Kadis v. Britt

• Court: North Carolina Supreme Court
• Writing for the Court: SEAWELL
• Citation: Kadis v. Britt, 224 N.C. 154, 29 S.E.2d 543, 152 A.L.R. 405 (N.C. 1944)
• Decision Date: 29 March 1944
• Docket Number: No. 233.,233.
• Parties: KADIS . v. BRITT.

29 S.E.2d 543

224 N.C. 154

KADIS .

v.BRITT.

No. 233.

Supreme Court of North Carolina.

March 29, 1944.

Appeal from Superior Court, Wayne County; Clawson L. Williams, Judge.

Action by Isaac Kadis against E. G. Britt to enjoin defendant from entering into employment with another concern in alleged violation of a contract. From an adverse judgment, plaintiff appeals.

Affirmed.

Plaintiff brought this action to enjoin the defendant from entering into employment with another concern in alleged violation of a contract hereinafter set forth.

The plaintiff was a retail clothing dealer in the City of Goldsboro, and the defendant had been for some years in his employment, his principal duties being that of deliveryman and bill collector. During his entire service with the plaintiff he never received more than $27.50 per week, and that only during the last few weeks of his employment. His compensation during the prior years had been less.

After he had been in the employment of the plaintiff for some years, they entered into the following contract:

"North Carolina "Wayne County

"This Agreement, Made this the 7th day of December, 1940, by and between Isaac Kadis, party of the first part, and E. G. Britt, party of the second part:

"Witnesseth: That whereas the said party of the second part is now an employee of the said party of the first part and the said E. G. Britt desires to continue in said employment for as long a period of time as the said Isaac Kadis shall desire from the date of this agreement; and whereas the said Isaac Kadis is desirous of continuing the said E. G. Britt in his employment so long as the said services of the said E. G. Britt shall be satisfactory to the said Isaac Kadis, and no longer:

"Now, therefore, in consideration of the premises and for the purposes aforesaid and the mutual covenants and agreements herein contained, and the especial consideration of the continued employment of the said party of the second part by the said party of the first part after the date of the execution of this agreement and for the consideration of the sum of One Dollar ($1.00) each in hand paid to the other by the said parties of the first and second parts, the receipt of which is hereby acknowledged, the said parties have agreed as follows:

"The said party of the second part agrees to diligently and faithfully serve the said party of the first part in the transaction of his business and in such manner as the said party of the first part shall direct, and the said party of the second part further agrees that he will not disclose or make known to any person or persons, firm or corporation any of the correspondence or business affairs whatsoever of the said party of the first part. The said party of the second part further agrees that during the period of his employment by the said party of the first part that he will keep a true and accurate account of all moneys, goods and effects which may come into his hands for the said party of the first part and will not waste or destroy any of the same, or use same for his own personal use, or any part thereof, but shall at all times strive to the best interest of the said party of the first part in all things and will, when required, render an exact accounting of such properties coming into his hands for the said party of the first part.

"And the said party of the first part agrees to and with the said party of the second part that he will continue to employ the said party of the second part for such a time as the said party of the first part is in need of, or desirous of, the services of the said party of the second part. It being distinctly understood between the parties hereto that that part of this contract in reference to duration of employment is unspecified and solely restsin the discretion of the said party of the first part.

"The said party of the second part further agrees that he mill not work for, or be employed as an agent, servant, or employee, partner, shareholder, or in anywise interested in, any firm or corporation engaged in any business or businesses such as is conducted by the said party of the first part at the time of the cessation of employment between the said parties of the first and second parts, in Wayne County, North Carolina, for a period of two years from the date of such cessation of employment, nor in any county in North Carolina whose boundaries touch Wayne County, North Carolina, for said period of time; nor will, during said period of time nor within the vicinity herein designated, the said party of the second part allow or permit his wife or any member of his immediate family to engage in any business that is herein restricted and within the territory herein restricted as to the said party of the second part.

