Central Adjustment Bureau, Inc. v. Ingram

Act, the 1973 the limitation Under assessment without such of such tax began run on assessments period on expira- the begun shall be made the tax was due year 31 of the December period....” tion of such reasons discussed payable. For at trial which introduced Evidence was issue, Westinghouse’s 1973taxes preceding the taxes were not attempted to show that not due until March 1974. were year period re- the three assessed within not have year period limitation would three need to statute. We do not quired by the 31, 1974. The 1974 begun until December the assessment was whether determine however, Act on Act, replaced the 1973 Act is hold that the 1973 timely since we Accordingly, when the 1974. March applicable. have be year period limitation three § 2(b), ch. Acts of Public taxes, no such gun run on the 1973 language quot- replaced the legislature in effect. of limitation was statute following: ed above with judgment of Having that the determined “ REQUIRING THE ‘(b) TAXES STATE affirmed, dowe the trial court should be RETURNS: ASSESSMENT. FILING OF arguments raised the other not address provisions of sub- —Notwithstanding the judg- the Commissioner im- (a), any tax the amount section court. ment of lower title, filing wherein posed under of the trial court is affirmed. The decree state, by the shall required return is of a appeal taxed to the of this The costs (3) years from three be assessed within appellant. year in which 31 of the December levy or other filed and no return was FONES, COOPER, C.J., HARBISON collection of enforce the proceeding to DROWOTA,JJ., concur. shall be assessment such tax without expiration of such begun after made or however, that’; and” provided,

period; T.C.A., presently codified

This Act is

§ 67-10-1501(b). tax only 1974 Act state

Under the statute of year the three

es must meet taxes Business limitations on assessmеnt. BUREAU, ADJUSTMENT CENTRAL 1-3 fall under classification which INC., Plaintiff-Appellant, taxes, § 67-5805, but T.C.A., are not state which each privilege taxes are instead local permitted to municipality is county and/or INGRAM, B. Henry Richard Preston filed with these taxes are

levy. Returns on Jr., Goostree, Bjorkholm, C. James government rather local appropriate Associates, Inc., Defendants- § T.C.A., By con 67-5807. than the state. Appellees. § 67-5803, T.C.A., de trast, specifically Tennessee, Supreme Court engaging privilege of clares that at Nashville. classification fall under businesses § taxable privilege is a state of 67-5805 Sept. filed the return state alone with Insurance. the Commissioner § Thus, if 1974 Act is T.C.A., 67-5807. taxes, as Westinghouse’s

applicable falling under classification privilege exercising a local Westinghouse was

then year by the three not affected

privilege assessment.

limitation compete, the

whether a covenant nоt to geographic time limitations broad, unnecessarily judicially can be modified so as to the covenant rea- make sonable and enforceable. plaintiff-employer, Adjust- The Central Bureau, corporation ment whose Texas Dallas, Texas, qualified in is home office is in as a collector to do business Tennessee past-due offices of debts. It has 25 branch States, including a throughout the United Nashville, in The de- branch Tennessee. who left employees fendants are former (hereinafter Bureau Associates, CAB) in 1979 to form company competed directly with All of the had defendants covenants not to After with CAB. left, brought suit the defendants Chancery seeking compensatory Court both injunctive According to CAB’s relief. allegations, the liable defendants were non-сompetition tort and for breach of the covenants.

The that the non-com- Chancellor found unreasonably petition covenants were regard to and time geographical broad with however, Chancellor, mod- limitations. The enforcing them as ified these restrictions addition, by injunctive relief. modified $80,- plaintiff the Chancellor awarded damages 000.00 for breach for com- covenants and the torts of unfair duty loyalty. of petition and breach of the Gorrell, Bowen, Jay Frank C. Judith S. Powell, Nashville, plaintiff-appellant. A. for Appeals the Chan- The Court reversed not to the issue cellor on Routson, Thompson, D. Fred Ronald W. holding were compete, that the covenants Nashville, defendants-appellees. unenforceable for lack of consideration. dеcision, it ground for its As an additional OPINION held, of modi- discussing the issue without DROWOTA, Justice. fication, unen- the covenants were unreasonably Tenn.R. were appeal This under Rule forceable because and time limita- geographic clauses in their App.P., broad involves issue affirmed the It raises an tions. contracts. tort, though re- necessary liability it regarding the defendants’ the case reconsideration support such a it is entered manded covenant when liability tort begun. damages. In addi- The defendants’ into after tion, disputed this Court. the issue not before Court addresses $59,000.00 compensa-

