Nichols v. Anderson.

• Decision Date: 05 June 1939
• Docket Number: No. 4434.,4434.
• Parties: NICHOLSv.ANDERSON.
• Court: New Mexico Supreme Court

43 N.M. 296

92 P.2d 781

NICHOLS

v.ANDERSON.

No. 4434.

Supreme Court of New Mexico.

June 5, 1939.Rehearing Denied Aug. 1, 1939.

Appeal from District Court, San Miguel County; Irwin S. Moise, Judge.

Suit in equity by F. W. Nichols against Melvin Anderson to restrain defendant from soliciting or delivering laundry or dry cleaning in competition with plaintiff and recover damages therefor, in which defendant filed a counterclaim for the amount of his bond deposited with plaintiff under such contract. Judgment for plaintiff, and defendant appeals.

Affirmed.

In equity suit to enjoin plaintiff's former employee from competing with plaintiff in violation of employment contract, damages for breach of such contract were properly allowed plaintiff as incident to main suit, though defendant complained that he was thus deprived of right to trial by jury on question of damages.

Nathaniel Lloyd, of Las Vegas, for appellant.

Luis E. Armijo, of Las Vegas, for appellee.

MABRY, Justice.

Plaintiff and appellee, F. W. Nichols, sued to restrain defendant and appellant, Melvin Anderson, from engaging in soliciting or delivering laundry or dry cleaning in the town of Las Vegas, and for damages in the sum of $500 for having so engaged in such business contrary to a contract theretofore made with plaintiff and appellee; and, in addition, he sought to recover the sum of $80.83 for collections made upon laundry deliveries for which no accounting was made to plaintiff and appellee. Defendant and appellant denied generally the allegations of plaintiff's complaint and by counterclaim sought to recover the sum of $100, the amount of a bond deposited with plaintiff and appellee, as called for by the contract hereafter to be noticed.

The judgment was for plaintiff and appellee in the sum of $250 found to be the damages suffered by virtue of defendant's unlawful competition in violation of the contract in question; and, in addition, for $46.78 found by the Court to be due plaintiff and appellee from defendant and appellant for unaccounted for items for which appellant and defendant was chargeable under the contract.

For convenience, the parties will hereafter be referred to as plaintiff and defendant.

Plaintiff, Nichols, was the owner and operator of a laundry and dry cleaning establishment in the town of Las Vegas, and defendant was employed by him as an agent and employee to solicit business and make deliveries. Prior to the employment a contract was made and entered into by and between the parties which provided, among other things, that the employee, defendant, “will not at any time while employed by plaintiff, nor within one year after the termination of such employment, regardless of the time or cause of such termination, either for himself or for any other person, firm or corporation, other than his employer, or his successors, directly or indirectly, solicit, call for, or deliver articles to be cleaned, pressed, dyed or laundered, in the city or town of Las Vegas, or in any other territory in which the employee shall have served the employer under this contract, or any extension of this contract; and, that within the aforementioned period of time, he, the employee, will in no manner attempt to induce any of the patrons or customers of the employer, his successors or assigns, to withdraw their patronage or custom.” It was by the contract further agreed that the defendant should deposit with plaintiff, his employer, the sum of $100 as security for the faithful performance of the contract, which deposit was to be returned to the employee at the termination of the contract, with stipulated interest, “less any and all unpaid items.”

It is alleged, and the proof is undisputed, that defendant did, after the termination of the contract of employment by mutual consent, engage in soliciting laundry and dry cleaning business on his own behalf in Las Vegas, as the owner and manager of a competing business, and prior to the expiration of the year from the time of the severance of the relation of employer and employee as between the parties. By mutual consent, the defendant left the employment of plaintiff on the 24th day of December, 1935. He immediately engaged in a competing business, soliciting from patrons of his former route, who patronized plaintiff as employer of defendant.

The Court found, and such findings are supported by abundant proof, that defendant did so engage as a competitor of plaintiff Within the time so restricted by the contract in question.

Defendant urges that the contract is: (a) Contrary to public policy, and in restraint of trade, and should not be enforced; (b) and, in any event, there was no evidence to support the Court's finding that plaintiff had been damaged in the sum of $250 by defendant so engaging in such business; and (c) that defendant should have prevailed upon his claim for $100, as set out by his cross complaint.

[1] Although defendant assigns as error and cites some authority upon the question that contracts in restraint of trade are against public policy and illegal and calls attention as well to Secs. 35-2901 to 35-2903, N.M.Comp.1929, as prohibiting contracts which operate to restrict trade and commerce, none of the authorities are in point. It is of course a well established rule that a naked agreement by one party not to engage in business in competition with another party is in contravention of public policy and therefore void, unless such agreement and restriction be incidental to some general or principal transaction. That is, its main object must not be to stifle competition. Gross, Kelly & Co. v. Bebo, 19 N.M. 495, 145 P. 480.

[2] But, as was stated in Tolman Laundry, Inc., v. Walker, 171 Md. 7, 187 A. 836, 838: “The principle is firmly established that contracts only in partial restraint of any particular trade or employment, if founded upon a sufficient consideration, are valid and enforceable, if the restraint be confined within limits which are no larger and wider than the protection of the party with whom the contract is made may reasonably require.” (Citing numerous authorities.)

We have held in a number of cases that an agreement to refrain from engaging in a certain business or profession within reasonable limits of time and place is valid if subsidiary to other legitimate purposes such as the sale or disposal of property, business or good will. Thomas v. Gavin, 15 N.M. 660, 110 P. 841; Gallup Electric Light Co. v. Pacific Improvement Co., 16 N.M. 86, 113 P. 848; Gross, Kelly & Co. v. Bebo, 19 N.M. 495, 145 P. 480; Gonzales v. Reynolds, 34 N.M. 35, 275 P. 922. The above statement from Tolman Laundry, Inc. v. Walker, supra, is quite universally recognized as the rule. Excelsior Laundry Co. v. Diehl et al., 32 N.M. 169, 252 P. 991; Eureka Laundry Co. v. Long, 1911, 146 Wis. 205, 131 N.W. 412, 35 L.R.A., N.S., 119; Grand Union Tea Co. v. Walker, 208 Ind. 245, 195 N.E. 277, 98 A.L.R. 958, et seq.; Granger v. Craven, 159 Minn. 296, 199 N.W. 10, 52 A.L.R. 1356.

[3] We hold that this contract, being only in partial restriction and restraint of trade and employment and founded upon sufficient consideration, and “being confined within limits which are no larger and wider than the protection of the party with whom the contract is made may reasonably require,” is valid and enforceable.

[4][5] We have next, the question of whether there was sufficient evidence to support the Court's finding that the counterclaim of defendant for $100 should not be allowed. Plaintiff, in his answer to the counterclaim, alleged that “during the time defendant worked for plaintiff that the defendant withdrew and took...