454 Pa. 488 | Pa. | 1973
Lead Opinion
Opinion by
This appeal is from a decree in equity refusing an injunction against appellee Bertolet sought by reason of his alleged breach of an agreement not to compete with appellant.
Appellant, Reading Aviation Service, Inc. [“Reading Aviation”], is engaged in the general aviation business, including the maintenance, repair and sale of aircraft. Since 1946, its principal facility has been located at the Reading Mumcipal Airport in Berks County. It also has maintenance and sales facilities at Queen City airport in Lehigh County and Allentown-Bethlehem-Easton airport in Northampton County.
Five days after the merger was consummated, Reading Aviation entered into a loan and security agreement with Chase Manhattan Capital Corporation [“Chase Manhattan”], pursuant to which Chase Manhattan advanced Reading Aviation the sum of $1,100,000 and received a warrant to purchase shares of the company’s common stock. The agreement required that Reading Aviation obtain non-competition agreements from Bertolet and another key employee. Accordingly, on August 1, 1968 Bertolet wrote a letter to Reading Aviation as follows: “In connection with my employment by you, I hereby agree that so long as I am an officer, director, employee or am otherwise active in your business, I will not own any interest in, or engage in any way, directly or indirectly, in any business competitive with you, or any of your subsidiaries, or solicit or in any other manner or way assist any such competitive business after I have voluntarily ceased to be an officer, director, employee or otherwise active in your business, or any of your subsidiaries.” Bertolet received an increase in annual salary from $80,000 to $40,000 effective the same day.
Some two years later, on March 20, 1970, Bertolet ceased to be an officer of Reading Aviation. At that time his salary was reduced to $15,000 per year. He continued in Reading Aviation’s employ until May 15th, at which time he went to work for a competing organization. Bertolet is now employed by Reading Public
The chancellor found that Bertolet left his job at Reading Aviation voluntarily, and that the restrictive covenant was ancillary to his employment. He concluded, however, that the covenant was void as an unreasonable restraint since it was without limitation as to time or space and indivisible as to terms. He further found that in any event the covenant had expired in that the loan to Chase Manhattan had been repaid and the warrant to purchase stock had been cancelled. Corporate defendant Reading Public Aviation, Inc. was enjoined from using that name. No appeal has been taken from this part of the chancellor’s decree, and that company is not an appellee herein.
Both parties took exceptions to the chancellor’s findings of fact and conclusions of law, and several points are pressed on us on this appeal. Reading Aviation contests the finding that its indebtedness to Chase Manhattan has been paid and that therefore the restrictive covenant is no longer in force. Bertolet objects to the finding that he left his employment voluntarily. We need not reach either of these questions in view of our resolution of the pivotal question in this case: whether the non-competition agreement is void on its face because unlimited both in time and space. The chancellor so found on the authority of Keeler v. Taylor, 53 Pa. 467, 91 Am. Dec. 221 (1866), and Henschke v. Moore, 257 Pa. 196, 101 A. 308 (1917). We think these venerable cases still represent good law, and we accordingly affirm the chancellor’s decree.
Keeler v. Taylor, supra, involved the validity of a workman’s promise to his employer, a scale manufacturer, to pay royalties on scales made for persons other than his employer. The Court said: “. . . (A) contract that restrained the industry of the defendant, not in
Because of the inherently unequal bargaining positions of the parties, we have consistently subjected covenants of non-competition between employees and their employers to close scrutiny. Albee Homes, Inc. v. Caddie Homes, Inc., supra; Morgan’s Home Equipment Corporation v. Martucci, 390 Pa. 618, 136 A. 2d 838 (1957). In the present case, we think the open-
The decree of the court below is affirmed. Costs on appellant.
Concurrence Opinion
Concurring Opinion by
I concur in the result reached by the majority solely on the ground that the covenant not to compete became ineffective as soon as the loan from Chase Manhattan Capital Corporation was repaid by appellant.
These findings were approved by the court en banc. It is well established that, absent an error of law or an abuse of discretion, the chancellor’s findings of fact adopted by the court en banc, if supported by sufficient evidence,
Because the covenant was solely for the protection of appellant’s creditor, Chase Manhattan Capital Corporation, and because that creditor’s loan was repaid, the contractual basis for the covenant has expired. There is now no ground for enforcing the covenant.
Appellant contends that the chancellor erroneously considered appellee’s defense based on the loan having been repaid because the issue was not raised in appellee’s answer. See Snyder v. Barber, 378 Pa. 377, 382-83, 106 A.2d 410, 412-13 (1954); Real Estate Co. v. Rudolph, 301 Pa. 502, 505, 153 A. 438, 439 (1930). However, the testimony upon which the chancellor based his findings was introduced into evidence without objection. Our rule is that an appellate court will treat the pleadings as amended to conform to the proof, if the case has been tried on the merits and there was no objection to the variance between pleadings and proof. Srednick v. Sylak, 343 Pa. 486, 491, 23 A.2d 333, 336 (1942).
In reaching his determination, the chancellor had the following evidence before him. Appellee had worked for appellant for over twenty years without appellant asking him to enter into a covenant not to compete.
On August 1, 1968, appellant obtained a loan of $1,100,000 from Chase Manhattan Capital Corporation, under a loan and security agreement dated July 29, 1968. The loan and security agreement between Chase Manhattan and appellant contained an express condition that a non-competition agreement was to be obtained by appellant from its key employees. Appellee was specifically designated as a key employee. The clause further required that the covenant be “in form and substance satisfactory to the Lender.” Appellee’s letter of August 1, 1968, which served as the non-competition agreement, virtuaUy reproduced the language of the clause in the security and loan agreement. Louis L. Allen, president of Chase Manhattan Capital Corporation, testified that the covenant not to compete was to remain in effect until “the loan agreement had been fully paid and satisfied.”
Mr. Allen was further asked by appellee on cross-examination: “Now, has that loan [$1,100,000] been paid off?” The witness responded: “Well, in a way, yes, it has. We have exchanged our notes for stock and made additional advances.” The evidence also
This evidence certainly was sufficient to sustain the chancellor’s findings of fact approved by the court en banc.