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Murphy v. Murphy

APRIL 24, 1975.

ROBERT

v.

MURPHY, D/B/A MURPHY-VEACH INSURANCE AGENCY, PLAINTIFF-APPELLANT,

v.

JACK D. MURPHY, DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of St. Clair County; the Hon. D.W. COSTELLO, Judge, presiding.

MR. JUSTICE GEORGE J. MORAN DELIVERED THE OPINION OF THE COURT:

Plaintiff Robert V. Murphy, doing business as Murphy-Veach Insurance Agency, sued to enjoin the defendant, Jack D. Murphy, from breaching his contract with plaintiff by soliciting insurance business from "customers or persons who formerly were customers of plaintiff" and from soliciting people to cancel their policies with plaintiff. Plaintiff also sought an accounting for loss of business of any former customers of plaintiff solicited by defendant. The defendant moved to dismiss for failure of the complaint to state a cause of action. The court below ordered the parties to submit memorandums. After considering the memorandums submitted, the court granted defendant's motion and dismissed the case. Plaintiff appeals.

Prior to February 1, 1967, Robert V. Murphy and Jack D. Murphy had been partners in an insurance business known as Murphy-Veach Insurance Agency. However, on the aforementioned date the parties entered into a written agreement whereby Jack D. Murphy sold his interest in the business to Robert V. Murphy. One part of the agreement provided that:

"The sale shall include all good will and business on the books of said insurance agency, including without limiting the generality of the language herein used, all renewals, dailies, expiration lists, lists of policies in force, copies of policies, books and records, policy forms * * *."

Another part of the agreement provided that:

"Vendor covenants that he will not directly or indirectly from date hereof for a period expiring February 1, 1970:

(a) Solicit or accept any insurance business from customers and persons on present coverages which the partnership carries on such persons or property * * *

(b) Disclose to any other individual, firm, partnership, or corporation the names of the accounts which he has sold to Vendee as part of this sale.

The parties agree that this covenant not to solicit or accept business is the essence of this agreement and represents the consideration for sale of said business, and in the event of any breach by Vendor of said covenant, that Vendee shall be entitled to a permanent injunction to restrain Vendor's violations of said covenant."

As part of his complaint, the plaintiff alleged that the defendant has solicited and accepted business from lists of policies and other specified business record property of the plaintiff, with the result that in 1971 and 1972, 32 former customers of plaintiff ceased doing business with plaintiff, half of them becoming customers of defendant. The plaintiff further alleged that all of the former customers were the property of the plaintiff as of February 1, 1967, and all subsequent times and that the plaintiff had a right to be free from any solicitation of plaintiff's customers by defendant.

The position of the defendant-appellee in the proceeding below, and on this appeal, is that, since the agreed upon 3-year period of nonsolicitation of plaintiff's customers had elapsed, the defendant had an unlimited right to solicit former customers of the plaintiff-appellant. We feel the defendant-appellee has overlooked one very important aspect of the complaint, as will become apparent hereinafter.

• 1-3 To begin with, we cannot agree with appellant's contention that all of the "aforementioned policy holders are the property and customers" of the appellant. While clientele may properly be called the customers of a particular business, they cannot be considered the "property" of that business. While a business can have a proprietary interest in lists of customers which it maintains, no business has a proprietary interest in the customers themselves. (See generally House of Vision, Inc. v. Hiyane, 37 Ill.2d 32, 225 N.E.2d 21.) The principle was perhaps best stated by the Supreme Court of Kansas in Garst v. Scott, 114 Kan. 676, 679, 220 P. 277, 278, 34 A.L.R. 395:

"Trade secrets are the property of the employer and cannot be taken or used by the employee for his own benefit, but customers are not trade secrets. They are not property."

Neither can we agree with the appellant's contention that he has a right at all time subsequent to February 1, 1967, to be free from appellee's solicitation of his customers. Contracts providing for non-competition upon termination of employment or partnership relationships are generally recognized as valid if reasonably limited in space and time. Howeven, if not so limited, such contracts are invalid as unlawful restraints of trade. (Bauer v. Sawyer, 8 Ill.2d 351, 134 N.E.2d 329; Canfield v. Spear, 44 Ill.2d 49, 254 N.E.2d 433.) To hold, as appellant contends, that appellant should be free from any solicitation of his customers after the 3-year limitation has elapsed would not only ...


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