II received more than tion. industry approximate- The collection 8,000 ly agencies highly nationwide is com- Defendant B. Richard Goostree was

petitive. Agencies operate essentially in hired as a сollector in the Nashville office regardless the same manner of size. Sales- 6, 1972, salary on March aat base persons past- contact businesses solicit monthly plus commissions. Prior $500.00 due accounts for collection. Collectors beginning employment, he was in- attempt then contact the debtors required sign formed that he money agency collect the re- owed. compete. presented covenant not to It was consisting ceives a fee of a percentage of to him and March 1972. percentage the amount This recovered. promotion Goostree received a collec- generally by agreement set between the June, manager April, tions salesperson and the client. promoted manager he was to district Most clients use than one more collection of the Nashville office. agency. primary choosing factor in Bjorkholm Defendant hired James was client, agency is the rate of return to the as a salesman for Nashville the office on although charged client, the rate 5,May salary at a of base a agency $750.00 services available from the and the personal plus month contact a commissions and an automobile between client and the agency salesperson are also factors. allowance. He a agree- covenant three later. This weeks scope, CAB’s business is national cov- lost, however, ment was and another was ering including spe- 48 states Hawaii. It August Bjorkholm on re- cializes in hospi- national accounts such as salary ceived one raise his base $50.00 holding universities, tal companies, major CAB, while at promotions. but no companies, oil companies credit card and financial institutions. case, The covenant was identical each providing as follows: Henry Ingram

Defendant Preston was 1, 1970, by hired on March CAB as a sales- “I, the undersigned, /§/_, inman North with salary Carolina a base during my employment the term of with of monthly plus $600.00 commissions. A Bureau, Inc., and/or week began working, after he CAB in- subsidiaries, wholly-owned its any and at him sign formed that he must a covenant time within of two termination compete. not to Ingram initially refused to thereof, shall not within sign, termination, but under threat of he States, directly United either or indirect- signed two weeks later. ly, (1) corporation by owning, with the June, 1972, promoted Ingram operating, being CAB managing, employed by, to manager of the Ingram Nashville district. having proprietary any interest of kind June, 1977, promoted was manager in, to of extending or any financial credit to region the northern CAB. of CAB is divid- person, enterprise, corporation firm or ed regions into three nationwide. The engaged any is business in region northern headquartered which was corporation engaged which the di- or in Nashville Kentucky included and Ten- rectly indirectly competes or with the nessee as well as most of the states in the manner; (2) corporation by divulg- in any midwestern, northeastern and mid-Atlantic ing any pertaining to the information areas regional of the United As a States. business, secrets, trade and/or confiden- manager, Ingram employed in was corporation, any tial data of or make highest corporate рosition outside that of same; use by or whatsoever an officer. contacting any or client customer of the corporation

Ingram who has been a client or cus- resigned February CAB on from time, during corporation 1979. At that he tomer of ‍​​‌‌‌‌‌​​​‌​‌​‌​‌‌‌​​​​‌‌​​​‌​​‌‌​​‌‌​​‌​​​‌‌‌‌‌‍the the term was the fifth highest paid employee at of employment. CAB. Ingram fully corporation On or about March

“I understand that the functioning began actively Associates rely employing this covenant in will prior agency Both the collection business. me, agree any that in the event of and I date, subsequent to this the new ven- corpora- of this covenant that breach customers, making use ture solicited CAB damages irreparable and that tion’s are by personal gained contacts the defend- corporation shall be entitled to in- employed by ants while relief, in such other junctive addition to defend- The Chancellor found that may proper. relief It and further as be ants agreed any if time it is further knowledge “... utilized valuable covenant is be determined that this

