Safelite Glass Corp. v. Fuller

Citation807 P.2d 677,15 Kan.App.2d 351
Decision Date15 March 1991
Docket NumberNo. 65544,65544
Parties, 6 IER Cases 417 SAFELITE GLASS CORPORATION, Appellant, v. Richard Max FULLER a/k/a R. Max Fuller, Appellee.
CourtCourt of Appeals of Kansas

Syllabus by the Court

1. In the absence of express language which limits assignability, covenants not to compete which do not involve personal and confidential relations are assignable and may be enforced by a subsequent purchaser of a business as an incident of the business.

2. An employee is not terminated upon the sale of a business when the employee continues in the same position and at the same salary with the successor employer as with the previous employer.

Hal D. Meltzer and Christopher F. Pickering of Turner and Boisseau, Chartered, Overland Park, for appellant.

Wanda M. Temm and C. Maxwell Logan of Shook, Hardy & Bacon, Overland Park, for appellee.

Before LEWIS, P.J., and ELLIOTT and RULON, JJ.

RULON, Judge:

In this contract action, Safelite Glass Corporation (Safelite), plaintiff, appeals from the district court's entry of summary judgment for Richard Max Fuller, defendant. Safelite brought this action, seeking injunctive relief and damages, to enforce Fuller's covenant not to compete in the replacement auto glass business. Fuller sold his auto glass business to Lear Siegler, Inc. (LSI). The asset purchase agreement contained a noncompetition clause prohibiting Fuller from competing in the auto glass business for five years. The Fuller-LSI agreement contemplated that Fuller would be employed by LSI; Fuller later worked for LSI as a district manager. LSI subsequently assigned all its assets, including the Fuller agreement, to Safelite. The district court found that LSI's assignment of assets to Safelite constituted a termination of Fuller's employment and voided the noncompetition agreement.

We must decide (1) whether Fuller's covenant not to compete was assignable and (2) whether the district court erred in concluding LSI's transfer of assets and liabilities to Safelite operated as a termination of Fuller's employment, voiding the covenant not to compete. We reverse and remand with directions.

The material facts are as follows:

Fuller was the sole stockholder of the Kansas corporation Magic Glass Company of Kansas, Inc. (Magic). In August 1986, Magic and Fuller, as sellers, entered into an extensive asset purchase agreement with LSI, a Delaware corporation. The agreement provided that LSI would purchase virtually all of Magic and Fuller's operating assets and assume all liabilities, except liabilities specifically excluded by the agreement. The agreement contained a noncompetition clause which provided:

"As part of the consideration paid by LSI hereunder, Seller [Magic] and Fuller agree with LSI that for a term of five (5) years after the Effective Date, Seller and Fuller each will refrain from using the name 'Magic Glass' when it relates to the replacement glass business and will refrain from carrying on, directly or indirectly, a business competitive with the business conducted by Seller (or by LSI as successor), within the State of Kansas or Missouri. To 'carry on a business' shall mean acting as a consultant, employee, sole proprietor, general or limited partner of a partnership, joint venturer, officer, director, shareholder owning more than 10% of the stock of a corporation, or holder of any profit sharing interest or arrangement with any business enterprise or corporation which carries on such a business.

"A. Notwithstanding anything to the contrary herein stated, it is contemplated that Fuller shall become an employee of LSI. In the event that Fuller becomes an employee of LSI or any of its subsidiaries and is thereafter terminated by LSI for a reason other than [the several following reasons] then this noncompete [agreement] shall be null and void. If Fuller voluntarily terminates employment, the noncompete agreement herein contained shall be in effect."

The agreement basically provided that the noncompetition clause would be enforceable if Fuller was terminated by LSI for cause, and the agreement listed several situations which established cause. The agreement also contained a clause stating, "This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns." (Emphasis supplied.)

Immediately after the sale, Fuller began working for LSI as a district manager. He earned a yearly salary of $50,000, a yearly bonus of $25,000 guaranteed for three years, and fringe benefits such as payment of country club dues and car telephone bills.

In 1987, LSI established a corporate division known as the Safelite Division to conduct its auto glass operations. LSI later formed the plaintiff corporation, Safelite, and assigned to it all the assets and obligations of its auto glass business, including the Fuller-LSI agreement. The LSI-Safelite transfer of assets occurred on March 24, 1987. Fuller apparently continued working for the successor corporation, Safelite, at least through May 1989.

On March 23, 1990, Fuller formed a Kansas corporation called Budget Auto Glass, Inc., (Budget) which began business replacing auto glass in Gardner and Chanute, Kansas. Safelite filed this action in June 1990, alleging that Fuller's operation of Budget was a violation of the noncompetition agreement. Safelite filed an application for a temporary injunction on June 18, 1990, asking the district court to restrain Fuller and Budget from operating an auto glass replacement business.

Fuller answered Safelite's petition on June 27, 1990, denying that his operation of Budget violated the noncompetition clause. Fuller asserted five affirmative defenses, alleging that (1) Safelite failed to state a claim for which relief could be granted; (2) Safelite was barred by waiver, estoppel, statute of limitations, laches, failure of consideration, release, or any other affirmative defense appearing during discovery; (3) the noncompetition clause in the Fuller-LSI agreement was a personal contract and nonassignable; (4) Fuller was "constructively terminated from his employment with the plaintiff," and thus the noncompetition clause was void by its own terms; and (5) the noncompetition clause was impermissibly broad and therefore unenforceable.

