Masterclean of North Carolina, Inc. v. Guy, 8621DC131

• Decision Date: 15 July 1986
• Docket Number: No. 8621DC131,8621DC131
• Citation: Masterclean of North Carolina, Inc. v. Guy, 345 S.E.2d 692, 82 N.C.App. 45 (N.C. App. 1986)
• Court: North Carolina Court of Appeals
• Parties: MASTERCLEAN OF NORTH CAROLINA, INC. v. John GUY.

Page 692

345 S.E.2d 692

82 N.C.App. 45

MASTERCLEAN OF NORTH CAROLINA, INC. v.John GUY.

No. 8621DC131.

Court of Appeals of North Carolina.

July 15, 1986.

Pettyjohn, Molitoris & Connolly by Anne Connolly and Theodore M. Molitoris, Winston-Salem, for plaintiff-appellee.

Smith, Patterson, Follin, Curtis, James & Harkavy by Marion G. Follin, III, Greensboro, for defendant-appellant.

JOHNSON, Judge.

Our first line of inquiry is whether the preliminary injunction entered by the trial court against defendant deprives defendant of a substantial right which he would lose absent a review prior to a final determination on the merits of this case.In A.E.P. Industries, Inc. v. McClure, 308 N.C. 393, 302 S.E.2d 754(1983), the Supreme Court of North Carolina stated the following:

A preliminary injunction is interlocutory in nature, issued after notice and hearing, which restrains a party pending final determination on the merits.Pursuant to G.S. 1-277andG.S. 7A-27, no appeal lies to an appellate court from an interlocutory order or ruling of a trial judge unless such order or ruling deprives the appellant of a substantial right which he would lose absent a review prior to final determination.

McClure, at 400, 302 S.E.2d at 759(citations omitted).We hold that defendant would be deprived of a substantial right, absent a review prior to a final determination, to wit: the right to work and earn a living in the states of North Carolina, South Carolina, Virginia, Georgia and Alabama.See generallyRobins R. Weill Inc. v. Mason, 70 N.C.App. 537, 320 S.E.2d 693, cert. denied, 312 N.C. 495, 322 S.E.2d 559(1984).Testimony established that there are only two prospective employers other than plaintiff engaged in the business of asbestos abatement in the state of North Carolina.As an appellate courtwe are "not bound by the findings, but may review and weigh the evidence and find facts" for ourselves.McClure, supra, 308 N.C. at 402, 302 S.E.2d at 760."A preliminary injunction, as a general rule, will be issued only '(1) if a plaintiff is able to show likelihood of success on the merits of his case and (2) if a plaintiff is likely to sustain irreparable loss unless the injunction is issued, or if, in the opinion of the Court, issuance is necessary for the protection of a plaintiff's rights during the course of litigation.' "Mason, supra, 70 N.C.App. at 540-41, 320 S.E.2d at 696, quoting, Investors Inc. v. Berry, 293 N.C. 688, 701, 239 S.E.2d 566, 574(1977)(emphasis in original).In order for a covenant not to compete to be held as valid and enforceable there must be a showing that it is the following:

1.In writing.

2.Made part of a contract of employment.

3.Based on reasonable consideration.

4.Reasonable both as to time and territory.

5.Not against public policy.

McClure, supra, 308 N.C. at 402-03, 302 S.E.2d at 760.

Defendant's first argument is that the preliminary injunction should be vacated because plaintiff failed to show a likelihood of success on the merits.The basis for defendant's argument is that clauses two (2), three (3), and four (4) of the covenant not to compete are unenforceable because they are not reasonable as to territory.Defendant compares the subject covenant not to compete with the covenant not to compete scrutinized in the case of Welcome Wagon International Inc. v. Pender, 255 N.C. 244, 120 S.E.2d 739(1961).That covenant not to compete was as follows:

NOW, THEREFORE, for and in consideration of this employment, and the compensation to be earned and paid to the Hostess hereunder, said Hostess covenants and agrees that she will not during the term of this employment, and for a period of five whole years thereafter, engage directly or indirectly for herself or as an agent, representative or employee of others, in the same kind or similar business as that engaged in by the company (1) in Fayetteville, North Carolina, or (2) in any other city, town, borough, township, village or other place in the State of North Carolina in which the company is then engaged in rendering its said service, or (3) in any city, town, borough, township, village or other place in the United States in which the Company is then engaged in rendering its said service, or (4) in any city, town, borough, township or village in the United States in which the company has been or has signified its intention to be, engaged in rendering its said service.

