Title: Kelite Prod., Inc. v. Brandt

State: oregon

Issuer: Oregon Supreme Court

Document:

Affirmed March 7, 1956.
*637 William A. Martin argued the cause for appellants. On the briefs were Davis, Jensen & Martin and Donald W. McEwen, of Portland.
William J. Moshofsky, of Portland, argued the cause for respondent. With him on the brief were Koerner, Young, McColloch & Dezendorf, of Portland.
Before WARNER, Chief Justice, and TOOZE, LUSK and BRAND, Justices.
AFFIRMED.
TOOZE, J.
This is a suit for injunction, brought by Kelite Products, Inc., a corporation, as plaintiff, against Victor L. Brandt and J.J. Westfall, as defendants, to restrain *638 defendants from soliciting or selling to customers of plaintiff products of a competitor substantially the same or identical to the products sold by plaintiff, and for other relief. The trial court entered a decree in favor of plaintiff; defendants appeal.
Plaintiff is a California corporation authorized to transact its business in Oregon. It has been and is engaged in the business of manufacturing, compounding, developing, perfecting, selling and distributing cleaning, scouring, and maintenance compounds, detergents, fluids, compositions, abrasives, polishing and paint removal materials. Plaintiff maintains a place of business in Portland, Multnomah county, Oregon, and through advertising and other means has built up a substantial customer clientele in Portland and vicinity. The business in which plaintiff is engaged is highly competitive, and there are numerous other business concerns in Portland selling products substantially the same as or identical to plaintiff's products.
On October 17, 1950, the defendant Brandt entered into a written contract of employment with plaintiff, whereby Brandt was employed as a service engineer and sales representative for plaintiff in the area in and about the city of Portland (Brandt had signed a similar agreement in 1943). The material portions of the contract are the following:
*641 On January 7, 1952, the defendant Westfall entered into a similar written contract with plaintiff; in fact, the two contracts are in precisely the same wording.
When defendants assumed the duties of their employment, there was immediately delivered to them by plaintiff a complete list of plaintiff's then customers located in Portland and vicinity, which showed the dates of purchases made by such customers of plaintiff's products and the types of products purchased. When securing new customers, as well as in selling to old customers, it was the duty of defendants to keep up to date this list and the data therein contained, adding the names of any new customers they secured.
Defendants carried on the duties of their employment in Portland and vicinity until January 3, 1953. Under date of December 20, 1952, by written notice to plaintiff, each defendant formally resigned his position, such resignation to be effective January 3, 1953, and on that date ceased working for plaintiff.
Even before terminating their employment relationship with plaintiff, defendants had arranged to serve as sales representatives of Greater Mountain Chemical Company, a competitor of plaintiff, in and about Portland, and immediately upon termination of their employment with plaintiff became associated with and proceeded to sell the products of Greater Mountain Chemical Company in and about the city of Portland, to customers of plaintiff. We quote from the testimony of defendants. Defendant Brandt on cross-examination, testified as follows:
Defendant Westfall testified as follows on cross-examination:
The complaint in this suit was filed on January 5, 1953, and on the same day, plaintiff having filed an undertaking in the sum of $1,500, a temporary restraining order was issued and, on January 6, 1953, served upon defendants, restraining them from soliciting or selling, directly or indirectly, to plaintiff's customers, products substantially the same as or identical to the products of plaintiff, and from inducing customers of plaintiff not to purchase plaintiff's products, and from disclosing or attempting to use certain information.
After trial the trial judge was of the opinion that the contract was unenforceable because it did not provide *649 specifically for a limitation of time or territory, and because, as stated in the decree, it imposed on each defendant unlimited restriction irrespective of the manner of termination of employment or the length of time of employment. However, the court was of the opinion, as expressed in the decree, that each defendant should be enjoined from using the lists and records of customers referred to in the decree and attached thereto and made a part thereof, or any other records with respect thereto, and then entered the following decree:
The plaintiff did not cross-appeal.
1. Of course, the time provided in the decree has long since expired, and it has been suggested that the question presented by the appeal is now moot. However, we think otherwise and believe it to be our duty to pass upon the merits of the controversy.
In Crom v. Frahm, 33 Idaho 314, 193 P 1013, it is said:
*651 Also see United Press Ass'n. v. Stockton I. Pub. Co., 19 Cal App2d 432, 65 P2d 893; Jones v. Stauffer, 49 Idaho 387, 288 P 419; 4 CJ 575, Appeal and Error § 2383, note 80(d); 5 CJS 35, Appeal and Error § 1455.
2. Contracts in general restraint of trade are void and unenforceable, but it is well settled that contracts in partial restraint of trade may be enforceable. In Eldridge et al. v. Johnston, 195 Or 379, 403, 245 P2d 239, we said:
3. A contract of employment, whereby an employe agrees that for some period of time after the termination of his employment he will not engage in business in competition with his employer, either as an employee of a competitor or as himself a competitor, if reasonable under all the facts and circumstances of the particular case, may and should be enforced to the extent necessary to protect the interests of the employer.
In 6 Corbin on Contracts 518, § 1394, the following rules are stated:
At page 524 of 6 Corbin on Contracts, the author further says:
