Court Opinion

ID: 9588366
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:33:32.156988+00
Date Added: 2024-06-11T09:13:14.642800
License: Public Domain

Fontron, J.,
dissenting: I cannot agree with the action of my colleagues in striking down, as unenforceable, the covenant not to compete which was a component part of the agreement under which the parties lived for some eight years, presumably to their mutual benefit and profit. The court’s opinion is premised on the proposition that the covenant not to compete is unrestricted as to area and that it was intended to prevent competition anywhere —or in the words of the trial corut, whose decision is being upheld, “the territorial restraint . . . actually extends to the world.”
Such an interpretation strikes me as unreasonable and even a bit absurd, considering all the contract provisions. I understand the rule of construction to be, as often declared by this court, that a contract must be interpreted in a reasonable manner in the light of all its terms, its intended purpose and the circumstances attendant upon its making. This principle is well expressed in Weiner v. Wilshire Oil Co., 192 Kan. 490, 496, 389 P. 2d 803:
*548“In placing a construction on a written instrument reasonable rather than unreasonable interpretations are favored by the law. Results which vitiate the purpose or reduce the terms of the contract to an absurdity should be avoided. .The meaning of a contract should always be ascertained by a consideration of all the pertinent provisions and never be determined by critical analysis of a single or isolated provision. (Tate v. Stanolind Oil & Gas Co., 172 Kan. 351, 240 P. 2d 465; Brooks v. Mull, 147 Kan. 740, 78 P. 2d 879; and Heckard v. Park, 164 Kan. 216, 188 P. 2d 926. It is not the province of the court to make contracts for the parties. Its function is confined to an interpretation of the contract which the parties have entered into. Every presumption is in favor of the legality of a contract rather than its illegality. (Mosher v. Kansas Coop. Wheat Mkt. Ass’n., 136 Kan. 269, 15 P. 2d 421; and Geier v. Eagle-Cherokee Coal Mining Co., 181 Kan. 567, 313 P. 2d 731.)
“Prior to a resort to extrinsic evidence, the instrument is to be interpreted from its ‘four comers.’ That is to say, all the language used anywhere in the instrument should be taken into consideration and construed in harmony with other portions of the instrument. (Skelly Oil Co. v. Cities Service Oil Co., 160 Kan. 226, 231, 160 P. 2d 246; Heckard v. Park, supra, and Smith v. Russ, 184 Kan. 773, 339 P. 2d 286.)”
(See, also, 2 Hatcher’s Kansas Digest [Rev. Ed.] Contracts, §52, 58 and 3A West’s Kansas Digest, Contracts, § 115, 117.)
The general rules of interpretation outlined in Weiner have been applied by this court in the construction of contracts involving restrictive covenants. In Heckard v. Park, 164 Kan. 216, 188 P. 2d 926, the plaintiff, who had been employed to teach and train a young musician, sued for specific enforcement of a written agreement containing certain restrictive covenants breached by the youthful artist. In an opinion upholding the contract as valid, this court said:
“. . . Reasonable rather than unreasonable interpretations are favored by the law. (Southwest Kan. Oil & G. Co. v. Argus P. L. Co., 141 Kan. 287, 292, 39 P. 2d 906; Brooks v. Mull, 147 Kan. 740, 747, 78 P. 2d 879.) . . . In Federal Land Bank v. Girtch, 151 Kan. 528, 99 P. 2d 768, the general and long established rule was followed and stated thus:
“ ‘Where ambiguity or uncertainty is involved, the intention is not ascertained from punctuation alone or by resort to literal interpretation, but by considering all language employed, circumstances existing when the agreement was made, the object sought to be attained, and other circumstances, if any, which tend to clarify the real intention of the parties.’ (Syl. f 2.)” (p. 219.)
In Foltz v. Struxness, 168 Kan. 714, 215 P. 2d 133, a case arising over a restrictive covenant in a contract between two doctors, the following pronouncement of the law is found.
“It is the duty of courts to sustain the legality of contracts in whole or in part when fairly entered into, when reasonably possible to do so, rather than *549to seek loopholes and technical legal grounds for defeating their intended purpose.” (Syl. f 5.)
Applying the basic tests of construction to the instant contract, I find myself baffled by the interpretation given it by a majority of the members of this court. It seems perfectly clear to me that the purpose of the restriction is to protect the plaintiff franchisor from competition by the defendant franchisee for a period of 5 years. A covenant against competition is, in my view, a legitimate subject for contract in a situation of this kind. Such was the decision in Shakey's Incorporated v. Martin, 91 Idaho 758, 430 P. 2d 504, where the Idaho court held in effect that a franchisor, in selling its franchises, has a legitimate business interest which is protectable by a covenant not to compete.
