McCandless v. Carpenter

• Decision Date: 02 March 1993
• Docket Number: No. 19426,19426
• Citation: 848 P.2d 444,123 Idaho 386
• Parties: Dana McCANDLESS, Plaintiff-Appellant, v. Bobby Edgar CARPENTER, Defendant-Respondent.
• Court: Idaho Court of Appeals

Page 444

848 P.2d 444

123 Idaho 386

Dana McCANDLESS, Plaintiff-Appellant, v. Bobby Edgar CARPENTER, Defendant-Respondent.

No. 19426.

Court of Appeals of Idaho.

March 2, 1993.

Dunn & Clark, Rigby, for plaintiff-appellant. Robin D. Dunn argued.

Edwin Wagner, Idaho Falls, for defendant-respondent.

SWANSTROM, Judge.

This case involves a dispute between two irrigation pipe repair business operators after one of them sold some used pipe repair equipment to the other. The seller brought this action to enforce noncompetition provisions of the sale contract between the two, requesting injunctive relief and liquidated damages. After trial, the district court ruled that the noncompete agreement lacked sufficient consideration to support specific performance of the agreement. The court also declined to enforce the liquidated damages provision based on the conclusion that the noncompete clause was unenforceable. The seller has appealed, contending that the court erred in making these rulings. For reasons stated below, we affirm.

Background Facts

Bobby Carpenter was seasonally employed by Ken Hopkins in the irrigation pipe repair business in southern Idaho between 1972 and 1984. In about September, 1985, Dana McCandless purchased Hopkins's pipe repair business. Carpenter then worked for McCandless during the summers each year until 1989.

Because McCandless wanted to expand his business he planned to buy a new machine. In March, 1990, he learned that Carpenter was interested in purchasing his old pipe-repairing machinery. McCandless decided he could sell his old machine and equipment and buy two new machines. After talking by phone with Carpenter, McCandless wrote a letter to Carpenter stating that he would sell Carpenter specifically listed equipment and tools (hereinafter "the equipment") for $6,000. Carpenter arranged for financing, met with McCandless, and told him he was prepared to purchase the equipment for $6,000. At the time of these negotiations and the subsequent sale, Carpenter was no longer employed by McCandless; that employment had ended several months before.

McCandless had his attorney draft a contract of sale for the equipment to Carpenter. On March 26, 1990, the parties met at McCandless' home where Carpenter looked at the equipment, gave his $6,000 check to McCandless and signed the contract which McCandless presented, entitled "Contract on Sale of Personal Property and Noncompete Agreement." Although Carpenter testified that he had first learned of the noncompete agreement when the written contract was presented to him, he also testified that he had read the contract and signed it without any coercion. Part of the contract language relative to the noncompetition agreement is as follows:

3. Buyer recognizes that he will receive special training, trade secrets, and experience which has been acquired by seller in the course of his business. Further, buyer recognizes that said trade secrets, training and general information acquired by seller are valuable and consideration which passes with the property described above.

4. Buyer agrees not to establish or open any business, trade or occupation similar to the business operated by seller, or in any manner to become interested, directly or indirectly, either as an employee, owner, partner, agent, stockholder, director, or otherwise, in any such business, trade, or occupation, within the counties of Jefferson, Clark, Teton, Fremont, Madison, Bingham or Bonneville, State of Idaho. The period of time for this restriction is the term of three (3) years from the date hereof.

It is undisputed that Carpenter, after consulting an attorney, violated the restrictive covenants in the contract by using the equipment to repair irrigation pipe in the seven-county area during the year 1991. Some of his customers had been customers of McCandless during the years that Carpenter had worked for McCandless. Learning this, McCandless brought this action.

Consideration For The Covenant Not To Compete

Notwithstanding the recitations in the contract, Carpenter argued to the trial court that the covenant not to compete was void because it lacked consideration. Part of his argument involved the contention that a contract of sale was fully completed before the written agreement was even presented to him and signed by the parties. ¹

Carpenter concedes the principle that courts will generally not examine the adequacy or sufficiency of consideration, except as it may bear upon competency or consciousness of action. Enders v. Wesley W. Hubbard & Sons, Inc., 95 Idaho 590, 513 P.2d 992 (1973). However, Carpenter asserts that the district court acted correctly in examining the consideration transferred and in relying upon the following rule in its written decision:

Still a court of equity will ordinarily refuse to order specific performance of the contract if the consideration supporting it is grossly disproportionate to the injury incurred by the covenantor or the benefit accruing therefrom to the covenantee.

