Delta Finance Co. of La. v. Graves

• Decision Date: 15 November 1965
• Docket Number: No. 10481,10481
• Citation: 180 So.2d 85
• Parties: DELTA FINANCE COMPANY OF LOUISIANA, Inc., et al., Plaintiffs-Appellants, v. Glen D. GRAVES et al., Defendants-Appellees.
• Court: Court of Appeal of Louisiana — District of US

Page 85

180 So.2d 85

DELTA FINANCE COMPANY OF LOUISIANA, Inc., et al Plaintiffs-Appellants, v. Glen D. GRAVES et al., Defendants-Appellees.

No. 10481.

Court of Appeal of Louisiana, Second Circuit.

Nov. 15, 1965.

Lunn, Irion, Switzer, Trichel & Johnson, Shreveport, for appellants.

Wilson, Abramson, Maroun & Kaplan, Donald R. Miller, Shreveport, for appellees.

Before GLADNEY, AYRES, and BOLIN, JJ.

GLADNEY, Judge.

This suit by Delta Finance Company of Louisiana, Inc. and Delta Loan Service of Shreveport, Inc., was filed November 25 1964 against Glen D. Graves, Sales Financing Management, Inc. and Kenneth O. Arnold, President of Sales Financing Management, Inc., as a result of the alleged violation by Graves of an employment contract. Plaintiffs prayed for damages and injunctive relief. From a judgment rejecting plaintiffs' demands, this appeal has been lodged.

The defendant, Glen D. Graves, was employed by Delta Finance Company of Louisiana, Inc., on November 5, 1963 after serving for some time as assistant manager at Term Plan Finance Company of Shreveport. While serving as manager of Delta on May 20, 1964 Graves were requested and did sign an employment contract, certain provisions¹ of which are involved in this controversy. Later, on October 23, 1964, Graves' employment with the plaintiff was terminated and thereafter on November 9, 1964 he obtained employment with the defendant, Sales Financing Management, Inc. This company ran an advertisement in the local newspapers announcing the association of Graves with the defendant company and inviting all of his friends to continue to do business with him. The advertisement included a snapshot of the defendant, Graves, was paid for by the defendant, Sales, and was run with the knowledge and consent of Arnold. Graves sent form letters to old customers who had done business with him in which he advised them of his new association and invited them to do business with him. A number of these persons had been customers of Delta during the time Graves was employed by Delta, and some of these had current accounts with Delta at the time Graves solicited their business through the letters. Graves, while so employed with Sales, admittedly loaned to and paid off active accounts of customers of Delta. Plaintiffs have itemized their damages against the defendants, in solido, as: loss of profits on loans already paid off, $1,000.00, loss of profits on loans already solicited and which will be paid off, $5,000.00 and damage to reputation, $1,500.00, or a total of $7,500.00. Injunction relief is sought against all defendants for a period of three years after October 23, 1964 prohibiting further solicitation of the active or paid out accounts of plaintiffs; prohibiting the making of any further loans to customers for the purpose of, or themselves directly, paying off or paying on the accounts of any active customers of plaintiffs; and prohibiting the publishing of the photograph of Graves or the use of his name in advertisements in conjunction with his employment by Sales Financing Management, Inc.

Following disposition of certain preliminary proceedings, Graves filed a plea of unconstitutionality and 'violation of his civil rights,' and all defendants filed exceptions of no cause or right of action. The answer to plaintiffs' petition generally denied the allegations thereof, and Graves, although admitting that in the course and scope of his employment by Sales he did solicit customers, some of which were doing business with Delta, alleged that he did not by design actively solicit its customers. The defense primarily is based on the provisions of LSA-R.S. 23:921.²

The trial court, in denying the demands of plaintiffs, gave the following reasons, inter alia, for its ruling:

'While plaintiffs did prove on the trial of the case that defendant Graves, while employed by co-defendant Sales Financing Management, Inc., did violate some of the provisions of this alleged contract, particularly in making loans to and paying off some of the active customer accounts of Delta, and in publishing his photograph and name in advertising in conjunction with his employment by Sales Finance Management, Inc., the demands must be rejected, as plaintiffs failed to prove either that they incurred any expense in the training of Graves, or that they incurred any expense in advertising that Graves was the man to see about obtaining a loan from plaintiffs. See National Motor Club of Louisiana, Inc. v. Conque, La.App., 173 So.2d 238.'

Although counsel for defendants have attacked this agreement made between Delta and Graves as wanting in consideration and as being potestative these contentions are without merit, and in our opinion were fully answered in Martin-Parry Corp. v. New Orleans Fire Detection Service, 221 La. 677, 60 So.2d 83 (1952). The defense, therefore, must stand or fall on the question of whether the provisions of the employment contract are prohibited by LSA-R.S. 23:921. Generally all employment agreements not to compete with the Business of a former employer were declared null and unenforceable prior to the 1962 amendment. After the amendment the statute sanctioned such agreements only in cases where the employer had incurred an expense in the training of the employee or had incurred an expense in the advertisement of the business that the employer was engaged in.

We opine the trial judge erred in resting his decision upon National Motor Club of Louisiana, Inc. v. Conque, supra. This decision by our brethren of the Third Circuit held an agreement not to compete invalid by the provisions of LSA-R.S. 23:921 and Public policy. Therein, the Court ruled that the employer had not incurred substantial training expense and advertisement expenses and such expenditures were for the benefit of the business and not for the employee; and that such contract could not be enforced against the former employee who engaged in similar employment and contacted former customers of the former employer. The contract provided that upon termination of his services the employee would not:

'* * * engage in the business of owning, operating, establishing, maintaining, working in, financing, being a director, stockholder or consultant or in or by any other capacity or means engage in the business of operating a motor club or other similar type of touring service or operation in any way competitive to that of the Company for a period of five years from date of this agreement in the State of Louisiana.' (173 So.2d 238, 240)

The decision of the case turned upon whether or not the money incurred by the employer in the training of the employee or in the advertisement of the business were substantial and sufficient to bring the employer within the scope of the 1962 amendment. The majority opinion of the Court noted that its decision conflicted with Aetna Finance Co. v. Adams, La.App., 170 So.2d 740, a decision of the First Circuit Court of Appeal. Two members of the Court dissented from the majority opinion and pointed out the Supreme Court, 247 La. 489, 172 So.2d 294, had refused writs in Aetna Finance Company v. Adams, assigning as reasons therefor that:

'On the facts found by the Court of Appeal, there is no error of law in its judgment.' (172 So.2d 294)

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