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M. S. JACOBS AND ASSOCIATES v. DUFFLEY (05/04/73)

decided: May 4, 1973.

M. S. JACOBS AND ASSOCIATES, INC., APPELLANT,
v.
DUFFLEY



Appeal from decree of Court of Common Pleas, Civil Division, of Allegheny County, July T., 1972, No. 1976, in case of M. S. Jacobs and Associates, Inc. v. Joseph C. Duffley.

COUNSEL

Charles D. Coll, for appellant.

No oral argument was made nor brief submitted for appellee.

Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Opinion by Mr. Justice O'Brien. Mr. Chief Justice Jones took no part in the consideration or decision of this case. Mr. Justice Pomeroy and Mr. Justice Manderino concur in the result.

Author: O'brien

[ 452 Pa. Page 145]

Appellant, M. S. Jacobs and Associates, Inc., is a corporation engaged in sales of various products for manufacturers, with its principal sales force located in Pennsylvania, New York, Ohio, and West Virginia. Sometime in 1966, appellee, Joseph C. Duffley, became an employee of appellant pursuant to an oral contract. On March 1, 1968, the parties entered into a written employment contract which included a covenant against competition after the termination of employment.

On May 16, 1972, appellant, alleging that appellee is now engaging in competition with it, in violation of the covenant against competition, filed a complaint in equity seeking an injunction. After hearing testimony, in an opinion filed July 19, 1972, the chancellor entered a decree nisi dismissing the complaint. Appellant took exceptions and, after oral argument was waived, the court en banc entered a final decree on October 17, 1972, dismissing appellant's exceptions and complaint. This appeal followed.

The record reveals that appellee came into the employ of appellant in 1966 as an inside salesman, with his duties limited to office work. Prior to the 1968 agreement, appellee was sent out on the road to follow up complaints by appellant's customers, but he was not actually engaged in a sales capacity and was not able to earn commissions. In March of 1968, appellee was placed on the outside sales force of appellant. He was given expenses and his salary included commissions from the sales he made. It was at this time that appellee signed the employment contract containing the restrictive covenant. A year later, in June of 1969, appellee tendered his resignation, claiming that he had a better offer elsewhere. However, when appellee was offered a raise in salary, he decided to remain in the employ of appellant.

[ 452 Pa. Page 146]

According to the chancellor, citing our opinion in Capital Bakers, Inc. v. Townsend, 426 Pa. 188, 231 A.2d 292 (1967), the restrictive covenant was unenforceable because it was not ancillary to the taking of employment. The chancellor distinguishes our decision in Jacobson & Co. v. Int. Environment Corp., 427 Pa. 439, 235 A.2d 612 (1967), where we held that a beneficial change in an employee's status was sufficient consideration to support a restrictive covenant agreed to after the initial taking of employment, on the grounds that there was no such change in appellee's status in the instant case.

Furthermore, the chancellor reasoned, when appellee resigned in June of 1969, a novation of contract occurred and when he continued in the employ of appellant at a higher salary, that employment was under a new contract, which did not contain the restrictive covenant.*fn1

Our review of the record indicates that it does not support the chancellor's attempt to distinguish the instant case from Jacobson, supra. Appellee admitted that although he was an outside man before the 1968 contract, he received no additional remuneration for his duties and was not in fact ...


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