Brecher v. Brown

• Decision Date: 06 February 1945
• Docket Number: 46637.
• Citation: 17 N.W.2d 377,235 Iowa 627
• Parties: BRECHER v. BROWN.
• Court: Iowa Supreme Court

17 N.W.2d 377

235 Iowa 627

BRECHER v. BROWN.

No. 46637.

Supreme Court of Iowa

February 6, 1945

Whitney Whitney & Stern, of Storm Lake, for appellant.

Pike Sias & Butler, of Waterloo, and White & White, of Storm Lake, for appellee.

SMITH Justice.

On March 25 1943, the parties hereto executed a written agreement by which plaintiff employed defendant as a 'veterinary assistant' in Storm Lake, Iowa, 'for an indefinite period of time' at a salary of $200 per month 'until changed by further agreement.'

Plaintiff agreed to furnish 'all necessary tools and equipment and an automobile' for defendant's use in rendering the agreed services. Defendant agreed not to engage in any other type of work and to devote all his working hours to plaintiff's service.

The controversy here particularly involves the following paragraph of the contract:

'It is further stipulated and agreed that upon the termination of Second Party's employment by First Party that the Second Party will not engage in the practice of veterinary medicine or surgery, or any competiting business to that of First Party, in Storm Lake, Iowa, or a territory within a radius of twenty-five miles of Storm Lake, Iowa, without the express written consent of First Party.'

Both parties were licensed veterinarians, plaintiff with an established practice of some ten or eleven years in that vicinity and defendant recently admitted to practice. Plaintiff also has a veterinary hospital in connection with his practice.

They operated under the agreement until December 29, 1943, when defendant quit and soon thereafter opened a veterinary office and hospital about one hundred feet from plaintiff's and engaged in practice for himself. This suit is brought by plaintiff to enjoin defendant 'from the practice of veterinary medicine and surgery * * * and the operation of a veterinary hospital at Storm Lake, Iowa.' The trial court denied the relief asked and plaintiff appeals.

The facts are not materially in dispute. Appellant was a close friend and classmate of appellee's older brother and knew appellee while the latter was still in veterinary college. The parties had some preliminary discussion and understanding before appellee came to Storm Lake and before the written contract was entered into. Appellee testifies appellant 'said if things went along all right there would be a partnership in a year.' Appellant's version is not materially different: 'I * * * told him if things worked out well it might develop into a partnership.'

Appellant says: 'I introduced him to my clients and started him to practice; would send him out on calls when a farmer with a sick animal would call in and we did surgery together and I introduced him to various farmers that I had been serving and sent him out to do the work for them. He had access to my books and a list of my customers and when calls from customers would come in and he was about the hospital he would answer the phone.' Appellee testifies to substantially the same facts and says he way always busy. When they commenced business appellant advanced $100 and placed it to appellee's credit at the bank. About four months later he increased the monthly salary to $225.

Appellee in July or August broached the subject of partnership but appellant told him he was getting in a hurry. A day or two before appellee quit in December he spoke again to appellant about it:

'He (appellant) told me that the partnership was out then--that he would increase my wages but he wouldn't give a partnership for another year or so; and I asked him how much it would cost me to enter into a partnership and all he said was it would cost me so much and I could pay it over a period of time and at a low rate of interest.'

'Q. But he wouldn't give you the amount? A. No.'

There is no further explanation of appellee's sudden decision to abandon the employment and launch out for himself but his legal right to do so, under the contract, is not questioned.

Appellant testified that his most remote clients were: one southeast of Storm Lake, twenty-six miles; one northeast, twenty-one miles; one northwest, twenty-two or twenty-three miles; and that his practice extended west of Alta and south and southwest, about fifteen miles. He said he expected to extend the area of his practice in the future.

I. Appellant argues but one proposition, viz., that the trial court erred in holding the contract thenforceable as against public policy on the ground that the restrictions therein were unreasonable. That is the ultimate and only question for our decision.

The reasons for the early common law doctrine banning contracts in general restraint of trade and for its gradual modification to meet changing conditions are stated at some length in Swigert & Howard v. Tilden, 121 Iowa 650, 97 N.W. 82, 63 L.R.A. 608, 100 Am.St.Rep. 374. The original ban has been lifted to admit many contracts in partial restraint but such contracts are upheld only when ancillary to contracts of sale or employment or for dissolution of partnerships or to other contracts which justify the covenantees in protecting themselves from competition. 17 C.J.S., Contracts, § 246, p. 629; Reeves v. Decorah Farmers' Coop. Soc., 160 Iowa 194, 202, 140 N.W. 844, 44 L.R.A.,N.S., 1104. But this does not mean that the restrictive provisions must be incident to contracts involving tangible property. Rowe v. Toon, 185 Iowa 848, 853, 854, 169 N.W. 38.

Whatever may be the subject matter of the principal contract, whether sale of good will, or for employment or other purpose, the modern test seems to be to inquire 'whether the restraint is such only as to afford a fair protection to the interests of the party in favor of whom it is given, and not so large as to interfere with the interests of the public.' Swigert & Howard v. Tilden, supra, 121 Iowa at page 660, 97 N.W. at page 85, 63 L.R.A. 608, 100 Am.St.Rep. 374; Haggin v. Derby, 209 Iowa 939, 943, 229 N.W. 257; 13 C.J. 475; 17 C.J.S., Contracts, § 247. 'The restriction must be reasonable, not oppressive, or out of proportion to the benefits which the vendee may, in reason, expect to flow from the restrictive features of the contract.' Swigert & Howard v. Tilden, supra.

The rule has been thus stated: 'Generally, the tendency of the modern authorities is * * * to gauge the validity of the contract by the reasonableness of the restraint imposed as necessary to the protection of the covenantee, and as compatible with the public interest.' 17 C.J.S., Contracts, § 246, p. 627.

In the Restatement of the Law of Contracts, § 515, the rule, so far as is pertinent here, is said to be: 'A restraint of trade is unreasonable, in the absence of statutory authorization or dominant social or economic justification, if it (a) is greater than is required for the protection of the person for whose benefit the restraint is imposed, or (b) imposes undue hardship upon the person restricted, or (c) tends to create, or has for its purpose of create, a monopoly * * * or * * * (e) is based on a promise to refrain from competition and is not ancillary either to a contract for the transfer of good will or...