shall personal gained developed contacts area, both, as time or unreasonable They employees. while were CAB competent jurisdiction, court potential know which customers like- corporation to en- shall be entitled secure, ly profitable, be and how period for such force this covenant They have retain and service customers. may as time and within such area profit personal able to from the been to be reasonable such determined relationships they developed of this court. In the evеnt breach ” customers.... covenant, agree pay all costs of findings. It amply supports record covenant, said includ- enforcement undisputed that defendant made to, ing, but not limited reasonable attor- resigna- plans prior to his took actions ney’s fees.” acquire proprietary interest tion 26, 1979, January Ingram filed a On agency, which was intended to collection incorporation of with the State of charter operate in CAB. competition direct corporation by for a the name of Tennessee instance, CAB, leaving to defend- prior For Associates, Inc., purposes the of Ingram Ingram CAB ant obtained from various engaging the debt collec- which included sheets branch officers client information January early or tion business. Febru- These sheets by deemed confidential CAB. 1979, Ingram ary, applied for a license forth information valuable to com- set CAB, of Kentucky operate petitor including and to of names both Tennessee contacts, collection, legal, accounting client opened accounts agency; collection he bank special requirements of each client as Ingram & Associates Nashville and charged client well as the commission each Louisville; began to collect master by Through its access to this and lists other information from oth- client information, Ingram Associates similar & country to use er CAB offices around major to proposals to make was able in his own business. CAB rate of clients which undercut Ingram resigned February CAB on from indicate commission. Other documents 1979; 22, resigned Bjоrkholm Goostree Ingram Associates its effort to that 1979, March, 10, On March In- 1979. made extensive use attract clients Bjorkholm of the gram, Goostree and developed good personal contacts will and Kathleen office met with Nashville CAB for CAB. working defendants while Garrison, Anthony David Powers and III of In- to finalize the formation Schweitzer gram rule, & Associates. was hold general As restrictive cov per outstanding of the stock with sixty employment cent contracts will en enants Powers, under the Bjorkholm, Garrison and Goostree forced if are reasonable particular Allright Auto holding per circumstances. ten cent.1 each etc., Garrison, Ingram, Ingram, v. 622 S.W.2d 681 Powers and ment Bureau CAB also sued 1. Kentucky. Kentucky reasoning (Ky.App.1981). of the Ken For the Schweitzer 34, court, infra, opinion. tucky p. held that the covenant was enforce this see Adjust against defendants. able

33 280, McQuown Parks, ployer. Berry, Tenn. Inc. 219 409 See v. Lakeland Win (1966). Co., (Fla.App. S.W.2d 361 of reasonable- Cleaning dow 136 So.2d 370 applies to 1962). ness consideration as well as to signed that a We hold covenant other such as and time to, matters territorial prior shortly contemporaneously with Colvin, Di limitations. Deeland 208 begins employment part after (1961). Tenn. therefore, original agreement, and that un adequate Whether there is adequate supported by der it is Ramsey, support non-competition signed covenant consideration. during on-going employment relation- reason, For we that there this find ship depends upon the of each facts case. is adequate consideration to de Davies, Davies & Davies Agenсy, Inc. According fendant Goostree’s covenant. (Minn.1980). N.W.2d CAB, began an exhibit filed Goostree question The first before us is whether working on for CAB March 1972. He employment future of an at-will not covenant non-competi constitutes consideration for a March 1972. Under these circumstanc tion In Ramsey Sup covenant. v. Mutual es, clearly was ply Tenn.App. 427 S.W.2d 849 original agreement.2 employment (1968),Ramsey agreed to a Even when the covenant is employer, Supply covenant with his Mutual until employment begun, courts Company, “at the time such employ in the following states have contin Ramsey’s ment.” 427 S.W.2d at found em employment ued ployment nearly be sufficient considera lasted two and a half Alabama, Connecticut, Florida, tion: before he left competi to work for a Geor gia, Iowа, Massachusetts, Kentucky, tor. Supply brought When Mutual Mis suit to covenant, Missouri, sissippi, enforce Ramsey argued Hampshire, New New Jersey was not sufficient considera and Texas. Annot. generally See rejected tion. The argument, court A.L.R.3d 825 Some of these courts holding reason promises the mutual parties as to continued form a employment,

“that even for an indefinite binding period time, promise bilateral contract subject with the to termination at of employment option constituting the of the sufficient con employer is sufficient See, e.g. sideration. consideration to such Sherman v. a con- Pfefferk orn, 468, (1922); 241 tract.” Id. 427 Mass. 135 S.W.2d at 852. N.E. 568 Reed, Associates, Roberts Inc. v. Bailen Ramsey authority is thus for the son, 537 (Mo.App.1976). S.W.2d 238 Other proposition employment that is sufficient courts, however, regard promise the mere fоr a consideration which is covenant binding employment continued as ‍​​‌‌‌‌‌​​​‌​‌​‌​‌‌‌​​​​‌‌​​​‌​​‌‌​​‌‌​​‌​​​‌‌‌‌‌‍not on original employment agreement. the employee employment the is where one made, however, The contention is that the They regard at-will. nevertheless the cove employee must informed of the covenant nant if binding perform as there is actual during employment negotiations before be ance of promise employ the of continued ginning employment. argued It is that if ment. the presented covenant not to the em ployee until the first day shortly at or work Coastal Thomas v. Industrial Servic thereafter, subject the covenant is the not es, 832, (1959), 214 Ga. 108 S.E.2d 328 the bargaining. of free reasoning court stated its as follows: argument,

