Diepholz v. Rutledge

• Decision Date: 29 December 1995
• Docket Number: No. 4-94-1091,4-94-1091
• Citation: 276 Ill.App.3d 1013,213 Ill.Dec. 643,659 N.E.2d 989
• Parties: , 213 Ill.Dec. 643 Kenneth DIEPHOLZ and Ken Diepholz Chevrolet, Inc., Plaintiffs-Appellants, v. George W. RUTLEDGE, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 989

659 N.E.2d 989

276 Ill.App.3d 1013, 213 Ill.Dec. 643

Kenneth DIEPHOLZ and Ken Diepholz Chevrolet, Inc. Plaintiffs-Appellants, v. George W. RUTLEDGE, Defendant-Appellee.

No. 4-94-1091.

Appellate Court of Illinois Fourth District.

Dec. 29, 1995.

Richard L. James, Paris, for Kenneth Diepholz.

Ralph D. Glenn, Glenn & Logue, Mattoon, for George W. Rutledge.

Presiding Justice COOK delivered the opinion of the court:

This case presents the question whether an automobile dealer who has covenanted not to engage in the automobile business in a certain county may, nevertheless, solicit customers or advertise within that county.

In 1991, plaintiff Kenneth Diepholz purchased an automobile dealership located in Mattoon, Coles County, Illinois, from defendant George W. Rutledge. As part of the sales transaction, the parties signed a covenant not to compete, which provided in pertinent part:

"GEORGE W. RUTLEDGE, in exchange for the sum of $384,000.00 dollars to be paid on or before Jan. 2, 1992, and as additional consideration for the sale of the business owned by him, known as RUTLEDGE OLDSMOBILE-CADILLAC, INC., hereby agrees that commencing January 2, 1992, he will refrain, directly or indirectly, for a period of four years from the date hereof, from engaging in the automobile sales or service business as an individual or as an owner in Coles County, Illinois. This covenant not to compete is granted to KENNETH DIEPHOLZ individually and to KEN DIEPHOLZ CHEVROLET, a corporate entity."

Subsequent to the purchase, plaintiff moved the dealership from Mattoon to Charleston, which is also located in Coles County.

Plaintiff became aware defendant planned to open an automobile dealership in adjacent Moultrie County. In November 1992, plaintiff sent defendant a letter, advising defendant that plaintiff would consider any solicitation by salesmen or by advertisement in the Charleston-Mattoon area to be a violation of the covenant not to compete. Defendant did not respond to the letter. In December 1992, defendant did purchase an automobile dealership in Sullivan, Moultrie County, Illinois. Sullivan is approximately 16 to 17 miles from Mattoon and 30 miles from Charleston. Upon acquisition of the Sullivan dealership, defendant began advertising in the surrounding communities, including on radio stations and in newspapers located in Coles County. In January 1993, plaintiff filed suit for injunctive relief and for damages from alleged breaches of the covenant not to compete.

At trial, plaintiff introduced newspaper advertisements placed by defendant in Mattoon's Journal Gazette. Defendant's advertisements announced "We're back!" and welcomed former customers to the new dealership. The Journal Gazette had a total distribution of 12,704 copies, of which 7,900 went to Coles County and 851 went to Moultrie County. Defendant's advertisements also appeared in Charleston's newspaper, which is not circulated in Moultrie County. Plaintiff introduced an interview of defendant that appeared in the December 7, 1992, edition of the Journal Gazette. In the interview, defendant stated he considered all area communities within about a 40-mile radius as part of the Sullivan dealership's service area, and he welcomed old and new customers from the Mattoon area. Defendant also advertised on WLBH radio, AM and FM, through its station in Coles County. Some commercials were aired during broadcasts of Mattoon High School basketball games. WLBH reaches approximately 300,000 listeners in 12 counties.

Defendant testified that his advertisements were intended to reach his old customers, "[w]herever they may exist." He stated that repeat business is "the only thing" in the automobile business. Defendant testified that he believed his only restriction under the covenant was that he could not own or be employed by a business located in Coles County. Defendant estimated that 11% of his sales were to Coles County residents when he owned the Mattoon dealership. At his Sullivan dealership, Coles County residents accounted for 11.3% of the vehicle sales and 4.55% of the service customers.

Defendant stated that he took his customer list from the Mattoon dealership to use at his current dealership. He stated that the list was hardly used and that it upset him that his staff did not use the list. Frank Hutchcraft, a salesman at defendant's Sullivan dealership, testified that he did not use the customer list, as he had his own customer base. Jeff Rutledge, the son of defendant and business manager of defendant's dealership, stated he had developed his own customer list when he worked at three dealerships in Coles County: the former Rutledge dealership in Mattoon, another Mattoon dealership, and plaintiff's dealership in Charleston. Jeff Rutledge did not know how many names on his customer list were Coles County residents. He had contacted 10% to 20% of the people on his list since he began working for defendant's Sullivan dealership.

The trial court found that plaintiff had drafted the covenant not to compete and had not included specific prohibitions on solicitation or advertising. The court further ruled that the covenant should be strictly construed. Accordingly, the court found plaintiff had not established a violation of the covenant by a preponderance of the evidence. Plaintiff appeals. We affirm.

In general, the meaning to be given the plain words of a written instrument is a question of law for the court's determination, where the parties have attached no unusual or peculiar meaning to the words. (Hagerty, Lockenvitz, Ginzkey & Associates v. Ginzkey (1980), 85 Ill.App.3d 640, 641, 40 Ill.Dec. 778, 779, 406 N.E.2d 1145, 1146.) In the present case, there is no indication that the parties attached unusual or peculiar meanings to the words of the covenant.

Courts often state that covenants not to compete must be strictly construed and interpreted and any doubts or ambiguities must be resolved in favor of natural rights and against restriction. (Hagerty, 85 Ill.App.3d at 643-44, 40...