Title: Wood v. May
Citation: 438 P.2d 587, 73 Wash. 2d 307
Docket Number: 38508
State: Washington
Issuer: Washington Supreme Court
Date: March 14, 1968

73 Wn.2d 307 (1968) 438 P.2d 587 GORDON S. WOOD, Appellant, v. WILLIAM R. MAY, Respondent.[*] No. 38508. The Supreme Court of Washington, En Banc. March 14, 1968. Vincent L. Gadbow (of Davies, Pearson, Anderson &amp; Pearson), for appellant. Andrew A. Berilla and Frank P. Girolami, for respondent. *308 FINLEY, C.J. In November 1961 appellant, Gordon S. Wood, a master horseshoer with some 15-years' experience, employed respondent, William R. May, as an apprentice horseshoer. On January 3, 1962 the parties signed a written contract wherein appellant agreed to teach respondent the art of horseshoeing. Respondent agreed that: The contract further provided that in the event of breach of the agreement not to compete, respondent could be enjoined by a court of equity from engaging in the trade of horseshoeing in the territory and during the time covered by the agreement. Respondent displayed marked aptitude for horseshoeing, and during the 2 years he worked for appellant he progressed rapidly from the apprenticeship stage. He was soon on his own, so to speak, in shoeing the horses of a substantial number of appellant's customers. Actually, respondent became the only contact appellant had with many of his customers, and these customers gained confidence in respondent's ability as a horseshoer. Consequently, when respondent terminated his employment in March 1964 and immediately set up his own horseshoeing business in Tacoma, 5 miles distance from Spanaway, he secured a substantial number of appellant's customers in Pierce County and on Vashon Island. Appellant began this action to enjoin respondent from engaging in horseshoeing in violation of the agreement. The bulk of appellant's horseshoeing business was located in Pierce County and on Vashon Island, although he regularly shod a few horses as far north as Lynden, nearly 100 miles from Spanaway. *309 The trial court dismissed the case at the close of appellant's evidence, finding that although the rest of the contract was reasonable, it was unreasonable to restrict respondent from engaging in horseshoeing within a radius of 100 miles from Spanaway, an area which includes all or part of 22 counties in Washington, and parts of Oregon and Canada. The trial court determined the contract to be indivisible and for that reason refused to modify the restrictive covenants as to time and area. There are four issues on appeal: (1) are restrictive covenants not to compete after termination of employment void for reasons of public policy? (2) if such covenants are not void, were the covenants in this contract supported by adequate consideration? (3) if supported by adequate consideration, were the restrictions reasonable as to time and areas as to both the parties and the public? (4) if the restrictions were unreasonable, can a court exercising its equity jurisdiction modify such restrictive covenants and enforce them against respondent in a more reasonable manner. [1, 2] In Racine v. Bender, 141 Wash. 606, 611, 252 Pac. 115 (1927), we recognized the following principles in relation to restrictive covenants in employment contracts: 9 A.L.R. 1467, 1468, states the rule as follows: The restrictive covenants in the instant matter are not void for reasons of public policy. The evidence indicated that there are some 3000 horses in the Pierce County area, and some 8 competent horseshoers residing in the immediate area. Although customers may prefer respondent to other horseshoers in the area, his services are not indispensible. The law presumes that the services can be performed by someone else. Racine v. Bender, supra, at 613. And, it was not shown that respondent will not be able to find work as a horseshoer without competing with appellant. [3] The contract, although somewhat vague and poorly drawn, was supported by adequate consideration. Respondent promised not to compete with appellant upon termination of his employment in return for appellant's promise to teach respondent the skill of horseshoeing. Over the period of 2 years during which the parties operated under the contract, appellant did indeed teach respondent the trade or art of horseshoeing. The evidence showed that there are two methods of becoming a skilled horseshoer. One may *311 either attend a college course in horseshoeing, followed by experience under a master horseshoer, or he may learn by the apprenticeship method as respondent did in this case. During the 2 years respondent worked for appellant he earned approximately $3800 the first year, and approximately $6500 the second year. After he left appellant's service respondent grossed from $500 to $1800 per month, horseshoeing being somewhat seasonal in nature. Appellant obviously fulfilled his part of the bargain. He taught respondent to be a proficient horseshoer, a trade at which he has been able to earn a good living. This is adequate consideration for a promise not to compete in a trade which involves a unique personal relationship between tradesman and customer. The trial court correctly found the area restriction in the contract to be unreasonable. It was correct to refuse to enforce this restriction as written, since it is both unduly harsh to respondent in curtailing his legitimate efforts to earn a livelihood and unnecessary for the protection of the legitimate interests of appellant. See 41 A.L.R.2d 314, 43 A.L.R.2d 141. The trial judge found the time restriction to be more acceptable, stating that he felt the time involved was "particularly lengthy," but that "[t]he Court could accept the restriction in terms of five years." [4] However, on the basis of the evidence presented, we are constrained to believe that the restrictions were probably unreasonable both as to area and time. The trial judge felt he was obligated to either accept or reject the restrictions in toto rather than to