Summary
upholding covenant not to compete within 30 miles of employment office for two years
Summary of this case from Snelling Snelling v. Dupay EnterprisesOpinion
23509, 23510.
ARGUED JUNE 14, 1966.
DECIDED JULY 7, 1966.
Injunction. DeKalb Superior Court. Before Judge Peeler.
Westmoreland, Hall Pentecost, John L. Westmoreland, Jr., Donald E. O'Brien, for appellants.
William W. Daniel, Johnson, Harper Daniel, for appellee.
1. The restrictive covenant sought to be enforced was reasonable as to time and territory and not otherwise unreasonable or unenforceable.
2. There being no allegations of malicious tortious conduct on the part of the corporate defendant to induce the individual defendant to terminate his employment with the plaintiff and breach the terms of his contract, no cause of action was set out against the corporate defendant.
ARGUED JUNE 14, 1966 — DECIDED JULY 7, 1966.
These two cases arise out of an equitable petition brought by Southeastern Personnel of Atlanta, Inc., to enjoin a former employee, Robert Spalding, and his new employer, Robert Spalding Associates, Inc., from violating restrictive covenants contained in the employment contract between Southeastern and Robert Spalding. The pertinent portions of that contract are here set out. The parties mutually agreed that the company (Southeastern) had established a valuable and extensive personnel business in the Greater Metropolitan Atlanta area; that the company's business had been developed and maintained at great expense and was of great value; that the employee would become familiar with the manner and methods of operation of the company, with confidential information pertaining to the company's business, with the list of potential employers and clients of the company and with other prospects of the company; that the company would suffer great loss and damage if, upon termination of employment, the employee, for himself or on behalf of others by whom he might be employed, should call upon any of the prospective employers and solicit business from them or clients of the company or engage in such business within a radius of thirty miles of the company's main office.
The contract then provided that "in consideration of the premises and for the sum of $1.00" the employee covenants and agrees that during his employment and for a period of two years immediately following the expiration or termination of his employment (whether voluntary or involuntary) and within a radius of 30 miles of a named building in Atlanta, the employee, in his own behalf or in the behalf of others, will not "directly or indirectly work or engage in any capacity in which he will perform any of the duties or responsibilities which he has agreed to perform in this contract in (1) any type of personnel placement or employment business or (2) any temporary help or service business, nor within said time or distance will he or she in any way directly or indirectly, for himself ..., or on behalf of or in conjunction, solicit, divert, or attempt to take away any of the clients or prospective employers or prospective employees, or the business or patronage of such clients or employers."
The contract further provided: "If during the term of this agreement the company, in its sole judgment, deems that the employee has violated any provision, term, or condition of this contract, the company may terminate this contract by giving the employee two weeks' written notice. If during the term of this agreement the company violates any provision of this contract the employee may terminate this contract by giving the company two weeks' written notice."
The petition alleges: that on January 14, 1965, the individual defendant and the plaintiff executed a written contract covering the terms of employment (of which the pertinent provisions are above set out); that the individual defendant remained in the employ of the plaintiff until he voluntarily resigned on February 15, 1966, without prior notice to the plaintiff; that the individual defendant has been licensed to conduct an employment business in the name of Robert Spalding Associates, Inc.; that on February 17, 1966, the corporate defendant was granted a charter which provided that it could engage in a general personnel placement service; that, on information and belief, the individual defendant owns all, or substantially all, of the corporate defendant's stock; that the defendant and his wife are officers of the corporate defendant; that the defendants are actively engaging in the personnel and employment business at a named location in Atlanta and the individual defendant was actively engaging in such business at that location even before the corporate defendant was organized; that, since the plaintiff's business depends upon personal contracts of its personnel counselors, their loyalty, personality and efficiency are important and necessary elements in the successful operation of the plaintiff's business; that during his employment the individual defendant became familiar with the manner, means and methods of the operation of the plaintiff's business and with potential clients of the plaintiff and, while the individual defendant was working for the plaintiff, a majority of the employers interested in hiring sales personnel and a majority of applicants seeking sales positions were referred to the individual defendant.
The petition also alleges: on information and belief, that the individual defendant is interviewing applicants for employment and counseling with them and the defendants are keeping in constant contact with employers for the purpose of securing job listings and arranging interviews for prospective employees with employers; that the defendants are soliciting, diverting and attempting to take away former clients and prospective employers and employees developed by and through the plaintiff; that, notwithstanding the restrictive covenants, the individual defendant caused the corporate defendant to be organized for the purpose of doing the very things the individual defendant agreed not to do; that the corporate defendant was organized as a scheme, device and fraud for attempting to avoid the individual defendant's just obligation under his employment contract; that the corporate defendant is but the alter ego of the individual defendant; that the defendants are engaging in the employment business in direct competition with the plaintiff in the territory included in the restrictive covenant.
The trial judge overruled the separate demurrers of each of the defendants and appeals are taken from the two judgments entered thereon.
In case No. 23509 the individual appellant contends the contract is unenforceable because: (1) it is unilateral; (2) it is unreasonable as to time and area and otherwise unreasonable; (3) it is vague, indefinite, uncertain and ambiguous.
