Matlock v. Data Processing Sec., Inc.

• Decision Date: 30 October 1980
• Docket Number: No. 18432,18432
• Citation: 607 S.W.2d 946
• Parties: J. C. MATLOCK, Jr., Thomas Bailey, Laurence B. Compton, and Total Assets Protection, Inc., Appellants, v. DATA PROCESSING SECURITY, INC., Appellee.
• Court: Texas Court of Appeals

Page 946

607 S.W.2d 946

J. C. MATLOCK, Jr., Thomas Bailey, Laurence B. Compton, and Total Assets Protection, Inc., Appellants, v. DATA PROCESSING SECURITY, INC., Appellee.

No. 18432.

Court of Civil Appeals of Texas, Fort Worth.

Oct. 30, 1980.

Rehearing Denied Nov. 26, 1980.

Cantey, Hanger, Gooch, Munn & Collins and Ralph H. Duggins, III, Fort Worth, for appellants.

McLean, Sanders, Price, Head & Ellis and Albon O. Head, Jr., Fort Worth, for appellee.

OPINION

MASSEY, Chief Justice.

For purpose of appeal the case may be viewed as one where Data Processing Security, Inc. (DPS) sought and obtained temporary injunctive relief against its former employees, J. C. Matlock, Jr., et al. and against Total Assets Protection, Inc., the corporation said employees had formed to compete with their former employer.

We affirm the decree of temporary injunction.

Basically this is the common situation where employees, contrary to contractual provisions in their employment contract proscribing competition with their employer for a period after severance, nevertheless join together and form a business in competition with him. Quite common is the formation of a new corporation by which to begin such business, and that is what was done in the instant case.

A contention, this by all former employees, (J. C. Matlock, Jr., et al.), is that by the evidence each contract is shown voidable, and for that reason void for want of consideration, because their execution of the "non compete" agreements was required after they had already entered into the service of DPS as the employer, without any additional consideration to support their contracts not to compete.

After having executed the contracts all of them continued in the service of DPS. Nevertheless each of them charges to be void the contract he has signed, under which he has performed in whole or in part, though it was known that he would be discharged if the contract were not signed. To sign the contracts was shown to have been a requirement if there was desire to continue in the employment of DPS. Matlock, et al. cannot claim benefit by the contention. One cannot successfully plead want of consideration, or unilateralness, in a contract which he has performed in whole or in part. Furthermore there is consideration for the contract because, knowing there would be discontinuance of the employment relation if it was not executed, each did contract so that it would continue. Bettinger v. North Fort Worth Ice Co., 278 S.W. 466, 469 (Tex.Civ.App.-Ft. Worth 1925, no writ); McAnally v. Person, 57 S.W.2d 945 (Tex.Civ.App.-Eastland 1933, writ ref'd).

A contention by two of those comprising Matlock, et al. was that they were not bound not to compete with DPS because each had signed his contract in Illinois, where the employer was then domiciled, because by the laws of that state the contracts would not be enforceable against them. They contend that, by Illinois law the provision against competition in the entire United States was illegal as providing for too great a "space" or area in which they were forbidden to compete. In furtherance they claim that the material provisions of contract were wholly void and unenforceable by the courts of any state, whether or not the laws of such state provide as does Illinois.

There is exhaustive argument upon the state of Illinois law. We have concluded that for our purposes we may accept such law as having provided unenforceability of the contracted "non compete" clause of the employment contracts because as to permissible "space" the provision for the area of the entire United States would be avoidable, and as such by the evidence produced as void, plus the further acceptance of the fact that by the laws of the State of Illinois to render the entire agreement not to compete utterly void and unenforceable even in an area where to enforce it would have been reasonable and proper. (We are not to be understood as expressing an opinion on Illinois law.)

Even with the acceptance, however, we hold the Illinois law to be without application in our resolution of the controversy. Initially we take note that, in common with the ordinary "non compete" contracts, those under scrutiny are entirely silent, even by any permissible implication, upon the place of performance by any of the employees included in Matlock, et al.

Where such a situation obtains resolution of the question of place of performance of the contract requires that we look to the intention of the parties, and, where necessary, apply the maxim that the safest rule is to deem applicable the law of the forum which holds the contract legal and valid and enforceable rather than to attribute to the parties an intent to make an illegal and unenforceable contract.

A leading case by which our conclusion is fortified is that of W. A. Ryan & Co. v. M., K. & T. R'y Co., 65 Tex. 13 (1885), involving a contract entered into in the state of Missouri with a carrier, which carrier was to make delivery of goods to a consignee in Honey Grove, Texas but which were destroyed by fire while in-transit. Suit was brought in Texas against the carrier and it advanced the defense that its contract (the bill of lading) contained exemption from liability in the event of loss by fire. The carrier prevailed in the trial court because of the contract exemption, which, though valid by Missouri Law, was invalid as forbidden by the law of Texas. On appeal the trial court's judgment was reversed and remanded. The Supreme Court held that Texas law ruled the case and that in Texas the provision of contract upon which the carrier relied did not operate to limit the carrier's liability. The court wrote thereon, as follows:

"It was, in effect, admitted upon the trial that common carriers could, by the law of Missouri, where the present contract was made, place such restrictions upon their common law liability as are contained in the bill of lading upon which this suit is based. (As) (t)he law of our state, in which the contract was in part to be performed, forbidding such restrictions, it is of vital importance to ascertain whether the validity of the contract is to be governed by the law of Texas or that of Missouri.

"It is admitted law that when a contract is to be wholly performed within a state, the laws of that state must furnish the rule as to its validity. The parties have their attention drawn to the law of the state in which alone the contract can be broken and liability incurred, and it must be presumed that they intended that their rights and obligations should be determined by the laws prescribed...