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Snyder v. Hamilton

FEBRUARY 26, 1963.




Appeal from the Circuit Court of Macon County; the Hon. MARTIN E. MORTHLAND, Judge, presiding. Reversed and remanded with instructions.


Rehearing denied April 8, 1963.

A writ of injunction was issued by the Circuit Court of Macon County, enjoining the defendant Hamilton until January 1, 1964, from entering into or engaging directly or indirectly in the school picture business, or any branch or element thereof, in competition with the plaintiff, in certain territory in the State of Illinois. Defendant appeals.

The plaintiff owns and operates the Inter-State Studio and employs about 30 salesmen to represent him in 10 states. These salesmen make calls on principals of schools and solicit the taking of pictures of students, take the pictures, mail the undeveloped film to plaintiff's studio at Sedalia, Missouri, where the film is developed and the finished picture made. The finished pictures are then mailed back to the school principals who distribute them to the students, collect the money and remit to the studio after the school deducts its commission. This is known as the "school picture business." Defendant Hamilton was a salesman for the plaintiff, working certain territory in Illinois. The first year of employment 1953, he took 8000-9000 pictures to fulfill contracts previously made by a former employee of the plaintiff. He gradually worked up volume until in 1959 he was taking approximately 29,000 pictures a year. The first year, Hamilton was paid $75 per week plus up to $40 a week for expenses. On July 1, 1954, he signed the employment contract which is the basis of the injunction. At that time, he went on a percentage basis, that is, Hamilton was to receive a certain percentage of the net sales remitted to the studio from the schools he booked after July 1, 1954. In 1955, the salary arrangement was changed to a "brokerage" setup. Under that arrangement Hamilton was to receive the entire amount collected from sales of pictures and to pay all costs and special charges for processing each picture. However, Hamilton continued to draw a weekly allowance. On December 15, 1959, defendant submitted his written resignation to the plaintiff, effective December 31, 1959. On December 31, 1959, defendant had a conversation with Charles Wicker, sales manager for the plaintiff, and at that time told Wicker that he planned to go into the senior picture business, that is, the taking of individual pictures of graduating students. Snyder at that time concentrated primarily on individual student pictures and did little if any senior picture business.

Beginning January 1, 1960, defendant called on some 25 to 30 schools in his old territory. He entered into an agreement with school authorities at a Decatur, Illinois school, to take school pictures during the school year 1960-1961. He took pictures at Joppa, Illinois and sent the films to School Pictures, Inc., Jackson, Mississippi for development.

On January 22, 1960, plaintiff filed complaint for injunction basing his suit upon the employment contract entered into by him and the defendant July 1, 1954. By the terms of this agreement or contract, it was provided:

"In consideration of his employment and of the training and instructions given and to be given him, the Employee agrees that upon and after termination of his employment hereunder, for a period of four (4) years, he will not enter into or engage, directly or indirectly, or as an individual, employer, partner, associate, or employee, in the school picture business or any branch or element thereof in competition with the Employer or his heirs, successors, or assigns, in the territory originally assigned to the Employee or in any other territory to which the Employee may be later assigned by the Employer and in which the Employee actually engages in the solicitation of business for the Employer. Solicitation or acceptance of school picture orders outside the restricted territory above referred to for shipment to or delivery in any such restricted territory shall be an activity included in (but in no wise restricting the meaning of) the language `enter into or engage in the school picture business' as used above."

There is nothing in the contract assigning territory, either exclusive or otherwise, no provision as to time of employment, terms of employment or duties on the part of either party. There is a provision that either party may terminate the agreement upon notice to the other. The remuneration clause is vague, only stating that the remuneration of the employee may change from time to time, depending upon the territory assigned to the employee. Under such agreement, the employer had the right to assign such territory as he saw fit to the defendant. If the defendant did not like it, he could quit. If the employer saw fit, he could assign other men or agents to any territory the employee might be working. And, at any time the employer wanted to, he could discharge the employee, and there was no redress on the part of the defendant.

On the record, it must be conceded that the defendant was an employee of the plaintiff until December 31, 1959. The salesman, percentage, or the brokerage agreement, all amounted to an employer-employee relationship. It must also be conceded that defendant, prior to the granting of the writ of injunction, was engaging in some phase of the school picture business in the same territory he had formerly worked as an employee of the plaintiff.

The school picture business can be divided into different classes. Plaintiff was engaged in the "individual student picture business." Defendant was about to enter into another phase, the "senior picture business." There is another phase that of "group pictures of classes," or "special group pictures." All would come under the general term "school pictures." The same method of approach, the procedure of solicitation and orders and method of payment would apply to all phases. From the testimony it would appear that at the time of the resignation of the defendant in December 1959, the plaintiff may have booked some "senior pictures" and "group pictures," but concentrated primarily on the "individual student pictures."

The defendant raises two points in his appeal. First, that the restrictive covenant is unilateral and void, and therefore the contract itself is void. Second, that the plaintiff had failed to prove that he would suffer irreparable injury if the injunction was not issued.

The general rule as pronounced by the Illinois courts is that restrictive covenants entered into by employees not to engage in a competing business with that of their employers must be reasonable as to time and area and must be reasonably necessary to protect the employer's business, and that a contract which is unlimited as to time and place is void. In this case defendant concedes that the time and the territory limitations are reasonable. But, while the defendant concedes the area and time restrictions of the employment contract are reasonable, he contends that the restrictive covenant and the entire agreement is void for the reason that it is one-sided, lacks mutuality and does not in any way bind the plaintiff; that while imposing restrictions on the defendant there is nothing in the contract that imposes any obligations on the part of the plaintiff.

The law in Illinois is that as a general proposition where one of the parties to an agreement has the right to arbitrarily terminate the contract, mutuality is lacking. The People v. Davidson, 411 Ill. 267, 275, 103 N.E.2d 600. A contract is sufficient if it legally obligates both parties to abide by and perform its conditions. Prudential Ins. Co. v. Hite, 69 Ill. App. 416; Industrial Nat. Gas Co. v. Sunflower Nat. Gas. Co., 330 Ill. App. 343, 360, 71 N.E.2d 199. It has been held that mutuality of obligation means that both parties to an agreement are bound or neither is bound. Hall v. Gruesen, 22 Ill. App.2d 465, 469, 161 N.E.2d 345. It is sufficient that it legally obligates both parties to abide by and perform its conditions. Industrial Nat. Gas Co. v. Sunflower Nat. Gas. Co., 330 Ill. App. 343, 71 N.E.2d 199; Hall v. Gruesen, 22 Ill. App.2d 465, 161 N.E.2d 345. Where one party reserves an absolute right to cancel or terminate the contract at any time, mutuality is absent. Hodorowicz v. Szulc, 16 Ill. App.2d 317, 147 N.E.2d 887.

The case of Paul v. Rosen, 3 Ill. App.2d 423, 122 N.E.2d 48, cited by defendant involved a sales agreement which was conditioned upon the buyer obtaining a new five-year lease from the owner. In that case there was no compulsion placed on the plaintiff to obtain the lease, and the court held that the provision relating to the obtaining of the lease did not impose mutual obligations with respect to the lease, and that the agreement was void for lack of mutuality. In the other case cited by defendant, Valdez v. Viking Athletic Ass'n, 349 Ill. App. 376, 110 N.E.2d 680, a letter from the prospective employer to the prospective employee, ...

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