Asheville Associates, Inc. v. Miller

Annotate this Case

121 S.E.2d 593 (1961)

255 N.C. 400

ASHEVILLE ASSOCIATES, INC., a Corporation, v. John William MILLER. ASHEVILLE ASSOCIATES, INC., a Corporation, v. Frank L. BERMAN.

No. 106.

Supreme Court of North Carolina.

September 27, 1961.

*594 Van Winkle, Walton, Buck & Wall, by O. E. Starnes, Jr., Asheville, Smith, Moore, Smith, Schell & Hunter, by Bynum M. Hunter, Greensboro, for defendants-appellants.

Ward & Bennett, Asheville, for plaintiff-appellee.

HIGGINS, Justice.

Courts generally refuse to enforce restrictive covenants in employment contracts unless they are (1) in writing, (2) entered into at the time and as a part of the contract of employment, (3) based on valuable considerations, (4) reasonable both as to time and territory embraced in the restrictions, (5) fair to the parties, and (6) not against public policy.

The contracts here involved are in writing. They were found to have been entered into as a part of the contracts of employment. The mutual agreements in these contracts were sufficient considerations to support the obligations undertaken. The timeone year, the territory14 counties in which Miller had previously worked and 10 counties in which Berman previously worked, are not unreasonable. Welcome Wagon Intern., Inc. v. Pender, 255 N.C. 244, 120 S.E.2d 739, and the many authorities cited therein.

The defendants assert the restrictive covenants were not based on valuable considerations and were not a part of the contracts of employment with the corporation. However, each of the defendants signed an original contract with the partnership. It contained the restrictive covenants. The partners incorporated. The corporation succeeded to the partnership *595 in the insurance field. For some time after incorporation the defendants operated according to the terms of their contracts with the partnership. However, new contracts between the corporation and the defendants were executed and these contracts likewise contained the restrictions. Judge Campbell held, and properly so, that the restrictive covenants in the contracts with the corporation were based on valuable consideration.

The time and the territory in which the covenants were to be enforced were reasonable. Thompson v. Turner, 1960, 245 N.C. 478, 96 S.E.2d 263, 83 N.C.L.R. 396; Delmar Studios of the Carolinas, Inc. v. Goldston, 249 N.C. 117, 105 S.E.2d 277; Sonotone Corporation v. Baldwin, 227 N.C. 387, 42 S.E.2d 352.

The defendants rely on the case of Kadis v. Britt, 224 N.C. 154, 29 S.E.2d 543, 152 A.L.R. 405. In that case Britt was employed as a clothing salesman in a retail store in Goldsboro at $27.50 per week. The restrictive covenant covered any business that Kadis might be engaged in if and when Britt left his employment. The restriction applied not only to Britt, but to his wife and other members of his immediate family. After two years Kadis discharged Britt on the ground his services were no longer needed. Britt had a family to support. After his discharge he accepted employment as a salesman in another clothing store in Goldsboro. The trial court refused to continue the injunction against Britt and this Court affirmed by reason of the plaintiff's failure to show an equitable right to enforce the restriction.

In the case before us the defendants, during the employment became acquainted with plaintiff's policyholders and its method of doing business. They resigned, entered into a competing business in the same territory and two other of plaintiff's employees became associated with them in this competing business.

The general rule with respect to enforceable restrictions is stated in 9 A.L.R. 1468: "It is clear that if the nature of the employment is such as will bring the employee in personal contact with patrons or customers of the employer, or enable him to acquire valuable information as to the nature and character of the business and the names and requirements of the patrons or customers, enabling him by engaging in a competing business in his own behalf, or for another, to take advantage of such knowledge of or acquaintance with the patrons and customers of his former employer, and thereby gain an unfair advantage, equity will interpose in behalf of the employer and restrain the breach * * * providing the covenant does not offend against the rule that as to time * * * or as to the territory it embraces it shall be no greater than is reasonably necessary to secure the protection of the business or good will of the employer." Welcome Wagon v. Pender, supra.

In this case the trial court found that health and accident insurance is a highly competitive business in the territory embraced in the defendants' covenants. The public will not be prejudiced by enforcing the covenants in these cases. Insurance agents are licensed. The form of insurance policies and the premiums charged are closely policed under the State insurance laws. The danger of monopoly by limiting competition in employment contracts, therefore, is not and cannot be a problem involving the public interest. After all, by enforcing the restrictions the court is only requiring the defendants to do what they agreed to do. Equitable excuse for failure to observe the restrictions is absent here.

The order of Campbell, J., is supported by his findings, which in turn are supported by the evidence.