Erie County Milk Ass'n v. Ripley

Opinion by Beaver, J., Beach on the Modern Law of Contracts (1897), vol. 2, states the law in regard to contracts in restraint of trade, so far as they are applicable to the present case, as follows: “Section 1562. It is a well settled doctrine that any agreement in restraint of trade is void as being against public policy, unless founded upon a valuable consideration, and, as regards time, space and [35] the extent of the trade, limited to what is reasonable under the circumstances of the case, for the reason that such contracts tend to deprive the public of the services of parties in the employments and capacities in which they are most useful and so tend to expose the public to the evils of monopoly. Many authorities declare, in substance, that all restraints are presumed to be bad, but, if the circumstances be set forth, that presumption may be excluded, and the court judge of these circumstances whether the contract be valid or not.” Section 1564, as to the validity of such contracts: “ The doctrine seems to be that there must not only be a consideration for the contract but there must be a good reason for entering into it; and it must impose no restraint on one party which is not beneficial to the other.....Whether or not a contract is void, as being in restraint of trade and against public policy, and whether the restraint is reasonable are questions of law for the court to determine.” “ Section 1567. The present rule in England is that the validity of a covenant which is in restraint of trade, whether the restraint be general or partial, depends upon its reasonableness. Such a covenant may be limited in point of space, provided that it is not more than is reasonably necessary for the protection of the covenantee and is in no way injurious to the interests of the public.” “ Section 1569. The tendency of modern thought and decisions has been no longer to uphold in its strictness the doctrine which formerly prevailed respecting agreements in restraint of trade. The severity with which such agreements were treated in the beginning has relaxed more and more by exceptions and qualifications and a gradual change has taken place, brought about by the growth of industrial activities and the enlargement of commercial facilities which tend to render such agreements less dangerous, because monopolies are less easy of accomplishment. Whether the restraint be general or partial is no longer considered a material question. ‘ The application of the rule does not depend upon the number of those who may he implicated nor the extent of space included in the combination but upon the extent of injury to the public.’ If the natural tendency of such a contract is injuriously to affect public interests, the form and declared purpose are of no moment, the agreement will be void and it matters not whether the restraint be complete or partial. [36] The apprehension of danger to public interests, however, should rest on evident grounds and courts should refrain from interference with the affairs of citizens, unless their conduct in some tangible form threatens the welfare of the public.” These general principles are supported by very many authorities, both in England and in this country, the citation of which is neither necessary nor desirable. The plaintiff employed the defendant to serve the customers of the former with millc upon one of its milk routes in the city of Erie. The employment is peculiar. The value of the business consists largely in the intimate knowledge of the route and the acquaintanceship of the patrons. Before introducing him to either, the plaintiff required a contract in which “ It is expressly agreed by the second party (the defendant), in consideration of his employment as aforesaid and the payment to him of the wages herein provided, that he will not for the space of one year after the termination of this contract, peddle or furnish milk directly or indirectly, or assist or become interested in furnishing milk directly or indirectly in the city of Erie or vicinity, except to the Erie County Milk Association.” The consideration for the services was $45.00 per month. The defendant about four months after his employment voluntarily quit the service of the plaintiff and within the prescribed period purchased a milk route in the city of Erie, consisting of about 115 customers, whom he continued to supply up to the time of the filing of the bill. Was this contract enforceable in equity ? We do not understand the appellant to contend that the contract is objectionable, either on the ground of the limitation of time or space, but that it lacks consideration, and that equity has no jurisdiction, unless some substantial and irreparable injury will result from the defendant’s acts. In Proctor v. Sargent, 2 M. & G. 20; 40 Eng. C. L. R. 470, it was held that a contract, in which the defendant, in consideration of his employment, agreed that he would not, during the continuance of such service or within the space of twenty-four months after quitting or being discharged from the same, commence the business of a cow-keeper within five miles from Northampton Square in the county of Middle-sex; and if at any time during such service or within twenty-four months after the determination thereof, the defendant [37] should commence such business, that he would pay ten shillings for every day he should act contrary to the agreement, was valid, being limited both in time and space and not appearing to be an unreasonable restraint of trade. In McClurg’s Appeal, 58 Pa. 51, it is ruled that a contract restraining the exercise of the profession of medicine within a particular locality, when there is reasonable ground for the restriction, is valid; that its exercise may be restrained by injunction and that the court will not inquire into the adequacy of the consideration. Stofflet v. Stofflet, 160 Pa. 529, related to the trade of a photographer who was restrained by injunction from conducting or maintaining a photograph gallery within the limits of the borough of Bangor. Smith’s Appeal, 113 Pa. 580, relates to a contract in which the defendant agreed not to engage in the manufacture of ochre in the county of Lehigh, or elsewhere, in which it was held that the contract was reasonable; that it was divisible as to place and that an injunction was the proper remedy to enforce it. In Patterson et al. v. Glassmire et al., 166 Pa. 230, the defendant sold to plaintiffs all the stocks, fixtures, merchandise and good will now owned and conducted in a certain store in the hair goods business and all the branches thereto appertaining and covenanted not to engage in the said business of hair dealing or any of the branches thereof sold as aforesaid, within eight squares of said place of business. Defendant subsequently opened a hair dressing establishment within two squares of their former store. It was held that defendants should be restrained by injunction from conducting the business of ladies’ hair dressing in the new shop which they had opened. If it affirmatively appeared that the defendant, for the express purpose of becoming acquainted with the streets and by-ways of Erie and with the patrons of the plaintiff or with the people generally had entered the employment of the plaintiff, with a view of subsequently using the information so gained for his own benefit, there can be no doubt but that the decree of the court helow would have been sustained, without question. Whether there was such a motive in the mind of the plaintiff does not appear, but it is, nevertheless, true that by the employment he learned all that was necessary for him to know to carry on a business in opposition to that conducted [38] by the plaintiff, a knowledge which could scarcely be obtained in any other way. In Fralich v. Despar, 165 Pa. 24, it was held that an employee who, in consideration of an increase in his wages, agrees not to reveal the secrets of his master’s trade which are revealed to him, has no right to use the secrets so obtained for his own private use or reveal them to others. In such case, equity will interfere to protect the master. This rule applies, we take it, whether the consideration be an increase in wages or a part of the original consideration. The prime object of the contract on the part of the plaintiffs was not only to secure the services of the defendant but to protect themselves against the use of the knowledge which he might acquire in the employment against them. The defendant was the judge of the reasonableness of the consideration. He made the contract with a full knowledge of what was contained in it. The court has found that the agreement “ was and is reasonably necessary for the protection of the plaintiff’s business, and that it was founded upon a valuable consideration and that, from the nature of the case, the plaintiff has no adequate remedy at law.” These legal conclusions based upon the facts found by the court are, in our opinion, justified. This is not the case of a plaintiff appealing to equity “ for the enforcement of a hard bargain.” We think the contract should be specifically enforced. We have not considered the assignments of error seriatim but have endeavored to discuss, in a very general way, all the principles involved in the case. The findings of fact and law complained of are all justified by the evidence and are in accordance with well settled principles. The offers of testimony, as contained in the fifteenth and sixteenth assignments of error, were irrelevant and properly excluded. The case was well considered and thoroughly discussed by the president judge in the court below and is, in our opinion, free from error. Decree affirmed. Rice, P. J., and Orlady, J., dissent.