Hejl v. Hood, Hargett & Associates, Inc.

• Citation: 674 S.E.2d 425
• Decision Date: 07 April 2009
• Docket Number: No. COA08-1065.,COA08-1065.
• Court: Court of Appeal of North Carolina (US)
• Parties: Phillip E. HEJL, Plaintiff-Appellee, v. HOOD, HARGETT & ASSOCIATES, INC., Defendant-Appellant.

674 S.E.2d 425

Phillip E. HEJL, Plaintiff-Appellee, v. HOOD, HARGETT & ASSOCIATES, INC., Defendant-Appellant.

No. COA08-1065.

Court of Appeals of North Carolina.

April 7, 2009.

Appeal by Defendant from judgment dated 27 February 2008 by Judge Robert P. Johnston in Superior Court, Mecklenburg County. Heard in the Court of Appeals 11 February 2009.

Sellers, Hinshaw, Ayers, Dortch & Lyons, P.A., by Robert C. Dortch, Jr., Charlotte, for Plaintiff-Appellee.

Cozen O'Connor, by Paul A. Reichs and Kimberly Sullivan, Charlotte, for Defendant-Appellant.

McGEE, Judge.

Phillip E. Hejl (Plaintiff) was hired as an account executive by the insurance company, Hood, Hargett & Associates, Inc. (Defendant) in July 1991. Defendant presented a non-solicitation contract (the Agreement) to Plaintiff fourteen years later, in January 2005. Defendant offered Plaintiff $500.00 to sign the Agreement, and Plaintiff signed the Agreement on 11 January 2005. The Agreement provided in relevant part:

1. Consideration. As consideration for the restrictions contained herein, [Defendant] shall pay [Plaintiff] the sum of FIVE HUNDRED DOLLARS ($500.00). [Plaintiff] acknowledges that this is reasonable and adequate consideration for the promises contained herein.

2. Restrictive Covenant: Solicitation. [Plaintiff] acknowledges that [Plaintiff's] services as an Account Executive/Producer and as a key employee in a position of trust are of a special and unusual character having unique value to [Defendant], the loss of which cannot adequately be compensated by damages in an action at law. [Plaintiff] further acknowledges that [Defendant] has invested or will be required to invest significant time and money in training [Plaintiff], and that [Defendant] has or will be required to disclose to [Plaintiff] confidential and proprietary information, including, but not limited to, customer lists and rate structure information.

In consideration of employment, the mutual agreements contained herein and the payment of such compensation and benefits as agreed herein, [Plaintiff] agrees as follows:

(a) For a period of two years following [Plaintiff's] termination of employment, [Plaintiff] shall not:

(i) On behalf of himself, another insurance company and/or agency, directly or indirectly, seek to induce, promote, facilitate, solicit, quote rates for, receive, write, bind, broker, transfer or accept replacement or renewal of insurance or otherwise provide insurance and/or insurance services on behalf of any person, firm or entity to whom [Defendant] has sold any product or service, or quoted any product or service, whether or not for compensation, in the one year prior to the time [Plaintiff] ceases to be employed by [Defendant]. Nor will [Plaintiff] induce or seek to induce the discontinuance or lapse of any insurance coverage or service provided or placed by [Defendant] in the one year prior to the time [Plaintiff] ceases to be employed by [Defendant]. This restriction applies regardless of whether [Plaintiff], directly or indirectly contacts the policyholder or prospect, or whether the policyholder or prospect contacts or seeks to contact [Plaintiff].

...

(b) ... [Plaintiff] covenants to refrain from performing or engaging in the activity prohibited by paragraph 2(a) hereof and its subparts in (1) Charlotte, North Carolina, or (2) in any other city, town, borough, township, village or other place in the State of North Carolina or the State of South Carolina in which city, borough, township, village or other place [Defendant] is engaged in rendering its services or selling its products.

After signing the Agreement, Plaintiff continued to work for Defendant two more years. Defendant terminated Plaintiff's employment on 5 February 2007.

Plaintiff filed a complaint for declaratory relief on 10 September 2007. In his complaint, Plaintiff alleged he:

intends to seek to induce, solicit, quote rates for, receive, write, bind, broker, transfer, or accept placement or renewal of insurance on behalf of persons or entities to whom Defendant sold any product or service in the one year prior to the time Plaintiff was terminated by Defendant. Plaintiff intends to undertake those actions in North Carolina and South Carolina.

Plaintiff requested that the trial court declare the rights and obligations of the parties regarding the enforceability of the Agreement. Specifically, Plaintiff asked the trial court to determine whether the Agreement was void because it: (1) lacked material and substantial consideration, (2) was overly broad with regard to length of time and breadth, or (3) was overly broad with regard to geographic scope.

