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CAPITAL BAKERS v. TOWNSEND (06/29/67)

decided: June 29, 1967.

CAPITAL BAKERS, INC.
v.
TOWNSEND, APPELLANT



Appeal from decree of Court of Common Pleas of Dauphin County, No. 2794 Equity Docket, 1967, in case of Capital Bakers, Inc. v. Eldon L. Townsend.

COUNSEL

Daniel W. Shoemaker, for appellant.

Robert H. Maurer, for appellee.

Bell, C. J., Musmanno, Jones, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Eagen. Mr. Chief Justice Bell concurs in the result. Mr. Justice Cohen took no part in the consideration or decision of this case.

Author: Eagen

[ 426 Pa. Page 189]

This is an appeal from a decree in equity below granting a preliminary injunction.

The undisputed facts are these: The appellant, Eldon L. Townsend, entered the employment of Capital Bakers, Inc. (Capital) on May 4, 1953, as a house-to-house salesman operating out of Capital's place of business in Carlisle, Pennsylvania. As a condition of employment, he executed a written contract, which, inter alia, provided that upon termination of his employment he would not for a period of one year solicit or engage in competition with Capital "within any territory or to any customers assigned to or covered or served by him."

[ 426 Pa. Page 190]

Some time later Townsend served as a supervisor for Capital, and on September 30, 1963, was made a Home Service Sales Manager. On January 1, 1965, without any change in his employment status and while still serving in the last mentioned position, he executed a supplementary employment contract, which incorcorporated a similar restrictive covenant against engaging in competition with Capital for a period of one year upon termination of his employment. However, this covenant was much broader in scope than that contained in the agreement executed on May 4, 1953. For instance, the new 1965 agreement restricted Townsend for the one-year period from engaging in or being employed by any baking business or plant located in any territory served by Capital.*fn1

On October 14, 1966, Townsend voluntarily terminated his employment with Capital and shortly thereafter engaged in the sale of bakery goods in areas served by Capital in Pennsylvania. When he refused to desist, after being warned that his activities were in violation of his employment contract with Capital, this action in equity was instituted and, after hearing, a preliminary injunction issued.

There is no doubt that the restrictive covenant included in the 1953 agreement was valid and enforceable. It was ancillary to the taking of the employment, and contained reasonable restrictions, both as to time and geographical extent, which were not illegal restraints of trade. See, Beneficial Finance Co. of Lebanon v. Becker, 422 Pa. 531, 222 A.2d 873 (1966), and Barb-Lee Mobile Frame Co. v. Hoot, 416 Pa. 222, 206 A.2d 59 (1965). By the same token, since the 1965 agreement was clearly not ancillary to the taking of employment,*fn2

[ 426 Pa. Page 191]

    the restrictive covenant therein is not valid or enforceable. See Restatement, Contracts § 515 (1932); Beneficial Finance Co. v. Becker, supra; Morgan's Home Equipment Corp. v. Martucci, 390 Pa. 618, 136 A.2d 838 (1957); and, National Starch & Chemical Corp. v. Snyder, 34 Pa. D. & C. 2d 533 (1964). The fact that this agreement also included a provision not present in the 1953 agreement requiring Capital to give a thirty-day notice to Townsend in the event of termination did not infuse it with validity. Contracts in restraint of trade, made independently of a sale of a business or contract ...


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