APPEAL from the Circuit Court of Coles County; the Hon. ROBERT
F. COTTON, Judge, presiding.
MR. JUSTICE SIMKINS DELIVERED THE OPINION OF THE COURT UPON DENIAL OF PETITION FOR REHEARING:
On January 1, 1970, plaintiff-appellant, Doyle Johnson, and defendant-appellee, Country Life Insurance Company, entered into an agency manager's agreement which provided, in pertinent part, as follows:
"19. TERMINATION OF AGREEMENT. This Agreement shall take effect upon the effective date set forth below, and shall continue in full force and effect until December 31, following such effective date, and from year to year thereafter, except that the same may be terminated by either party hereto at any time upon the giving of thirty (30) days notice in writing to the other party, and shall terminate upon the death of Agency Manager. However, upon termination of this Agreement, all commissions and over-writing provided for herein shall remain and be payable in accordance with the provisions of this Agreement. * * *
23. COMMISSIONS AFTER OTHER TERMINATIONS. In the event Agency Manager ceases to represent Company for reasons other than those covered in Paragraphs 20, 21 and 22 and does not represent any other life insurance company in any capacity or solicit or assist in the sale of life insurance, annuities or health insurance of other companies in this state or in any state or territory in which this Company is authorized to do business, renewal commissions and overwriting on paid-for business shall be paid to Agency Manager as follows: * * *
In the event Agency Manager ceases to represent Company and represents any other life insurance company in any capacity or solicits or assists in the sale of life insurance, annuities or health insurance of other companies in this state, or in any state or territory in which this Company is authorized to do business, no renewal commissions or overwriting shall be payable, and all rights and interests of Agency Manager shall thereupon cease."
On July 27, 1970, effective August 21, 1970, the defendant terminated plaintiff's employment by notice as provided in section 19. Plaintiff brought suit for declaratory judgment alleging section 23 of the agreement to be void and against public policy in that "* * * the same will deprive him of his livelihood and will deprive him of vested renewals which he has earned" and that in the event he is employed in the insurance field in the State of Illinois or in any State or territory in which defendant is authorized to do business, he will forfeit all renewals previously earned. The trial judge found the agreement to be a valid, binding contract, not in restraint of trade nor contrary to public policy. He also found that section 23 of the agreement did not deprive plaintiff of the right to be gainfully employed. Plaintiff appeals from that judgment.
Plaintiff Johnson testified in his own behalf and the following is a summary of his testimony. He had not engaged in the business of selling life and health insurance for any company other than defendant since the execution of the agreement in question. He had been with the company since 1949, and had been an agency manager in Coles County, selling life insurance for defendant since April 1, 1952. Johnson further testified that he had never sold insurance in any State other than Illinois, nor in any county other than Coles since 1952. It was his impression that defendant did business in eleven States. At the time of trial, plaintiff was selling automobile, fire and liability insurance but had not broken even in that business. He stated that sale of life insurance is best when done in one locality to customers with whom the agent is acquainted, and in whom they have confidence. Defendant ranked its agency managers throughout the State of Illinois and plaintiff was in the top ten of 101 counties. He testified that he could reasonably expect to receive $63,250 in renewals from business that was already "on the books" when he was terminated.
Under the contract the "renewals" are percentages of the annual premiums paid by the insured to keep the policy in force. The plaintiff was entitled to commissions on the annual premiums commencing with the second year of the policy and continuing through the tenth year.
The initial question posed by this appeal is whether the provisions of section 23 of the agreement between plaintiff and defendant constitute a contract in restraint of trade. If it is not, then the judgment of the trial court must stand. If the contract is in restraint of trade the common law test of reasonableness as to time, area, its effect upon the parties and the public becomes the pertinent inquiry. As demonstrated by House of Vision v. Hiyane, 37 Ill.2d 32, 225 N.E.2d 21; Canfield v. Spear, 44 Ill.2d 49, 254 N.E.2d 433, for example, cases involving restraint of trade have most commonly arisen in the context of a contract which completely prohibits the employee from engaging in competition with his former employer within a designated area for a specified period of time. We are unaware of any case in this State which has involved the covenant here in question.
Other jurisdictions have passed on the question and have, in most instances, rejected the contention that a contract provision, such as that contained in section 23, is in restraint of trade, and, in some instances, found the restraint to be reasonable. These cases are collected in 36 A.L.R.3d 958, beginning at p. 1024.
In Masden v. Travelers Ins. Co. (8th Cir. 1931), 52 F.2d 75, the contract provided for forfeiture of renewal commissions in the event, that the employee, within one year of termination of the contract, became employed by another insurance company and worked in the territory specified in the agreement. The court found the provision to be enforceable since it was limited both as to time and area.
Similar provisions have been upheld in the following cases. The time and area in each case was limited, however those factors were mentioned only in Stancliff, infra. Himes v. Masonic Mut. L. Assoc. (1926), 215 Ala. 183, 110 So. 133 (2 years in specified area); Bohrnstedt v. Travelers Ins. Co. (1928) 123 Or. 539, 262 P. 938 (1 year in specified area); Stancliff v. Southland L. Ins. Co. (Tex. Civ. App. 1943), 172 S.W.2d 521 (2 years in specified area).
At the other end of the spectrum are cases such as Chase v. New York Life Insurance Co. (1905), 188 Mass. 271, 74 N.E. 325, which involved an agreement providing for the payment of renewal premiums following termination of the agency provided that the agent "shall not be engaged in the business of life insurance for any other company, in any capacity whatever, in the State of Massachusetts, during the maturity of said renewal commissions". The court, in denying the plaintiff's claim for commissions said, "As the plaintiff sues upon the contract, he must abide by its terms * * *" and held that since plaintiff had chosen, in violation of the agreement, to engage in the business of life insurance in Massachusetts he could not recover. (Emphasis added.)
Another much cited case is Barr v. Sun Life Assurance Co. (1941), 146 Fla. 55, 200 So. 240. There the agreement between the agent and the company provided for payment of commissions on renewal premiums for a period up to ten years and continuing after termination of the agents employment provided "that the agent does not become connected with or do business * * * with any other life assurance company." Thus the time limitation was measured by the period of time during which commissions on renewals were to be paid, and the area was unlimited. The court sustained the contract saying, "There is nothing in this contract which precludes the employee from accepting ...