Evco Distributing, Inc. v. Brandau, 51080

• Decision Date: 24 April 1981
• Docket Number: No. 51080,51080
• Citation: 626 P.2d 1192,6 Kan.App.2d 53
• Parties: EVCO DISTRIBUTING, INC., Appellant, v. Jack BRANDAU, Appellee.
• Court: Kansas Court of Appeals

Page 1192

626 P.2d 1192

6 Kan.App.2d 53

EVCO DISTRIBUTING, INC., Appellant, v. Jack BRANDAU, Appellee.

No. 51080.

Court of Appeals of Kansas.

April 24, 1981.

Syllabus by the Court

1. The purpose of a temporary injunction is not to determine any controverted right, but merely to prevent a threatened act which might perpetrate an injury, lessen the value of a claimed right, or cause total loss of a claimed right pending final determination of the controversy between the parties. A temporary injunction merely preserves the status quo until a final determination of a controversy can be made.

2. The doctrine of res judicata amounts simply to this that a cause of action once finally determined, without appeal, between the parties, on the merits, by a competent tribunal cannot afterwards be litigated by a new proceeding, either before the same or any other tribunal.

3. A determination made pursuant to an order granting a temporary injunction is not a determination on the merits, and the principles of res judicata do not apply.

4. Forbearance to sue can be good consideration for a promise, regardless of the actual validity of the claim, if the one who forbears has a reasonable and sincere belief in its validity.

5. Only a legitimate interest of an employer may be protected by a covenant not to compete, which is ancillary to a contract of employment, and such a covenant is unreasonable if the real object is merely to avoid ordinary competition.

6. The presence of a benefit or detriment to a promisor, sufficient to constitute consideration, is a question of fact as is the question of what constitutes consideration when that issue is controverted.

7. As a general rule, an unfaithful servant forfeits compensation otherwise earned but for such unfaithfulness. The policy of this rule is to remove from the agent all possible temptation to neglect the principal's interests in favor of the agent's own interests.

8. In an action for permanent injunction and damages for breach of an anti-competition clause ancillary to an employment contract, it is held that the trial court did not err in finding the doctrine of res judicata inapplicable, the agreement not to compete unenforceable for lack of consideration, and in denying defendant's counterclaim for compensation.

Jack N. Stewart of Hampton, Royce, Engleman & Nelson, Salina, for appellant.

William L. Winkley, Salina, for appellee.

Before ABBOTT, P. J., and REES and SPENCER, JJ.

SPENCER, Judge:

Plaintiff has appealed from a judgment denying a permanent injunction and damages against defendant, its former employee. Defendant has cross-appealed from the judgment which denied his counterclaim for one month's compensation of $3,000.

Much testimony was adduced at trial, establishing in detail the background of the parties' business relationship. It is not necessary, however, to conduct a lengthy review of the testimony in order to reach the issues presented.

At the time of entering Evco's employ, Brandau entered into a written contract of employment dated May 3, 1976, which contained a non-competition clause, in substance as follows:

"3. For a period of one year following termination of employment of the Employee (but in no event beyond December 1, 1976) the Employee agrees that he shall not, directly or indirectly, engage in any business of the same or similar character to the business heretofore conducted by Evco within the territory served by Evco ...."

"In consideration of such covenant not to compete, Evco hereby agrees to pay to the Employee the aggregate sum of $40,500.00, payable as follows:

                May 1, 1976  $12,500.00
                May 1, 1977  $14,500.00
                May 1, 1978  $13,500.00
                             ----------
                Total        $40,500.00"
                

Pursuant to this portion of the agreement, Brandau received the first scheduled installment. The contract also provided:

"So long as the Employee continues as an Employee of Evco he shall devote his entire time and attention to the business and affairs of Evco."

