Peoples Sec. Life Ins. Co. v. Hooks

• Citation: 367 S.E.2d 647,322 N.C. 216
• Decision Date: 05 May 1988
• Docket Number: No. 437PA87,437PA87
• Court: North Carolina Supreme Court
• Parties: PEOPLES SECURITY LIFE INSURANCE COMPANY v. Milton S. HOOKS.

Page 647

367 S.E.2d 647

322 N.C. 216

PEOPLES SECURITY LIFE INSURANCE COMPANY v. Milton S. HOOKS.

No. 437PA87.

Supreme Court of North Carolina.

May 5, 1988.

Mount, White, Hutson & Carden, P.A. by James H. Hughes, Durham, for plaintiff-appellant.

Brooks, Pierce, McLendon, Humphrey & Leonard by James T. Williams, Jr. and Jim W. Phillips, Jr., Greensboro, for defendant-appellee.

MITCHELL, Justice.

The plaintiff contends that the Court of Appeals erred in affirming the trial court's entry of judgment, pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure, dismissing the plaintiff's claims. We conclude that the Court of Appeals was correct in affirming the dismissal.

The plaintiff, Peoples Security Life Insurance Company [hereinafter Peoples Life], brought this action alleging in its complaint that it is in the business of selling life, health and accident insurance policies. The defendant, Hooks, was employed by the plaintiff until 27 November 1985 as a district manager with supervisory responsibilities in the towns of Rocky Mount, Wilson and Farmville and their immediate vicinities. Hooks supervised, on behalf of Peoples Life, approximately forty-five insurance agents whose duties included selling and servicing insurance policies and collecting premiums.

On 27 November 1985, Hooks resigned from Peoples Life to accept employment with Monumental Life Insurance Company, a competitor of Peoples Life. At Monumental, Hooks was assigned the job of developing the territory of eastern North and South Carolina. To assist him in developing his assigned territory, Hooks hired fifteen insurance agents and four sales managers who until then had been employed by Peoples Life.

In its complaint, the plaintiff alleged as its first claim for relief that the defendant maliciously interfered with employment contracts existing between Peoples Life and certain former agents. The plaintiff alleged as its second claim that the defendant, by hiring the plaintiff's employees, breached a covenant not to compete contained in his own employment contract with Peoples Life. The plaintiff alleged actual damages in excess of $785,000 and sought punitive damages of not less than $1,000,000.

The defendant denied the material allegations in plaintiff's complaint and counterclaimed for monies allegedly due him.

A motion to dismiss under N.C.G.S. § 1A-1, Rule 12(b)(6) tests the legal sufficiency of the complaint. Sutton v. Duke, 277 N.C. 94, 176 S.E.2d 161 (1970). In ruling on the motion, the allegations of the complaint are viewed as admitted, and on that basis the court must determine as a matter of law whether the allegations state a claim for which relief may be granted. Newton v. Standard Fire Ins. Co., 291 N.C. 105, 229 S.E.2d 297 (1976). In reviewing a dismissal of a complaint for failure to state a claim, the appellate court must determine whether the complaint alleges the

                substantive elements of a legally recognized claim and whether it gives sufficient notice of the events which produced the claim to enable the adverse party to prepare for trial.   See Sutton v. Duke, 277 N.C. at 104, 176 S.E.2d at 167;   see also Stanback v. Stanback, 297 N.C. 181, 254 S.E.2d 611 (1979).  A claim should be dismissed under Rule 12(b)(6) where it appears that the plaintiff is entitled to no relief under any statement of facts which could be proven.   See Newton v. Standard Fire Ins. Co., 291 N.C. at 111, 229 S.E.2d at 300;   Sutton v. Duke, 277 N.C. at 102, 176 S.E.2d at 166
                

FIRST CLAIM

The plaintiff, Peoples Life, brought this action alleging in its first claim for relief that the defendant tortiously interfered with terminable at will contracts between the plaintiff and certain of its former employees. Pertinent allegations include the following:

7. That most of the contracts which plaintiff had with its insurance agents provided that in the event that agents left the employment of the company they agreed for a period of one year "not to work upon or in any way interfere with any part of any account or territory upon which the Agent previously worked in the same State for the Company."

8. That the defendant, Milton S. Hooks, had personal knowledge of the contractual relationship with the agents in the Rocky Mount-Wilson-Farmville area with the plaintiff, and of the terms and conditions thereof.

....

11. That before resigning from the employment of the plaintiff, the defendant, Milton S. Hooks, sought out and took employment with another insurance company, which he knew to have a history of pirating the plaintiff's insurance agents. His employment was to develop the territory of eastern North and South Carolina for his new employer.

