Cheatham v. Kem Mfg. Corp.

• Decision Date: 27 June 1979
• Docket Number: No. 51153,51153
• Citation: 372 So.2d 1085
• Court: Mississippi Supreme Court
• Parties: Terry B. CHEATHAM, Rhonda Stewart Cheatham & General Specialties, Inc., a Mississippi Corporation, v. KEM MANUFACTURING CORPORATION, a Georgia Corporation.

Page 1085

372 So.2d 1085

Terry B. CHEATHAM, Rhonda Stewart Cheatham & General

Specialties, Inc., a Mississippi Corporation, v. KEM MANUFACTURING CORPORATION, a Georgia Corporation.

No. 51153.

Supreme Court of Mississippi.

June 27, 1979.

Baine, Moore, Simmons & Thompson, Frank T. Moore, Jr., Jackson, for appellant.

Watkins, Pyle, Ludlam, Winter & Stennis, William A. Pyle, Jackson, James E. Goodman, Atlanta, Ga., for appellee.

Before PATTERSON, SUGG and COFER, JJ.

PATTERSON, Chief Justice, for the Court:

Terry B. Cheatham and Rhonda Stewart Cheatham, his wife, and General Specialties, Inc., appeal from a decree of the Chancery Court of the First Judicial District of Hinds County whereby Kem Manufacturing Corporation, a Georgia Corporation, was awarded $38,839.92 in damages and granted injunctive relief against appellants.

In July of 1972, Kem entered into a contract with Terry B. Cheatham whereby he was employed as sales representative in a designated territory in Mississippi. The contract provided, among other things, that Cheatham's full-time services were to be devoted exclusively to the business of his employer, Kem, and provided:

RESTRICTIVE COVENANT. (a) Company is engaged in the business of developing, manufacturing and purchasing sanitary and maintenance chemicals, supplies and equipment (including, but not limited to, soaps, cleaners, detergents, waxes, deodorants, insecticides, disinfectants, industrial cleaning and dishwashing compounds, dry cleaning supplies, floor maintenance materials and equipment, and washroom and janitor and sanitary supplies and services), rendering engineering and maintenance services in connection therewith, and marketing such products and services to governmental, institutional, industrial and commercial consumers, throughout North, Central and South America and the Caribbean area. It has built up and established a valuable and extensive trade in its products and services in such territories which, together with Company's business connections and customers, have been established and maintained at great expense and are of great value to it. By virtue of Agent's employment by Company, he must have complete and intimate knowledge of, and will become further familiar with and possessed of, the manner, methods, secrets and confidential information pertaining to such business, and with the names and lists of Company's customers and clientele, their business requirements, and the amounts paid by them for Company's products and services; and, through his representation of Company, he will become personally acquainted with the customers, competitors and trade of the Company. Agent agrees that Company would suffer great loss and damage if, during Agent's employment or upon its termination, he should, for himself or on behalf of any other person, persons, partnership or corporation by whom he may be subsequently employed, solicit orders for sanitary and maintenance chemicals, supplies and equipment, or for engineering and maintenance services in connection therewith, for distribution to governmental, institutional, industrial and commercial consumers; or if he should engage in such business in the territory set forth in sub-Paragraph 4(b) of this employment contract; or if he should disclose any of Company's methods, secrets or other confidential information. If any of the restrictive convenants (sic) hereinafter set forth should be violated by Agent, Company would suffer irreparable damage, and the resulting damages would be difficult or impossible to measure accurately. Agent further agrees that an injunction and restraining order enforcing such covenant is necessary to afford Company adequate remedy. Therefore, in consideration of the premises and of the mutual promises herein made, and of Agent's employment for a period of one month or more under the terms of this Agreement, Agent does expressly covenant and agree that, during the term of his employment under this contract, and for a period of two (2) years immediately following the termination of such employment, with or without cause:

(1) He will not, except as authorized by Company, for himself or on behalf of any other person, persons, partnership or corporation, either individually or as a joint venturer or silent partner, employee or stockholder, solicit orders for sanitary and maintenance chemicals, supplies or equipment or for engineering and maintenance services in connection therewith for sale or distribution to consumers, whether governmental, institutional, industrial or commercial, within the territory hereinafter described.

(2) He will not in any way, directly or indirectly, for himself or on behalf of or in conjunction with any other person, persons, partnership or corporation, solicit, divert or take away any of the customers or patronage of Company's business hereinabove described within the territory hereinafter defined.

(3) He will not, within the territory defined hereinafter, directly or indirectly, for himself or on behalf of others, as an individual on his own account, or as an employee, agent or salesman for any person, partnership, association or corporation, or as a member of any partnership or joint venture, or as an officer, director or shareholder of any corporation, or otherwise, engage in the business, or any phase thereof, of developing manufacturing or purchasing sanitary and maintenance chemicals, supplies and equipment, rendering engineering and maintenance service in cooperation or connection therewith, or marketing such products and services to governmental, institutional, industrial or commercial consumers.

(4) He will not, within the territory hereinafter defined, directly or indirectly, for himself or on behalf of others, own, manage, control, operate, aid or participate in the ownership, management, operation or control of any business which engages in the business, or any phase thereof, of developing, manufacturing or purchasing sanitary and maintenance chemicals, supplies and equipment, rendering engineering and maintenance services in connection therewith, or marketing such products and services to governmental, institutional, industrial and commercial consumers.

The contract stated that, in event of a breach, as the amount or measure of damages resulting would be difficult to determine and, for the purpose of liquidating the amount of such damages and "not as a penalty" it was agreed that the amount would be fixed at a sum equal to twice the total of the amounts paid Cheatham by Kem during the twelve months immediately preceding termination.

Although it appears that Cheatham's earnings from his employment by Kem were substantial, in May of 1976 Cheatham and his wife, appellant Rhonda Stewart Cheatham, the latter using her maiden name and placing 100 percent of the stock in her name, organized a corporation called General Specialties, Inc. and began engaging in substantially the same business as Kem. Without the...