Such an if accepted, “Though promise may pac- threatens be nudum any agreement vitiate between an em tum promisee when made because the ployee already working bound, and his or her em not binding it becomes when he holding, light In so mony suggests began working we view the record the he on that most favorable to the defendant. The covenant day. same itself is dated March 1972. Goostree’s testi-

34 covenant, agreed consideration

subsequently furnishes the Associated Dairies contemplated by doing Byrum he was ex only employment what to retain at at 329. pected to do.” 108 S.E.2d Id. The Court held there was no will. consideration since Associated Dairies was although court thus there held By- not bound to retain mutuality no consideration to bind was or single day. rum for even already employer employee, when an signed non-competition cove employed, inter- disagree We with the defendants’ nant, sup contract performance under the Ray there pretation of Moss. The court mutuality nec plied the and consideration question only the of whether decided binding. essary to make the contract standing continued promise employment Kentucky Court of relied is sufficient for a non- alone Services, v. Industrial Thomas Coastal employ- competition after Inc., holding is enforce that a covenant begun. It address the ment has did not “provided employer continues to able issue of consideration when employee employ appreciable for an appreciable fact continued for an covenant, length signs of time after he Indeed, opinion time. does period of relationship and the severs his long Byrum indicate how remained not employer voluntarily resign with his with Associated Dairies after ing.” Ingram, supra, v. covenant. also, Person, 57 McAnally at 685. (“One can (Tex.Civ.App.1933) 945 S.W.2d Thus, per if there has been actual successfully plead of considera a want employ in the form formance of continued tion, unilateralness, in a contract which ment, inquiry beyond Ray must move performed part.” Id. he has whole or Hoyt Hoyt, Moss. 948); Burwell, 119 Conn. Roessler v. (1963), stated: S.W.2d this Court (1934) (Employed over 4 176 A. 126 holding “The authorities are uniform in covenant); years Hogan v. signing after there full or sub- that where has been N.J.Super. Bergen Brunswig Corp., 153 to a performance by party stantial one (1977) (continuation A.2d 1164 contract, originally invalid for bilateral for 3 held sufficient con mutuality obligation, the oth- want of sideration); Sheppard Build Frierson party performance cannot refuse er 154 So.2d ing Supply 247 Miss. receiving promised benefits. [Cita- (1963) years); (Employed four and Corbin tions ... Williston omitted] Moore, Ala. 77 So.2d 331 Stokes v. performance that once is made contend (actual excess of four employment here) counter-promise (Appellee’s contract unilat years rendered enforceable promise (Appellant’s promise) the other inception). its eral at binding as considera- becomes sufficient however, contends, The defendant By for it. this tion has been received rejected reasoning, ad Tennessee has this binding contract view a unilateral the mere hering instead to the rule that former, a invalid forged out of bilateral sup employment continued will not fact of contract.” non-competitiоn signed covenant port a 128-29, 372 at S.W.2d at 305. Id. subsequent relying on As employment, stat- persuaded that the doctrine We are Farms, Dairies, Ray sociated Inc. v. Moss in- in cases Hoyt applied should be ed al, Inc., et volving non-competition Such covenants. Moss, non-competition Ray In agreement the deci- approach is with an employee signed by the defendant covenant cited above. of our sister state courts sions agreement, original not was Moreover, not over- require it does that we opinion not state how although the does Moss; rather, remains Ray Moss Byrum, Ray had long employee, Ralph is the only good law when for Dairies when worked Associated employment. continued promise for of signed the In consideration covenant. performanсe manager resigned Whether sufficient district at the time he support compete a covenant not to de from CAB order to it in the pends upon the facts and of Nashville area. circumstances requirement each case. The that consider required Some courts which have addi non-competition ation for a covenant be tional consideration other than continued reasonable remains. Di Deeland v. Col employment have held that a beneficial vin, instance, possible, It is supra. for change in employee’s status constitutes employment only period for a short sufficient consideration to a re time would be insufficient consideration un agreed strictive to after the initial See, e.g., der the circumstances. Frierson taking employment. See M.S. Jacobs Sheppard Building Supply Associates, Duffley, Inc. v. 452 Pa. (“If (1963) Miss. 154 So.2d Faw, Casson (1973); 303 A.2d 921 appellant discharged had shortly been after Cranston, (Del.Ch. 375 A.2d 463 Co. signing agreement, this Court would 1977). In Agency, Davies & Davies probably sup hold the was not Davies, (Minn.1980), 298 N.W.2d 127 consideration”). ported by Another factor signed employee the covenant after his em affecting reasonableness is the circum ployment began. enforcing the cove stances under an employee which leaves. nant, the court found decisive the fact that Although an at-will can be dis covenant, he had because he had charged reason without breach responsible selling position advanced a contract, discharge which is arbi firm, years his ten with the and had in trary, capricious clearly bad faith aspect effect taken over one of the firm’s bearing equity whether court of business which had become identified with should enforce a covenant. him. Id., 155; 154 So.2d at Gibson’s Suits Davies, As in Davies & defendants In- § (6th Chancery 1982). ed. gram and Goostree received additional ben- length We find that because of beyond efits above and employ- continued defendant, they of each ment cove would not have received binding against nant is them. had Defendants covenants. The Ingram and fact of these Goostree remained with additional benefits shows the performed extent signing seven to which CAB under its the covenants Bjorkholm while defendant contracts with and Goostree. For employed was reason, years. for two Each this additional defendant left we hold that volun tarily; supported by there is no covenants are evidence sufficient con- that CAB acted in bad faith or sideration. with unclean hands. It is

