Daughtry v. Capital Gas Co.

• Decision Date: 04 December 1969
• Docket Number: 5 Div. 871
• Citation: 229 So.2d 480,285 Ala. 89
• Parties: , 1970 Trade Cases P 73,134 Eric Carl DAUGHTRY and Mrs. Omer Gibson, doing business as Bullock County Propane Gas Co. v. CAPITAL GAS COMPANY, Incorporated, a Corp.
• Court: Alabama Supreme Court

Page 480

229 So.2d 480

285 Ala. 89, 1970 Trade Cases P 73,134

Eric Carl DAUGHTRY and Mrs. Omer Gibson, doing business as Bullock County Propane Gas Co. v. CAPITAL GAS COMPANY, Incorporated, a Corp.

5 Div. 871.

Supreme Court of Alabama.

Dec. 4, 1969.

Rehearing Denied Jan. 8, 1970.

Russell, Raymon & Russell, Tuskegee, for appellants.

Ball & Ball, and Robert S. Lamar, Jr., Montgomery, for appellee.

BLOODWORTH, Justice.

Respondents Daughtry and Gibson appeal from a decree enjoining respondent Daughtry from selling liquefied petroleum gas or liquefied petroleum gas applicances in Macon County, Alabama, and enjoining respondent Gibson, d/b/a Bullock County Propane Gas Company, from aiding Daughtry in violating his written contract with complainant Capital Gas Company.

The bill of complaint filed by Capital Gas Company sought to enforce its noncompetition employment contract.

The primary question on this appeal is whether a written contract of employment containing a covenant by the employee (Daughtry) not to compete with his employer (Capital Gas) after termination of his employment is supported by an adequate consideration.

We hold the contract is so supported for the reasons as will hereinafter appear. There are other assignments of error which we will treat in the order they appear in brief and in which we find no reversible error.

Capital Gas Company is a corporation engaged in the business of selling and distributing liquefied petroleum gas and liquefied petroleum gas appliances. Its business is carried on primarily in central Alabama, and it has done business in Bullock, Lee, Macon, Montgomery and Tallapoosa counties since 1947. The trial court found that approximately 90% Of its customers in these counties are located in Macon County.

The trial court also found that Capital Gas Company has invested large sums of money in advertising its products and services, and in building up good will. It has made substantial capital investments and has acquired a large number of customers. The company's main office is in Montgomery, Alabama, and a branch office is maintained outside Tuskegee, Alabama. Sales and deliveries of gas and appliances are made to customers within the Macon County area by a company employee operating out of the Tuskegee office who is designated the branch manager.

On January 15, 1966, Daughtry was orally employed by Capital Gas Company to be the branch manager of the Tuskegee office. The job included working as a truck driver-salesman for the company.

On June 1, 1966, Capital Gas and Daughtry executed a written contract of employment which contained a 'negative covenant' that Daughtry would not compete with complainant in Bullock, Lee, Macon, or Tallapoosa Counties for a period of two years after the termination of his employment with complainant. The trial court found that Daughtry signed the contract voluntarily and without fraud, duress or threats on the part of complainant, which finding is supported by the evidence.

In February 1967, Daughtry had a disagreement with Capital Gas Company concerning his action in making a credit sale to a customer who was behind in her monthly payments to the company. Thereafter, Daughtry tendered his resignation to the company and it was accepted.

Daughtry remained unemployed until August, 1967 when he was engaged as a salesman and deliveryman by respondent Gibson, d/b/a Bullock County Propane Gas Company in Union Springs, Alabama. It is a business competitor of Capital Gas engaged in the sale and distribution of liquefied petroleum gas and appliances in the same general area.

Daughtry is well known in Macon County, and has gained knowledge of a large number of customers of Capital Gas, most of whom live in rural and difficult to locate areas, through the use of a route book which Capital Gas had supplied to him. The record further shows that, while working for Bullock County Propane, Daughtry sold gas to customers whom he had formerly serviced while employed by Capital Gas Company.

The first assignment of error, the primary contention on this appeal, alleges the trial court erred in finding that the written contract between Daughtry and Capital Gas Company was valid and supported by consideration.

Daughtry and Gibson contend that Daughtry received no remuneration for signing the contract, and that his pay and duties remained the same as prior to signing it; therefore, it is void and unenforceable.

Capital Gas contends that Daughtry's continued employment with the company under the terms of the contract was adequate consideration to support it.

In support of their position Daughtry and Gibson rely on the cases of Kadis v. Britt, (1944) 224 N.C. 154, 29 S.E.2d 543, 152 A.L.R. 405, and Schneller v. Hayes, (1934) 176 Wash. 115, 28 P.2d 273.

In Kadis v. Britt, supra, the Supreme Court of North Carolina held void as against public policy a covenant in an employment contract restricting an employee who worked as a deliveryman and bill collector, and any member of his family, from obtaining employment with the employer's competitor in certain territory following termination of his employment. The court determined that the undue hardship placed upon the employee and his family be having to abandon the only occupation for which he was fitted was greater than the protection of any right or asset the employer held in the conduct of his business.

In Schneller v. Hayes, supra, an optician's agreement not to engage in business as an optician in the same city as his employer in consideration of employment was held to be without consideration since the agreement promised nothing in the way of future employment or wages, and his employment could be terminated at the employer's pleasure. But, more significantly, the court pointed out the contract was unlimited as to time, and its enforcement would forever prohibit the employee from carrying on his business in the same city as his former employer.

We do not consider these cases to be dispositive of the instant case, nor that they represent the 'better view' as argued by respondents Daughtry and Gibson. Neither was decided pursuant to any statutory authority.

Title 9, §§ 22--24, Code of Alabama, 1940 '* * * has fixed the public policy of this State in respect to employment contracts. To be enforceable under it there must be an employment contract mutually binding or executed by the employer in such manner as to provide valuable and reasonably adequate consideration for the contract of the employee * * * .' Stokes v. Moore, 262 Ala. 59, 63, 77 So.2d 331, 334.

The pertinent provisions of Title 9, § 23, supra, are:

'* * * one who is employed as an agent, servant, or employee may agree with his employer, to refrain from carrying on or engaging in a similar business and from soliciting old customers of such employer within a specified county, city, or part thereof * * * so long as such employer carries on a like business therein.'

In Stokes v. Moore, supra, we held a contract by the manager of a small loan business not to engage in a similar business in Mobile, Alabama, for one year from the termination of his employment as manager of his employer's small loan business was supported by a sufficient consideration and was valid as containing a reasonable limitation on area and time in which the contract was to extend. In that case, the late Mr. Justice Foster wrote for the court:

'* * * The compliance with the contract by the employer by giving respondent employment from March 20, 1950 to August 24, 1954 with apparent willingness to continue to do so for an indefinite period in the future provided a valuable and adequate consideration for the covenant of the employee to continue as expressed in the contract, although it was unilateral at its inception. * * * ' Stokes v. Moore, supra, at...