Court Opinion

ID: 9647681
Source: CourtListenerOpinion
Date Created: 2023-08-23 13:45:19.97565+00
Date Added: 2024-06-11T15:32:03.785474
License: Public Domain

STEPHENSON, Justice.
I respectfully dissent. The law is clear in this state that reasonable covenants not to compete are enforceable. If there had been no sale of the insurance agency by Mrs. Smelker and this action had been brought by her, injunctive relief would be in order. The only real problem arose upon the sale by Mrs. Smelker to defendants, with an attempted assignment of “sellers rights in and to any non-compete agreements.” In the agreement made by plaintiff and C. T. Smelker & Company in which plaintiff agreed not to compete, there was no provision made for assignment. There is not a single case in this state in which it has been held, that in the absence of ratification, an agreement in an employment contract not to compete could be assigned unless the agreement provided it could be assigned. The law on this point is clearly stated in the opinion of Justice Pope, in Texas Shop Towel v. Haire, Tex.Civ.App., 246 S.W.2d 482 as follows:
“Where an employee makes a contract restricting his right to compete, and pro>-vides further that the contract is assignable, an employer may assign the contract. Those are cases in which the employee, not the employer, has controlled his future rights. (Cases cited).
“But, because an owner of a business-may require from his employee a covenant not to compete; it does not follow that he can transfer the covenant to a buyer without the consent of the employee. ‘An executory contract for personal services cannot be assigned by the employer, unless the employee assents to> the substitution of the assignee as employer.’ (Cases cited).”
In my opinion this assignment would not be permitted by the cases construing Article 569 V.A.C.S. In Southern Community Gas Co. v. Houston Natural Gas Corp., Tex.Civ.App, 197 S.W.2d 488, it is held that under this statute, all contracts, whether negotiable or not, are assignable with certain exceptions. That two well recognized exceptions are contracts establishing a personal relation and contracts providing for credit between the parties. I have concluded that the employment contract in this case established a personal relation between the parties and provided for credit. Such contract gave either party the right to terminate it upon ten days written notice, which demonstrated that plaintiff was imposing a confidence and trust in C. T. Smelker which gave Smelker practically unlimited control over plaintiff’s ability to make a livelihood. Such contract also provided that Smelker agreed to extend credit to and carry on its books the accounts receivable of persons, partnerships and corporations to whom plaintiff has sold insurance, after the effective date of such contract, for a period of sixty days, which time could be extended by mutual agreement. See Oak Cliff Ice Delivery Co. v. Peterson, Tex.Civ.App, 300 S.W. 107.
The case of Thames v. Rotary Engineering Co, Tex.Civ.App, 315 S.W.2d 589 is *133cited in the majority opinion as authority for the proposition that employment contracts with covenants not to compete are assignable. The situation is entirely different from that of this instant case. In the Thames case, the employment contracts were made with a partnership, from which various members withdrew and one died but none were added. Later the partnership assets were conveyed to a corporation made up of the surviving partners.- The court had this to say:
“It does not appear that any additional burden or hazard was cast upon the appellants (employers) or either of them, by the various changes * * *. By their continuing to work, without any apparent change in their contractual relations, we also believe that appellants acquiesced and consented to such changes by virtue of their continuing to accept their salaries and perform the services required.”
There was no acquiescence or ratification in the instant case, as plaintiff did not return to work after the sale was made.
Even though it is stated in the majority opinion that plaintiff testified the sale included goodwill, I do not think this was the clear import of such testimony. The question was asked on cross examination:
“Q. Now, Mr. Hardcastle, of course, this contract, when you sold your agency, you sold all the assets, the good will and the list of customers and policies.”
The Court overruled the objection that the instrument spoke for itself was the best evidence. Plaintiff gave this answer:
A. “We just sold our agency.”
A careful reading of the contract of sale from Plaintiff to C. T. Smelker Company does not indicate to me that goodwill was an asset included. There is no mention of goodwill and no right given to do business under the Hardcastle name. There appears to be only a sale of all of the right, title and interest in future commission to be derived from certain insurance policies. Furthermore, no mention is made in the sale as to any time limit nor area limit within which plaintiff agreed not to solicit insurance from the owner of the policies mentioned.
The majority opinion cites two cases as authority for holding there was a valid assignment of the covenant not to compete. These cases are Citizens State Bank of Houston v. O’Leary, 140 Tex. 345, 167 S.W.2d 719, and Wells v. Powers, Tex.Civ.App., 354 S.W.2d 651. It is noted that neither of these cases involved employment contracts and therefore could not be in conflict with the law set forth in the Texas Shop Towel v. Haire case, supra, and Oak Cliff Ice Delivery Co. v. Peterson case, supra.
I would affirm the judgment of the trial court.