Justin Belt Co., Inc. v. Yost

502 S.W.2d 681, 17 Tex. Sup. Ct. J. 88, 1973 Tex. LEXIS 227
CourtTexas Supreme Court
DecidedNovember 28, 1973
DocketB-3848
StatusPublished
Cited by50 cases

This text of 502 S.W.2d 681 (Justin Belt Co., Inc. v. Yost) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Justin Belt Co., Inc. v. Yost, 502 S.W.2d 681, 17 Tex. Sup. Ct. J. 88, 1973 Tex. LEXIS 227 (Tex. 1973).

Opinions

STEAKLEY, Justice.

It is the recognized rule that non-competition agreements in the employer-employee relationship are enforceable when made during employment. The initial question here is the enforceability or not, subject of course to the test of reasonableness as to time and area, and to judicial reformation if need be, of such an agreement fairly made in settlement of a pending suit by an employer against former employees. The suit here was for damages and injunctive relief for breach of confidential relations in the nature of a conspiratorial disclosure by the former employees of trade secrets to a competitor. There is the further question of whether the settlement agreement imposed unreasonable restraints of both time and area; and, if so, whether, as to both, the covenant is subject to reformation by the court in the exercise of its equitable powers. We answer each of these questions in the affirmative.

The following statement, taken primarily from Justin’s brief and not questioned by Souder, et al., recounts the background and current status of the case.

Petitioners are Justin Belt Company, Inc., and H. J. Justin and Sons, Inc., collectively referred to as Justin. Respondents are Roger Souder, Joe Yost, Tony Lama Company, Inc., and Tony Lama Leather Products, Inc., referred to as Souder, Yost and Lama.

In January, 1970, Justin filed suit against Yost and Souder for damages for conspiracy and breach of confidential relations and requested injunctive relief, both temporary and permanent. Yost was employed by Justin Belt Company, Inc. from August 19, 1963, to December 12, 1969, when he resigned his position as general manager. Souder was employed by H. J. Justin & Sons, Inc. from January 1, 1940, until his resignation on December 30, 1969. Souder had served as general manager for H. J. Justin & Sons, Inc. for several years. Justin alleged that Yost and Souder left key positions with Justin with the plan and purpose of forming a company in Fort Worth, Texas, to manufacture belts and boots in competition with Justin and had actually entered into an agreement with Justin’s principal competitor, Tony Lama Company, Inc. of El Paso while still employed by Justin.

Justin further alleged that Yost and Souder threatened to proselyte Justin’s employees to employ them in competition with Justin and to make available to Lama trade secrets, customer lists and other confidential information concerning Justin’s business ; also, it was alleged that such actions on the part of Yost and Souder constituted illegal and unlawful competition. Justin sought to restrain and enjoin Yost and Souder from using confidential information and trade secrets obtained from Justin and from manufacturing belts and boots in competition with Justin.

Under date of February 16, 1970, Justin and Yost and Souder, joined by Tony Lama Company, Inc. as a third party, settled this suit. A final judgment was thereafter entered, dismissing Justin’s suit with prejudice. The settlement agreement is set out in full in the margin.1

[683]*683On February 22, 1972, the suit at hand was filed by Souder and Yost. They sought a declaratory judgment that the settlement agreement was unenforceable; and, in the alternative, that the agreement be reformed to prohibit Souder and Yost from engaging in the boot business or in the manufacture thereof for a period not longer than two years. Justin filed a cross-action alleging breach of the settlement agreement and invoked the equitable powers of the trial court to issue a temporary injunction enjoining Souder, et al, from violating its terms and conditions, from jointly engaging in the boot business or in the manufacture of boots in competition with Justin, and for damages. After hearing evidence, the trial court reformed paragraph I of the settlement agreement to provide that Respondents Yost and Souder should “not engage in the bootmaking business for a period of seven years from February 16, 1970, within the continental United States west of the Mississippi River” and granted appropriate injunctive relief to Justin. The Court of Civil Appeals reversed the judgment as to this, ruling the settlement agreement void, and not subject to reformation. 488 S.W.2d 850.

In other situations involving non-competition covenants, Texas courts have stated the rule that contracts which are in reasonable restraint of trade must be ancillary to and in support of another contract. Thus, a contract between two insurance companies to limit their agent’s compensation and not employ agents of non-complying companies was not one contract in support of another, but merely an independent [684]*684agreement to limit competition; as such, it was unenforceable. Potomac Fire Insurance Co. v. State, 18 S.W.2d 929 (Tex.Civ.App.1929, writ ref’d).

