Iowa Glass Depot, Inc. v. Jindrich

• Decision Date: 21 September 1983
• Docket Number: No. 69247,69247
• Parties: IOWA GLASS DEPOT, INC., Appellant, v. Robert JINDRICH, Appellee.
• Court: Iowa Supreme Court

Page 376

338 N.W.2d 376

IOWA GLASS DEPOT, INC., Appellant, v. Robert JINDRICH, Appellee.

No. 69247.

Supreme Court of Iowa.

Sept. 21, 1983.

Susan E. Harman of Lynch, Dallas, Smith & Harman, Cedar Rapids, for appellant.

Thomas D. Hobart and William L. Meardon of Meardon, Sueppel, Downer & Hayes, Iowa City, for appellee.

Considered by REYNOLDSON, C.J., and HARRIS, McCORMICK, SCHULTZ, and CARTER, JJ.

SCHULTZ, Justice.

This appeal presents issues concerning the enforceability of a covenant not to compete contained in an employment contract. At trial the district court denied the employer, Iowa Glass Depot, Inc., (Glass) the injunction it sought against its ex-employee, Robert Jindrich. We affirm.

Glass has been in the business of selling and installing automobile glass for more than 50 years. It has twelve retail outlets, including an Iowa City store that has been in operation since 1969.

In 1970 Jindrich, a high school student, began working part-time for Glass in its Iowa City outlet. After graduation he started working full-time as an installer-trainee. He was promoted to the position of manager of the Burlington outlet in 1973. He received further promotions when he became manager of the Iowa City outlet in 1975 and manager of the Davenport outlet in 1981.

As manager of an outlet Jindrich was responsible for sales, solicitation of business, inventory, bookkeeping and installation of glass. He was aided by two employees, a secretary and an installer.

In the later months of 1976, after a manager in Mason City left Glass and started a competing business, Glass decided that each manager would be asked to execute an employment contract containing a covenant not to compete. Although he never previously had a written employment contract with Glass, Jindrich executed such a contract on November 18, 1976.

Following his last promotion, Jindrich began his duties in Davenport on January 1, 1981. He was not asked to sign another employment contract at that time. Because of marital difficulties he did not move to Davenport but commuted from Iowa City until September 17, 1981, the day he voluntarily terminated his employment with the company.

After his termination Jindrich was unable to secure full-time employment and worked part-time in mobile home sales and service. In December 1981 Jindrich and a friend formed a partnership named Glass Services. This partnership commenced to sell, repair and install all types of glass in the Iowa City area. As a partner in the business, Jindrich occasionally contacted and sold auto glass to some of the same customers he had served while he was an employee of Glass.

On December 14, 1981, Iowa Glass brought a suit in equity seeking an injunction against Jindrich to enforce the covenant not to compete in the selling or installing of auto glass. The trial court held that the parties abandoned the employment contract and the covenant not to compete when Jindrich accepted employment in the Davenport outlet.

The initial issue on appeal is whether or not the employment contract was abandoned. If Glass is correct in its assertion that the contract was not abandoned, secondary issues arise concerning the validity of the covenant. The parties cannot agree whether there was adequate consideration for the covenant and whether in the circumstances the covenant was reasonable.

Each issue has its source in the written employment contract. The pertinent portions of this form contract are as follows:

1. First Party agrees to employ Second Party as a Salesman for the purpose of selling and installing auto glass which has been purchased by customers from First Party. The employment of Second Party shall also include the solicitation of orders for the sale and installation of auto glass. The place of employment of Second Party shall be the place of business of First Party in the City of Iowa City, the business address of which is 113 Stevens Road, in said city. The place of employment shall also include the county in which that city is located. The installation of the auto glass shall be made at the place of business of First Party in that city, or at such other place within the county which is necessary to secure the sale of the auto glass.

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4. The employment of Second Party shall continue so long as his services are satisfactory to First Party. However, both parties reserve the right to terminate the employment under this agreement by giving notice to the other as hereinafter provided.

