Environmental Products Co., Inc. v. Duncan, 15203

• Decision Date: 02 December 1981
• Docket Number: No. 15203,15203
• Citation: 285 S.E.2d 889,168 W.Va. 349
• Court: West Virginia Supreme Court
• Parties: ENVIRONMENTAL PRODUCTS CO., INC. v. Danny S. DUNCAN, Etc., et al.

Page 889

285 S.E.2d 889

168 W.Va. 349

ENVIRONMENTAL PRODUCTS CO., INC. v. Danny S. DUNCAN, Etc., et al.

No. 15203.

Supreme Court of Appeals of West Virginia.

Dec. 2, 1981.

Dissenting Opinion Jan. 8, 1982.

Syllabus by the Court

1. If a covenant not to compete is contracted after employment has been commenced without that restriction, there must be new consideration to support it.

2. " '[I]t is not the reasons assigned upon which the [lower] court decided a question that is to be reviewed, but the action of the court itself; and the question always in the appellate court is, whether the judgment to be reviewed is correct.' Syl. pt. 5, State ex rel. Dandy v. Thompson, 148 W.Va. 263, 134 S.E.2d 730 (1964), in part." McAllister v. McAllister, W.Va., 276 S.E.2d 321 (1981), Syllabus Point 2.

Bowles, McDavid, Graff & Love and Gerard S. Stowers, Charleston, for appellant.

Wood, Grimm & Delp and Bert M. Grimm, Jr., Huntington, for appellees.

HARSHBARGER, Chief Justice:

Danny Duncan began work for Environmental Products Co., Inc. on February 20, 1978, and took an equipment-estimator training course given by his employer with government-paid veteran assistance. About three months later he was assigned to Environmental's Huntington territory as a salesman and worked continuously until he resigned in late December, 1979.

When he was hired he was told he would earn one thousand dollars per month, but soon would earn between eighteen thousand and twenty-five thousand dollars annually. He did not then sign a contract, and in January, 1979, he received a seven hundred dollar per month raise, and another two hundred dollar per month raise in March, 1979.

His first contract, dated April 1, 1979, ¹ contained these relevant paragraphs:

8. Disclosure Information. Employee recognizes that the list of customers is a valuable, special and unique asset of Environmental's business. Employee shall not, during or after the term of his employment, disclose the list of customers to any person, firm or corporation.

12. Restrictive Covenant. Upon termination of this agreement at the end of the initial or any renewal term, or upon termination during the initial or any renewal term for any reason other than breach by Environmental, Employee agrees that he will not for a period of two years within a radius of 250 miles from the principal place of business of Environmental directly or indirectly own, manage, operate, control, be employed by, participate in, or be connected in any manner with the ownership, management, operation or control of any business similar to the type of business conducted by Environmental and its subsidiaries at the time of the termination of this agreement.

Phil Gandy, Vice-President of Environmental Products, testified that prior to Duncan's April 1 contract, his other salesmen had contracts containing identical restrictive covenants. Duncan's job and responsibilities were no different after than before he signed this contract.

In early January, 1981, Duncan commenced employment with defendant Tri-State Controls, Inc. On January 22, 1981, Environmental Products filed a complaint and sought a circuit court injunction to prohibit Duncan's employment with and dissemination of confidential information, trade secrets and customer lists to Tri-State. Putnam County Circuit Judge James O. Holliday denied a preliminary injunction, and Environmental Products came here and was again denied. Now Environmental Products appeals Judge Holliday's decision that the contract was void as an unenforceable restraint of trade and that the covenant was geographically overbroad.

If a covenant not to compete is contracted after employment has been commenced without restriction, there must be new consideration to support it. Pemco Corp. v. Rose, W.Va., 257 S.E.2d 885, 889 (1979). In Pemco, we found that neither Virginia nor West Virginia had decided whether continued employment is adequate consideration for a new contract, and divined that it would not be adequate in Virginia. It certainly is not adequate here.

Environmental contended there was adequate consideration in a salary change, a guaranteed bonus, and profit-sharing, and the trial court agreed. ² This record, however does not support that conclusion. Duncan was promised a salary change at his initial employment in 1978, and he received two raises before March, 1979. His contract was dated April, 1979, and recited a salary Duncan was already receiving. A profit-sharing plan was then available to all employees, not just salesmen, whether or not they signed a contract. The "guaranteed bonus" was not guaranteed at all because it was only "in such amount as the Board of Directors of Environmental in its sole discretion shall determine." Duncan received a bonus in 1978 and received one in 1979, gratuities that certainly did not make future bonuses assured, nor prove an expectancy that might be thought new consideration.

His contract, therefore, did not alter any benefits, conditions or terms of employment; it only imposed limitations. Those are void for lack of consideration.

We need not decide whether the covenants' restrictions were...