Title: Lassen v. Benton

State: arizona

Issuer: Arizona Supreme Court

Document:

86 Ariz. 323 (1959) 346 P.2d 137 Keith O. LASSEN, Appellant, v. F.R. BENTON, Appellee. No. 6598. Supreme Court of Arizona. November 13, 1959. *324 Rhodes & Killian, Mesa, and Evans, Kitchel & Jenckes, Phoenix, for appellant. Snell & Wilmer, and Roger W. Perry, Phoenix, for appellee. DON T. UDALL, Superior Court Judge. Plaintiff-appellant, Dr. Keith O. Lassen, a licensed veterinarian, brought an injunctive action in the Maricopa County Superior Court against defendant-appellee, Dr. F.R. Benton, also a veterinarian, to enforce a restrictive covenant in an employment contract theretofore entered into between the parties, and for damages incident to the breach thereof. The trial court without any findings of fact held that said contract was unenforceable and entered judgment for defendant Benton. This appeal followed. The parties will hereafter be designated as they appeared in the lower court, i.e., plaintiff and defendant. For nearly 20 years the plaintiff had been engaged in the practice of his profession in Mesa, a city of not over 20,000 population at the time the parties entered into the agreement. He limited his own practice to treating and caring for large animals and specialized in that field. However, the plaintiff also built a small animal hospital in Mesa in 1948, which was operated thereafter under the supervision of hired veterinarians. On April 1, 1953, defendant entered his employ under a written contract whereby he was to operate and manage the small animal hospital owned by plaintiff. The contract expired at the end of three years. At the close of the term, the parties attempted to negotiate a new agreement, but *325 their efforts to renew the contract failed, and ten months thereafter, February 1, 1957, the plaintiff terminated defendant's employment. Thereupon, the defendant began practicing veterinary medicine in Mesa and commenced the establishment of a boarding kennel and small animal hospital, which resulted in the bringing of this lawsuit. The pertinent part of the contract which plaintiff alleges defendant violated, reads as follows: The 12 mile zone surrounding Mesa city limits takes in approximately two-thirds of Phoenix, and all of the cities of Scottsdale, Tempe, Chandler, and Gilbert, as well as Williams Air Force Base. The record further reveals that a large proportion of plaintiff's hospital business came from the immediate vicinity of Mesa, the remainder coming from the outside area, and that the hospital had approximately 6,000 customers during the time defendant managed it. The plaintiff makes only one assignment of error wherein he contends that the restrictive covenant appearing in the agreement is valid and enforceable and that the lower court erred in entering judgment for defendant. He argues that both the duration and the area mentioned in the covenant are reasonable and necessary for the protection of the employer's business, and that no injury will result to the public by restraining the breach of the covenant. One of the leading cases in this field of the law, with a similar factual basis to the one at bar, is the case of Granger v. Craven, 159 Minn. 296, 199 N.W. 10, 52 A.L.R. 1356. In that case, plaintiff, a physician and surgeon in Rochester, employed the defendant, who was also a physician and surgeon, to take charge of the ear, nose, and throat department in plaintiff's office. The contract was subject to termination by either party on 30 days' written notice. It further provided that defendant, after termination of the contract, would not engage in the practice of medicine or surgery, or any of the branches thereof, directly or indirectly, or as an employee of anyone else in Rochester, nor within 20 miles thereof, for three years after such termination. The Supreme Court of Minnesota in a well-reasoned opinion held that the restrictive covenant was reasonable and enforceable. See also Allen v. Rose Park Pharmacy, 120 Utah 608, 237 P.2d 823. In Bauer v. Sawyer, 6 Ill. App.2d *326 178, 126 N.E.2d 844, 851 in many respects comparable to the instant case the Appellate Court of Illinois held that a restrictive covenant could properly be enforced in equity by injunction. In this regard the Court said: A treatise on restrictive covenants is found in Briggs v. Butler, 140 Ohio St. 499, 45 N.E.2d 757, 758, 41 A.L.R.2d 60. A syllabus by the Court announces the rule applicable here: Speaking of a restrictive covenant whereby an assistant who became associated with an experienced older physician agreed not to establish a practice of his own within the city during five years after termination of agreement, the court in Freudenthal v. Espey, 45 Colo. 488, 102 P. 280, 238, 26 L.R A.,N.S., 961 approving such agreement, said: Defendant contends the enforcement of the covenant in question would be against public policy and would unreasonably restrict defendant's rights. We do not take that view of this case. Concerning the question of public policy and its application to a case similar to this one, the court in Granger v. Craven, supra [159 Minn. 296, 199 N.W. 11] made the following statement: The defendant also urges that the restrictive covenant is unreasonable in that is covers a geographical area broader than necessary to protect the legitimate interests of the employer. While it is true that only a small part of the hospital business estimated at 10% to 25% came from the area included in the 12-mile radius from the Mesa city limits, the record is silent on the question of a public need of additional veterinarians in that particular area. Also, there is no affirmative showing in defendant's answer or his proof that the enforcement of the contract would be injurious to the public interest. On the questions of area, fair protection to the covenantee, and of public need, the court in the Granger case, supra, laid down the rule that should be adhered to in determining this case, viz.: This Court in the case of Henderson v. Jacobs, 73 Ariz. 195, 239 P.2d 1082, held *328 that restrictive covenants will be enforced where the restraint is limited as to time and space and is ancillary or incidental to a lawful contract. The law is well settled that a restrictive covenant which is ancillary to a valid employment contract and which is not unreasonable in its limitations should be upheld in the absence of a showing of bad faith or of contravening public policy. Since in the instant case the restrictions covenanted to were not shown to have been entered into in bad faith or to be unreasonable, and since no public policy is shown which would override the rights of the parties to bind themselves by such a contract, we hold the trial court was in error by its refusal to enjoin the violation of the covenant. The judgment is reversed with directions to enforce the covenant and award damages, if any, sustained by plaintiff as a result of defendant's violation thereof; such damages are to be assessed from the time the breach commenced. PHELPS, C.J., and STRUCKMEYER, UDALL, and JOHNSON, JJ., concurring. NOTE: Justice CHARLES C. BERNSTEIN being the trial judge, disqualified, and Honorable DON T. UDALL, Judge of Superior Court, Navajo County, was called to sit in his stead.