Ridley v. Krout

• Citation: 180 P.2d 124,63 Wyo. 252
• Decision Date: 02 May 1947
• Docket Number: 2355
• Parties: ELVIN E. RIDLEY, Plaintiff and Appellant, v. FRANK KROUT, Defendant and Respondent
• Court: United States State Supreme Court of Wyoming

180 P.2d 124

63 Wyo. 252

ELVIN E. RIDLEY, Plaintiff and Appellant, v. FRANK KROUT, Defendant and Respondent

No. 2355

Supreme Court of Wyoming

May 2, 1947

APPEAL from District Court, Sheridan County; JAMES H. BURGESS Judge.

Action for an injunction by Elvin E. Ridley against Frank Krout. From a judgment in favor of the defendant, the plaintiff appeals.

Judgment affirmed.

For the Plaintiff and Appellant, the cause was submitted upon the brief and also oral argument of E. E. Birchby of Sheridan Wyoming.

POINTS OF COUNSEL FOR APPELLANT

A contract which in its terms is in unreasonable restraint of trade is invalid as against public policy but a contract in reasonable restraint of trade is valid.

The ground on which agreements in restraint of trade are held illegal at common law is that they are contrary to public policy, but before parties can be absolved from their solemn obligations on this ground, it must be shown that their agreements are manifestly injurious to the public welfare since it is also the policy of the law to hold persons to their contracts. The law of both the United States and of the State in which the violation of law occurred applies in determining the validity of an agreement in restraint of trade. 17 C. J. S. 622.

The question of reasonableness of restraint must be determined according to it own particular facts, and the subject matter the situation of the parties, and the circumstances should be considered, the nature of the business restrained being as important a consideration as the elements of time and place. A restraint to be reasonable must be such only as to afford a fair protection to the interests of the party in favor of whom it is given and not so large as to interfere with the interests of the public, or impose undue hardship on the person restricted. Subject to this qualification it may extend to all the territory in which the business has been carried on or wherein the covenantee's trade is likely to go, although coextensive with the United States.

The reasonableness of a territorial restriction may be considered with respect to the effect of modern means of transportation and communication. 17 C. J. S. 630.

The covenant or contract by which the restraint is imposed must be incidental to and in support of another lawful contract or sale by which the covenantee acquires some interest needing protection. Contracts which have for their object merely the removal of a rival and competitor in a business are unlawful under all circumstances. However, it is not necessary that the restrictive covenant be ancillary to a sale of a business contract of employment, or to any other lawful contract. Hence, it is not necessary that the contract accompany the sale of the tangible plant of a business. If the business is one which is carried on without any business plant, an agreement not to engage in such business in connection with the transfer of its good will and patronage is valid. 17 C J. S. 629.

Agreements not to engage in a competing business will ordinarily be held valid where necessary to protect the employer against employee's use of trade secrets confided to him during employment. 289 S.W. 295, 52 A. L. R. 1344.

If an employer is engaged in a business which he carries on through agents or servants whose performance of their duties involves a confidential knowledge of the employer's trade or business and brings them into such direct and personal business relation with the employer's business and its patrons that the agents or servants commonly acquire the names and residences of customers, their requirements, credit, and other trade or business information, or a personal following on clientel, during the period of their service, then it is not injurious to the public and it is reasonable to permit the employer and the agent or servant to enter into an ancillary covenant in partial restraint of trade to protect the employer's business from the competition of the servant for a reasonable length of time through a definite area. Tolman Loundry Co. v. Walker, 87 A. 836; 13 C. J. S. 485.

A contract in restraint of trade must be supported by a valuable consideration appearing on the face of the agreement, but the adequacy of such consideration cannot be inquired into by the courts. 17 C. J. S. 641.

Generally, covenants by employees not to engage in a similar or competing business for a definite period of time following the termination of the contract of employment in which the covenant is incorporated will be enforced in equity unless found to be contrary to public policy, unnecessary for the employer's business or protection, or unnecessarily restrictive of the rights of the employees, due regard being had to the subject matter of the contract, and the circumstances and conditions under which it is to be performed. 98 A. L. R. 967. City Ice and Fuel Co. v. McGee, 57 S.W. 2d. 440.