8 Am.Jur. Proof of Facts 2d Covenant Not to Compete § 2, 663, 674 (1976).

Initially we note that "[a] written instrument is presumptive evidence of a consideration." I.C. § 29-103; see also W.L. Scott, Inc. v. Madras Aerotech, Inc., 103 Idaho 736, 653 P.2d 791 (1982). "Once this presumption arises, the party seeking to assert the affirmative defense of lack of consideration must establish that defense by a preponderance of the evidence." Id. at 741, 653 P.2d at 796. The presumption may be rebutted by any substantial evidence. It has been held, for example, "where a deed contains recitals of fact purporting to evidence receipt or acknowledgement of payment, such recitals may be challenged as untrue, and parol evidence is admissible for that purpose. The law uniformly allows the admission of parol evidence to prove that a recital of fact is untrue." Vanoski v. Thomson, 114 Idaho 381, 383, 757 P.2d 244, 246 (Ct.App.1988). Of course, in the present case, the burden of showing the insufficiency of consideration is upon Carpenter. The district court's written "Findings of Fact, Conclusions of Law and Judgment" show that he was aware of this burden. For the most part, McCandless does not dispute the court's findings. Accordingly, we need only to determine whether the court's findings regarding "consideration" are supported by substantial evidence.

In addition to the facts we have already related, the district court made other findings which we summarize as follows:

1. As a result of ... [his employment with Ken Hopkins prior to 1985], Carpenter was experienced in the irrigation pipe repair business and acquainted with ranchers in Eastern Idaho who required this service.

2. [McCandless] also worked for [Hopkins] for a short period of time in 1985.

3. In 1985, McCandless purchased equipment from [Hopkins] and went into the business of repairing sprinkler irrigation pipe.

....

5. McCandless purchased customer lists, purchased additional equipment worked to maintain and improve his equipment and worked to improve the efficiency of his business operation in order to enhance the profitability of his business.

6. McCandless ... [seasonally employed Carpenter as "contract labor" between 1985 and 1989 to assist him in his sprinkler pipe repair business]. This employment relationship was terminated in 1989.

7. The customer lists that McCandless had purchased were not "trade secrets" since Carpenter already had the benefit of any such information before the restrictive covenant was signed and these customer lists were available for purchase by anyone.

8. Upon termination of this employment relationship in 1989, Carpenter could have used any knowledge that he had gained from working for McCandless either as an employee of another entity involved in the pipe repair business or as a proprietor of a business involved in the pipe repair business.

....

14. There is no evidence in the record before this court that Carpenter received any "knowledge, trade secrets and start up knowledge" referred to in the March 26, 1990 agreement from McCandless at the time of the execution of the said agreement, or thereafter.

15. The evidence establishes that Carpenter's knowledge about the techniques used in McCandless' pipe repair business, his customers, were all known by Carpenter at the time his employment was terminated in 1989 and prior to his execution of the "Contract of Sale of Personal Property and Noncompete Agreement" at issue in this action.

Although McCandless does dispute finding number 15, that finding is supported by McCandless' own testimony elicited during his cross-examination. From its findings, the district court concluded that Carpenter, by virtue of executing the March 26, 1990 contract, received nothing of value in addition to the listed equipment for which he had paid full value. The court specifically found that the "main purpose of the contract ... was to restrict Carpenter from competing with McCandless." Consistent with these findings, the court concluded that McCandless was the only party that benefitted from the noncompetition agreement and the liquidated damages provision. We agree.

The restrictive covenant operated in one direction only. It purported even to prohibit Carpenter from being employed in the pipe repair business by any competitor to McCandless within the seven-county area. On the other hand, Carpenter was given no protection in any area of the state against competition from McCandless. In fact, McCandless testified that he was considering "franchising" the business even into areas where Carpenter was permitted to do business, outside of the seven-county area. To this end, McCandless had restrictive language in the contract requiring Carpenter to charge his customers a "minimum repair cost" per section of pipe. He testified that he wanted "his franchisees, whether it be in Western Idaho or the American Falls-Twin Falls Area, ... to be able to...