Chenault v. Otis Engineering Corp., 380

• Decision Date: 28 December 1967
• Docket Number: No. 380,380
• Parties: Louis W. CHENAULT, Appellant, v. OTIS ENGINEERING CORPORATION, Appellee. . Corpus Christi
• Court: Texas Court of Appeals

Page 377

423 S.W.2d 377

Louis W. CHENAULT, Appellant, v. OTIS ENGINEERING CORPORATION, Appellee.

No. 380.

Court of Civil Appeals of Texas.

Corpus Christi.

Dec. 28, 1967.

Rehearing Denied Jan. 25, 1968.

Harry F. Maddin, of Cullen, Mallette, Maddin, Edwards & Williams, Victoria, for appellant.

Henry Nuss, III, and Leslie S. Lockett, of Kleberg, Mobley, Lockett & Weil, Corpus Christi, for appellee.

OPINION

GREEN, Chief Justice.

This is a suit brought by appellee Otis Engineering Company for temporary and permanent injunctive relief, whereby it sought to have the court enforce a restrictive covenant that appellant Louis W. Chenault would not compete with appellee within a specified area for a specified period of time. Upon preliminary hearing, the court granted a temporary injunction, and after trial before the court and a jury entered judgment after verdict enjoining appellant from conducting business in competition with appellee in the Victoria area, defining the limits of such area all of which were within 100 miles of Victoria, for the duration of the time specified in the written agreement on which the suit was based, towit three years from the date of the execution of the agreement. This appeal is from such judgment.

The evidence shows that appellant had been in the employ of appellee in the latter's Victoria district approximately fourteen years, during which time he was trained in wire line operation in connection with Otis' work in oil fields, in sales of appellee's oil field equipment, and in management. For the last twelve years, appellant had been in charge of Otis' Victoria operations, holding the position of district manager with direct responsibility for contacting customers and obtaining business for Otis. Appellee had operations throughout the United States and in Canada, and other foreign countries, and it was not unusual that employees would be transferred from one territory of employment to another. In the Spring of 1966, appellee through its proper officials decided that appellant should be transferred to Corpus Christi, Texas, to be their district manager of that area. When appellee insisted upon such transfer, appellant, rather than move his family from Victoria, applied for a leave of absence. After conferences between appellant Chenault and representatives of Otis, a written agreement prepared by appellee's general counsel was entered into and executed, which reads as follows:

'LEAVE OF ABSENCE AGREEMENT

THE STATE OF TEXAS

COUNTY OF NUECES

Know all men by these presents, that this memorandum of a contract made an entered into this 1st day of July, 1966 by and between LOUIS W. CHENAULT and OTIS ENGINEERING CORPORATION, hereinafter call 'Otis,' witnesseth:

Whereas, Louis W. Chenault desires that Otis grant him a one-year leave of absence from active employment; and

Whereas Otis desires to restrict Louis W. Chenault from competing with it in the Victoria area for three years;

Now, therefore, in consideration of the mutual promises herein contained, and for other good and valuable considerations, hereinafter set forth, Louis W. Chenault and Otis have agreed and, by these presents, do agree as follows:

1. As of the date of this contract Otis grants to Louis W. Chenault a leave of absence, not to exceed one year, to be employed as a life insurance salesman in the Victoria, Texas area, by Life Insurance Company of the Southwest.

2. Louis W. Chenault will transfer to Life Insurance Company of the Southwest and will begin participating in the Life Insurance Company of the Southwest benefit program (hospitalization, vacation, holidays, etc.) according to their company policy and his Otis benefits will not be in effect unless and until he should return to work at Otis.

3. Should Louis W. Chenault desire to return to employment at Otis during the period before the leave of absence expires, Otis will reemploy him in some capacity at one of the various company locations, consistent with Louis W. Chenault's physical condition at the time he should desire to return to work.

4. If Louis W. Chenault returns to Otis' employment prior to the expiration of the leave of absence, his seniority will be considered continuous and his various benefits will be renewed on the day of reemployment without the customary new employee waiting period, on the basis of his continuous seniority.

5. Louis W. Chenault agrees that for a period of three years from the date of this contract he will not do any work, perform any services or engage in any business in or within a 100-mile radius of Victoria, Texas, which competes in any way or manner with Otis.

WITNESS our hands affixed to duplicate copies, each of which shall have full dignity and force as an original.