unnecessary at say long this time to how IV employment must continue before there is performance substantial ‍​​‌‌‌‌‌​​​‌​‌​‌​‌‌‌​​​​‌‌​​​‌​​‌‌​​‌‌​​‌​​​‌‌‌‌‌‍Parks, under the doctrine In Allright Auto Berry, of Hoyt Hoyt discussed above. The 219 Tenn. 409 S.W.2d 361 this length of each defendant in Court held that “the time and territorial this case is sufficient to constitute greater substan limits involved must be no than is performance. tial necessary protect the business interests employer.” In the instant case the addition, we note that defendant In- Chancellor found gram received salary numerous increases legitimate Bureau had a interest business employed while Beginning as a protected by noncompetition to be cove- salesman, Ingram advanced until at compеtition nants and that the defendants’ resignation, occupied time of his one of damaged sup- interest. The record highest positions company. De- ports finding. fendant Goostree also received numerous salary increases promotions. although as well as two The held Chancellor Cen- position He had risen to the legiti- of Nashville Bureau tral had such a protect, mate interest employer’s business to the cove- tect the interest is void in its sought entirety. nants to be enforced were unrea- employing Courts this rule rea- sonably year broad. He found that the two partial son that delegates enforcement courts, limitation was unreasonable but enforced a prove when the covenants exces- year upon one limitation. He based this a sive, power private agreements. to make finding that when clients of a collection Vroman, Rector-Phillips-Morse, agency change agencies in order main- (1973). 253 Ark. 4-5 relationship employee, tain a with a former trend, however, The recent has been they immediately do so and that customers away from nothing the all or at all rule in only agency seldom use one collection and favor of judicial some form of modification. frequently regularly and re-evaluate their Several explicitly courts have overruled agencies. prior adopted judi- their own case law and The Chancellor further found that See, cial e.g., modification. Ehlers v. Iowa prohibiting restriction contact with cus- Co., Industries, supra; Warehouse Solari tomer a Adjust- which was client of Central Inc. v. Malady, 55 N.J. 264 A.2d 53 during ment Bureau the defendants’ entire (1970). Our research indicates some form employment, terms of was also unreason- judicial modification has now been He, therefore, prohibition able. limited the adopted by majority jurisdictions. to those CAB customers who were custom- See, Co., supra, Ehlers v. Iowa Warehouse 1, 1979, that, January ers as of as thus 370; (1975). Annot. 61 A.L.R.3d 397 We altered, the covenant was reasonable and think that appropriate under circumstanc- enforceable. es, judicial some form of modification permitted, when, especially should be inas Finally, the Chancellor concluded that us, specifical- the case before the covenant scope the nationwide of the restrictions ly provides for modification. that, imposed here was too broаd since but competing the defendants were with CAB Courts approaches have taken one of two very in the area in which had worked modifying restrictive The covenants. previously, the defendants had no cause to pencil” provides “blue rule that an unrea complain. against competition may sonable restriction modified and be enforced to the extent that agree We with both the Chancellor grammatically meaningful reasonable re the Court of that the restric striction making remains after the words tions unreasonably were broad. As en the restriction unreasonable are stricken. Chancellor, however, forced the cov Industries, Malady, supra, Solari enants question were reasonable. The be example, 264 A.2d at 57. For in a restric fore this Court is whether thе Chancellor soliciting tion on business clients “Tole authority modify had the a covenant not do, Ohio, and the United States” the court which is otherwise unreason “Ohio, pencil” or mark “blue out ably broad. Tennessee courts have not leaving the United States” the covenant previously question. addressed this As a Briggs enforceable Toledo. v. But therefore, impression, case of first it is ler, (1942). 140 Ohio 45 N.E.2d 757 St. appropriate guidance to look for to deci having sions courts considered this pencil advantage rule has the blue question. generally, See Annot. 61 A.L. simplicity prevents from actual- a court cases). (collecting R.3d 397 ly rewriting private agreements. On the hand, other still fails if the contract majority At one time the of courts em- provision offending cannot stricken. ployed nothing the “all or at all” rule. See integral term Often divisible contains Ehlers v. Iowa Warehouse 188 N.W.2d (Iowa 1971). rule, pencil- so that “blue Under this a court ing” provision the con- either enforces the contract as written or emasculates Vlerah, rejects altogether. it A covenant contain- tract. Raimonde v. Ohio Van ing greater necessary pro- term than St.2d 325 N.E.2d 544

