National School Studios, Inc. v. Superior School Photo Service, Inc.

242 P.2d 756, 40 Wash. 2d 263, 1952 Wash. LEXIS 319
CourtWashington Supreme Court
DecidedApril 3, 1952
Docket31909
StatusPublished
Cited by39 cases

This text of 242 P.2d 756 (National School Studios, Inc. v. Superior School Photo Service, Inc.) is published on Counsel Stack Legal Research, covering Washington Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
National School Studios, Inc. v. Superior School Photo Service, Inc., 242 P.2d 756, 40 Wash. 2d 263, 1952 Wash. LEXIS 319 (Wash. 1952).

Opinion

Donworth, J.

This action was instituted by an employer to enjoin a former employee from breaching a covenant (contained in his contract of employment) not to compete with his employer during a period of eighteen months after termination of his employment. The employer also prayed for injunctive relief against the two other defendants who were alleged to have conspired with the employee to breach his covenant. Damages were also sought against all defendants because of their actions in furtherance of the alleged conspiracy.

The defendants denied the principal allegations of the complaint and set up three affirmative defenses:

(1) That the contract was not supported by a valid consideration; (2) that the contract lacked mutuality of obli *265 gation and was unfair and inequitable; and (3) that the plaintiff had no trade secrets, since its business methods were not unusual and the relationship of defendants Lien and Hunt to plaintiff’s customers was not confidential. Defendant Lien alleged as a fourth affirmative defense that the employer had itself breached the contract of employment by replacing Lien with another employee without prior notice to him.

These allegations having been denied in plaintiff’s reply, the cause was tried to the court sitting without a jury. After the trial, the court rendered a memorandum decision in which the authorities bearing upon the questions involved were thoroughly considered. In its decision, the trial court concluded (1) that, assuming the covenant not to compete was valid, it would be inequitable to grant injunctive relief because there was no mutuality of obligation; and (2) that no damages could be recovered because none had been proved with reasonable certainty.

Accordingly, the trial court entered findings of fact and conclusions of law and judgment dismissing plaintiff’s action. From this disposition, plaintiff has appealed to this court.

We shall refer to respondents, respectively, as Superior,. Lien, and Hunt.

The material facts as revealed by the record are as follows:

Appellant is a Minnesota corporation which succeeded to the business of a copartnership known as National School Studios. Its business is photographing school children. Respondent Lien was originally employed by appellant’s predecessor in 1940 as a salesman for the purpose of contacting the principals and other heads of schools in the states of Washington, Oregon, and Idaho. It was his duty to solicit business, make arrangements to take pictures of the students at various schools, take the pictures, and ship the film to appellant’s plant in Minnesota, whereupon his duties with respect to each particular transaction ceased. Appellant processed the films and shipped the printed photographs to *266 the school, where the students were allowed to inspect them and order whatever quantity they desired. The school principal collected from the students the amounts due for photographs purchased and remitted directly to appellant. Upon receipt thereof, appellant credited Lien’s account with his commission, which was forty per cent of such gross receipts.

Lien’s original employment in 1940 was pursuant to an oral contract. He received some slight training, was furnished with necessary equipment and a list of about twenty customers, and was assigned the territory above mentioned. He had a drawing account of seventy-five dollars per week, which was charged, however, against his commissions earned. Lien usually drew one hundred dollars or more per week.

Lien worked for two years on this basis until he left his employment in 1942 to serve in the armed forces. When he returned in November, 1945, he was re-assigned to his old territory under the same terms and conditions of employment. In August, 1946, at his employer’s request, he- signed a written contract containing a restrictive covenant not to solicit business from his employer’s customers, directly or indirectly, in his territory for a period of eighteen months after the termination of his employment. The contract provided for its termination at will by either party upon written notice thereof being mailed to the other. The terms and conditions of his employment were not otherwise changed, and he continued in the employment of appellant corporation (which had succeeded to the business of the copartnership in 1948) until about August 28, 1950, when this action was begun. During each of his last two years in appellant’s employ, he secured about $50,000 gross volume in business, from which he netted, after payment of expenses, about $10,000 each year. He drew his last pay check May 24, 1950.

