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H.b.g. Corp. v. Houbolt

OPINION FILED AUGUST 29, 1977.

H.B.G. CORPORATION ET AL., PLAINTIFFS-APPELLEES,

v.

NEAL HOUBOLT ET AL., DEFENDANTS-APPELLANTS.



APPEAL from the Circuit Court of Will County; the Hon. THOMAS W. VINSON, Judge, presiding.

MR. JUSTICE BARRY DELIVERED THE OPINION OF THE COURT:

The defendants, Neal Houbolt, Appliance Wiring Components, Inc., and Interstate Wire Corporation appeal from a temporary injunction issued after an evidentiary hearing in the Circuit Court of Will County. Plaintiffs, H.B.G. Corporation and J.E. Messenger Company, Inc., brought the action seeking injunctive relief and damages for an alleged breach by defendants of a non-competition restrictive covenant contained in an employment contract and an agreement for the sale of businesses.

The facts surrounding the various parties' dealings must be set out chronologically to fully understand the issues presented on appeal.

On or about February 16, 1963, defendant Neal Houbolt, his wife and his mother-in-law contracted in writing to sell their businesses, consisting of a partnership and two corporations, to plaintiffs' predecessor. The sale agreement contained provisions purporting to restrict the defendant and other sellers from competing, within the limits of the continental United States, for 5 years from the date of the sale, with customers of the businesses purchased. Paragraph 8 of the sale agreement required Neal Houbolt to enter into an employment agreement for a minimum period of 5 years with the purchaser as a condition of the parties entering into the agreement to purchase and sell the various business interests. In addition paragraphs 7 and 8 of the agreement to purchase and sell the various businesses provide:

"7. The SELLERS agree not to enter into competition, within the continental limits of the United States, with the PURCHASER in connection with the businesses being sold for a period of five years from the date of sale, either as officers, employees, directors, proprietors or stockholders and the SELLER, Neal Houbolt, agrees that the non-competition agreement as aforesaid shall apply to him for a period of five years from and after the termination of his employment by Gray Realty Corporation or any of its divisions.

8. As a specific condition of entering into this agreement, the PURCHASER requires and the SELLERS agree that Mr. Neal Houbolt must continue in the management of the businesses being acquired. Mr. Neal Houbolt agrees, therefore, to enter into a contract of employment as an employee of Gray Realty Corporation for a minimum period of five years at a salary of $25,000.00 per year."

Subsequent to the sale of the businesses, defendant Neal Houbolt entered into a written employment contract consistent with the requirement of the sale contract. The employment contract was embodied in a letter to Neal Houbolt dated March 1, 1963. The contract stated the following:

"This will confirm our understanding regarding your Employment by the electrical wire and wire harness division of H.B.G. Corporation as General Manager.

You are hereby employed as General Manager of the electrical wire and wire harness division of H.B.G. Corporation in compliance with the February 16th, 1963 Agreement between J.E. Messenger Co., et al, and Gray Realty Corporation for five years at a salary of $25,000 per year payable monthly. Your salary is guaranteed by H.B.G. Corporation for the period of five years and shall be continued to be paid to you or your legal representatives if during said five year period you shall die or become incapacitated or if your services are terminated by the action of H.B.G. Corporation except that said salary shall not continue to be paid if you voluntarily terminate your services or if your services are terminated by H.B.G. Corporation for willful neglect of or willfull malfeasance or failure to perform your duties as such employee.

You also agree that you will not, for a period of five years following the termination of your employment, directly or indirectly, own, manage, operate, control, be employed by, participate in or be connected in any manner with the ownership, management, operation, or control of any business similar to the type of business conducted by the electrical wire and wire harness division of H.B.G. Corporation. However, this limitation shall only apply so far as all persons or businesses which are or have been customers of H.B.G. Corporation, during the term of this agreement are concerned, and shall not prevent you from entering into any business activity which does not sell or supply or attempt to sell or supply to such customers of H.B.G. Corporation products similar to those manufactured and sold by H.B.G. Corporation.

If this letter expresses your understanding of our agreement, please sign in the space provided below."

Neal Houbolt signed the letter indicating his agreement. In the spring of 1968, defendant Houbolt had a conversation with the owner of plaintiffs' predecessor, the purchaser corporation wherein both acknowledged the expiration of the written employment agreement and wherein the owner of plaintiffs' predecessor expressed his intention not to renew the written employment agreement, but to continue Neal Houbolt's employment without a specific agreement. On February 17, 1974, 11 years after the sale, Neal Houbolt terminated his employment with plaintiff who had succeeded the original purchaser by virtue of a corporate name-change. Defendant thereafter devoted his full time to Jemco Engineering Company which he had formed in 1964. This company was also employed by plaintiffs to perform engineering services during defendant Houbolt's employment by plaintiffs. In March of 1974, Appliance Wire Components, Inc., was formed with Neal Houbolt's wife and son as officers and directors and in March of 1975, Interstate Wire Corporation was formed with defendant's wife and JoAnn Hand, a Jemco Engineering employee, and Dominic Bucciferro, a former employee of both J.E. Messenger Company, Inc., and Jemco Engineering Company, as officers and directors. Plaintiffs subsequently filed their complaint seeking to enjoin defendant Neal Houbolt from breaching the covenant contained in his employment agreement through the operations and doings of Appliance Wiring Components, Inc., and Interstate Wire Corporation. The trial court granted plaintiff a temporary injunction from which this appeal resulted.

The defendant raises five issues on appeal:

"A) Whether the employment agreement of March 1, 1963, is the sole and controlling ...


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