37 partial guments in favor of enforcement form emphasizing criticized as has been Bothman, need hesitate to convincing, are no court v. over substance. Bess Corbin, (Minn.1977). re give It has been them effect.” Williston N.W.2d 791 Beit, authority against weight Beit v. jected as the Doctrine On as Williston by criticized writers such 49-50 Conn.B.J. (SEC See, and Corbin. RESTATEMENT objection recognize the force We § OND) reporter’s OF CONTRACTS permit an modification could judicial §§ Contracts, note; 1390 and 6A on Corbin unneces oppressive and employer to insert Contracts, (1968); 14 on Williston knowing into a contract sary restrictions § (3d 1972). 1647B, 1647C ed. modify enforce the can that the courts trend, therefore, has The most recent Especially on reasonable terms. pencil” rule in to abandon the “blue been employer' at the contract allows when See, of a rule of reasonableness. favor fees, may noth torney’s employer have Co., supra; e.g., Ehlers v. Iowa Warehouse court, thereby pro ing by going to to lose Bothman, supra; Karpinski v. Bess v. See, litigation. Rector- voking needless N.Y.S.2d 268 Ingrasci, 28 N.Y.2d Vroman, supra, Phillips-Morse, Industries, (1971); Inc. N.E.2d 751 Solari If is credible evi 489 S.W.2d at 5. there v. Malady, supra; and Raimonde Van v. finding that a contract is dence to sustain a Vlerah, provides that supra. This rule oрpressive, deliberately unreasonable and faith unless the circumstances indicate bad then the covenant is invalid. Ehlers employer, a court will part on the Co., at 374. Even supra, Iowa Warehouse to the compete enforce covenants not to in the of evidence sufficient absence reasonably necessary they extent that may finding invalidity, a court employer’s protect interest “without determining rea well find in the course of imposing hardship undue on the provision sonableness that contractual public adversely is not when the interest either in attorney’s fees is unreasonable affected.” Ehlers v. Iowa Warehouse part. whole or in supra, at 370. case, hold In the instant we persuaded We are that the rule of properly acted en thаt the Chancellor It reasonableness is the better rule. terms forcing the contract on reasonable with and the rule consistent an extension of further find against the defendants. We Allright of reasonableness set forth in finding of to sustain a no credible evidence supra. adopting Berry, Auto Parks faith on the of CAB or warrant bad it, we do not intend a retreat from the provision contractual invalidation of the general precluding courts from creat attorney’s fees. ing parties. new contracts for Bob Appeals as judgment of the Motors, Regal Chrysler- Pearsall judg- and the to all defendants reversed (Tenn. Inc., Plymouth, 521 S.W.2d 578 is affirmed. Costs ment of the Chancellor 1975). guided by spe We are instead against the defendants. are taxed cial nature of covenants not to Further, already discussed. as noted HARBISON, J., COOPER, C.J., con- leading commentators on contracts: two cur. making “This is not a new contract JJ., BROCK, sepa- dissent FONES and among it parties; is a choice opinion. rate possible effects of the one that made, is the establishing the one that BROCK, Justice, dissenting. most desirable for the contractors respectfully dissent. large. public Partial enforcement Dairies, Ray Moss Inc. much of a variation from Associated involves less Farms, Inc., 326 S.W.2d 458 than parties effects intended (1959), continued em- this Court held that nonenforcement If the ar- total would. 38