modify them on the basis of his factual findings. We do not believe he could properly decide the issues before him while operating under this assumption. We are granting a new trial in this matter so that reasonable restrictions upon respondent's competitive activities, both as to time and area, can be determined and imposed. We note in passing that counsel for appellant admitted in oral argument that an area of 25-miles radius from Spanaway would be reasonable. This court approved a restrictive period of 3 years in the Racine case, supra. *312 But we offer no suggestion without more evidence than the record reveals whether a period of 1 year, 3 years or some other period of time is reasonable under the facts in this case. Neither do we suggest that it would be improper to restrict respondent only as to those customers with whom he came in contact while in the service of appellant. See Columbia College of Music &amp; School of Dramatic Art v. Tunberg, 64 Wash. 19, 116 Pac. 280 (1911), in which such a restriction was found adequate to protect the employer. We do not limit the court upon new trial to any given formula for determining reasonable restrictions, nor do we read any of the cases cited in this opinion as so limiting a trial court. While guidelines set down in similar cases are helpful, the facts of a given case must determine the reasonableness of the restrictions imposed. It is well settled that a court of equity will use its power to enforce a restriction against a former employee's competition only to the extent that such restriction is reasonable and necessary to protect a legitimate business interest of the employer. Racine v. Bender, supra, Schneller v. Hayes, 176 Wash. 115, 28 P.2d 273 (1934). See also 6A Corbin, Contracts § 1394 (1962). But it does not follow that an entire contract must fail because of an unreasonable restriction as to time and area. One line of authority holds that unless the contract is divisible the court will not write a new contract and will refuse to grant any equitable relief against competition. See, e.g., Wisconsin Ice &amp; Coal Co. v. Lueth, 213 Wis. 42, 250 N.W. 819 (1933); Welcome Wagon, Inc. v. Morris, 224 F.2d 693 (4th Cir.1955); Restatement, Contracts § 518 (1932). However, a substantial number of American courts in later cases have adopted a new and different rule that a contract in restraint of trade will be enforced to the extent it is reasonable and lawful. See, e.g., John Roane, Inc. v. Tweed, 33 Del. Ch. 4, 89 A.2d 548, 41 A.L.R.2d 1 (1952); Redd Pest Control Co. v. Heatherly, 248 Miss. 34, 157 So. 2d 133 (1963); Igoe v. Atlas Ready-Mix, Inc., 134 N.W.2d 511 (N.D. 1965). *313 [5] We adopt the reasoning in the second line of cases. The enforcement of such a contract does not depend upon mechanical divisibility, meaning that offending portions of the covenant can be lined out and still leave the remainder grammatically meaningful and thus enforceable. This is the so-called "blue pencil test." The better test is whether partial enforcement is possible without injury to the public and without injustice to the parties. Ceresia v. Mitchell, 242 S.W.2d 359 (Ky. 1951); Fullerton Lumber Co. v. Torborg, 270 Wis. 133, 70 N.W.2d 585 (1955); 17 C.J.S. Contracts § 289, at 1224. Professor Corbin, in approving the latter test, says: And, at 104: Professor Williston's comments on the subject are as follows: We are in accord with the views expressed by Corbin and Williston. Under the circumstances of this case we find it just and equitable to protect appellant by injunction to the extent necessary to accomplish the basic purpose of the contract insofar as such contract is reasonable. The trial court erred in granting dismissal at the close of appellant's case. A new trial must be afforded to determine what is reasonable regarding time and space in limiting respondent's competitive horseshoeing activities, wherein both parties may offer evidence bearing thereon. Since we do not have the benefit of respondent's evidence, we cannot decide whether the restriction should be as to area, i.e., a certain number of miles from appellant's business, or as to those customers which respondent came to know during his employment with appellant. Neither can we decide a precise limitation as to time. The judgment should be reversed and remanded for new trial consistent with the views expressed herein. It is so ordered. HILL, WEAVER, HUNTER, HAMILTON, and NEILL, JJ., concur. ROSELLINI, J. (dissenting) The respondent was born and raised in the small community of Cleveland, Tennessee. *315 When he was 17 years old, he entered the United States Army and had not completed his high school studies. While in the army, he was awarded an army high school diploma. The respondent, prior to army service, had no special training for employment and had not held any compensable employment. After his discharge from the army, the respondent married and lived with his wife at Eatonville, Pierce County, Washington. He was 25 years old at the time of trial. Prior to beginning his apprenticeship as a horseshoer, he served 4 months as a deputy sheriff for Pierce County. In November 1961, the respondent began apprenticeship with the appellant and was paid $1 for each horse shod. Nothing was said in regard to an agreement not to compete. In the latter part of 1961, the appellant asked the respondent to go to his accountant's office, stating that he had a contract which he desired the respondent to sign. The respondent signed the contract described by the majority. Evidence discloses that horseshoeing can be taught in college in a 5-weeks' course. The apprenticeship under the appellant lasted from November 1961 to the middle of July 1962, approximately an 8-months' period. From July 1962, the respondent was considered a journeyman horseshoer. He was permitted to and did shoe horses without direction or advice from appellant. The record shows that there are approximately 3,000 horses in Pierce