Kinney v. Scarbrough Co.

74 S.E. 772, 138 Ga. 77, 1912 Ga. LEXIS 196
CourtSupreme Court of Georgia
DecidedApril 11, 1912
StatusPublished
Cited by22 cases

This text of 74 S.E. 772 (Kinney v. Scarbrough Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kinney v. Scarbrough Co., 74 S.E. 772, 138 Ga. 77, 1912 Ga. LEXIS 196 (Ga. 1912).

Opinion

Lumpkin, J.

(After stating the foregoing facts.)

1. Two divergent lines of decisions have arisen in regard to the territorial limitation necessary for the upholding of contracts in restraint of trade, in connection with a sale of a business and good will, the retiring of a partner, or the like. Two points of view affect this: first, looking at the matter with a special consideration of the parties immediately concerned and their protection ; and second, viewing it from the standpoint of the public, and the interest'which it has in the freedom of trade and in not having [81]*81parties cut off from a means of livelihood, thus tending to diminish the resources, wealth, and useful population of the State or country. In the earlier English cases the rule was quite stringently declared against contracts in restraint of'trade, and it was thought to have been fully adjudicated that contracts in restraint of trade without territorial limitation would not be upheld, as being against public policy. Year Book 2 Henry V, pl. 26; Claygate v. Batchelor, Owen, 143; Price v. Green, 16 Mees. & W. 346. Contracts in restraint of trade within a limited area, and reasonable in their nature, came to be recognized and enforced as not being in general restraint. In later English cases the older ones have been explained as being cases in which the territory over which the restraint operated was greater than was necessary to protect the business of the contracting party. The earlier decisions had been followed in numerous jurisdictions before this explanation, and a number of courts adhered to the rule. It is considered in such jurisdictions, that, where the area within which the limitation operates is so large as to cause the public interest to suffer, the contract can not be upheld, although the business sought to be protected may extend over the entire area. On the other hand, some of the State and Federal courts have followed the modern English view, and hold that if the area over which the restraint'is to operate is not greater than that covered by the business to be protected, it is not against public policy, although it may include the entire country. 1 Page, Contracts, §§ 376-379.

Without undertaking to discuss how large an area may be embraced in a contract in restraint of trade, if reasonably necessary for the protection of the good will of a business transferred, it is settled in this State that a contract in restraint of trade, without territorial limitation, is contrary to public policy and unenforceable. Civil Code (1910), § 4253; Seay v. Spratling, 133 Ga. 27 (65 S. E. 137). We are not now dealing with contracts of monopoly strictly so called, or contracts merely agreeing not to do business, without being .ancillary to a sale of business or good will. They may involve another feature.' ,

The jurisdiction of equity to enjoin a person from doing business or performing service of a certain character has generally been invoked under one of four heads: (1) Where there has been a sale of a business and good will, with an ancillary agreement by the seller [82]*82not to engage in the business in a certain territory. (2) Contracts by which, an employee agrees to give his entire service to the employer, which sometimes include an express negative covenant not to serve any other person within a fixed time and territory. In such cases, the negative covenant will not be enforced by injunction, unless the services are of a peculiar merit or character, and can not be performed by others. Hammond v. Georgian Co., 133 Ga. 1 (65 S. E. 124). (3) Contracts binding one to desist from the practice of a learned profession. (4) A contract by an employee, ancillary to his contract of employment, not to engage in a competing business for himself or as an employee of another. In the present case the effort to obtain an injunction is made under the last head mentioned. The general principles as to territorial limitation upon restraint of trade above mentioned are applicable to all of the subdivisions of that topic, though each may have some differentiating features. Indeed the courts have shown greater reluctance in reference to enjoining a man from performing personal service or labor than from conducting a business.

It was contended in behalf of the defendant in error, that in Rakestraw v. Lanier, 104 Ga. 188, 201 (30 S. E. 735, 741, 69 Am. St. R. 154), a distinction was made between a contract binding one to desist from the practice of a learned profession and a contract binding a person who has sold out a mercantile or other kind of business, and the good will connected therewith, not to again engage in that business. This is true, but the distinction was not that in the former contract no limitation as to space was necessary, but that a reasonable limitation as to time was also necessary. After referring to contracts in general and partial restraint of trade, Mr. Justice Little said (p. 201) : “We test this contract by the rules before referred to, and find it supported by a legal consideration. Being limited as to space, although unlimited as to time, we find that it may properly be classed among contracts in partial restraint of trade. When we seek its terms to ascertain whether it is reasonable, made to protect the promisee, and not oppressive on the promisor, we find” that the facts were such as to render the limitation arbitrary and unreasonable. Thus it was held that, in such a case, not only must the restraint of trade be partial, and not general, but it must also be proportioned to the legitimate object to be subserved, and not unreasonable in character. If the doctrine of that case be [83]*83applied to the present one, it will not help the plaintiff. We are aware that there are a number of cases which have sustained agreements, ancillary to employment, that the employee would not enter into the service of a competitor or rival of the employer for a specified time after leaving his service. In some of them there was a limitation as to space. In some, courts which follow'the modern English rule, above mentioned, looked at the matter from the standpoint of reasonable protection entirely. But we are of the opinion that our decisions require a limitation as to space, and that this rule applies to the present case as well as to one in which there has been a sale of property and good will. We therefore hold that the provision of the contract here involved, which was unlimited as to space, was not enforceable.

2. It does not appear that any secret formula or technical trade secrets were involved. But there was evidence tending to show that the defendant, by virtue of his position, had acquired knowledge of the customers of the plaintiff; that, while pretending to be acting-in its interest, informing it that he had taken a number of orders, and promising to make reports, he had actually contracted to represent a rival company; that he pursued a policy of double dealing for some time; that, when he finally left the employment of the plaintiff, and notified it of the fact, he failed to deliver to it the orders which he previously reported that he had taken; and •that he intended to fill such orders with maps furnished by his new employer. This can be prevented by injunction; and on the interlocutory hearing the questions of fact involved were for the consideration of the presiding judge.

3.

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Bluebook (online)
74 S.E. 772, 138 Ga. 77, 1912 Ga. LEXIS 196, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kinney-v-scarbrough-co-ga-1912.