ployment began working, is no consideration for a restric- point at that the covenants imposed employment longer after an subject bargain- tive covenant were no of free Moss, observed, relationship begun. ing. In As the Court of Ray “[ejven if competitor employer, employee] he who was is notified of [the business, dairy allegedly began day the restrictive covenant on the to hire the first employment, his new employer’s has foreclosed his sales drivers to use those options point other at that employer’s has little drivers to solicit the business. sign.” choice but to response, employer required its driv- ers, defendant, including sign a non- Ray employee’s Moss rule that an competition agreement. refusing to en- anticompetitive covenant executed after the agreement, force the this Court found as employment commencement of his is unen follows: forceable because without consideration is “In the agree- case at bar there was no followed in a of other number statеs. Ka complainant

ment that the would retain Britt, 154, 543, dis v. 224 N.C. 29 ‍​​‌‌‌‌‌​​​‌​‌​‌​‌‌‌​​​​‌‌​​​‌​​‌‌​​‌‌​​‌​​​‌‌‌‌‌‍S.E.2d the defendant for as much as one (1944); Wilmar, Incorpo 152 A.L.R. 405 day.... In these circumstances there Liles, 71, N.C.App. rated v. 13 185 S.E.2d was no consideration to sustain the con- 278, (1971), 51 A.L.R.3d 816 cert. denied purports 305, tract which to restrain the de- (1972); 280 186 N.C. S.E.2d 178 For engaging fendant from Milholen, the solicitation Machinery rest Paschal Co. v. Id., 678, (1975); of business for another.” 205 Tenn. N.C.App. 27 220 S.E.2d 190 275, 115, 326 S.W.2d at 461. Hayes, Schneller v. 176 Wash. 28 P.2d 273, (1934); Kistler, George 275 Inc. W. v. Thus, original employ- if the terms of the O’Brien, (1975); 464 Pa. 347 A.2d 311 ment do not include a covenant Productions, Johnston, III, Beaver compete, any subsequent not to La.App., (1976); Morgan 335 So.2d 59 supported by must be some consideration Toth, Company Lumber 41 Sales Ohio other than mere continued un- (1974); Misc. 321 N.E.2d 907 Pemco der a contract terminable at will. e.g., Rose, Corp. (applying supra Virginia Colvin, Di Deeland v. law). urged We hold this case (1961) (new obligation give S.W.2d 483 may that consideration be found to have two weeks’ notice before ter- promotions consisted of and increases in consideration). adequate minated held to be compensation granted to the de'fendants- Ray supported by following Moss is employees over the employ of their Rose, reasoning Corp. Pemco appellant. ment with Davies Davies (1979): W.Va. 257 S.E.2d Minn., Davies, Agcy., 298 N.W.2d argument employer’s “The that the con- authority is cited as for such a sideration for the cove- holding. I decline this invitation because legal nant is the forebearance the fundamental doctrine that in order right discharge unavailing find we but for act to constitute consideration for a logical support_ not without Com- promise “bargained it must have been principles governing employ- mon law given exchange very prom for that employed ment contracts should not be ise.” Section Restatement of Con supply non-compe- for a tracts, American Law Institute. There is provision tition covenant where such a simply no indication in this record whatever freely bargained par- was not promotions for a conclusion that and in ties.” compensation, given years creases after case, present In the instant CAB did not compete the covenants not to exe were the covenants to the defendants until after cuted, bargained given were for and previous employ- had terminated their exchange The cove for those covenants. begun Although ment and work for nants not to in the instant case presented bargained the covenants were to the de- all were not for at but were employees shortly they merely imposed upon fendants as soon as or after Company, hold v. Iowa su- employment began. their Ehlers Warehouse at 370. pra, fail for lack of consid that these covenants majority eration. The finds consideration to follow either of these I think it unwise where there is none. I to adhere to the rule courses. continue the courts of this state have no busi- that Parks, Berry, Allright Auto Inc. par- for the creating ness in new contracts 409 S.W.2d 361 this Motors, Regal ties. Pearsall Inc. v. Bob that “the time and territorial Court held Tenn., Inc., 521 S.W.2d 578 Chrysler-P., greater limits must no than is involved be (1975). proper role is to enforce a Our necessary protect the business interests to оr, invalid, written, if it to contract as be employer.” In the instant case the altogether. Supreme it As the reject Chancellor found Rector-Phillips-Morse, held in of Arkansas legitimate Bureau had a business interest Vroman, 253 Ark. protected by noncompetition to cove- be (1973), A.L.R.3d 391 when a covenant competition that the defendants’ nants and competition reaching too far to against damaged that interest. valid, the court will not make a new be agree I with both the Chancellor and the parties by reducing for the contract Court of that the restrictions restriction to a shorter time or to a smaller unreasonably these covenants were broad. area; make parties are not entitled to But, urged uphold we are to the reason- they by an will be bound they of the сovenants have ableness as may the courts make for whatever contract by been altered the Chancellor. It is said future, them time in the since this at some previously this ad- Court has not power upon confer the courts the to question my dressed this and to the best of agreements. per- I also find private make knowledge that is true. following suasive observation: Some courts have taken one of two every way that finds its to “For in “modifying” noncompetition courses cov- court, there are thousands which exer- pencil” enants. The an “blue allows employees cise an in terrorem effect against competi- unreasonable restriction obligations respect who their contractual tion to modified and to the enforced competitors legal сom- and on who fear grammatically meaningful, extent that a covenator, they employ plications if reasonable restriction remains after gentlemanly are anxious to maintain who rendering the words restriction unreason- Thus, competitors. relations with their Industries, able are stricken. See Solari mobility of untold numbers of em- Malady, A.2d 53 55 N.J. by the intimidation ployees is restricted (1970). severity no court of restrictions whose general- If severance is would sanction. courts, including majority in Other truly ly applied, employers can fashion case, this have followed what been confidence that ominous covenants with as the “rule of reasonableness” referred to enforced they pared will be down and altering unreasonable covenants not particular of a casе are when the facts compete enforcing such covenants as not unreasonable. This smacks of hav- altered. See Ehlers v. Iowa Warehouse cake, eating ing employee’s it one’s Iowa, (1971). Company, 188 N.W.2d 368 Blake, Employee Agreements too.” Not Under rule it is said that unless the this 625, 682- Compete, 73 Harv.Law Rev. faith” on the circumstances indicate “bad employer, the court will enforce whereby cove- compete policy not to to the extent that unreasonable covenants modified they reasonably necessary protect nants not to are to be modified, enforced, and, imposing the as thus employer’s interest “without courts employer oppres- to insert hardship permit when the undue on the will unnecessary restrictions into such public advеrsely interest is not affected.” sive and covenants, knowing that the courts will