A step away from Potomac is Chenault v. Otis Engineering Corporation, 423 S.W. 2d 377 (Tex.Civ.App.1967, writ ref’d. n. r. e.) In Chenault, the court upheld a non-competition agreement between an employer and employee; the employee was not only on leave of absence from the employer, but was in fact in the employ of another at the time of execution of the agreement and for several months thereafter. The court reasoned that in light of the leave of absence agreement, the restraining covenant not to compete was nonetheless ancillary to and connected with the former employment.

Beyond this, and to the point here, is Novelty Bias Binding Company v. Shevrin, 342 Mass. 714, 175 N.E.2d 374 (1961). The employment relationship had terminated because of embezzlements of large sums of money by the employee. Criminal proceedings against him were thereafter instituted, and an agreement to make restitution was later effected in which the former employee agreed not to disclose secret knowledge or confidential information gained during his employment and to refrain from competition. The suit was by the employer to enjoin violation of the agreement by the former employee. The employee contended, as Souder and Yost claim here, that the restrictive covenant was illegal and unenforceable because it was not inserted in a contract for personal service and was not ancillary to an existing employment. The Massachusetts court enforced the covenant upon reasoning with which we agree :

. . . The covenant entered into was at least ancillary to a permissible transaction (see Williston, Contracts [Rev. ed.] § 1636), namely, an agreement for restitution for the thefts committed during employment .... The defendant doubtless desired to avoid imprisonment; the plaintiffs obviously desired that the good will of the businesses be protected from one who at liberty could do them immediate and grievous harm. In the circumstances disclosed, we think considerations of public policy, equity and fair dealing favor enforcement of the covenant if it is otherwise reasonable.

The language of Williston, referred to above, is as follows:

A rule of the early decisions, still operative, that consideration must be given for a restrictive promise, even though it is under seal, accords with the broader principle that the restrictive promise must be ancillary to some permissible transaction. 14 Williston on Contracts § 1636 at 102 (3d ed. 1972) .

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Kadah v. Paladin Drones, Inc.
North Carolina Business Court, 2026
MPHLEX, LLC v. Sovereign International, INC.
Missouri Court of Appeals, 2024
Marsh USA Inc. v. Cook
354 S.W.3d 764 (Texas Supreme Court, 2011)
Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding
289 S.W.3d 844 (Texas Supreme Court, 2009)
Alex Sheshunoff Management Services, L.P. v. Johnson
209 S.W.3d 644 (Texas Supreme Court, 2006)
Cranston Print Works Co. v. Pothier
848 A.2d 213 (Supreme Court of Rhode Island, 2004)
Stone v. Griffin Communications & Security Systems, Inc.
53 S.W.3d 687 (Court of Appeals of Texas, 2001)
Sharewell, Inc. v. Commissioner
1999 T.C. Memo. 413 (U.S. Tax Court, 1999)
Evan's World Travel, Inc. v. Adams
978 S.W.2d 225 (Court of Appeals of Texas, 1998)
Zep Manufacturing Co. v. Harthcock
824 S.W.2d 654 (Court of Appeals of Texas, 1992)
Peat Marwick Main & Co. v. Haass
818 S.W.2d 381 (Texas Supreme Court, 1991)
Daytona Group of Texas, Inc. v. Smith
800 S.W.2d 285 (Court of Appeals of Texas, 1990)
Martin v. Credit Protection Ass'n, Inc.
793 S.W.2d 667 (Texas Supreme Court, 1990)
DeSantis v. Wackenhut Corp.
793 S.W.2d 670 (Texas Supreme Court, 1990)
Posey v. Monier Resources, Inc.
768 S.W.2d 915 (Court of Appeals of Texas, 1989)
Pecorino v. Raymark Industries, Inc.
766 S.W.2d 316 (Court of Appeals of Texas, 1989)

Cite This Page — Counsel Stack

Bluebook (online)
502 S.W.2d 681, 17 Tex. Sup. Ct. J. 88, 1973 Tex. LEXIS 227, Counsel Stack Legal Research, https://law.counselstack.com/opinion/justin-belt-co-inc-v-yost-tex-1973.