Pender, supra, at 246, 120 S.E.2d at 740.The covenant not to compete considered in Pender, supra, is strikingly similar to the covenant the parties entered into in the case sub judice.If restriction one (1) in the covenant in the case sub judice stated Fayetteville, North Carolina instead of Forsyth County, North Carolina, the covenants would be virtually identical.However, there are some factual circumstances in the case sub judice which are distinguishable from Pender, supra.In Pender, supra, defendant was employed by plaintiff as a hostess whose responsibility was to procure a sufficient number of sponsors to ensure the program's success.Plaintiff was a Delaware Corporation in the advertising business, which employed hostesses to contact prospective customers for local merchants and enhance said merchant's good will among newcomers to the local market.Plaintiff in Pender, supra, operated in approximately 1,200 cities and employed 3,500 hostesses.The Court in Pender, supra, stated the following:

The court is without power to vary or reform the contract by reducing either the territory or the time covered by the restrictions.However, where, as here, the parties have made divisions of the territory, a court of equity will take notice of the divisions the parties themselves have made, and enforce the restrictions in the territorial divisions deemed reasonable and refuse to enforce them in the divisions deemed unreasonable.It is patent that division (1)--Fayetteville--is not unreasonable.Likewise it appears that divisions (3) and (4)--any city or town in the United States in which the plaintiff is doing or intends to do business--are unreasonable and will not be enforced.Whether (2) is reasonable is for the chancellor.

Pender, supra, at 248, 120 S.E.2d at 742.(emphasis supplied).We note that three Justices dissented to the majority opinion in Pender, supra.The majority in Pender, supra, in upholding the five year time period of the covenant, did not follow Welcome Wagon International Inc. v. Morris, 224 F.2d 693(4th Cir.1955), for the stated reason "that decision does not follow the general rule and is not based on sounder reasoning."Pender, supra, 255 N.C. at 249, 120 S.E.2d at 742.Quoting 9 A.L.R., p. 1468, the Court in Pender, supra, stated the general rule as follows:

It is clear that if the nature of the employment is such as will bring the employee in personal contact with patrons or customers of the employer or enable him to acquire valuable information as to the nature and character of the business and the names and requirements of the patron or customers, enabling him by engaging in a competing business in his own behalf or for another, to take advantage of such knowledge of or acquaintance with the patrons and customers of his former employer, and thereby gain an unfair advantage, equity will interpose in behalf of the employer and restrain the breach ... providing the covenant does not offend against the rule that as to time ... or as to the territory it embraces it shall be no greater than is reasonably necessary to secure the protection of the business or good will of the employer.

Pender, supra, at 249, 120 S.E.2d at 742(emphasis supplied).This Court has stated the following:

[T]he restraint is unreasonable and void if it is greater than is required for the protection of the promisee or if it imposes an undue hardship upon the person who is restricted.Owing to the possibility that a person may be deprived of his livelihood, the courts are less disposed to uphold restraints in contracts of employment than to uphold them in contracts of sale.

Wilmar, Inc. v. Liles, 13 N.C.App. 71, 75, 185 S.E.2d 278, 281(1971), quoting with approval, Little Rock T. & L. Sup. Co. v Independent L. Serv. Co., 237 Ark. 877, 377 S.W.2d 34(1964).

In the case sub judice, plaintiff's only witness Mr. Smith, the president of the plaintiff corporation, did not testify sufficiently...