No. 790 October Term, 1978, Appeal from the Order in the Court of Common Pleas of Montgomery County, Civil Action, Equity, No. 77-17611.
Norman Mittman, Lansdale, for appellant.
Joseph A. Malloy, Jr., Philadelphia, for appellee.
Jacobs, President Judge, and Hoffman, Cercone, Price, Van der Voort, Spaeth and Hester, JJ. Spaeth, J., files a concurring opinion. Cercone, President Judge, and Hester, J., file dissenting statements. Jacobs, former President Judge, did not participate in the consideration or decision of this case.
[ 268 Pa. Super. Page 87]
The instant appeal is from an order of the court below denying appellant's request for a preliminary injunction to restrain appellee from violating a covenant not to compete. Because the covenant was not supported by consideration, we affirm the order of the court below.
The facts pertinent to this appeal are as follows. From 1952 to 1976, appellee maintained a general practice of medicine in Norristown, Montgomery County. From 1965 to 1976, he maintained the practice in an office owned by his son at 1000 DeKalb Street in that borough. In 1976, appellee expressed a desire to sell his practice and move to Florida. On August 25, 1976, the parties signed an agreement of sale drafted by appellee's attorney. The agreement provided that appellant would purchase appellee's practice along with all equipment, medical supplies, and furniture. As originally drafted, the agreement included the sale of the "good will" of the practice, but at appellant's request, these words were deleted. Finally, the agreement provided that it was contingent upon appellant purchasing the building at 1000 DeKalb Street from appellee's son.
Shortly thereafter, appellant secured the necessary financing to purchase the property at 1000 DeKalb Street. On September 21, 1976, closing on the property was scheduled. Appellant was represented at closing by counsel, who objected that the agreement of sale did not contain a covenant not to compete. Appellee reaffirmed his intention to retire to Florida, and stated that he would sign any covenant that appellant desired. Closing on the property was completed, and the parties returned to the office of appellee's attorney. An addendum to the August 25th agreement was signed which provided that appellee would not engage in the practice of medicine within fifteen (15) miles of Norristown for a period of five (5) years.
In March or April of 1977, appellee returned to the Norristown area and secured employment at the Norristown State Hospital. On October 17, 1977, he opened an office for
[ 268 Pa. Super. Page 88]
the general practice of medicine in King of Prussia, approximately four (4) miles from his old office in Norristown. Appellant immediately filed a complaint in equity requesting, inter alia, a preliminary injunction restraining appellee from maintaining an office within fifteen (15) miles of Norristown. On November 1, and December 15, 1977, hearings were held on appellant's complaint. The court below determined that because the covenant not to compete was not supported by consideration, a preliminary injunction could not be issued. Reviewing the record, we must agree with the court below.
"The law in this Commonwealth for more than a century has been that in order to be enforceable covenants in restraint of trade must satisfy three requirements: (1) the covenant must relate to either a contract for the sale of good will or other subject property or to a contract of employment; (2) the covenant must be supported by adequate consideration ; and (3) the application of the covenant must be reasonably limited in both time and territory." Maintenance Specialties, Inc. v. Gottus, 455 Pa. 327, 331, 314 A.2d 279, 281-82 (1974) (concurring opinion) (emphasis added).
See, e. g., Piercing Pagoda, Inc. v. Hoffner, 465 Pa. 500, 351 A.2d 207 (1976). In a sale of business transaction, a covenant not to compete is especially useful to "protect the asset known as 'good will' which the purchaser has bought." Morgan's Home Equipment Corp. v. Martucci, 390 Pa. 618, 631, 136 A.2d 838, 846 (1957). In the instant transaction, however, the reference to "good will" in the sales agreement was expressly deleted at the request of appellant. While the covenant may protect assets other than good will, we find no support for appellant's claim that the addendum was merely an ancillary agreement, part and parcel with and supported by the original sales contract of August 25, 1976. The agreement of August 25, 1976, was a full, ...