Respondent Hunt had worked for some years as a salesman for appellant’s predecessor in a certain territory in the state of Illinois. In 1945, he signed a contract with his employer containing provisions identical with Lien’s contract, *267 except that the restrictive covenant was limited to .Hunt’s Illinois territory. Hunt and Lien were acquainted with each other; Hunt had solicited Lien’s territory for a few months while Lien was in the armed forces. They each knew that the other had signed a contract restraining him from competing with appellant in his respective territory for eighteen months after ceasing to be employed by appellant.

In 1949, Lien and Hunt first talked about organizing Superior. They exchanged a few letters about the project prior to the time that Hunt came to Washington in April, 1950. Superior was incorporated in this state May 2, 1950, for the purpose of engaging in the same type of business as appellant’s.

While Lien was still in appellant’s employ, he either loaned to Hunt the sum of eight thousand dollars or purchased stock in Superior in that amount. Respondents contended that it was a bona fide loan, while appellant insisted that Lien took stock for that amount.

It is apparent from his testimony that Lien planned in May, 1950, to work for both appellant and Superior at the same time. He intended to keep up his average volume of business for appellant, but whatever business he could secure over that amount he would divert to Superior. His eight thousand dollars had been used by Superior for its business operations, and Lien’s only means of obtaining repayment or any return on his investment were from the earnings of Superior.

Prior, and subsequent, to the organization of Superior, Lien continued to solicit business for appellant, and by June 15, 1950 (the end of the school year), he had booked approximately $25,000 worth of business for appellant. Lien admitted that sometime prior to August 1,1950, he had carried Superior contract forms, but he was unable to recall having booked any business for Superior.

Through some source not clearly revealed in the record, appellant became aware of Hunt’s activities in organizing Superior, and it became suspicious of Lien. It sent *268 Prothero, a salesman, to this state to investigate. Prothero made two telephone calls to the office of Superior asking for Lien and was advised that Lien was then out of the office but would be in at nine o’clock the next morning. Prothero thereupon returned to Minnesota, reported this information to appellant, and was immediately sent back to this state as Lien’s replacement.

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

Related

James Majors v. Multicare Health System
Court of Appeals of Washington, 2020
Robert Emerick, V Cardiac Study Center, Inc,ps
357 P.3d 696 (Court of Appeals of Washington, 2015)
Villas at Harbour Pointe Owners Ass'n v. Mutual of Enumclaw Insurance
137 Wash. App. 751 (Court of Appeals of Washington, 2007)
Ed Nowogroski Insurance v. Rucker
971 P.2d 936 (Washington Supreme Court, 1999)
ED NOWOGROSKI INS., INC. v. Rucker
971 P.2d 936 (Washington Supreme Court, 1999)
Tiegs v. Watts
135 Wash. 2d 1 (Washington Supreme Court, 1998)
Standard Hydraulics, Inc. v. Kerns
387 S.E.2d 130 (West Virginia Supreme Court, 1989)
Organon, Inc. v. Hepler
595 P.2d 1314 (Court of Appeals of Washington, 1979)
Cherne Industrial, Inc. v. Grounds & Associates, Inc.
278 N.W.2d 81 (Supreme Court of Minnesota, 1979)
Carlson v. Leonardo Truck Lines, Inc.
538 P.2d 130 (Court of Appeals of Washington, 1975)
Jewett-Gorrie Insurance Agency, Inc. v. Visser
531 P.2d 817 (Court of Appeals of Washington, 1975)
Sturgis Co. v. H. D. Baker Co.
524 P.2d 413 (Court of Appeals of Washington, 1974)
O'BRIEN v. Larson
521 P.2d 228 (Court of Appeals of Washington, 1974)
Best Dairy Farms, Inc. v. Houchen
448 P.2d 158 (Montana Supreme Court, 1968)
Vojak v. Jensen
161 N.W.2d 100 (Supreme Court of Iowa, 1968)
Orkin Exterminating Co., Inc.(Arwell Div.) v. Burnett
160 N.W.2d 427 (Supreme Court of Iowa, 1968)
Kadiak Fisheries Co. v. Murphy Diesel Co.
422 P.2d 496 (Washington Supreme Court, 1967)

Cite This Page — Counsel Stack

Bluebook (online)
242 P.2d 756, 40 Wash. 2d 263, 1952 Wash. LEXIS 319, Counsel Stack Legal Research, https://law.counselstack.com/opinion/national-school-studios-inc-v-superior-school-photo-service-inc-wash-1952.