Larx Co. Inc. v. Nicol , 224 Minn. 1 ( 1946 )

In the original opinion, the material portions of the contract (dated December 10, 1935) here involved are set out. The validity of the following paragraph is challenged in this action:

"Second party, for himself, his heirs, executors, administrators and assigns agrees that he will not enter into or engage in any business of manufacturing or selling, nor in any manner be associated with, a business of manufacturing or selling any abrasive scouring powder, or competitive product to 'Brite-Ize Cleanser' so long as this agreement shall remain in full force and effect, and will not sell or assign said Copyright or Trade Mark."

In the original opinion, it was held that the contract was executed and delivered in Illinois and that under the law of Illinois an employe's covenant not to engage in a competitive business with his former employer for an unlimited time in an unlimited space is invalid as contrary to public policy. I am in full accord with that holding.

In the majority original opinion, it is stated:

"* * * Therein [referring to the contract of December 10, 1935] Nicol covenanted not to use it, directly or indirectly, in competition with the corporation, and the corporation agreed to pay him $250 a month in consideration therefor." (Italics supplied.)

It also states:

"It is true that under the contract Nicol covenanted not to engage in any competitive business either in the use of theformula or otherwise." (Italics supplied.)

I find no such provisions in the contract. Several readings of it fail to disclose a word about a secret formula. On the assumption that such a provision is found in the contract, the original majority opinion concludes that, although the covenant not to engage in a competitive business is invalid, that part of the contract which relates to the use of the secret formula is valid under the Illinois decisions, particularly Pelc v. Kulentis, 257 Ill. App. 213. The contract involved in the Pelc case contained two separate covenants, and the court held that the invalidity of one independent covenant does not prevent enforcement of other valid provisions therein. In the opinion filed on reargument, the cases cited also involve contracts containing both valid and invalid covenants. It holds that such contracts are divisible and are enforceable as to the parts that are not unlawful. In the instant case, as I see it, there is but one covenant and that an illegal one. Being only one, it is not divisible or severable. But assume there are two covenants in the contract, one legal and the other illegal, as the majority opinion declares, the agreement to pay $250 per month covers the full consideration to be paid. That item is certainly not divisible.

The facts that the contract may have been beneficial to plaintiff and that defendant has observed all the terms of the agreement have no bearing on the question of the validity of the contract and create no occasion for invoking the rule of estoppel, first raised in the final paragraph of the opinion.

If defendant disclosed or attempted to disclose the formula, claimed secret, it may be that he could be enjoined from doing so, but as I see it he could not be so enjoined under any provision of the contract here questioned, but because of the former relationship of employer and employe.

For the above reasons, I respectfully dissent.