In all frankness, what would be the area in which plaintiff’s interest might require protection in this case? I can only conclude that the area of protection was intended by the parties to be that area in which the defendant was franchised to operate an income tax service under the plaintiff’s name and according to its system. By the express terms of the franchise the tax return business was to be conducted by defendant within a distance of 5 miles from Yates Center, not at some distant spot of this teeming world. Added weight is given this view by the provisions of paragraph lb wherein the franchisor agrees to refrain from competing with the franchisee “within said 5 mile area” during the term covered by the agreement.
To repeat — I believe that a fair and reasonable construction of the restriction set forth in the contract between these parties is that Mr. Lovelace, the defendant, is not to compete with H & R Block, Inc. within a five-mile area radiating from Yates Center. Any other construction would, to me, appear irrational.
There is no claim by defendant that he was forced into making the agreement, nor is there any indication of coercion on the part of plaintiff. The defendant appears to be possessed of normal, if not superior, intelligence (being an accountant and tax consultant) and fully capable of entering into his own contracts with understanding and comprehension. He should be required to respect and to carry out a voluntary agreement.
In its opinion, this court seems to emphasize the similarity between contracts of franchise and contracts of employment. The resemblance seems somewhat exaggerated. Although in some re*550spects the two may be comparable, a contract granting a franchise is much more analogous to a contract for sale of a business than it is to an employment contract. The analogy between contracts of sale and contracts of franchise is implicit in the Idaho court’s decision in Shakey's Incorporated v. Martin, supra.
However, the resemblance between contracts for the sale of a business and contracts which grant a franchise is not basic to the views expressed in this dissent, for the Kansas court has upheld restrictive covenants in contracts of employment (Heckard v. Park, supra; Foltz v. Struxness, supra) as well as contracts of sale. (Mills v. Cleveland, 87 Kan. 549, 125 Pac. 58; Pohlman v. Dawson, 63 Kan. 471, 65 Pac. 689.) So long as the restraint is reasonable and not offensive to the public interest, the same tests are to be applied in either case. In the Heckard case we held:
“The old rule as to limitations of time and space with respect to contracts involving restraint of trade has given way to the modem doctrine of reasonableness, and the real test is never whether there is any restraint but always whether the restraint is reasonable under the facts and circumstances of the particular case.” (Syl. f 7.)
This rule was reiterated in the Struxness decision.
The trial court found that the territorial limitation, which it construed as being world-wide, was unreasonably broad and this court has concurred in that view. I would concede that a restriction against competition anywhere in the world might well be unreasonable under the facts of this case. Rut a 5-mile limitation is an entirely different matter. In Struxness the trial court reduced the area limitation from a distance of 100 miles from the city of Hutchinson to a distance of 5 miles therefrom, and the court was upheld. In Wilson v. Gamble, et al., 180 Miss. 499, 177 So. 363, cited in the Struxness opinion, the contract of an assistant physician not to engage in practice within 5 miles of a city was held to be valid. Cases relating to the reasonableness of area limitation in covenants not to compete are collated in 46 A. L. R. 2d Anno: Sale — Covenant As To Competition — Area, pp. 119-396. A good many authorities holding a 5-mile restraint to be reasonable are listed in § 179 at pp. 361, 362, while none of a contrary view appear. A 5-mile limitation appears entirely reasonable in this case and since no claim is made that public policy is violated, the rule expressed in Foltz v. Struxness, supra, is particularly apt:
“Although restrictive provisions in contracts of employment must be reasonable and not such as to contravene the public welfare, the paramount public *551policy is that freedom to contract is not to be interfered with lightly.” (Syl. f 6.)
It should further be pointed out that Foltz v. Struxness, supra, stands for the proposition that where a territorial restriction is more extensive than required to provide reasonable protection against encroachment, a court of equity is empowered to reduce the territory to the extent reasonably necessary to insure the contemplated protection and to enforce the contract to such extent. This ruling finds substantial support among the authorities and in my judgment should have been followed by the trial court in this case.
The majority opinion does not note the trial corut’s conclusion that the time limitation of 5 years was also unreasonable. This finding was arrived at, by the court’s own statement, “Without any evidence whatever.” I believe the court was mistaken in finding as a matter of law that the time limit was unreasonable. The law in this regard is seen reflected by the statement found in 45 A. L. R. 2d Anno: Sale — Covenant As To Competition — Time, § 11, p. 115:
“Where the duration of the restraint is limited as to time, the mere length of the period of time during which the restraint is to operate, standing alone, is never sufficient to render the restrictive covenant not to compete ipso facto unenforceable. This proposition is so well settled that no case has been found that would even intimate a contrary viewpoint.”
See, also, Heckard v. Park, supra, where the contract in issue covered a period of seven years.
For reasons disclosed above I must, with due respect, dissent. I would reverse the judgment of the court below.
Kaul, J., joins in the foregoing dissenting opinion.