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7. Both parties recognize that Second Party will be the key man who will be responsible for the development of the business of First Party in the city and county above named. Second Party will be the person who will be in direct contact with the customers of First Party in that area. Both parties expect that through the efforts of Second Party, for which he will be compensated in accordance with the terms of this agreement, a substantial patronage and good will should be developed within the area covered by this agreement. Both parties recognize that the nature of the services to be rendered by Second Party are such that it might be very detrimental to First Party if Second Party was privileged to terminate his employment under this agreement and enter into competition with First Party within the area covered by this agreement.

8. Second Party agrees that, upon the termination for any cause of his employment under this agreement, he will not for a period of three (3) years thereafter either directly or indirectly engage in the business of selling or installing auto glass or soliciting orders for the sale and installation of auto glass in the City of Iowa City, or the County in which that city is located. Second Party further agrees that he will not within that time, or within that area, in any manner, directly or indirectly, attempt to hire the employees of First Party engaged in the business of selling or installing auto glass, or attempt to take away any of the auto glass customers of First Party, within the City of Iowa City, or in the County in which that city is located, during the period of three (3) years from the date of the termination of his employment.

I. Abandonment. Abandonment of a contract is "the relinquishment, renunciation or surrender of a right. Its existence depends upon intention and acts evidencing intention to abandon." Storck v. Pascoe, 247 Iowa 54, 64, 72 N.W.2d 467, 472-73 (1955). The act of relinquishment must be unequivocal and decisive. Id. 247 Iowa at 64, 72 N.W.2d at 473.

Abandonment of a valid contract may be accomplished by express agreement of the parties, or the parties, by conduct inconsistent with the continued existence of the original contract, may estop themselves from asserting any right thereunder. Severson v. Elberon Elevator, Inc., 250 N.W.2d 417, 421 (Iowa 1977). Since there is no express agreement to abandon this contract, we must examine both the acts of the parties and the contract itself to determine whether the parties unequivocally and decisively relinquished their rights under the covenant.

Jindrich claims that the contract of employment was abandoned or terminated by his transfer to Davenport. In his brief he cites no authority for his position and only reaches this contention as a part of his claim that he did not breach the employment contract. Neither party breached the terms of the contract of employment, since the transfer to Davenport was mutually acceptable. Nonetheless, the question of abandonment of the covenant remains.

The specific terms of paragraph 8 of the agreement provide that the restriction will take place "upon the termination for any cause of his employment under this agreement." The restrictive covenant is ancillary to the employment contract and, by its terms, only becomes enforceable upon termination of employment under the contract. Thus, while the oral agreement between the parties concerning Jindrich's transfer to Davenport at a new salary supports an inference Jindrich terminated his employment under the contract, this conduct is not inconsistent with continued existence of the covenant not to compete in Iowa City. Indeed, the record supports a contrary conclusion. Glass testified at trial that no new written contract was entered into restricting competition in the Davenport area because Jindrich was still living in Iowa City. Both the absence of a new written contract covering the Davenport location and Jindrich's continued residence in Iowa City are wholly consistent with the inference the employer still desired protection in Iowa City and did not intend to abandon the covenant not to compete.

Based on our de novo review of the record, we conclude Jindrich has not established that the parties unequivocally and decisively relinquished their rights under the covenant. As noted earlier, we can infer that the transfer was a termination of the Iowa City employment on January 1, 1981, and triggered the time limitation clause contained in the covenant. Since we disagree with the trial court's determination that the covenant not to compete was abandoned, we find it necessary to examine the other claims concerning the validity of the covenant provisions of the contract.

II. Validity of the covenant not to compete.

A. Consideration. Jindrich argued to the trial court that the covenant not to compete was unenforceable because it lacked consideration. He points out that he was already employed as a manager when he signed the employment contract and received no additional compensation, security, promises or other benefits for the covenant. As the trial court did not reach this issue, we must decide it without the aid of an initial determination.

We agree with Jindrich on the facts that he has outlined. Nevertheless, we also must consider that...