"It being expressly understood and agreed between the parties to this agreement that the continued employment of the said party of the second part by the said party of the first part, at and upon the date of the execution of this agreement, is one of the considerations of the said parties of the first and second parts in reducing this agreement to writing.

"In witness whereof, the said parties of the first and second parts have hereunto set their hands and seals, this the day and year first above written.

"Isaac Kadis (Seal)

"E. G. Britt (Seal)"

Pertinent parts of this contract involved in the discussion have been italicized for convenience.

The defendant served the plaintiff for about two years after the execution of this contract and was then discharged, the plaintiff saying that he needed him no longer, but expressing his satisfaction with the service and efficiency of the defendant.

Thereafter the defendant obtained employment for a short while driving a truck, but found himself physically unable to continue this work. He then, within two years of the cessation of his employment with plaintiff, accepted employment with L. A. Collins, who was, and is, doing a clothing business in Goldsboro similar to that carried on by the plaintiff; and in his new employment, the defendant had a position and performed duties of the same kind performed by him in his former employment with plaintiff, but at a larger salary.

The defendant is about forty-five years old and has a family dependent upon him.

The plaintiff sued out this injunction to prevent the defendant from continuing in the employment of Collins. Upon the hearing before Judge Williams at the August-September, 1943, Term of Wayne Superior Court, judgment was rendered dissolving the injunction and dismissing the case, and plaintiff appealed.

Paul B. Edmundson, of Goldsboro, for plaintiff, appellant.

W. A. Dees, of Goldsboro, for defendant, appellee.

SEAWELL, Justice.

It is correctly stated in 17 C.J.S., Contracts, § 240, that "the distinction drawn between contracts in general and in partial restraint of trade, by which the strict early common law rule invalidating all restrains was relaxed, was subsequently replaced by the test of the reasonableness of the restraint." But it must be added that this test must be applied against a public policy which has come to recognize exceptions to the general rule. Contracts in partial restraint of trade do not escape the condemnation of public policy unless they possess qualifying conditions which bring them within that exception. They are still contrary to public policy and void "if nothing shows them to be reasonable." Benjamin on Sale, 7th Ed., p. 535; id., p. 538, quoting Tindal, C. J., in Horner v. Graves, 7 Bing. 743. They must be supported under the rule which places the burden upon those who would avail themselves of an exception--at least to the extent that their reasonableness must be made to appear. Since the determinative question is one of public policy, the reasonableness and validity of the contract is a question for the court and not for the jury, to be determined from the contract itself and admitted or proven facts relevant to the decision. Benjamin on Sale, supra, p. 535. The appeal here is from a judgment dissolving the injunction and the evidence is addressed to the court.

Any contract in restraint of trade tends to produce or foster monopoly--a result peculiarly offensive to the age inwhich public policy against such agreements was engendered and became a fixed principle of the common law. At common law all contracts in restraint of trade were against public policy and void. In retreat from the severity of this rule toward justifiable exceptions, and particularly with respect to contracts involving personal service, we can go only so far without coming into opposition to the public welfare as sponsored by government, and critically imperilling individual rights which our fundamental laws have declared to be inalienable. At that point, a superior sort of public policy supervenes, which does not have its root in the mere conveniences of trade, but in the necessity of self-support, both in its public and in its private implications.

The restrictive negative covenant in a contract of this sort, to be legally effective, must be ancillary to a valid affirmative covenant, and examination by the court is necessarily directed to the substance and validity of this covenant. When the contract is defective for want of a legally protectible subject or because its practical effect is merely to stifle normal competition, it is as much offensive to public policy as it ever was in promoting monopoly at the public expense and is bad. Hence, the trend of discriminating decision is away from the latitude by which contracts in restraint of employment have been upheld almost as a matter of course, or upon a merely plausible showing of some shadowy right to which the negative covenant is ancillary. The grave consequences of unemployment demand that the principal affirmative promise, and its basis or subject, be examined and weighed with care.

Whatever difficulty we may encounter in maintaining an equitable balance between conflicting interests of...