Securities Acceptance Corp. v. Brown

• Decision Date: 09 December 1960
• Docket Number: No. 34832,34832
• Citation: 106 N.W.2d 456,171 Neb. 406
• Parties: SECURITIES ACCEPTANCE CORPORATION, a Delaware Corporation, and Securities Acceptance Corporation of North Platte, a Nebraska Corporation, Appellants, v. Robert M. BROWN, Appellee.
• Court: Nebraska Supreme Court

Page 456

106 N.W.2d 456

171 Neb. 406

SECURITIES ACCEPTANCE CORPORATION, a Delaware Corporation, and Securities Acceptance Corporation of North Platte, a Nebraska Corporation, Appellants, v. Robert M. BROWN, Appellee.

No. 34832.

Supreme Court of Nebraska.

Dec. 9, 1960.

Opinion Clarified on Denial of Rehearing Feb. 17, 1961.

See 107 N.W.2d 540.

Syllabus by the Court

1. At common law all contracts in restraint of trade were against public policy and void.

2. A contract which imposes partial restraint upon the exercise of a trade, business, or occupation is not unreasonable when it is ancillary to an actual transaction involving property, business, or employment made in good faith and is necessary or appropriate to afford fair protection to the one in whose favor the restriction is made. Such a contract will be respected and enforced.

3. The law does not look with favor upon restrictions against competition, and an agreement which limits the right of a person to engage in a business or occupation will be strictly construed and will not be extended by implication or construction beyond the fair or natural import of the language used.

4. However, such contracts should receive a reasonable construction, so as to give effect to the intention of the parties thereto and carry out, rather than defeat, the purpose for which they were executed.

5. The doctrine of equitable estopped is frequently applied to transactions in which it is found that it would be unconscionable to permit a person to maintain a position inconsistent with one in which he has acquiesced or of which he has accepted any benefit. And so also the acceptance of any benefit from a transaction or contract, with knowledge or notice of the facts and rights, will create an estoppel.

6. Injunction should not be granted to enforce a negative agreement in a contract of employment, unless the court is satisfied that the enforcement will be just and equitable and will not work undue hardship or oppression.

7. A contract of employment may constitute a valid consideration for an agreement that the employee will not compete with his employer during the term of the employment, or thereafter, within such territory and during such time as may be reasonably necessary for the protection of the employer's business.

8. There are three general requirements relating to partial restraints of trade: First, is the restriction reasonable in the sense that it is not injurious to the public; second, is the restriction reasonable in the sense that it is no greater than is reasonably necessary to protect the employer in some legitimate interest; and third, is the restriction reasonable in the sense that it is not unduly harsh and oppressive on the employee.

9. The determination of a matter which is involved in the litigation and discussed at the bar is not to be regarded as mere dictum, even though it is only indirectly involved in the decision of the question upon which the case turns.

10. Satisfactory proof is required of the one seeking injunctive relief to establish the necessity for and the reasonableness of covenants restraining the inherent right to labor in cases when the restraint deals with the performance of personal services.

11. If the nature of the employment is such as will bring the employee in personal contact with the patrons or customers of the employer, or enable him to acquire valuable information as to the nature and character of the business and the names and requirements of the patrons or customers, enabling him, by engaging in a competing business in his own behalf, or for another, to take advantage of such knowledge of or acquaintance with the patrons or customers of his former employer, and thereby gain an unfair advantage, equity will interfere in behalf of the employer and restrain the breach of a negative covenant not to engage in such competing business, either for himself or for another, providing the covenant does not offend against the rule that as to the time during which the restraint is imposed, or as to the territory it embraces, it shall be no greater than is reasonably necessary to secure the protection of the business or good will of the employer.

12. A contract in restraint of trade, which is neither limited in time nor space, is against public policy and void.

13. The general rule is that a contract in partial restraint of trade must be reasonable in its terms and limited in its extent, that is, limited as to both time and space.

14. However, where the conditions therein appear to be reasonable in their terms and operation, contracts containing restrictive provisions may be enforced although they are only limited as to either time or space.

Matthews, Kelley & Stone, Omaha, Baskins & Baskins, North Platte, for appellants.

McGinley, Lane, Shanahan & McGinley, Ogallala, for appellee.