12. That the plaintiff is informed and believes that before terminating his employment with the plaintiff, the defendant, Milton S. Hooks, understood and actively engaged in inducing the plaintiff's agents to terminate their contracts of employment with the plaintiff.

13. That immediately after his resignation the defendant, Milton S. Hooks, with full knowledge of his contractual relationship with the plaintiff, employed 15 of the plaintiff's insurance agents and 4 of its sales managers, intentionally inducing them to terminate their contracts of employment with the plaintiff.

14. That upon information and belief, the defendant, Milton S. Hooks, employed said insurance agents to sell insurance in the same territory in which they had sold insurance for plaintiff, in direct violation of their contractual obligation to the plaintiff "not to work upon or in any way interfere with any part of any account or territory upon which the Agent previously worked in the same State for the Company."

....

19. That the actions, as outlined above, by the defendant, were without justification and were done wilfully, in reckless and wanton disregard of the plaintiff's rights.

In Childress v. Abeles, Justice Parker, later Chief Justice, explained the claim for tortious interference with a contract and defined its elements as follows:

The overwhelming weight of authority in this nation is that an action in tort lies against an outsider who knowingly, intentionally and unjustifiably induces one party to a contract to breach it to the damage of the other party.

[The] essential elements of the wrong [are as follows]: First, that a valid contract existed between the plaintiff and a third person, conferring upon the plaintiff some contractual right against the third person. Second, that the outsider had knowledge of the plaintiff's contract with the third person. Third, that the outsider intentionally induced the third person not to perform his contract with the plaintiff. Fourth, that in so doing the outsider acted without justification. Fifth, that the outsider's act caused the

plaintiff actual damages. (citations omitted).

240 N.C. 667, 676, 84 S.E.2d 176, 181 (1954).

A motion under Rule 12(b)(6) should be granted when the complaint reveals that the interference was justified or privileged. See, e.g., Smith v. Ford Motor Co., 289 N.C. 71, 221 S.E.2d 282 (1976); Childress v. Abeles, 240 N.C. 667, 84 S.E.2d 176 (1954). In Smith we held that "[t]he privilege [to interfere] is conditional or qualified; that is, it is lost if exercised for a wrong purpose. In general, a wrong purpose exists where the act is done other than as a reasonable and bona fide attempt to protect the interest of the defendant which is involved." Smith v. Ford Motor Co., 289 N.C. at 91, 221 S.E.2d at 294 (quoting Carpenter, Interference With Contract Relations, 41 Harv.L.Rev. 728, 746 (1928)). In determining whether an actor's conduct is justified, consideration is given to the following: the circumstances surrounding the interference, the actor's motive or conduct, the interests sought to be advanced, the social interest in protecting the freedom of action of the actor and the contractual interests of the other party. 4 Restatement (Second) Torts § 767 (1979); see also Smith v. Ford Motor Co., 289 N.C. at 94, 221 S.E.2d at 296. If the defendant's only motive is a malicious wish to injure the plaintiff, his actions are not justified. 86 C.J.S. Torts § 44 (1954). If, however, the defendant is acting for a legitimate business purpose, his actions are privileged. Numerous authorities have recognized that competition in business constitutes justifiable interference in another's business relations and is not actionable so long as it is carried on in furtherance of one's own interests and by means that are lawful. See Childress v. Abeles, 240 N.C. 667, 84 S.E.2d 176; 45 Am.Jur.2d Interference §§ 29-32 (1950); see generally Annot. "Interference with Business Relation," 9 A.L.R.2d 262-63 (1969). With these familiar principles in mind, we review the plaintiff's claim for interference with its employment contracts.

In the present case, the plaintiff's complaint alleges that the defendant offered the plaintiff's employees job opportunities which induced them to terminate their terminable at will contracts and, by locating these employees in their previously assigned territories, induced them to breach the noncompetition clauses contained in their contracts with the plaintiff. The plaintiff contends that these allegations state a valid claim for tortious interference.

The mere fact that the plaintiff's employment contracts with the employees in question were terminable at will does not provide the defendant a defense to the plaintiff's claim for tortious interference. Childress v. Abeles, 240 N.C. at 678, 84 S.E.2d at 184. Moreover, even though the employment contracts were terminable at will, the non-competition clauses contained therein were not. The non-competition clauses bound the employees for one year after termination of their employment with the plaintiff, and competition by the employees during that period in violation of the clauses would be a breach of contract.

The plaintiff's complaint reveals on its face, however, that the...