Import Motors, Inc. v. Luker, CA

• Decision Date: 23 April 1980
• Docket Number: No. CA,CA
• Citation: 268 Ark. 1045,599 S.W.2d 398
• Parties: IMPORT MOTORS, INC., Appellant, v. Leon LUKER, Appellee. 79-290.
• Court: Arkansas Court of Appeals

Page 398

599 S.W.2d 398

268 Ark. 1045

IMPORT MOTORS, INC., Appellant, v. Leon LUKER, Appellee.

No. CA 79-290.

Court of Appeals of Arkansas.

April 23, 1980 Released for Publication by the Court of Appeals.

Jacoway, Herdlinger, Jacoway & Stanley by Thomas A. Jacoway, Springdale, for appellant.

Davis, Douglas, Penix, Springdale, for appellee.

WRIGHT, Chief Judge.

The appellant, Import Motors, Inc., brings this appeal from a decree of the chancery court denying relief on appellant's complaint against appellee, Leon Luker, for specific performance, damages, injunctive relief and other incidental relief for alleged breach of a covenant not to compete in an employment contract.

For reversal appellant argues the chancellor erred in finding the competition of appellee was only ordinary and the agreement of the parties did not involve a sale of business. Appellant further argues the court erred in failing to enter judgment against appellee for $250.00 he admittedly owed appellant and in failing to award injunctive relief, return of $5,000.00 compensation paid appellee as consideration for the covenant not to compete, for damages and related relief.

The appellant entered into a contract of employment for a term of one year effective April 1, 1977, for the employment of appellee as a shop manager in a newly established foreign car repair service and Fiat dealership at Springdale, Arkansas. The contract provided at the end of the one year term the ". . . agreement may be extended on a year to year basis on the terms and conditions as agreed by the parties". The contract fixed appellee's salary at $20,000.00 per year, payable in the sum of $1,666.67 monthly. Prior to entering into the contract the appellee owned and operated his own foreign car repair shop in Springdale and had developed a substantial number of loyal customers. It is undisputed he was a highly skilled foreign car mechanic, and most of his established customers followed appellee to his employment with appellant and did business there.

The contract contained a covenant by appellee not to compete within two years after leaving the employment reading as follows:

Employee agrees that during the term of this agreement and for a period of two (2) consecutive years immediately following the termination of this agreement or his employment, whichever occurs latter, and regardless of the cause of termination, he will not by himself or on behalf of any other person, firm, partnership or corporation, engage in the business of auto service and maintenance within a trade area known as Northwest Arkansas and within a radius of twenty-five (25) miles from Springdale. Employee further agrees that he will not directly or indirectly, for himself or on behalf of, or in conjunction with, any other person, firm, partnership, or corporation, solicit or attempt to solicit the business or patronage of any person, firm, corporation or partnership within said twenty-five (25) mile radius for the purpose of selling and/or servicing automobiles or other products similar to those dealt in by the Company. Employee shall not perform such other incidental business and service as the Company now engages in, nor will the Employee disclose to any person any of the secrets, methods or systems used by the Company in and about its business. Employee specifically agrees that $5,000.00 of his compensation is predicated upon said covenant not to compete and that the violation of said agreement shall automatically entitle the Company to reimbursement of $5,000.00 for the year of the infraction and that the Company shall also be entitled to a $100.00 per day penalty for each and every day that employee continues to violate the provisions of his covenant not to compete contained herein.

The appellee began working as shop manager in appellant's new business when the business opened in early April, 1977. He was given ten per cent of the stock in the appellant corporation, and he sold the stock to appellant prior to leaving the employment. Dissension developed between appellee and the manager, who was one of the principal corporate owners, resulting in appellee leaving the employment on February 27, 1978, some thirty-two days before the expiration of the term of the one year contract.

The manager became dissatisfied with some of the actions of appellee with reference to the discharge of his duties, and testified he discovered improprieties on the part of the appellee, specifically, ". . . in the taking of monies and not turning them over to the company"; and, ". . . letting people go without paying their bills". He further testified that when he discussed these matters with appellee, the appellee would become upset and say, "If you don't like the way I am doing things I will take my tools and go". The manager decided he could no longer permit the appellee to continue as shop manager, and on or about February 27, 1978, advised appellee he would not permit him to continue as shop manager, but would permit him to work as a mechanic. There is no indication his salary would have been reduced. The appellee declined to work as a mechanic and left the employment. He admitted at trial he owes appellant $250.00 he received for a transmission, and no explanation was offered for not turning the money over to his employer.

The last of June, 1978, appellee opened his own business called "Leon's Foreign Car Service", a mile from appellant's business, and numerous customers discontinued patronizing appellant's business and began patronizing appellee. The evidence reflects appellant's business declined markedly after appellee opened his competing business. Prior to appellee opening the competing business the appellant was operating at a profit, but since that time the appellant has been operating at substantial losses notwithstanding an increase in new car sales. Appellant attributed these losses to the repair service competition from appellee and offered in evidence monthly gross sales receipts from the shop business reflecting substantial declines in such receipts subsequent to appellee's competition.

It is undisputed the appellee's employment involved no trade secrets or confidential information obtained by appellee while employed by appellant. Also, the evidence does not support appellant's contention there was a sale of a business.

At the close of the evidence the court granted appellant's motion to treat the pleadings as amended to conform with the proof.

The trial judge's opinion rendered after briefs were submitted made observations and findings, reading in part as follows:

The respective briefs reflect the numerous factors to consider, including the employee's access to confidential information, special training received during employment, access by the employee to lists of customers, the employee's ability to exploit personal contacts and the goodwill purchased with a business. In the case at bar, there are admittedly no trade secrets involved. Neither are there...