Bicycle Transit Authority, Inc. v. Bell, 134A85

• Citation: 333 S.E.2d 299,314 N.C. 219
• Decision Date: 13 August 1985
• Docket Number: No. 134A85,134A85
• Parties: BICYCLE TRANSIT AUTHORITY, INC. v. Dr. Ritchie BELL, Individually and trading as Abies Rentals, Walter Triplette and Livingston Lewis.
• Court: United States State Supreme Court of North Carolina

Page 299

333 S.E.2d 299

314 N.C. 219

BICYCLE TRANSIT AUTHORITY, INC. v. Dr. Ritchie BELL, Individually and trading as Abies Rentals, Walter Triplette and Livingston Lewis.

No. 134A85.

Supreme Court of North Carolina.

Aug. 13, 1985.

Haythe & Curley by Samuel T. Wyrick, III and Emily R. Copeland, Raleigh, for plaintiff.

Erdman, Boggs & Harkins by Harry H. Harkins, Jr., Chapel Hill, and Sessoms & Marin by Stuart M. Sessoms, Jr., Durham, for defendants.

MARTIN, Justice.

The primary issues presented for review are (1) whether the Court of Appeals erred in holding that summary judgment was inappropriate for any party because there was a material question of fact as to whether the covenant not to compete had been breached, and (2) if summary judgment was appropriate given the record before the trial judge, whether it was properly entered in favor of one or more defendants. For reasons set forth below, we hold that whether the covenant not to compete was breached is a question of law and therefore the Court of Appeals erroneously remanded the case for determination of whether conduct of one or more of the defendants amounted to a breach. In addition we hold that the trial judge erroneously entered summary judgment in favor of defendants. The decision of the Court of Appeals is reversed and the case remanded to that court for remand to Superior Court, Orange County, with direction to enter summary judgment in favor of plaintiff to the extent set forth below.

In 1973 the three defendants formed a corporation known as Carolina Bikeways, Inc. The defendants were the sole shareholders of Bikeways for most of its existence. Sometime prior to 1980 defendant Bell leased to Bikeways approximately 1,700 square feet of space in a building he owned on West Main Street, Carrboro, North Carolina, so that Bikeways could operate a bicycle sales and repair business known as "The Clean Machine." The defendants conducted the business of Clean at that location until August 1980. On or about 1 August 1980 Bikeways sold to plaintiff, Bicycle Transit Authority, Inc., all of its assets pursuant to a contract of sale. Ancillary to the contract of sale, and incorporated by reference therein, were a lease to plaintiff of that portion of the building formerly occupied by Bikeways trading as The Clean Machine and a covenant by all defendants not to compete with plaintiff. This covenant provides as follows: ¹

1. Covenant. The Parties of the First Part [defendants] hereby agree that for a period of seven (7) years from July 30, 1980, they will not jointly or severally (unless they have obtained the Party of the Second Part's [plaintiff] prior written consent) directly or indirectly be employed by, be associated with, be under contract with, own, manage, operate, join, control or participate in the ownership, management, operation, or control of, or be connected in any manner with, any business which is a competitor of the Party of the Second Part in Durham County or Orange County, North Carolina. The Parties of the First Part acknowledge that remedies at law for any breach of the foregoing will be inadequate and that the Party of the Second Part shall be entitled to injunctive relief. In consideration for such covenant, the Party of the Second Part agrees to pay to the Parties of the First Part (to be divided among the Parties of the First Part as they themselves shall decide and determine) the sum of $30,000. The $30,000 shall accure [sic] interest at the rate of 10% per annum for the period of two years from August 4, 1980, thereby making the unpaid principal and accrued interest the sum of $36,000 at the end of the second full year. This sum of $36,000 shall be paid in a lump sum to the Parties of the Second Part on August 3, 1987. However, at the end of the two year period referred to above, the $36,000 principal and accrued interest thereon shall continue to accrue interest at the rate of 10% per annum, which interest shall be paid in equal quarterly installments in the amount of Nine Hundred Dollars ($900.00) each until the above-styled $36,000 sum becomes due and payable on August 3, 1987. The payment of all interest and principal amounts due hereunder shall be by means of a check made jointly payable to the Parties of the First Part and delivered on their behalf to Michael J. Mulligan, Esq., Suite 210, Croisdaile [sic] Office Park, Durham, North Carolina 27705. Delivery of any said payment to Michael J. Mulligan, Esq., shall constitute a full acquittance of the Party of the Second Part for said sum.