Defendant filed an answer and counterclaim on 21 November 2007. Defendant admitted the facts alleged in Plaintiff's complaint, and joined Plaintiff in asking the trial court to determine the validity of the Agreement by considering the issues of consideration and the time and geographic scope of the Agreement. In addition, Defendant counterclaimed for breach of contract, seeking damages in accordance with the Agreement. Plaintiff filed a reply to Defendant's counterclaim on 2 January 2008.

The matter was heard on 27 February 2008. After considering pleadings, affidavits, briefs, and arguments of counsel, the trial court entered an order on 6 March 2008. The trial court concluded the Agreement was void as a matter of law due to the lack of adequate and valuable consideration. The trial court ordered that the Agreement was unenforceable and dismissed Defendant's counterclaim with prejudice. Defendant appeals.

Defendant first argues the trial court erred in finding the Agreement void due to a lack of adequate and valuable consideration. Defendant further argues the trial court should not have dismissed Defendant's counterclaim as the Agreement was reasonable as to time and scope and was therefore valid and enforceable.

"The Declaratory Judgment Act, [N.C. Gen.Stat. §] 1-253 et seq., affords an appropriate procedure for alleviating uncertainty in the interpretation of written instruments and for clarifying litigation." Bellefonte Underwriters Insur. Co. v. Alfa Aviation, 61 N.C.App. 544, 547, 300 S.E.2d 877, 879 (1983) (citing Insurance Co. v. Curry, 28 N.C.App. 286, 221 S.E.2d 75, disc. review denied, 289 N.C. 615, 223 S.E.2d 396 (1976)), aff'd per curiam, 310 N.C. 471, 312 S.E.2d 426 (1984). "North Carolina courts have held that summary judgment is an appropriate procedure in an action for declaratory judgment." Medearis v. Trustees of Meyers Park Baptist Church, 148 N.C. App. 1, 4, 558 S.E.2d 199, 202 (2001) (citing Conner Co. v. Spanish Inns, 294 N.C. 661, 242 S.E.2d 785 (1978), disc. review denied, 355 N.C. 493, 563 S.E.2d 190 (2002); see also Montgomery v. Hinton, 45 N.C.App. 271, 262 S.E.2d 697 (1980)). "Summary judgment may be entered ... under Rule 56 of the North Carolina Rules of Civil Procedure, and the Rule applies in an action for declaratory judgment." Bellefonte, 61 N.C.App. at 547, 300 S.E.2d at 879 (citing Blades v. City of Raleigh, 280 N.C. 531, 544, 187 S.E.2d 35, 42-43 (1972)). Therefore, on review of a declaratory judgment action, we apply the standards used when reviewing a trial court's determination of a motion for summary judgment. Medearis, 148 N.C.App. at 4, 558 S.E.2d at 202.

Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen.Stat. § 1A-1, Rule 56(c) (2007). "If the granting of summary judgment can be sustained on any grounds, it should be affirmed on appeal. If the correct result has been reached, the judgment will not be disturbed even though the trial court may not have assigned the correct reason for the judgment entered." Shore v. Brown, 324 N.C. 427, 428, 378 S.E.2d 778, 779 (1989) (citing Sanitary District v. Lenoir, 249 N.C. 96, 105 S.E.2d 411 (1958) and Hayes v. Wilmington, 243 N.C. 525, 91 S.E.2d 673 (1956)).

In the present case, the existence and provisions of the Agreement are admitted, and the facts are not in controversy. The controversy is the legal significance of those facts. Further, although Plaintiff's complaint was labeled "Complaint for Declaratory Relief," it appears the trial court treated it as a motion for summary judgment. With no disputed issues of fact, and with summary judgment being an appropriate procedure in a declaratory judgment action, we review the trial court's judgment as a motion for summary judgment determining whether the trial court's judgment can be sustained on any grounds.

I. Consideration

We first review Defendant's argument that the trial court erred in its conclusion of law that the Agreement was not a valid contract due to the lack of adequate and valuable consideration. Our Courts have held that a covenant not to compete is valid if the covenant is: "`(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.'" Exterminating Co. v. Griffin and Exterminating Co. v. Jones, 258 N.C. 179, 181, 128 S.E.2d 139, 140-41 (1962) (quoting Asheville Associates v. Miller and Asheville Associates v. Berman, 255 N.C. 400, 402, 121 S.E.2d 593, 594. (1961)). "Where the covenant is entered into in connection with an employee's being hired for a job, it is generally held that `mutual promises of employer and employee furnish valuable considerations each to the other for the contract.'" Reynolds & Reynolds Co. v. Tart, 955 F.Supp. 547, 553 (W.D.N.C.1997) (quoting Greene Co. v. Kelley, 261 N.C. 166, 168, 134 S.E.2d 166, 167 (1964)). However, when the restrictive covenant is entered into after an already existing employment...