Court Opinion

ID: 9590284
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:53:29.714654+00
Date Added: 2024-06-11T09:13:37.369369
License: Public Domain

Judge COZORT
dissenting in part.
I concur with that portion of the majority opinion reversing the trial court’s dismissal of the action as to defendant Pugh. As to the portion affirming the dismissal of the action against defendant Helton, I dissent. I believe the trial court erred in granting defendant Helton’s motion to dismiss under Rule 12(b)(6) of the Rules of Civil Procedure.
*723The majority opinion states that plaintiffs complaint against defendant Helton failed to state a claim because the contract upon which plaintiffs claim was based “lacked an essential element, a statement of any kind of consideration . . . [and] is invalid as a matter of law.” (Emphasis added.) In support of its holding, the majority relies on the view expressed in the second edition of American Jurisprudence that the statute of frauds requires that the consideration be in writing, and that evidence extrinsic to the written agreement is inadmissible to show a consideration when there is not a statement of consideration in the agreement or memorandum evidencing the agreement. See 72 Am. Jur. 2d Statute of Frauds § 344 (1974). I do not believe that view is a correct statement of the law of this State.
It is without doubt that a contract to be enforceable must be supported by consideration. See Restatement of Contracts § 71 (1979). Our courts have long recognized the requirement of consideration in employment contracts containing covenants not to compete. See, e.g., Exterminating Co. v. Griffin and Exterminating Co. v. Jones, 258 N.C. 179, 128 S.E. 2d 139 (1962); Greene Co. v. Kelley, 261 N.C. 166, 134 S.E. 2d 166 (1964); and Wilmar, Inc. v. Liles and Wilmar, Inc. v. Polk, 13 N.C. App. 71, 185 S.E. 2d 278 (1971), cert. denied, 280 N.C. 305, 186 S.E. 2d 178 (1972). For a situation like the instant case, where 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.” Greene Co. v. Kelley, 261 N.C. at 168, 134 S.E. 2d at 167.
In the case below, plaintiff filed a complaint alleging “[t]hat for good and adequate consideration, and as part of the employment of the Defendant by the Plaintiff, the Defendant signed a non-competition agreement ...” Plaintiffs complaint alleges consideration. When considering the complaint under Rule 12(b)(6) of the Rules of Civil Procedure, the court must treat the allegations of the complaint as true. Smith v. Ford Motor Co., 289 N.C. 71, 221 S.E. 2d 282 (1976). Thus, we must assume that the defendant’s promise was supported by consideration. It is inappropriate to consider, for purposes of a motion under 12(b)(6), whether the contract fails to comport with the statute of frauds, because the defense that the statute of frauds bars enforcement of a contract is an affirmative defense that “can only be raised by answer or *724reply.” Weant v. McCanless, 235 N.C. 384, 386, 70 S.E. 2d 196, 198 (1952); Rule 8(c), N.C. Rules Civ. Proc. The majority has resolved an issue not before the trial court on the motion to dismiss under Rule 12(b)(6). I also note that defendant’s answer fails to raise the statute of frauds as a defense and does not deny the contract.
In any event, assuming the statute of frauds question was before the trial court and needs to be resolved here, I do not believe that § 75-4 of our General Statutes requires that the consideration given in return for a covenant not to compete must be in writing.
The majority rule among jurisdictions appears to be that a contract within the statute of frauds must, in order to satisfy that statute, include a statement of the consideration for the promise of the defendant. See 72 Am. Jur. 2d § 344 (1972). This rule mirrors the English rule set forth in Wain v. Warlters, 5 East 10, 102 Eng. Reprint 972 (1804), which construed the British Statute of Frauds, 29 Charles II., with respect to a promise to pay the debt of another. North Carolina, however, follows what may be termed the minority position. See Annot., 23 A.L.R. 2d 164 (1952).
In Miller v. Irvine, 18 N.C. (1 Dev. & Bat. Law) 103 (1834), Chief Justice Ruffin of our Supreme Court considered the authority of Wain v. Warlters and decided that the Court was free to exercise its own judgment on the question of whether the writing must express the consideration. The court then rejected the English rule, reasoning that the statute of frauds does not require the consideration to be memorialized in a writing for the same reason that the statute requires the signature only of the party charged with making the promise: “[I]f one only is to be charged on [the contract], there seems to be no reason why it should contain any matter but such as charges him; that is, such stipulations as are to be performed on his part.” Id, at 104. Therefore, the court concluded:
[T]he statute does not extend to the consideration at all, but that the fraud and perjury provided against, is that which charges the defendant to do what he never contracted to do.
Id. at 108.
The North Carolina rule has been applied in actions to enforce the sale or conveyance of real property, see, e.g., Miller v. *725Irvine, 18 N.C. (1 Dev. & Bat. Law) 103 (1834) and Lewis v. Murray, 177 N.C. 17, 97 S.E. 750 (1919), and in cases involving promises to answer for the debt of another. See Green v. Thornton, 49 N.C. (Jones) 230 (1856); Supply Co. v. Person, 154 N.C. 456, 70 S.E. 745 (1911). The statute of frauds applicable to those cases requires no more or less than the statute of frauds applicable to contracts limiting a person’s right to do business in this State, that is, that the contract or some memorandum or note thereof, be put in writing and signed by the party to be charged therewith. See N.C. Gen. Stat. §§ 22-1, 22-2, 75-4 (1987).
Radio, Inc. v. Brogan, 12 N.C. App. 172, 182 S.E. 2d 594 (1972), and Radio, Inc. v. Florist, 12 N.C. App. 173, 182 S.E. 2d 595 (1972), cited by the majority, do not purport to address a statute of frauds question, and do not control the case before us.
This is to say only that the contract satisfies the statute of frauds contained in § 75-4; the agreement will nevertheless be invalid if there is no legally sufficient consideration. Plaintiff should be permitted to offer extrinsic evidence, written or parol, of the consideration for defendant Helton’s covenant. If it cannot offer such evidence, the trial court should, on proper motion, grant summary judgment for defendant Helton under Rule 56 of the N.C. Rules of Civil Procedure. It was error, however, to grant defendant Helton’s motion to dismiss for failure to state a claim. For these reasons, I respectfully dissent.