Court Opinion

ID: 9607291
Source: CourtListenerOpinion
Date Created: 2023-08-22 02:57:05.006578+00
Date Added: 2024-06-11T18:02:37.935846
License: Public Domain

Mallery, J.
(dissenting)—I dissent. Respondent brought this action to recover commissions earned as a salesman for the appellant. The written contract of employment prescribed his duties as follows:
“(b) To negotiate screening agreements with theatre owners or managers and to sell contracts to advertisers for the display of all syndicated or special film campaigns offered by United according to instructions, catalogs and current rates furnished by United.” (Italics mine.)
The appellant admitted owing the amount for which judgment was given, but asserted, as an affirmative defense, that respondent had forfeited the commissions in question as liquidated damages under the terms of an ancillary clause to the contract, which reads:
“. . . If, during such period [eighteen months after the effective date of his resignation] and without United’s written consent, the Salesman accepts employment with a film, advertising company competitive to United or enters *657into the film advertising business for himself, then he shall forfeit any rights in such Reserve commission credits. . . .” (Italics mine.)
This case was tried upon stipulated facts. Nothing more definite regarding the kind of work respondent performed for a competitor appears in the pleadings, the stipulation, or the findings of fact, than the following finding of fact:
“XI. On or before October 22, 1954, plaintiff, George W. Ekman, accepted employment in the State of Washington with the Alexander Film Company, a film advertising company competitive with defendant, without defendant’s consent.” (Italics mine.)
The contract is clearly in restraint of trade and is too broad in scope to come within the purview of certain partial restraints of trade now sanctioned in the law.
The test of validity of such restraints is whether or not the particular restriction is necessary to protect the employer against the agent’s use of customer contacts to compete with him afterwards. If the restrictions imposed are no greater than are reasonably necessary to prevent this injury, they are valid.
The appellant is a Missouri corporation and does business in the state of Washington. Respondent’s sales for the appellant were largely within the state of Washington. The ancillary clause of the contract is unlimited as to the geography of its area and to the nature of the services contemplated. Thus, the terms of the contract would apply even if respondent were employed by the Alexander Film Company in the capacity of a bookkeeper or janitor in the state of Florida. The ancillary contract is in restraint of trade, because it is an unreasonable restriction upon respondent’s right to make a living anywhere at any kind of work for a competitor.
The majority opinion tacitly admits that an injunction as broad as the total prohibition of the instant contract would be in restraint of trade. On the other hand, it does not agree with appellant’s contention that courts rewrite such contracts so as to enforce them as far as they are reasonable. *658Instead., it skirts the issue of restraint of trade upon which the case was tried. It seems to hold that contracts in restraint of trade cannot be enforced by injunction, but that being in restraint of trade does not bar their enforcement by the imposition of forfeitures as penalties for breaches thereof.
The cases relied upon by the majority opinion are all from foreign jurisdictions. The majority, therefore, does not act under the compulsion of Washington precedent.
In a case of first instance, the function of the court is to choose from among all the possible conflicting theories the one it deems soundest as the basis of its decision. Foreign decisions are not precedents in this state (no Federal question is here involved), and we are under no compulsion to accord them any weight whatever. We should do so only to the extent that their reasoning is persuasive of their correctness.
From this point of view, the foreign cases relied upon, in the majority opinion, do not sanction the penalties here in question, because their reasoning is not in point. The contracts therein construed provided that certain insurance renewal commissions would be paid during the continuation of the employment, which thus became a condition precedent to the existence of the obligation to pay. The proper motive of the parties to those contracts was to induce the continued employment of the agent. They did not purport to impose penalties for competition after the employment ceased.
In the instant case, we have a condition subsequent, which constitutes a penalty in fact because the commissions were earned under the terms of the contract and then “forfeited” if respondent did any kind of work anywhere for a film company. No one has suggested that if the respondent had simply quit work his commissions would not have accrued upon the happening of the contract conditions for accrual. Indeed, it was admitted that the commissions were owed but for the forfeiture predicated on the restraint of trade clause of the contract.
*659This is a clear case of forfeiture rather than liquidated damages. It is begging the question to say that a penalty is not a penalty because the parties had a right to contract, did contract, and are, therefore, bound by the terms of the contract providing for the penalties. The appellant drew the contract in question and provided therein for a “forfeiture” of earned commissions.
The trial court agreed with respondent’s theory that the contract was in restraint of trade and declined to enforce the penalty for that reason. The judgment can and should be sustained upon that ground.
This court will sustain a judgment upon any ground if it should be sustained, but under the law-of-the-case rule it will not reverse a judgment upon some novel theory of its own upon which the trial court had no opportunity to pass.
The judgment should be sustained. I dissent.