It is not necessary in order to procure an injunction to show actual damage by instances of successful competition; it is sufficient if such competition, in violation of the covenant, may result in injury. The inability to prove actual damages will justify equitable intervention. The plaintiff is not required to defer commencement of proceedings for relief until it can be shown that defendant has actually solicited its customers, and that injury to its business has thereby, or by other unlawful means, been accomplished. Capital Laundry Co. v. Vannozzi, 169 A. 554, 98 A. L. R. 969.

For the Defendant and Respondent, the cause was submitted upon the brief of H. Glenn Kinsley and James Munro, both of Sheridan, Wyoming.

POINTS OF COUNSEL FOR RESPONDENT

Something more than the mere breach of a covenant is essential in order to entitle the employer to invoke injunctive relief; it is necessary in this regard to show irreparable damage to the employer and an inadequate remedy at law. 9 A. L. R. 1463.

A contract restraining freedom of employment must be reasonable, and is valid only to the extent necessary to afford adequate protection to the party in favor of whom it is given; it must not unduly interfere with the right of the employee to labor and to follow any occupation in which he sees fit to engage, or be contrary to the rights and interests of the public. Walker Coal & Ice Co. v. Westerman (1928) 263 Mass. 235, 160 N.E. 801; 67 A. L. R. 1003.

It is a settled principle of law that no man may, per se, contract with another that that other will not follow a calling by which he may make his livelihood. It is only when they are incidental to some contract which is reasonable in its purpose and its terms, and it is necessary to the protection of the rights of the employer under such contract, that the validity of restrictive covenants will be recognized and enforced, and then only when they are themselves reasonable, no public interests are involved, and the restriction is limited to the very point of the necessity of protecting contract rights, to which the covenant is incidental. It is never the covenant itself, but the covenant in relation to the facts of the situation or contract to which it is incidental, which may be valid. Super Maid Cook-Ware Corp. v. Hamil, 284 U.S. 677, 76 L.Ed. 572, 52 S.Ct. 138.

In Kimberlay v. Jennings (1836) 6 Sim. 340, 58 Eng. Reprint, 621, 5 L. J. Ch. N. S. 115, it is held that where the employers reserved the right to discharge the employee or discontinue the payment of his salary, if the latter, from illness or any other cause over which he could have no control, should become incapable of serving the employer, the clause rendered unreasonable a covenant by the employee that he would not, for the remainder of the term of employment, the whole being six years, render service to any other individual in any capacity, or in any other trade, business, profession, or employment, without the consent of the employer, or the survivor of them.

A court of equity should not lend its power to enforce the provisions of an executory contract against one of the parties unless the terms and conditions of the contract were such that the court of equity might enforce at least a part of the terms thereof against the other party. Nettles v. City Ice & Fuel Co. (1935) Fla. 160 So. 42; Lewis v. Kirkland (1935) Fla. 160 So. 44; Wheeler v. Nickles (1935) Fla. 160 So. 45; Love v. Miami Laundry Co. (Fla.) 160 So. 34.

There is no power the exercise of which is more delicate, which requires greater caution, deliberation, and sound discretion, or is more dangerous in a doubtful case, than the issuing of an injunction. It is the strong arm of equity, which ought never to be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages. The right must be clear and it will not be awarded in doubtful cases, nor in new ones not coming within well-established principles. 9 A. L. R. 1460.

It has been generally held that a restrictive clause in an employment or business sale contract preventing future competition by the employee or seller, or preventing an employee from performing services for others during the existence of the employment relationship, may not be enforced by the employer or a purchaser where there has been a breach by the latter of his own obligations under the contract. 155 A.L.R. 654.

Equity will not assist a party seeking to enforce a hard bargain. The right to specific performance depends upon circumstances and conditions in addition to the existence of a valid contract. The contract must be perfectly fair in all its parts and free from misrepresentation or misapprehension. When the promise not to compete is ancillary to an employment contract, injunction to enforce the promise will not be granted "unless the whole...