Fulton Container Co., Inc. v. United States

This appeal is from a District Court decision in favor of the Government in an action for tax refund instituted by taxpayer under 28 U.S.C. § 1346 (a) (1) (1964). Taxpayer properly invokes our jurisdiction under 28 U.S.C. § 1291 (1964).

The taxpayer, a company engaged in the manufacture and sale of both multi-wall and textile bags, sold its multiwall bag business to West Virginia Pulp and Paper Company. Negotiations, initiated by the purchaser in early May of 1958, led to the execution, on June 18, 1958, of an “Asset Purchase Agreement”. Under the instrument’s terms, the taxpayer agreed not to reenter the multiwall bag business or compete with the purchaser in such business for a five-year period. At the same time, in a lease agreement with Friedman Bag Company, the parent of taxpayer, the purchaser agreed not to manufacture textile bags on the leased premises during the same period. Taxpayer had desired that mutual covenants not to compete be included within the terms of the “Asset Purchase Agreement”, but the purchaser insisted that the final sale agreement not define such a broad obligation as to it.

The sale agreement called for the payment to taxpayer of $918,704.50. Of…