/s/ Louis W. Chenault

LOUIS W. CHENAULT

OTIS ENGINEERING CORPORATION

By: /s/ E. E. Pearson'

Appellant's last day of active employment by Otis was June 30, 1966. He received no pay after that date. As noted in the above instrument, he became a life insurance salesman in the Victoria area for several months. This did not prove to be a success. In November, 1966, he indicated an interest in returning to active service with appellee, which advised him of several locations at which there were openings, and offered him employment. Attention is called to jury findings 1, 3, and 11, infra. He declined all of these. In November, appellant purchased a wire-line truck and other equipment for the purpose of going into business for himself in the Victoria area in competition with appellee. When a request for a line of credit was made by him to Otis, appellee through its general counsel and vice-president replied by letter dated December 9, declining such credit, pointing out paragraph 5 of the agreement above copied, and stating:

'* * * Since purchase of Otis equipment for this purpose would be in violation of the provisions of our agreement, we cannot approve your request for a line of credit and, additionally, I want to take this opportunity to confirm in writing my statement during our telephone conversation that if you violate any of the provisions of our agreement of July 1, 1966, Otis will take such action as may be necessary to exercise those rights and remedies available to the company in accord with the provisions of our agreement.'

Nevertheless, appellant obtained the necessary equipment, and admittedly did do business in the Victoria district, all of which was within 100 miles of Victoria, in competition with appellee Otis, and continued to do so until temporarily restrained following a hearing in the trial court in this suit on January 30, 1967. On December 30, 1966, he submitted to Otis a letter of resignation from his leave of absence with Otis, effective January 1, 1967.

In answer to special issues, the jury found as follows:

(1) When Louis Chenault inquired of Otis about jobs he could have, Otis was ready and able to perform the obligation in the leave of absence agreement to reemploy him in some capacity at one of the various company locations consistent with the said Chenault's physical capacity;

(2) There was legal consideration given by Otis to Chenault for the execution by Chenault of the leave of absence agreement containing the provision that Chenault would not engage in competition with Otis;

(3) Chenault's inquiries to Otis about resuming performance by him of duties for Otis were made as a good faith effort by him to resume work for Otis (4) If Chenault engages in work in the territory included within Otis' Victoria, Texas, district in competition with Otis, such work will be damaging to Otis;

(5) E. E. Pearson did not represent to Chenault prior to Chanault's execution of the leave of absence agreement that the provisions in the agreement relating to non-competition were a mere formality and would not be enforced;

(11) Otis Engineering Corporation has not failed to offer Louis Chenault reemployment in a position consistent with his background and experience; and

(12) $4800 has been lost by Chenault in net profit due to Chenault's inability to perform wireline services in the Victoria area from February 7, 1967, until May 17, 1967.

Appellant bases his appeal on four points of error, as follows:

POINT ONE

The Trial Court erred in entering judgment for Appellee because the contract relied upon is void and contrary to public policy since it constitutes an invalid restraint of trade.

POINT TWO

The Trial Court erred in entering judgment for Appellee because there was no consideration to support the contract upon which suit was based.

POINT THREE

The Trial Court erred in entering judgment for Appellee because there is no evidence, or alternatively, insufficient evidence that the restrictions sought to be imposed upon Appellant are reasonable and necessary or that Appellee would be damaged.

POINT FOUR

For all the reasons stated in the preceding points, the Trial Court erred in not entering judgment for Appellant dissolving the temporary injunction and awarding Appellant his damages.

The rule is well established in Texas that non-competition clauses in contracts pertaining to employment are not normally considered to be contrary to public policy as constituting an invalid restraint of trade.

'There was a time in our jurisprudence when covenants not to compete were held to be unenforceable because in restraint of trade and contrary to public policy. However, under the customs and usages of modern business practice it is not well established that contracts ancillary to employment involving trades or professions are enforceable, though amounting to limited restraint of trade, where they are reasonably limited as to time and space. Some cases even go so far as to uphold such restrictive covenants, even in the absence of a time limitation, where the agreement is reasonably limited as to area. 13 Tex.Jur.2d Section 189, Pages 398--400, Krueger, Hutchinson & Overton Clinic v. Lewis (Tex.Civ.App.), 266 S.W.2d 885, affirmed 153 Tex. 363, 269 S.W.2d...