Wilmar, Inc. v. Liles, 7126SC620

• Decision Date: 15 December 1971
• Docket Number: No. 7126SC620,7126SC620
• Court: North Carolina Court of Appeals
• Parties: , 51 A.L.R.3d 816, 1972 Trade Cases P 73,870 WILMAR, INCORPORATED v. Leo Vander LILES. WILMAR, INCORPORATED v. O. T. POLK, Jr.

Page 278

185 S.E.2d 278

13 N.C.App. 71, 51 A.L.R.3d 816, 1972

Trade Cases P 73,870

WILMAR, INCORPORATED v. Leo Vander LILES.

WILMAR, INCORPORATED v. O. T. POLK, Jr.

No. 7126SC620.

Court of Appeals of North Carolina.

Dec. 15, 1971 Certiorari Denied by Supreme Court Jan. 28, 1972.

Grier, Parker, Poe, Thompson, Bernstein, Gage & Preston, by Mark R. Bernstein, Sydnor Thompson and W. Samuel Woodard, Charlotte, for plaintiff appellee.

McElwee & Hall, by John E. Hall, and W. G. Mitchell, North Wilkesboro, for defendant appellants.

BRITT, Judge.

Did the trial court err in entering the temporary injunction appealed from? We hold that it did.

By seeking to have defendants enjoined from certain acts, plaintiff asks the court to exercise its equitable jurisdiction. While under our present system the same court grants legal as well as equitable relief, this does not allow a party the option to demand either at his will; equitable relief will be granted only when legal relief is inadequate, and the party must bring himself within the rule by alleging and establishing facts which will warrant the equitable remedy. McIntosh, N.C. Practice and Procedure, 2d Ed., Sec. 2191.

Although the Supreme Court of North Carolina and this court have considered numerous cases involving anticompetitive covenants, our search fails to reveal any case in which either court addressed itself to a determination of whether the contract before it was, in fact, a naked contract not to compete or an ancillary contract in restraint of trade and whether a restrictive covenant not ancillary to a principal contract of employment, sale, or lease is enforceable.

In 54 Am.Jur.2d, Monopolies, Sec. 514, p. 961, it is said:

'As a general rule, an anticompetitive covenant is unenforceable unless it is ancillary or incidental to a lawful contract, even though it is supported by a consideration. A restrictive provision which might be upheld if it were incidental to some principal contract cannot be enforced if it appears to be the main purpose of the contract, and not subordinate thereto.'

In Purchasing Associates, Inc. v. Weitz, 13 N.Y.2d 267, 246 N.Y.S.2d 600, 196 N.E.2d 245 (1963) the New York Court of Appeals said:

'At one time, a covenant not to compete, basically an agreement in restraint of trade, was regarded with high disfavor by the courts and denounced as being 'against the benefit of the commonwealth'. (Citations) It later became evident, however, that there were situations in which it was not only desirable but essential that such covenants not to compete be enforced.

'Where, for instance, there is a sale of a business, involving as it does the transfer of its goodwill as a going concern, the courts will enforce an incidental covenant by the seller not to compete with the buyer after the sale. (Citations) * * * The sole limitation on the enforcibility (sic) of such a restrictive covenant is that the restraint imposed be 'reasonable,' that is, not more extensive, in terms of time and space, than is reasonably necessary to the buyer for the protection of his legitimate interest in the enjoyment of the asset bought. (Citations)

'Also enforcible (sic) is a covenant given by an employee that he will not compete with his employer when he quits his employ, and the general limitation of 'reasonableness', to which we have just referred, applies equally to such a covenant. (Citations) However, since in the case of such a covenant the element of good will, or its transfer, is not involved and since there are powerful considerations of public policy which militate against sanctioning the loss of a man's livelihood, the courts have generally displayed a much stricter attitude with respect to covenants of this type. (Citations)'

In Little Rock Towel & Linen Supply Co. v. Independent Linen Serv. Co., 237 Ark. 877, 377 S.W.2d 34 (1964) we find:

'A naked contract not to compete with another is against public policy. Shapard pard v. Lesser, 127 Ark. 590, 193 S.W. 262, 3 A.L.R. 247. Such an agreement is permissible, however, either in connection with the sale of a going business or, as here, in connection with a contract of employment. Yet even in those instances the 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. Rest., Contracts, § 515, which we quoted with approval in Marshall v. Irby, 203 Ark. 795, 158 S.W.2d 693. 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. Williston, Contracts (Rev.Ed.), § 1643; Banks, Covenants Not to Compete, 7 Ark.L.Rev. 35.'

In Super Maid Cook-Ware Corporation v.Hamil, 50 F.2d 830 (1931), the 5th Circuit Court of Appeals said:

'Appellant by its prayer for injunctive relief prima facie puts itself in the position of seeking, by contract, to deprive appellees of the right to earn their livelihood. Equity places upon it the burden of showing that the contract was fair, the restrictive covenants reasonable, and that they have a real relation to, and are really necessary for, the protection of appellant in the business to which the covenants are an incident. For, fundamentally, in and of themselves these covenants are in restraint of trade, and unenforceable. It is a settled principle of law that no man may, per se, contract with another that that other will not follow a calling by which he may make his livelihood. It is only when they are incidental to some contract which is reasonable in its purpose and its terms, and it is necessary to the protection of the rights of the employer under such contract, that the validity of restrictive covenants will be recognized and enforced, and then only when they are themselves reasonable, no public interests are involved, and the restriction is limited to the very point of the necessity of protecting contract rights, to which the covenant is incidental. In short, it is never the covenant itself, but the covenant in relation to the facts of the situation or contract to which it is incidental, which may be valid.

'Further, it is well settled that, while a court of equity will in proper cases issue its writ of injunction to enforce covenants of this kind, it will not do so unless the whole matter appears equitable; that is, unless it rests upon a contract which is fair in its terms, involves no imposition nor injustice, and the private interests of the employer in the subject-matter of the contract to which the restrictive covenant is incidental, requires in good faith for its protection the enforcement of the covenant. Hepworth Mfg. Co. v. Ryott (1920) 1 Ch. 1, 9 A.L.R. 1484; Samuel Stores v. Abrams, 9 A.L.R. 1450, note; Taylor Iron & Steel Co. v. Nichols, 73 N.J.Eq. 684, 69 A. 186, 24 L.R.A., N.S., 933, 133 Am.St.Rep. 753; Kinney v. Scarbrough Co., 138 Ga. 77, 74 S.E. 772, 40 L.R.A.,N.S., 473; Herbert Morris, Ltd. v. Saxelby, 1 App.Cas. 688; Clark Paper & Mfg. Co. v. Stenacher, 236 N.Y. 312, 140 N.E. 708, 29 A.L.R. 1325; Club Aluminum Co. v. Young, 263 Mass. 223, 160 N.E. 804; Mentor Co. v. Brock, 147 Minn. 407, 180 N.W. 553, 20 A.L.R. 857; Southern Properties v. Carpenter (Tex.Civ.App.) 21 S.W.2d 372, 373.'

The case of Orkin Exterminating Co. v. Jones, et al., 258 N.C. 179, 128 S.E.2d 139 (1962), involved covenants not to compete set forth in original contracts of employment. Our Supreme Court held that courts of equity will enforce such a covenant not to compete if it is: (1) in writing, (2) entered into at the time and as part of...