Several days prior to May 1, 1977, the date the second installment was due, Evco accused Brandau of having breached his agreement by attempting to develop, construct and market a fiberglass dry fertilizer spreader box, potentially competitive with products marketed by Evco. Due to this asserted breach, Evco refused to pay the second installment of $14,500.

The dispute between the parties was apparently resolved when on August 25, 1977, the parties entered into two new agreements, referred to as exhibits "C" and "D." Under these agreements, Brandau was not to compete with Evco for a period of two years following termination of his employment, but such was in no event to extend beyond August 31, 1979; Evco agreed to pay the remaining two installments provided for in the May 3rd contract, and did pay to Brandau the second installment with interest. On the next day Brandau submitted his resignation to Evco, which was formally accepted on August 27, 1977.

Several weeks later, Brandau entered into the employ of Lor-Al Corporation, a competitor of Evco in the agricultural equipment market. Evco consequently initiated suit against Brandau, seeking temporary and permanent restraint of defendant-Brandau and damages, all pursuant to non-competition provisions contained in agreements "C" and "D," which purportedly extended the covenant not to compete as set forth in the May 3rd contract for a period of two years following termination of employment, but in no event beyond August 31, 1979.

Pursuant to plaintiff's petition, the trial court conducted evidentiary hearings relative to the issuance of a temporary injunction against Brandau, with such relief being granted in favor of Evco pending further order of the court.

Following trial on the merits, the court entered findings of fact and conclusions of law. Relevant portions are in substance: (1) Consideration existed for the employment contract of May 3, 1976, which provided for payment to Brandau of $40,500 if he did not terminate his employment and compete with Evco prior to December 1, 1976. (2) No new consideration was provided by Evco to support agreements "C" and "D" as Evco was already bound to pay the two remaining installments of the $40,500 promised Brandau in the contract of May 3rd, and Brandau was then unconditionally entitled to that sum in that he did not leave Evco's employment and compete prior to December 1, 1976. (3) No new consideration was provided by Evco by reason of its claim of settlement in good faith of a bona fide dispute between the parties, i. e., by agreeing to pay the non-competition sums promised by the May 3, 1976, contract despite Brandau's unfaithfulness during the term of his employment. (4) No new consideration was provided by Evco's agreement to advise Brandau as to whether his subsequent participation in business would be deemed a violation of his covenant not to compete as set forth in agreements "C" and "D". The trial court also concluded Evco's purpose in obtaining Brandau's execution of contracts "C" and "D" was to eliminate competition; and that Evco had no intention of continuing to employ Brandau since the relationship of the parties was unsatisfactory to both, and Evco knew Brandau would resign immediately.

Based on these conclusions, the trial court held Brandau was entitled to the final non-competition installment of $13,500, pursuant to the May 3, 1976, contract, but that Brandau was not entitled to back compensation of $3,000 as he had violated the contract provision calling for him to devote his entire time and attention to Evco's business while in its employ.

Evco first contends the trial court's order of February 17, 1978, granting Evco a temporary injunction against Brandau pursuant to the terms of the non-competition provisions contained in agreements "C" and "D," rendered the issue of Evco's consideration for such agreements res judicata. Specifically, Evco relies upon the trial court's finding at that time that agreements "C" and "D" were freely and voluntarily entered into by the parties, that consideration for said agreements was presumed, and there was no evidence to rebut such presumption. Evco's reliance on such finding is misplaced.

In Comanche County Hospital v. Blue Cross of Kansas, Inc., 228 Kan. 364, 613 P.2d 950 (1980), we find:

"The purpose of a temporary injunction is not to determine any controverted right, but merely to prevent a threatened act which might perpetrate an injury, lessen the value of a claimed right or cause total loss of a claimed right pending final determination of the controversy between the parties. The grant of a temporary injunction would not be proper if it would appear to accomplish the whole object of the suit without bringing the cause or claim to trial. A temporary injunction merely preserves the status quo until a final determination of a controversy can be made. In re Sharp, 87 Kan. 504, 124...