Also see 5 Williston, Contract 4606, § 1643.
Salesmen and solicitors come into actual contact with the customers; they deal directly with them. In making sales their own personalities are expected to and do enter into the matter; their success as salesmen, in large measure, often depends upon their establishing a good will between themselves and the customers. Their employer, who pays them a salary for this purpose, is entitled to the good will which they so establish, and to be protected therein insofar as it may be reasonably necessary to his interests. In the absence of a contractual restriction upon the activities *653 of a salesman after termination of his employment, courts of equity have often restrained him from entering into unfair competition with his former employer. It is unnecessary for us to discuss the numerous situations where such relief may and should be awarded to a former employer, because here we are dealing with specific contractual obligations.
4. As we said in Eldridge et al. v. Johnston, supra, at page 405:
The defendants in this case entered into the contracts in question freely and voluntarily; they read and understood the terms thereof. The termination of their employment was through no act of their employer, but by their own voluntary act, and after giving the notice required by the provisions of the agreement.
Yet, as demonstrated by the record in this case, excerpts of which appear above, defendants, with callous indifference to their solemn contractual undertakings, immediately upon the termination of their employment proceeded to sell to regular customers of plaintiff the competitive products of their new employer; customers with whom they had transacted business as plaintiff's salesmen, and whose names, addresses, and requirements appeared upon the lists furnished defendants by plaintiff and added to by themselves. They seek to avoid the iniquity involved *654 in their transactions by a technical claim that the contracts which they signed are void because, as they allege, they are unlimited as to territory and time. Equity has but little patience with men who deliberately violate their solemn promises and will enforce their obligations if any reasonable basis therefor may be found.
5. The contract in the instant case must be construed as a whole. From it, we must determine the intention of the parties. It is obvious that plaintiff's chief concern was to prevent defendants upon termination of their employment, either as employes of competitors or for themselves, from soliciting customers of plaintiff with whom defendants had come in contact while employed as salesmen by plaintiff, and whose names appeared upon the lists furnished by plaintiff and added to by defendants in the course of their employment. Such a restriction was not unreasonable under the circumstances, and by the contract defendants agreed to it. All those customers resided in the city of Portland and the immediate surrounding area. The restriction being as to those customers, their places of business in Portland and vicinity, necessarily restricted the territory covered thereby. As to any other purchasers of products similar or identical to those sold by plaintiff, defendants were at liberty to make solicitations and sales, in Portland or elsewhere. Viewing the contract as a whole, we are of the opinion that by its terms there is necessarily implied a restriction as to territory, being governed by the locations of plaintiff's customers in Portland and vicinity, and that such restriction is not unreasonable. Foss v. Roby, 195 Mass 292, 81 NE 199, 10 LRA NS 1200.
6. Having found that the contract is limited as to territory and in that respect reasonable, we now come to the consideration of the time element. It is true that *655 no time limit is set. The question then is: Does the failure to provide a specific limitation as to time render the contract void and unenforceable? We think not.
Where the promise of an employe is not open to objection on the ground that the restraint it imposes is excessive in respect to territorial extent, the agreement will not usually be held to be invalid by reason of the fact that it is without limitation so far as time or duration is concerned. In cases where no limitation of time is provided by the contract, a reasonable time will be implied, and what is reasonable time will depend upon all the facts and circumstances of the case.
In 6 Corbin on Contracts 505, § 1391, it is said:
See also Foltz v. Struxness, 168 Kan 714, 215 P2d 133; Foss v. Roby, supra; United Dye Works v. Strom et ux., 179 Wash 41, 35 P2d 760; John Roane, Inc., v. Tweed, 33 Del Ch ___, 89 A2d 548, 41 ALR2d 1, and note commencing at page 24 of 41 ALR2d; note in 58 ALR 156, 167.
In the absence of contractual restrictions, it has often been held that an employe who, upon termination of his employment, enters the employ of a competitor of his former employer, is not guilty of unfair competition in selling to customers of his former employer if *656 the names and places of business of such customers are retained in his own memory or are not taken from private and secret lists furnished him by his former employer, or may be secured by anyone by reference to classified sections of a telephone directory, or by other easily available sources. But where the employe has entered into a specific contract containing restrictions upon his subsequent activities, a different rule is usually applied. The rule applicable to this case is well stated by the author of the note appearing in 9 ALR at page 1468:
7. Under all the facts and circumstances of this case, plaintiff was entitled to injunctive relief against the wrongful acts of defendants; it was entitled to even more relief as to the period of time of the restraint than awarded by the decree. But having taken no *657 cross-appeal from the decree, it is presumed that plaintiff was and is satisfied therewith. In the absence of a cross-appeal, we are powerless to increase the duration of the restraint, even if so inclined.
The decree is affirmed. Neither party to recover costs.