County. The appellant had approximately 130 customers. There is no contention that these customers owned all or even a substantial percentage of these horses. When the respondent terminated his employment with the appellant, he began shoeing horses. Eleven months after his departure, he had only 13 rotating customers who had been customers of the appellant. A rotating customer is defined as one who, by agreement, has his horse shod for a period of a year; during that period his horse will be shod every 6 to 8 weeks without the necessity of the owner asking for the service. The majority, in reversing the trial court, fails to note that courts are reluctant to enforce contracts which prohibit *316 individuals from continuing to work. It holds that the contract is enforceable even though the restriction of engaging in the business of horseshoeing for a period of 5 years and within 100 miles' vicinity of Pierce County is unreasonable. The majority has failed to observe that there is a different test applied where restrictions are contained in bargains for transfer of land or business and to where they are contained in bargains for employment. A restriction which may be upheld as reasonable in the sale of land or a business, may be found unduly harsh where the relationship between the parties has been that of employer and employee. This is rightly so because by an improvident contract entered into by an employee may deny him the opportunity to earn a livelihood which is every man's right. Restatement of Contracts, § 515 (1932), and the comments beginning at 988, illustrates this rule: Illustrations of Clause (b): Also, when the restraint is excessive as to time, the court will not enforce the restriction. Thus in Schneller v. Hayes, 176 Wash. 115, 28 P.2d 273 (1934), the court refused to enforce the restriction because it was unlimited as to time. In Welcome Wagon, Inc. v. Morris, 224 F.2d 693 (4th Cir.1955), a case in which it was sought to enjoin Morris from violating a covenant (contained in her contract of employment with Welcome Wagon), not to engage in the same business or a business similar to that of Welcome Wagon, the district judge denied injunctive relief, and the decision was affirmed upon appeal. The contract in that case provided: The opinion states at 698: And, at 701: In the leading case of Herbert Morris, Ltd. v. Saxelby. [1916] A.C. 688, 702, Lord Atkinson said that an employer Lord Parker pointed out that there is a distinction between restrictions placed upon a vendor and equal restrictions placed upon an employee. He said, at 709: In Nordenfelt v. Maxim Nordenfelt Guns &amp; Ammunition Co., [1894] A.C. 535, 566, Lord Macnaghten said: "[T]here is obviously more freedom of contract between buyer and seller than between master and servant or between an employer *320 and a person seeking employment." This was quoted in Mason v. Provident Clothing &amp; Supply Co., [1913] A.C. 724, 738, and the idea repeated: See also Styles v. Lyon, 87 Conn. 23, 86 Atl. 564 (1913); Allen Mfg. Co. v. Murphy, 23 Ont. L.R. 467 (1911). In Standard Oil Co. v. Bertelsen, 186 Minn. 483, 487, 243 N.W. 701 (1932), the court said: The restriction of 5 years and 100 miles' vicinity are unreasonable as to time and area. The court should be slow to enforce an agreement restraining an employee from engaging in his occupation. In the instant case the respondent does not know and has never worked at any other occupation than horseshoeing. If an injunction is granted it will be necessary for respondent to sell his home and move elsewhere. The great hardship to the respondent seems oppressive and harsh when it is compared to benefits the contract bestows upon the appellant. There is no showing of irreparable harm to the appellant if the contract is not enforced. The damage he may sustain is minute in comparison to the respondent's damage. From the record it appears that the restraint is not reasonable and necessary for the protection of the appellant. This is so because there are 3,000 horses in the vicinity and the appellant has only 130 customers. Thus he has ample opportunity and potential to increase his business, *321 while the respondent is prevented from earning his livelihood in the only manner for which he is trained. The cross-examination of the appellant suggests that the reason some of his customers left him was because he was inattentive to his business and some of his work was not satisfactory to them. The public interest is a factor to be considered. The public has a right to obtain the best services possible and should not be forced by the court to accept services which may be inferior. When the equity power of the court is invoked, it is the duty of the court to weigh the consideration of the contract. It must find that the bargain is fair and equitable between the parties. If it is unfair or the consideration of the party seeking injunctive relief is small in comparison to the penalty he seeks to impose on the other party, the court should refrain from using its injunctive powers. Since horseshoeing can be taught in 5 weeks in college, and an apprentice can become a journeyman horseshoer in 8 months, it is not an occupation that is special, unique, or extraordinary. Thus a restriction such as that imposed on the respondent is not a reasonable quid pro quo for being taught the occupation of horseshoeing. I believe this contract should not be enforced. I would affirm the trial court. In any event if it is enforced, it should be governed by the rule in Columbia College of Music &amp; School of Dramatic Art v. Tunberg, 64 Wash. 19, 116 Pac. 280 (1911), where the court refused to enforce a contract by a music teacher not to teach elsewhere except to restrain him from soliciting clients of his employer. Any other result would be unjust and would prevent the respondent from earning a livelihood by the only occupation for which he is trained. HALE, J., concurs with ROSELLINI, J. [*] Reported in 438 P.2d 587.