Allen v. Rose Park Pharmacy

237 P.2d 823, 120 Utah 608, 1951 Utah LEXIS 243
CourtUtah Supreme Court
DecidedNovember 19, 1951
Docket7672
StatusPublished
Cited by29 cases

This text of 237 P.2d 823 (Allen v. Rose Park Pharmacy) is published on Counsel Stack Legal Research, covering Utah Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Allen v. Rose Park Pharmacy, 237 P.2d 823, 120 Utah 608, 1951 Utah LEXIS 243 (Utah 1951).

Opinions

WOLFE, Chief Justice.

Osbourne Allen was discharged as manager and pharmacist at the defendant’s drug store. This is an action for a declaratory judgment to determine the validity of the following negative covenant in the contract of employment under which Allen was employed.

“Osbourne agrees that in the event of termination of this contract for any reason, * * * he shall not directly or indirectly compete, as an employee or principal in the operation of a drug store or pharmacy within a radius of two miles of this drug store for a period of five years thereafter.”

The trial court found that the five year period of non-competition was reasonable as to time, but the two-mile radius was more than necessary to protect the defendant’s business and was therefore an unlawful restraint of trade. The restrictive covenant was held to be unenforceable for lack of consideration, lack of mutuality of obligation and because it was an unreasonable restriction as to area.

In the fall of 1949 plaintiff, a registered pharmacist, entered into an argreement whereby he was to manage a drug store, being built by the defendant at 4th North and Oakley Streets (between 11th and 12th West) in Salt Lake City, Utah. He was to be paid a weekly salary, and also a bonus [611]*611of 10% of the net profits. The bonus was to be credited to his purchase of stock in the corporation to the extent of 25% ownership. This provision was written into the contract at plaintiff’s insistence because as he testified he knew the people in that neighborhood and wanted to make this job his lifetime work. Plaintiff worked for the defendant in his off-hours for four or five weeks before he was put on the payroll, November 18, 1949. He purchased all the equipment, supplies and merchandise for the new store which opened for business December 20th. The contract of employment was executed between the parties on approximately December 28th, 1949. Plaintiff and his wife worked long hours at the store and the business soon became profitable. A daily average of 20 prescriptions were filled. Plaintiff and his wife resided close to the store in an area known as Rose Park. They had many friends and neighbors who patronized the store because of this close friendship. On the 14th day of November, 1950, defendant gave plaintiff 30 days notice of intention to terminate the employment. It appears that a son of one of the directors of the corporation was given the job as manager.

Plaintiff contends that the negative covenant was not supported by a proper consideration nor was there mutuality of obligation. He argues that if he worked for only one week, then under this contract defendant could terminate the employment, and enforce the plaintiff’s promise not to compete for five years within a two-mile radius; that unless the contract provides employment for a definite period of time, there is a lack of mutuality of obligation necessary to support the negative covenant. In Schneller v. Hayes, 176 Wash. 115, 28 P. 2d 273, an optician’s employee covenanted never to enter the same business in the same city upon termination of employment. The court reasoned that because the employee was already working for his employer when the covenant was executed and because the contract of employment was terminable at will, there was no mutuality of consideration. The following [612]*612passage was quoted from Meurer Steel Barrel Co. v. Martin, 3 Cir., 1 F. 2d 687, 688:

“If for any reason the promise of one party is not binding upon him, it is not a sufficient consideration for the promise of the other and the contract is void for want of consideration.”

A collection of cases and quotations taken therefrom, which express this view may be found in Ridley v. Krout, 63 Wyo. 252, 267, 180 P. 2d 124, 128. In the Meurer Steel Barrel Co. case the court explained the doctrine of mutuality as follows:

“As an unilateral contract is not founded on mutual promises, the doctrine of mutuality of obligation is inapplicable to such a contract. It is applicable, however, to a bilateral contract containing mutual executory promises because there both parties are bound by reciprocal obligations and the promise of one is the consideration for the promise of the other. If for any reason the promise of one party is not binding upon him, it is not a sufficient consideration for the promise of the other and the contract is void for want of consideration (citing cases). The terms ‘consideration’ and ‘mutuality of obligation’ are sometimes confused. ‘Consideration is essential; mutuality of obligation is not unless the want of mutuality would leave one party without a valid or available consideration for his promise. The doctrine of mutuality of obligation appears therefore to be merely one aspect of the rule that mutual promises constitute considerations for each other. Where there is no other consideration for a contract, mutual promises must be binding on both parties. But where there is any other onsideration for the contract, mutuality of obligation is not essential.’ Moreover, a contract does not lack mutuality merely because its terms are harsh or its obligations unequal, or because every obligation of one party is not met by an equivalent counter obligation of the other party.” (Emphasis added.)

In Genola Town v. Santaquin City, 96 Utah 88, 80 P. 2d 930, 934, this court said:

“The development of the doctrine of mutuality as to remedy reveals that it was founded on the idea that one party should not have from equity what the other party could not have obtained had it applied. The doctrine that at the time of making of the contract there must be mutual fixed obligations is not tenable.”

[613]*613The argument that there is no mutuality of obligation in the instant case simply conveys the objection that the defendant’s promise of employment, being terminable at will, is not sufficient consideration to sustain the negative covenant. Professor Williston states that

“no briefer definition of sufficient consideration in a bilateral contract can be given than this: Mutual promises in each of which the promisor undertakes some act or forbearance that will be, or apparently may be detrimental to the promisor or beneficial to the prom-isee, and neither of which is void, are sufficient consideration for one another.” Williston on Contracts, Revised Edition, Volume I, § 103 F.

The defendant, Rose Park Pharmacy, agreed: to employ plaintiff as pharmacist and manager, to pay him a stipulated weekly wage of $100.00, to pay him a 10% bonus from net profits, to permit plaintiff to acquire up to 25% of its stock and to give him 30 days prior notice of intention to discharge him. On plaintiff’s part, he agreed to devote his best efforts to the promotion and operation of the drug store, to perform services as pharmacist and manager, to give 60 days notice of intention to quit, to account for all funds in the event of termination and not to compete for five years within two miles of the store. It is a continuing contract of employment with an exchange of promises expressing a legal detriment and benefit to both parties, the entire agreement subject to termination by either.

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Bluebook (online)
237 P.2d 823, 120 Utah 608, 1951 Utah LEXIS 243, Counsel Stack Legal Research, https://law.counselstack.com/opinion/allen-v-rose-park-pharmacy-utah-1951.