Oxman v. Profitt, 17949

• Citation: 126 S.E.2d 852,241 S.C. 28
• Decision Date: 13 August 1962
• Docket Number: No. 17949,17949
• Court: United States State Supreme Court of South Carolina
• Parties: Maxwell OXMAN, Roy Markus, Eva Markus, Hy Garfinkel and J. E. Koolkin d/b/a South Carolina Agency and United Insurance Company of America, Respondents, v. Clay L. PROFITT, Appellant.

Page 852

126 S.E.2d 852

241 S.C. 28

Maxwell OXMAN, Roy Markus, Eva Markus, Hy Garfinkel and J E. Koolkin d/b/a South Carolina Agency and United Insurance Company of America, Respondents, v. Clay L. PROFITT, Appellant.

No. 17949.

Supreme Court of South Carolina.

Aug. 13, 1962.

McLain, Sherrill & Morrisette, Robert P. Wilkins, Columbia, for appellant.

Levi & Wittenberg, Columbia, for respondents.

TAYLOR, Chief Justice.

This action was brought to enforce by injunction certain covenants contained in an employment contract between plaintiffs, a South Carolina partnership and United Insurance Company of America, and defendant-appellant, a former insurance agent of plaintiffs. By demurrer defendant challenged the validity of the covenants.

A temporary restraining order was issued and after hearing, an injunction pendente lite was issued upon the filing of a bond by plaintiffs in the sum of $2500.00. Overruled and denied were the demurrer and motions to make the complaint more definite and certain and to require plaintiffs to separately state an alleged multiplicity of causes of action. Defendant now appeals from this Order.

Defendant entered into a contract of employment with plaintiffs on or about November 17, 1958. It is alleged that prior to entering into this contract, the defendant had previously been an agent of the plaintiffs for approximately one and one-half years, had resigned and later returned to the employment of plaintiffs at the time this contract came into effect.

The covenants, which are the subject matter of this appeal, are contained in Paragraph (24) of the contract which reads in part as follows:

'(24) While the Agent is soliciting applications for policies of insurance issued by the Company under the supervision of the State Manager and for a period of one year thereafter, Agent agrees that he will not directly or indirectly be connected with any other health and accident or life insurance company engaged in similar business to the business conducted by the State Manager in any territory within the State of South Carolina. Agent further agrees that in the event of the termination of his association with the Company and the State Manager that he will not directly or indirectly induce or attempt to induce any Agents, Unit Managers, Collectors or employees of the State Manager to terminate their association with the State Manager of the Company; nor will the Agent induce or attempt to induce any policyholder of the Company to terminate his or her insurance with the Company. * * *'

It is alleged that defendant terminated his connection with plaintiffs during the spring of 1959 and entered other fields of endeavor. It is further alleged that in February, 1961, the defendant along with one Victor Sherman formed a corporation known as Twentieth Century Associates, Inc., for the purpose of acting as agents in South Carolina to solicit policies of accident and health for Twentieth Century Life Insurance Company. Defendant in addition to being an officer and director of said corporation is alleged to travel throughout South Carolina soliciting and writing accident and health insurance similar to that offered by plaintiffs, and that defendant has induced or attempted to induce policyholders of the plaintiffs to terminate his or her insurance with plaintiffs and in addition has either directly or indirectly induced or attempted to induce plaintiffs employees to breach their contract of employment with plaintiffs. By such actions, plaintiffs contend defendant has violated the terms of the contract and agreement, in particular the covenants contained in Paragraph (24) and by his actions has indicated that in fact he will continue to do so.

Defendant-Appellant contends that the covenants are void on the grounds that they are indefinite as to time and territory and that they are not necessary in their fullest for plaintiffs' protection.

A restrictive covenant not to compete ancillary to a contract of employment is generally looked upon with disfavor and is critically examined and construed against the employer, but the covenant will ordinarily be upheld if it is necessary for protection of the legitimate interest of the employer, is reasonably limited with respect to time and place, is not unduly harsh and oppressive, is reasonable and supported by valuable consideration. Oxman v. Sherman, 239 S.C. 218, 122 S.E.2d 559.

In instant case we do not have the general restrictive covenant found ancillary to employment contracts; i. e., not to compete. The covenant here present states that defendant will not 'induce or attempt to induce any policyholder of the Company to terminate his or her insurance with the Company.' This covenant, therefore, allows competition but attempts to prevent what plaintiffs consider 'unfair competition.'

Section 37-1202, Code of Laws of South Carolina, 1952, lists unfair methods of competition and unfair acts or practices in the business of insurance. Paragraph (1)(e) states: 'making any misrepresentation to any policyholders insured in any company for the purpose of inducing or tending to induce such policyholder to lapse, forfeit or surrender his insurance' shall be an unfair method of competition.

Section 37-1204, Code of Laws...