Later, Fuller filed a motion for summary judgment with an attached supporting memorandum. He argued in his memorandum that the noncompetition clause was a personal contract benefiting only LSI and was not assignable and that, because Safelite was not a party to or an intended beneficiary of the Fuller-LSI agreement, Fuller was entitled to summary judgment as a matter of law. The affidavit attached to his motion stated that LSI had specifically requested that the noncompetition clause in the Fuller-LSI agreement inure to the benefit of Safelite, but that Fuller had not agreed to those terms and had intended the clause to benefit only LSI. Fuller filed a supplemental memorandum two days before the hearing on his summary judgment motion, in which he admitted the existence of a general assignability clause in the Fuller-LSI agreement, but argued that the noncompetition clause itself contained a restriction against assignability. The supplemental memorandum also asserted that the noncompetition clause became void and unenforceable by its own terms when LSI assigned the contract to Safelite.

On the other hand, Safelite argued that covenants not to compete are generally assignable, that the covenant in this case is a negative covenant, not a personal service contract as argued by Fuller, and that the Fuller-LSI agreement was fully assignable and enforceable by Safelite due to the contract's assignability clause.

On the day the district court granted Fuller summary judgment, Safelite filed a supplemental response, alleging that Fuller's employment was never terminated by LSI or Safelite. Additionally, Safelite argued that Fuller consented to the LSI-Safelite assignment by working for and accepting benefits from Safelite after the assignment. Safelite further argued that because Fuller accepted employment benefits from Safelite, he was estopped from denying that the covenant not to compete benefited Safelite. Finally, Safelite argued that if the court found that Fuller was indeed terminated, a factual issue would remain regarding whether the termination was voluntary or involuntary, and, therefore, summary judgment was not appropriate.

The district court's journal entry, in part, provides:

"The contract between defendant and Lear Siegler, Inc. is not ambiguous and the non-competition clause becomes void upon the transfer of the Safelite division or the Safelite division assets to a third party.

"Defendant ceased to be employed by Lear Seigler [sic ], Inc. upon the sale of the business. The assignment of the non-compete agreement in favor of Lear Seigler [sic ], Inc. ... was ineffective as it became void under its terms."

1. The Covenant Not to Compete

Safelite contends that Fuller's covenant not to compete is a negative covenant bargained for by LSI, its predecessor, to protect the transferred good will of Fuller's former business and is enforceable by Safelite as LSI's successor. Fuller contends that the covenant obligated him only to LSI and that the personal nature of the promises and obligations contained in the agreement are enforceable only by LSI.

The rules for the district court's grant of summary judgment and this court's scope of appellate review of that grant are well settled.

"Summary judgment is proper where the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. [Citations omitted.] When a summary judgment is challenged on appeal, an appellate court must read the record in the light...

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7 cases
  • Weber v. Tillman
    • United States
    • Kansas Supreme Court
    • March 8, 1996
    ...contracts are strictly construed against the employer. Eastern Distributing, 222 Kan. at 671, 567 P.2d 1371; Safelite Glass Corp v. Fuller, 15 Kan.App.2d 351, 356-57, 807 P.2d 677, rev. denied 249 Kan. 776 Cases evaluating noncompetition agreements between physicians have been published by ......
  • Metropolitan Life Ins. Co. v. Strnad
    • United States
    • Kansas Supreme Court
    • June 3, 1994
    ...3, 675 P.2d 900 (1984). This court's analysis must begin within the four corners of the instrument itself. See Safelite Glass Corp. v. Fuller, 15 Kan.App.2d 351, 362, 807 P.2d 677, rev. denied 249 Kan. 776 Construction of the Contract Metropolitan notes that one of the Strnads' arguments is......
  • Great American Opportunities, Inc. v. Cherrydale Fundraising, LLC, Civil Action No. 3718-VCP (Del. Ch. 1/29/2010)
    • United States
    • Court of Chancery of Delaware
    • January 29, 2010
    ...to enforce a covenant not to compete generally is assignable in connection with the sale of a business."); Safelite Glass Corp. v. Fuller, 807 P.2d 677, 683 (Kan. Ct. App. 1991); Kegel v. Tillotson, 2009 WL 3486739, at *2 (Ky. Ct. App. Oct. 30, 2009) (citing Managed Health Care Assoc., Inc.......
  • A.O. Smith v. Dept. of Human Resources
    • United States
    • Kansas Court of Appeals
    • December 9, 2005
    ...Corp., 24 F.3d 1272, 1280 (10th Cir. 1994)." AOS has also cited and relied heavily on this court's opinion in Safelite Glass Corp. v. Fuller, 15 Kan.App.2d 351, 807 P.2d 677, rev. denied 249 Kan. 776 (1991). Safelite, however, was not a wage payment case. The district court found that an em......
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2 books & journal articles
  • Kansas Noncompete Agreements — an Updated Overview
    • United States
    • Kansas Bar Association KBA Bar Journal No. 77-1, January 2008
    • Invalid date
    ...Supp. 1259, 1262 (D. Kan. 1984). [52] Puritan-Bennett Corp. v. Richter, 8 Kan. App. 2d 311, 314-15, 657 P2d 589, 591, 592 (1983). [53] 15 Kan. App. 2d 351, 359, 807 P.2d 677, 683 (1991). [54] Varney Bus. Servs. Inc. v. Pottroff, 275 Kan. 20, 31, 59 P.3d 1003, 1013 (2002); Equifax Services I......
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    • United States
    • Colorado Bar Association Colorado Lawyer No. 36-4, April 2007
    • Invalid date
    ...were assignable and even though the Individual Defendants did not expressly consent to the assignment. Safelite Glass Corp. v. Fuller, 807 P.2d 677 1991); Equifax Serv., Inc. v. Hitz, 905 F.2d 1355, 1361 (10th Cir. 1990) (holding covenants assignable); Artromick Int'l, Inc. v. Koch, 759 N.E......

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