Heard before CARTER, MESSMORE, YEAGER, CHAPPELL, WENKE, and BOSLAUGH, JJ.

WENKE, Justice.

On August 26, 1959, Securities Acceptance Corporation, a Delaware corporation, brought this action in the district court for Lincoln County against Robert M. Brown, a former employee, for the purpose of enjoining him from breaching certain restrictive or noncompetitive provisions of an employment contract which he had entered into with it. Subsequent thereto, and before trial, leave was granted to make Securities Acceptance Corporation of North Platte, a Nebraska corporation, a party plaintiff and that was done. On September 4, 1959, a hearing was held on plaintiffs' application for a temporary injunction and it was denied. Thereafter, upon the issues raised and tried, the trial court found generally for the defendant and against the plaintiffs, held the restrictive provisions in the parties' employment contract to be void, and dismissed plaintiffs' petition. Plaintiffs thereupon filed a motion for new trial, which the trial court overruled. This appeal is from that order.

For convenience we shall herein refer to appellant Securities Acceptance Corporation, a Delaware corporation, as Securities Acceptance; to appellee Robert M. Brown as Brown; and to appellant Securities Acceptance Corporation of North Platte, Nebraska, a corporation, as Securities Acceptance Corporation of North Platte.

The action, which primarily seeks injunctive relief, is equitable in its character and, on review, will be considered de nove. See, Tarry v. Johnston, 114 Neb. 496, 208 N.W. 615; Personal Finance Co., of Lincoln v. Hynes, 130 Neb. 547, 265 N.W. 541; Adams v. Adams, 156 Neb. 778, 58 N.W.2d 172; Gallagher v. Vogel, 157 Neb. 670, 61 N.W.2d 245. In view of that fact we will reach an independent conclusion without referring to the findings of the district court.

Securities Acceptance is primarily engaged in the consumer loan and finance business although it also does some insurance business. Its home, or main office, is located in Omaha, Nebraska. It opened a branch office in North Platte, Nebraska, in 1947 and has continued to conduct such business there ever since. Some of the business in the North Platte office is done in the name of Securities Acceptance Corporation of North Platte, a wholly owned subsidiary of Securities Acceptance. However, Securities Acceptance directs all policies, conducts all activities, and hires and pays all employees in the North Platte office, including Brown while he worked therein.

Sometime prior to March 11, 1952, Securities Acceptance employed Brown to work in its North Platte office. This contract of employment was entered into verbally. He began such employment as credit and collection manager on March 11, 1952, at a salary of $325 per month. Immediately prior thereto Brown had been working for Commercial Credit Corporation in Salina, Kansas. Commercial Credit Corporation is also engaged in the financing of loans and Brown had been working for it since December 1, 1949. On July 16, 1952, his salary was increased to $350 per month.

Sometime in August of 1952, Securities Acceptance sent Brown a written contract covering his future employment with it. This contract was in behalf of Securities Acceptance and its subsidiaries. Brown voluntarily signed this agreement and returned it to the Omaha office of Securities Acceptance. It was also executed by Securities Acceptance. It is dated August 28, 1952, and provides, insofar as here material, that:

'V. The employee, unless especially instructed by the Employer to disclose the facts, in which event he will comply strictly with said instructions, will keep secret from every person the names of past, present and prospective borrowers, security holders, and all other business customers and associates of the Employer, together with all knowledge which he may at any time acquire during his employment as to such subjects and as to any loans, earnings, finances, and all other concerns of the Employer.

'VI. The employee will not furnish to any other person or retain or use any papers or information whatever concerning any of the subjects and matters referred to in paragraph V.

'VII. All the terms of paragraphs V and VI shall remain in full force and effect for three years after the termination of the employment provided for in this contract; and, during the whole of said period, the Employee will not make or permit to be made any public announcement that he was formerly connected with the Employer.

'VIII. For a period of eighteen months after the termination of his employment for any reason, provided such termination shall take place not less than six months after the date hereof, the Employee will not engage in any way directly or indirectly in any business competitive with the Employer's business, nor solicit or in any other way or manner work for or assist any competitive business in any city or the environs or trade territory thereof in which the Employee shall have been located or employed by the Employer.'

After Brown signed this written contract of employment with Securities...