Orkin Exterminating Co., Inc.(Arwell Div.) v. Burnett

160 N.W.2d 427, 1968 Iowa Sup. LEXIS 903
CourtSupreme Court of Iowa
DecidedJuly 18, 1968
Docket52925
StatusPublished
Cited by49 cases

This text of 160 N.W.2d 427 (Orkin Exterminating Co., Inc.(Arwell Div.) v. Burnett) is published on Counsel Stack Legal Research, covering Supreme Court of Iowa primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Orkin Exterminating Co., Inc.(Arwell Div.) v. Burnett, 160 N.W.2d 427, 1968 Iowa Sup. LEXIS 903 (iowa 1968).

Opinions

STUART, Justice.

This action was brought in equity to enforce a covenant not to compete contained in an employment contract between the parties. This is the second appeal. In the opinion filed November 15, 1966, 259 Iowa 1218, 146 N.W.2d 320, 327, we followed the language of the covenant and held defendant must be enjoined “from engaging directly or indirectly in the same or similar or competitive line of business as that carried on by the plaintiff-company, or from working for any individual, firm or corporation engaged in such business or similar or competitive line of business, and from in any way, directly or indirectly, taking away any of the company’s business or customers, or destroying, injuring or damaging the good will of the plaintiff-company with its customers within a ten-mile radius of any city, town, village or other area in which defendant may have worked while employed by plaintiff, for a period of three years”. We remanded the case for a determination of the damages plaintiff sustained by reasons of defendant’s breach of the covenant and for decree in conformance with this opinion.

On January 16, 1967 the trial court issued a writ of injunction to run for three years from the date of the writ. Defendant filed a motion for modification of the injunction seeking to have it commence on the date of the termination of the employment, February 28, 1966. On February 9, 1967, plaintiff filed an application for defendant to show cause why he should not be held in contempt of court for violating the injunction. On March 9, 1967 the two matters set out above as well as the determination of the amount of damages came on for trial. The trial court modified the injunction to run for three years from and after February 28, 1966, awarded plaintiff damages of $1000 and made no finding on [429]*429the contempt citation. Plaintiff appealed. Defendant cross-appealed from the award of damages.

I. Plaintiff’s right to an injunction is founded on the restrictive covenant contained in defendant’s contract of employment with plaintiff’s predecessor. It provided: “Representative agrees that on the termination for any cause whatsoever of his employment with the company, he will not, for a period of three (3) years * * [compete with the employer] * * *

The trial court was correct in modifying the writ of injunction to provide for the three year period to commence February 28, 1966, the date defendant’s employment terminated.

II. Plaintiff claims the trial court erred in allowing only $1000 damages. Defendant on cross-appeal claims the evidence was not sufficient to sustain any award of damages. Our review is de novo. We give weight to the trial court’s findings of fact, but are not bound by them. R.C.P. 344(f) (7).

The measure of the damages resulting from the wrongful breach of an agreement not to compete is the loss naturally resulting from the breach, including loss of profits. Moorehead v. Hyde and Braden, 38 Iowa 382, 386; Galucha v. Naso, 147 Iowa 309, 311, 126 N.W. 146, 147; Peterson v. Johnson Nut Co., 209 Minn. 470, 297 N.W. 178, 181; South Carolina Finance Corp. v. West Side Finance Co., 236 S.C. 109, 113 S.E.2d 329, 335-336; 22 Am.Jur.2d 113, Damages, § 79; Anno: 127 A.L.R. 1152, 1156, 1168; cf. Eyerly v. Smith, 210 Iowa 1056, 1059, 231 N.W. 383, 385. We now summarize the evidence by which plaintiff sought to prove damages.

Each month plaintiff’s servicemen, including defendant, forwarded to the district office invoices for the services performed. These invoices were part of plaintiff’s regular accounting procedure. The district manager testified the records were kept under his supervision and identified exhibit 2, as a list of plaintiff’s customers serviced by defendant which he continued to service in his own behalf under the trade name of Bob’s Pest Control after his employment was terminated. It was abstracted from the invoices (exhibit 1). It listed the customer’s name, the date plaintiff lost the account and the yearly charge for service.

Defendant confirmed the list and the fact he serviced the accounts. His only disagreement was with some of the dates. Had these accounts continued with plaintiff they would have produced a gross revenue of over $4500 between March 1966, the first month after defendant’s employment was terminated, and March 1967. The contracts were for one year and were renewed automatically. However, they were cancellable by either party on 30 days notice. Some of the accounts had been with plaintiff eight to ten years.

To establish the loss of profits resulting from the deceased revenue, plaintiff offered the testimony of its executive vice president who explained plaintiff’s practice of keeping a current running analysis of operational costs. As a result of this study it was determined the direct operating expense of the district in which defendant was employed was 65.6 per cent of the total sales. This included the salary and expenses of supervisory personnel and the district office. Expenses chargeable to the serviceman, including salary, commissions, direct automobile expense, meals, motel, travel expense and supplies, amounted to 50.1 per cent of total sales. If expenses incurred on a national level such as general operating expenses of the company, executives salaries, national advertising, etc., were included the total cost rose to 89.6 per cent of the total sales.

Defendant argues that since the contracts were cancellable at will and there was no competent evidence any customer cancelled the contract because of any act of the appellee, the damages are specula[430]*430tive, and the evidence presented no basis for estimating the amount of the damages in money with reasonable certainty. The evidence clearly shows plaintiff was damaged to some extent by defendant’s breach of the covenant not to compete. The question is the sufficiency of the evidence to enable the finder of fact to arrive at a dollar amount.

Courts have recognized a distinction between proof of the fact that damages have been sustained and proof of the amount of those damages. If it is speculative and uncertain whether damages have been sustained, recovery is denied. If the uncertainty lies only in the amount of damages, recovery may be had if there is proof of a reasonable basis from which the amount can be inferred or approximated. Natkin & Co. v. R. F. Ball Construction Co., 255 Iowa 1156, 1167, 123 N.W.2d 415, 422; Meeker v. Stuart, 188 F.Supp. 272, 276; Hedrick v. Perry, 102 F.2d 802, 807; Gallagher v. Vogel, 157 Neb. 670, 61 N.W.2d 245, 250-251; South Carolina Finance Corp. v. West Side Finance Co, 236 S.C. 109, 113 S.E.2d 329.

We believe the evidence here was sufficient to enable the fact finder to approximate the monetary damages sustained by plaintiff. The evidence as to the amount of plaintiff’s business which transferred to defendant was definite. The evidence of the cost of producing that amount of sales was reasonably certain. The only fact in doubt was whether plaintiff might not have lost this business in any event.

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Bluebook (online)
160 N.W.2d 427, 1968 Iowa Sup. LEXIS 903, Counsel Stack Legal Research, https://law.counselstack.com/opinion/orkin-exterminating-co-incarwell-div-v-burnett-iowa-1968.