Wallace Butts Ins. Agency, Inc. v. Runge

• Decision Date: 01 May 1984
• Docket Number: No. 8310SC593,8310SC593
• Citation: 314 S.E.2d 293,68 N.C.App. 196
• Court: North Carolina Court of Appeals
• Parties: WALLACE BUTTS INSURANCE AGENCY, INC. v. Tommy RUNGE.

Page 293

314 S.E.2d 293

68 N.C.App. 196

WALLACE BUTTS INSURANCE AGENCY, INC. v. Tommy RUNGE.

No. 8310SC593.

Court of Appeals of North Carolina.

May 1, 1984.

Reynolds & Cox, P.A. by Ted R. Reynolds and Maria J. Mangano, Raleigh, for plaintiff appellant.

House, Blanco & Osborn, P.A. by Lawrence U. McGee and John S. Harrison, Winston-Salem and Sanford, Adams, McCullough & Beard, by E.D. Gaskins, Jr. and H. Hugh Stevens, Jr., Raleigh, for defendant appellee.

HILL, Judge.

Plaintiff contends the restraining order was improvidently dissolved because (1) defendant was interfering with a substantial right of plaintiff, and (2) the court's finding the covenant to be unenforceable "as a matter of law" in effect decides the action. Plaintiff asserts the order was erroneous both procedurally and substantively. We do not agree and overrule plaintiff's first assignment of error.

The standard for issuance of a preliminary injunction is well settled: A preliminary injunction should not be issued unless the plaintiff shows both (1) likelihood of success on the merits of the case; and (2) that he is likely to sustain irreparable harm unless the injunction is issued, or that the injunction is necessary to protect his rights during litigation. Investors, Inc. v. Berry, 293 N.C. 688, 239 S.E.2d 566 (1977); Waff Bros. v. Bank, 289 N.C. 198, 221 S.E.2d 273 (1976). Generally, issuance of a preliminary injunction is a matter of discretion to be exercised by the court after weighing the equities and the relative advantages and disadvantages to the parties. Superscope, Inc. v. Kincaid, 56 N.C.App. 673, 289 S.E.2d 595, disc. rev. denied, 305 N.C. 592, 292 S.E.2d 14 (1982).

The employment agreement between the insurance agency and defendant was entered into in the state of Georgia. Consequently, the lex loci contractus rule which the courts of this State consistently have followed is applicable. See Land Co. v. Byrd, 299 N.C. 260, 261 S.E.2d 655 (1980); see also Fast v. Gulley, 271 N.C. 208, 155 S.E.2d 507 (1967).

In Georgia, a covenant not to compete ancillary to an employment contract is void and unenforceable unless "it is strictly limited in time and territorial effect and is otherwise reasonable considering the business interest of the employer sought to be protected and the effect on the employee." Howard Schultz & Assoc. v. Broniec, 239 Ga. 181, 183, 236 S.E.2d 265, 267 (1977).

The contract into which the parties entered originally contained the following non-competition clause:

Restrictive Covenants. After terminating his employment with the Agency [plaintiff herein] the Employee shall not for a period of one (1) year thereafter within the sales area within which he has been operating, own, manage, control, operate, be employed by or participate in or be in any manner connected with the ownership, management, operation or control of any business in the sale of credit life or credit accident insurance or any other insurance sold by the Agency. (Emphasis ours)

A careful reading of the restrictive covenant leads us to the conclusions that the limitations imposed on the defendant are overly broad and unnecessary to protect the employer. The defendant is barred from employment in any capacity by a company which sells credit life and/or health insurance. Nor can the defendant participate in or be in any manner connected with the ownership, management, operation or control of a credit or health insurance company. Such limitations could, if enforced, compel the defendant to seek employment completely alien to his life's work or to move outside the area not only where plaintiff was operating at the time of employment but any other areas added thereafter. In this case the plaintiff was a North Carolina corporation which was operating in areas greater than those of the Georgia corporation which originally employed the defendant. This merger plus others could tend to limit the area and opportunity for employment by the defendant unreasonably; and defendant could do nothing to protect himself if the covenant is enforced. By merger or subsequent expansion the employer could move into territories never suspected by the employee when first employed. We therefore adjudge the trial judge was correct in concluding the contract was unenforceable as a matter of law.

Nor do we find error by the trial judge procedurally in determining the covenant was unenforceable as a matter of law. The case-in-chief was not before the court--only the ancillary matter of the restraining order. Nevertheless, the judge in ruling on the motion for the restraining order must consider the likelihood of success on the merits of the case. It was entirely proper for the judge in his discretion to consider this matter in weighing the equities and relative advantages and disadvantages to the parties. Plaintiff's first assignment of error is overruled.

By its second assignment of error plaintiff argues the court erred in ruling that the commencement of an identical suit in South Carolina was intentionally calculated to harass the defendant and frustrate the court's original denial of injunctive relief. ¹ We conclude the court ruled correctly and affirm its action.

In connection with the issuance of the restraining order on 7 March 1983, the trial court made inter alia the following findings of fact to which no objections were made by the plaintiff:

2. The Temporary Restraining Order was dissolved and the request for preliminary injunctive relief was denied by the Honorable James H. Pou Bailey on the morning of February 25, 1983, on the grounds that the covenant is invalid as a matter of law.

3. Without giving notice of appeal...