORRIS, AND GREENVILLE MEN'S WEAR, INC. DOING BUSINESS AS THE COUNTRY GENTLEMAN
v.
JOE MACIONE, JR.



BEFORE ROY NOBLE LEE, C.J.; ROBERTSON AND SULLIVAN, JJ.

ROBERTSON, JUSTICE, FOR THE COURT:

I.

This dispute concerns performance of a contract between a corporation and a former shareholder. The specific term at issue requires the corporate owner of a haberdashery to extend to a former shareholder a fifty percent (50%) discount on any merchandise he may wish to purchase there for his personal use. The remaining shareholders, seeking to avoid the contract, dissolved the corporation, created a new one and caused the haberdashery's assets to be transferred to the new entity. The Chancery Court saw through the subterfuge and specifically enforced the contract. We affirm.

 II.

 In the late 1970s, Greenville Men's Wear, Inc. was organized for the purpose of operating a retail clothing store in the Greenville Mall in Greenville, Mississippi. Owning equal shares of the corporation were Joe Macione, Ben Sayle, Ben Sayle, Jr., and Don Morris. Macione and Sayle were to finance the operation; Sayle, Jr. was to provide bookkeeping services to the corporation; and Don Morris was to supervise the day-to-day management of the business. Soon thereafter, the corporation opened "The Country Gentleman" in the mall. Each shareholder and the members of his immediate family were afforded the privilege of purchasing clothing from the inventory of The Country Gentleman at fifty percent (50%) of the retail price.

 In 1981, Morris and his wife, Tina, had accumulated enough cash to make a down-payment toward the purchase of all the capital stock in the corporation. Sayle and Macione agreed to sell. In the contract whereby the Morrises purchased all of the capital stock in the corporation, the following clause appears:

 After closing and so long as Greenville Men's Wear operates The Country Gentleman or other mercantile establishment in Greenville, Mississippi, sellers or either of them may purchase for their personal use merchandise from the store at fifty (50%) percent of retail price.

 The contract made no mention of sellers' family members, the preexisting practice notwithstanding. At the same time, Don and Tina Morris executed a promissory note in favor of Joe Macione and Ben Sayle in the sum of $25,000, payable in $5,000 annual installments, the last installment falling due December 31, 1985. The discount proviso served as additional consideration for the sale to the Morrises.

 Morris continued to extend the fifty percent discount to Sayle and Macione for a time. After the final installment of the promissory note had been made, however, Morris declined to continue to extend the discount privilege. All attempts at compromise failed, and each party hired counsel. In corresponding with Macione's attorney, Morris stated that, should Macione insist upon enforcing the discount, the Morrises would simply dissolve Greenville Men's Wear, Inc. and transfer control of The Country Gentleman to a new corporation. Such a move, in counsel's view, would serve to discharge the obligations of the Morrises regarding the discount.

 On February 17, 1987, Macione filed suit in the Chancery Court of Washington County requesting the specific performance of the discount provision of the sales contract. The Morrises

 responded by filing a petition with the Secretary of State to dissolve Greenville Men's Wear, Inc. The Certificate of Dissolution was issued on March 27, 1987. Contemporaneously, the Morrises caused to be formed a new corporation, Morris' Traditionals for Men and Women, Inc. Greenville Men's Wear transferred all of its assets to Morris' Traditionals, which now operates the Country Gentleman. Insofar as the public knew, the business continued as before.

 The Chancery Court held that the dissolution was for the principal purpose of avoiding the obligations to Macione and his co-seller under the contract and, as such, ineffective to discharge Greenville Men's Wear, Inc.'s obligation to sell merchandise at a fifty percent (50%) discount to Macione. The Court then ordered

 That so long as the defendants, Don and Tina Morris, Greenville Men's Wear, Inc., Morris Traditionals for Men and Women, Inc., or other successor in interest shall operate The Country Gentleman or other mercantile establishment in Greenville, Mississippi, Joe Macione may purchase merchandise from the store or other ...


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