In case No. 23510 the corporate appellant urges that its demurrer should have been sustained because it was not a party to the contract and the petition fails to show any malicious tortious acts on its part to cause any violation of the contract by the individual defendant.
1. In case No. 23509 the individual appellant argues the contract is unilateral since it provided that during the term of the agreement "the company in its sole judgment, deems that the employee has violated any provision, term, or condition of this contract, the company may terminate this contract by giving the employee two (2) weeks' written notice." Thus, the contract is at the whim of the employer and is for only a 15-day period.
We find no merit in this argument. The contract was for a one-year term, with automatic renewal, and had been performed by both parties for over a year. In Breed v. National Credit Assn., 211 Ga. 629, 632 ( 88 S.E.2d 15), where various terms of the contract, including the time of employment, were concededly vague, this court pointed out that performance by the parties supplies mutuality and held: "The test of mutuality is to be applied as of the time the contract is to be enforced; and if the promisee accomplishes the object contemplated, then the promise is rendered valid and binding." Griffin v. Vandegriff, 205 Ga. 288, 295 ( 53 S.E.2d 345); Thomas v. Coastal Industrial Services. 214 Ga. 832 (1) ( 108 S.E.2d 328); McMurray v. Bateman, 221 Ga. 240, 254 ( 144 S.E.2d 345).
Moreover, this court has held that a covenant is not unreasonable merely because the employer reserved the right to terminate the employee's services at any time with or without cause. The Insurance Center v. Hamilton, 218 Ga. 597, 603 ( 129 S.E.2d 801).
The individual appellant also urges that the contract was unreasonable as to time and territory and was otherwise unreasonable. "Although contracts in general restraint of trade are void as being contrary to public policy ( Code § 20-504), `a contract concerning a lawful and useful business in partial restraint of trade and reasonably limited as to time and territory is not void.'" Thomas v. Coastal Industrial Services, 214 Ga. 832 (2), supra. The test to be applied to contracts of this nature is stated in Turner v. Robinson, 214 Ga. 729, 730 ( 107 S.E.2d 648): "if considered with reference to the situation, business, and objects of the parties, and in the light of all the surrounding circumstances with reference to which the contract was made, the restraint contracted for appears to have been for a just and honest purpose, for the protection of the legitimate interests of the party in whose favor it is imposed, reasonable as between them, and not specially injurious to the public, the restraint will be held valid.
In the instant case the contract pointed out cogent reasons why the employer would suffer loss if after the employee's termination he, for himself or on behalf of others who might subsequently employ him, should "call upon any of the prospective employers and solicit business from them or from the clients of the company, or engage in such business within a radius of thirty ... miles of the main office of the company." Under the holdings of numerous decisions of this court, neither the time nor territory was unreasonable. See The Insurance Center v. Hamilton, 218 Ga. 597, 602, supra, and cases therein cited.
The appellant further contends that the effect of this contract is to bar him from employment with any competitor in any capacity whatsoever; that such stipulation is unreasonable under the pronouncements of Dixie Bearings v. Walker, 219 Ga. 353 ( 133 S.E.2d 338), and Stein Steel Supply Co. v. Tucker, 219 Ga. 844 ( 136 S.E.2d 335). It is sufficient to observe that the contract in this case prohibits only specified activity, to wit: engaging in a capacity in which the employee "will perform any of the duties or responsibilities which he has agreed to perform in this contract..." Hence, the cited cases would not be applicable. See in this connection Bennett v. Kimsey, 218 Ga. 470 ( 128 S.E.2d 506).
Finally, the appellant contends that the provisions stating that "within said time or distance" the employee would not "solicit, divert or attempt to take away any of the clients or prospective employers or prospective employees, or the business or patronage of such clients of employers" is too vague, indefinite and ambiguous to be enforceable. The clause complained of merely prohibits solicitation of present and future clients within the prescribed time and territory and is enforceable. See Kessler v. Puritan Chemical Co., 213 Ga. 845 ( 102 S.E.2d 495).
The trial judge did not err in overruling the individual defendant's general demurrer to the petition.
2. This court has held in order to state a cause of action against a defendant corporation, not a party to the contract, the petition must allege malicious tortious acts on the corporation's part to cause the defendant former employee to violate his contract. Wallace Business Forms v. Elmore, 221 Ga. 223, 224 ( 144 S.E.2d 82); Williams v. Rio Grande Fence Co., 221 Ga. 633, 635 ( 146 S.E.2d 630). Although the petition contained numerous averments as to the connection between the individual and the corporate defendants and that the corporate defendant was organized for the purpose of accomplishing what the individual defendant could not do, there were no allegations of such malicious tortious conduct on the corporate defendant's part, causing or inducing the individual defendant to terminate his employment and breach the terms of his contract, as would make out a cause of action against the corporate defendant. The trial judge erred in overruling its demurrer to the petition.
Judgment affirmed in Case No. 23509. Judgment reversed in Case No. 23510. All the Justices concur.