James C. Greene Company v. Kelley , 261 N.C. 166 ( 1964 )

134 S.E.2d 166 (1964) 261 N.C. 166

JAMES C. GREENE COMPANY, a North Carolina Corporation,
v.
L. E. KELLEY, Jr.

No. 461.

Supreme Court of North Carolina.

January 17, 1964.

Smith, Leach, Anderson & Dorsett, Raleigh, for plaintiff appellant.

Lake, Boyce & Lake, by G. Eugene Boyce, Raleigh, Harvey Hamilton, Jr., Luther Hamilton, Sr., Morehead City, for defendant appellee.

HIGGINS, Justice.

The plaintiff sought to restrain the defendant from engaging in the business of adjusting insurance claims and losses within 75 miles of Morehead City for a period of four years after the termination of his employment. No other relief was sought. If the plaintiff's proof fails to entitle it to the relief sought, nonsuit was proper. Failure to make out a case requires dismissal by the court. Yandell v. American Legion, 256 N.C. 691, 124 S.E.2d 885.

The defendant admitted he signed a paper writing containing a provision that he would not engage in competition in the manner alleged. He admitted he had not observed these restrictions. The admissions made out a prima facie case. Hence, nonsuit would not be proper unless the plaintiff's evidence, as a matter of law, made out a complete defense.

The courts generally have held that restrictive covenants not to engage in competitive employment are in partial restraint of trade, and hence to be enforceable they must be (1) in writing, (2) supported by a valid consideration, and (3) reasonable as to terms, time, and territory. Failure in either requirement is fatal. Orkin Exterminating Co. v. Griffin, 258 N.C. 179, 128 S.E.2d 139; Asheville Associates v. Miller, 255 N.C. 400, 121 S.E.2d 593; Welcome Wagon v. Pender, 255 N.C. 244, 120 S.E.2d 739; Hanley Paper Co. v. McAllister, 253 N.C. 529, 117 S.E.2d 431; Thompson v. Turner, 245 N.C. 478, 96 S.E.2d 263; Maola Ice Cream Co. v. Maola Milk & Ice Cream Co., 238 N.C. 317, 77 S.E.2d 910; Sonotone Corp v. Baldwin, 227 N.C. 387, 42 S.E.2d 352; Kadis v. Britt, 224 N.C. 154, 29 S.E.2d 543, 152 A.L.R. 405.

It is generally agreed that mutual promises of employer and employee furnish valuable considerations each to the other for the contract. However, when the relationship of employer and employee is already established without a restrictive covenant, any agreement thereafter not to compete must be in the nature of a new contract based upon a new consideration. Kadis v. Britt, supra. Therefore, the employer could not call for a covenant not to compete without compensating for it.

The defendant, as a further defense, alleged he had been working for the plaintiff, and for its predecessor who assigned the contract to the plaintiff, for approximately one year, and that the written contract dated December 11, 1953, did not change his employment status; that he received no consideration whatever for the added covenant not to compete.

The plaintiff, by a reply, entered a general denial. Both the original and the succeeding contracts, however, contained this provision: "This Contract, when executed by both Employer and Employee, supersedes all previous written and oral agreements between the parties hereto." The plaintiff's witness Fornes testified: "* * * I went back to New Bern, North Carolina, with James C. Green Company about February 1, 1953. * * * Mr. Kelley was working in the New Bern office. He had been working there about three months." So, according to the plaintiff's evidence, the defendant had been working at the same employment for more than one year before the first written contract was executed. While the defendant from time to time received increases in salary, the evidence fails to relate any of them to the covenant not to compete. The new contract with the restrictive covenant was without consideration—hence invalid. Upon the plaintiff's own evidence, Judge Williams was justified in entering the judgment of nonsuit.

Affirmed.