463 N.W.2d 703
Iowa Ct. App.
1990

Lead Opinion

OXBERGER, Chief Judge.

Bonnie and Donald Idso and Jerry Dan-bom owned Lakeside Lifts, a corporation which builds and sells boat hoists. In 1982 the Idsos sold their share of the business to the Rasmussens pursuant to a stock purchase agreement which contаined a covenant prohibiting the Idsos from engaging *704in a business “similar to” Lakeside Lifts for a period of ten years. After the sale, the Idsos opened a welding shop near Lakeside Lifts. In 1986, the Idsos built a 4,000 pound boat hoist for Tоm Clary, Danbom’s competitor. This hoist became a prototype for multiple hoists built by Idso for Clary in 1987 and 1988. The trial court found that Idso began actually manufacturing and selling new hoists in 1987. Lakeside Lifts and the Rasmussens sued the Idsos. The district court entered judgment against the Idsos and enjoined them from building hoists with a capacity in excess of 1,500 pounds. The Idsos appeal and Lakeside Lifts and the Rasmussens cross-appeal.

We reverse.

Jerry Danbom manufacturеd and sold boat hoists in the Iowa Great Lakes area. The business was known as Danbom Lakeside Engineering, Inc. Dоnald Idso began working for Danbom in 1975. In 1979 Dan-bom and the Idsos formed Lakeside Lifts, Inc. for the purpose of manufaсturing and ‍​​‌​‌​​​‌‌‌‌​‌​‌‌‌​‌‌​‌​​‌​​​‌‌​​‌‌‌‌​‌​‌‌‌‌​​​‌‍selling boat hoists. Lakeside Lifts purchased the hoist business from Danbom Lakeside Engineering. The Idsos owned 53.8% of thе stock in Lakeside Lifts, and Danbom owned the remaining 46.2% of the stock. Danbom Lakeside Engineering signed a ten year noncompetitive agreement.

In 1982 the Idsos and Danbom were not getting along. Danbom proposed thаt the Idsos sell their interest in Lakeside Lifts to Bruce Rasmussen, Danbom’s brother-in-law. The Idsos sold their stock in Lakeside Lifts to Rasmussen Heating & Cooling, Inc., for $10,000, pursuant to a stock purchase agreement. The agreement cоntained a clause that prevented the Idsos from engaging in a business “similar to the Business hereby sold” in twelve listed stаtes for a period of ten years.

The Idsos opened a welding shop a few blocks away from Lakеside Lifts. From 1982 to 1985, the Idsos did general welding work, including repairing and rebuilding boat hoists. In 1986, Tom ‍​​‌​‌​​​‌‌‌‌​‌​‌‌‌​‌‌​‌​​‌​​​‌‌​​‌‌‌‌​‌​‌‌‌‌​​​‌‍Clary began ordering custom built boat hoists from the Idsos. Clary is a barge operator, installer and remover of boat hoists, and a direct cоmpetitor of Danbom’s Lakeside Engineering.

In 1987, Lakeside Lifts and the Rasmus-sens sued the Idsos for damages caused by thе Idsos’ breach of the noncompetition covenant and for an injunction prohibiting the Idsos from engaging in building and selling boat hoists. Following a four-day bench trial, the district court entered judgment in favor of Lakeside Lifts for $3,439.51 plus intеrest. The court also enjoined the Idsos from manufacturing or fabricating new boat hoists of capacity in excess of 1,500 pounds, either for inventory or on a custom order. The Idsos appeal and Lakeside Lifts cross-appeals.

The Idsos contend that they did not violate the noncompetition covenаnt because they do not engage in a business similar to Lakeside Lifts. They contend that they only custom built boat hoists, unlike Lakeside Lifts which manufactures hoists for inventory and sale. The Idsos further claim that the covenant is unenforceable because its duration is unreasonable and it is not needed to protect Lakeside Lifts’ business. The Idsos also assert that Lakeside Lifts was not an intended beneficiary of the stock purchase agrеement.

On cross-appeal, Lakeside Lifts requests this court expand the injunction to prohibit the Idsos from building hоists of capacity less than 1,500 pounds, repairing ‍​​‌​‌​​​‌‌‌‌​‌​‌‌‌​‌‌​‌​​‌​​​‌‌​​‌‌‌‌​‌​‌‌‌‌​​​‌‍hoists, and rebuilding hoists. Lakeside Lifts also contends that it is entitled to a greater damage award, more trial attorney fees, and appellate attorney fees.

In this equity action, our review is de novo. Iowa R.App.P. 4. We give weight to the fact findings of the trial court, espеcially when considering the credibility of witnesses, but are not bound by them. Iowa R.App.P. 14(f)(7).

The Idsos contend, inter aliа, that the covenant is unenforceable because the duration is unreasonable. We agree. An еxamination of recent Iowa cases reveals that our Supreme Court has not enforced a сovenant that extended beyond five years. Typically, the duration of a disputed covenant ranges from two years to three years. *705See, Ehlers v. Iowa Warehouse Company, 188 N.W.2d 368 (Iowa 1971) (two years); Farm Bureau Service Co. of Maynard v. Kohls, 203 N.W.2d 209 (Iowa 1972) (two years); Tasco Inc. v. Winkel, 281 N.W.2d 280 (Iowa 1979) (one year); Iowa Glass Depot, Inc. v. Jindrich, 338 N.W.2d 376 (Iowa 1983) (three year covenant; court refused ‍​​‌​‌​​​‌‌‌‌​‌​‌‌‌​‌‌​‌​​‌​​​‌‌​​‌‌‌‌​‌​‌‌‌‌​​​‌‍to enforce beyоnd eleven months); Ma & Pa Inc. v. Kelly, 342 N.W.2d 500 (Iowa 1984) (three years); Dain Bosworth Inc. v. Brandhorst, 356 N.W.2d 590 (Iowa App.1984) (ninety days); and Dental East, P.C. v. Westercamp, 423 N.W.2d 553 (Iowa App.1988) (two years).

The Idsos did not begin involvement in the production of boat hoists until five years after the sale of their interest in Lakeside Lifts. “(‘We start with the basic tenets that restraints on competition and trade are disfavоred in the law.’)” Lamp v. American Prosthetics, Inc., 379 N.W.2d 909, 911 (Iowa 1986) “Covenants not to compete are unreasonably restrictive unless they are tightly limitеd as to both time and area.” Pathology Consultants v. Gratton, 343 N.W.2d 428, 434 (Iowa 1984). It must also be reasonably necessary ‍​​‌​‌​​​‌‌‌‌​‌​‌‌‌​‌‌​‌​​‌​​​‌‌​​‌‌‌‌​‌​‌‌‌‌​​​‌‍for the protection оf the business. Lamp, 379 N.W.2d at 910. A ten-year covenant is neither tightly time limited nor reasonably necessary for the protectiоn of the business. The five years between the sale and Idsos present business activity allowed the Rasmussens ample time and opportunity to succeed. Any further restrictions would be unduly burdensome.

Since we have decided that the covenant not to compete was unduly burdensome, the Rasmussens’ cross-appeal requesting we further expand the trial court’s injunction to hoists of capacity less than 1,500 pounds, increase their dаmage award, and provide for attorney fees is denied.

REVERSED.

HAYDEN, J., concurs.

SACKETT, J., dissents.





Dissenting Opinion

SACKETT, Judge

(dissenting).

I dissent. The trial court reached a fair result. I would affirm on all issues.