modify and enforce the on rea- covenants And,

sonable terms. when such covenants provision employer

contain a for the do, fees, attorney’s

recover as often employer nothing have to lose will court,

going thereby provoking needless

litigation. Rector-Phillips-Morse, su-

pra. would hold that the Chancellor erred attempt modify

his to so the unreasonable

provisions of these covenants not to com-

pete as to render them and to reasonable

enforce the altered “covenants.”

I am authorized to state that Mr. Justice

FONES concurs this dissent. Tennessee, Appellant,

STATE of Leech, Jr., Gen., Kim- Atty. William M. BOLIN, Appellee. Darel Dean, Gen., Nashville, berly Atty. J. ‍​​‌‌‌‌‌​​​‌​‌​‌​‌‌‌​​​​‌‌​​​‌​​‌‌​​‌‌​​‌​​​‌‌‌‌‌‍Asst. appellant. Tennessee, Supreme Court of Howell, Columbia, Gary appellee. M. at Nashville. Oct. OPINION

FONES, Justice. jury The issue in this case is whether a that “the use of instruction which states deadly weapon presumption ... raises malice, facts and unless rebutted other contrary” to the unconstitu- circumstances tionally persuasion shifts the burden to the the element of malice from State defendant.

Defendant was convicted the trial with intent to commit mur- court assault degree after the der the first above jury. charged to the instruction was found the Criminal defective, charge constitutionally re- to be assault, aggravated duced the offense

Case Details

Case Name: Central Adjustment Bureau, Inc. v. Ingram

Court Name: Tennessee Supreme Court

Date Published: Sep 17, 1984

Citation: 678 S.W.2d 28

Court Abbreviation: Tenn.