Harwell Enterprises, Inc. v. Heim
| Decision Date | 19 November 1969 |
| Docket Number | No. 6927SC532,6927SC532 |
| Citation | 6 N.C.App. 548,170 S.E.2d 540 |
| Parties | HARWELL ENTERPRISES, INC. v. Gary L. HEIM, Individually, and Gary L. Heim and Dwight Ballard, Trading asMetro Screen Engraving Company. |
| Court | North Carolina Court of Appeals |
Whitener & Mitchem by Basil L. Whitener and Anne M. Lamm, Gastonia, for plaintiff appellant.
Horace M. DuBose, III, Gastonia, for defendant appellee Heim.
Hollowell, Stott & Hollowell, by Grady B. Scott, Gastonia, for defendant appellee Ballard.
While Ballard took exceptions to overruling his demurrer and in the record made assignments of error, nevertheless, he did not set same out in his brief, and they are taken as abandoned by him. Rule 28, Rules of Practice in the Court of Appeals of North Carolina. Ballard filed a brief in support of the ruling of the trial judge sustaining the demurrer of Heim.
We confront the question as to whether the employment contract in this case is void and unenforceable.
The law of 'restrictive covenants not to compete' has been fashioned in numerous decisions of the North Carolina Supreme Court. Although general restraints of trade are not allowed, so-called partial restraints have been permitted under certain conditions. Moskin Bros. v. Swartzberg, 199 N.C. 539, 155 S.E. 154 (1930); Scott v. Gillis, 197 N.C. 223, 148 S.E. 315 (1929); 17 C.J.S. Contracts, § 241(1), pp. 1109--1110.
This case involves a personal service contract and does not involve covenants not to compete entered into in connection with the sale of a business and its good will.
The demurrer admits the facts pleaded in the complaint, but it does not admit any legal inferences or conclusions of law asserted by the pleader. Maola Ice Cream Co. of North Carolina v. Maola Milk & Ice Cream Co., 238 N.C. 317, 77 S.E.2d 910 (1953).
Applying this principle as to the admitted facts, we next turn to the applicable law. In Asheville Associates, Inc. v. Miller and Asheville Associates, Inc. v. Berman, 255 N.C. 400, 121 S.E.2d 593 (1961), Higgins, J., set forth the applicable rule as follows:
'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.'
Restrictive covenants in employment contracts, otherwise reasonable, will be enforced by a court of equity if
'* * * they are no wider than reasonably necessary for the protection of the employer's business, and do not impose undue hardship on the employee, due regard being had to the interests of the public.' 17 C.J.S. Contracts § 254, p. 1138. See Greene Co. v. Arnold, 266 N.C. 85, 145 S.E.2d 304 (1965); Asheville, Associates, Inc. v. Miller, Supra; and Welcome Wagon, International, Inc. v. Pender, 255 N.C. 244, 120 S.E.2d 739 (1961).
Restrictive covenants not to compete in employment contracts are scrutinized more rigorously than similar covenants incident to a sale of a business. The burden is on the plaintiff to establish the reasonableness of the contract. The mere allegation of business throughout the United States which needs to be protected is not sufficient. The plaintiff has failed to demonstrate on this record that the restrictive covenant applying to the entire United States was necessary to protect the legitimate interests of the business of the plaintiff. Noe v. McDevitt, 228 N.C. 242, 45 S.E.2d 121 (1947).
Some of the criteria to be observed in these cases are set out by Stacy, C.J., in Beam v. Rutledge, 217 N.C. 670, 9 S.E.2d 476 (1940):
'Public policy is concerned with both sides of the question. It favors the enforcement of contracts intended to protect legitimate interests and frowns upon unreasonable restrictions. * * * It is as much a matter of public concern to see that valid contracts are observed as it is to frustrate oppressive ones. Both functions belong to the courts.
The test to be applied in determining the reasonableness of a restrictive covenant is to consider whether the restraint affords only a fair protection to the interest of the party in whose favor it is given, and is not so broad as to interfere with the rights of the public. * * * The question is...
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