On or about 6 October 1982 defendant Bell leased to Alan Garrett Snook a portion of the building occupied by plaintiff. After the lease agreement was executed, Snook orally sublet the premises to Performance Bicycle Shop, Inc. (PBS), a closely-held corporation of which Snook is president and majority shareholder. In lieu of the immediate payment of rent, Snook gave defendant Bell a personal promissory note due 30 September 1983 to cover the first two months' rent of the leased premises. Snook testified by way of deposition that it was his intent to repay the note and interest from funds paid to him by PBS. Under Snook's control, PBS began to sell bicycle parts and accessories from the premises. Although most of PBS's business is conducted through telephone and mail orders, it also caters to a walk-in clientele. The lease agreement between Bell and Snook specifically provides that "the leased premises shall be used by the Lessee to operate a mail order and walk-in bicycle business and may be used for any other lawful purpose." ² The rent for the premises is paid directly to Bell by PBS.

On 4 November 1982 plaintiff filed a complaint against Bell alleging that he violated the terms of the noncompetition and consulting agreement and that he engaged in unfair and deceptive trade practices affecting commerce. Bell's answer denied these allegations and counterclaimed for attorney's fees and for installment payments together with interest due but unpaid under the terms of the covenant executed by defendants and plaintiff. Plaintiff subsequently amended its complaint by adding the other two defendants as parties and seeking injunctive relief and attorney's fees. Plaintiff replied to Bell's counterclaim by alleging that plaintiff is excused from any payments due under the noncompetition agreement because Bell materially breached the contract, the consideration for the contract failed, and because of his course of conduct Bell is estopped from claiming any payments otherwise due under the agreement. Ultimately both plaintiff and defendants moved for summary judgment. At a hearing before the superior court all parties stipulated that "the sole legal issue in dispute ... [is] whether the acts of the defendant Bell as alleged by the plaintiff constituted a violation of the non-competitive covenants contained in the contracts between the parties." On 27 December 1983 the superior court entered an order denying plaintiff's motion for summary judgment and granting defendants' motion for summary judgment. The court ordered plaintiff to pay defendants ³ monies due under the noncompetition agreement and the costs of the action. Plaintiff appealed to the Court of Appeals which reversed and remanded for trial because of the existence of "a jury question whether Bell's conduct fell within the contractual anti-competitive provisions." Defendants appealed pursuant to N.C.G.S. 7A-30(2), and plaintiff's petition for certiorari to consider the issue whether plaintiff should have been granted summary judgment was allowed 23 April 1985.

As this Court said recently:

The law is succinctly stated in Bone International, Inc. v. Brooks, 304 N.C. 371, 375, 283 S.E.2d 518, 520 (1981):

A party moving for summary judgment may prevail if it meets the burden (1) of proving an essential element of the opposing party's claim is nonexistent, or (2) of showing through discovery that the opposing party cannot produce evidence to support an essential element of his or her claim. Moore v. Fieldcrest Mills, Inc., 296 N.C. 467, 251 S.E.2d 419 (1979); Zimmerman v. Hogg & Allen, 286 N.C. 24, 209 S.E.2d 795 (1974). Generally this means that on "undisputed aspects of the opposing evidential forecast," where there is no genuine issue of fact, the moving party is entitled to judgment as a matter of law. 2 McIntosh, North Carolina Practice and Procedure § 1660.5, at 73 (2d ed. Supp.1970). If the moving party meets this burden, the non-moving party must in turn either show that a genuine issue of material fact exists for trial or must provide an excuse for not doing so. Moore v. Fieldcrest Mills, Inc., 296 N.C. at 470, 251 S.E.2d at 421-22; Zimmerman v. Hogg & Allen, 286 N.C. at 29, 209 S.E.2d at 798. If the moving party fails to meet his burden, summary judgment is improper regardless of whether the opponent responds. 2 McIntosh, supra. The goal of this procedural device is to allow penetration of an unfounded claim or defense before trial. Id. Thus, if there is any question as to the credibility of an affiant in a summary judgment motion or if there is a question which can be resolved only by the weight of the evidence, summary judgment should be denied. Moore v. Fieldcrest Mills, Inc., 296 N.C. at 470, 251 S.E.2d at 422.

The standard for summary judgment is fixed by Rule 56(c) of the North Carolina Rules of Civil Procedure. The judgment sought shall be rendered forthwith if the pleadings and other materials before the trial judge show that there is no genuine issue of material fact and that any party is entitled to a judgment as a matter of law. Kessing v. Mortgage Corp., 278 N.C. 523, 180 S.E.2d 823 (1971).

Broadway v. Blythe Industries, Inc., 313 N.C. 150, 152-53, 326 S.E.2d 266, 268-69 (1985). Both plaintiff and defendants argue that the sole issue for determination, that is, whether the acts of Bell constituted a violation of the noncompetitive covenant, is a matter of...