Court Opinion

ID: 8907434
Source: CourtListenerOpinion
Date Created: 2022-11-27 02:02:10.231794+00
Date Added: 2024-06-11T17:08:18.287341
License: Public Domain

Judge Arnold
dissenting.
I respectfully dissent from the majority’s decision for the following reasons. The majority states that Bell’s conduct raises, at least, a jury question regarding whether his conduct violated the agreement’s anti-competition provision. However, as the majority points out in their statement of the facts, the parties stipulated, at the hearing on the motions for summary judgment, that the only issue to be decided was whether Bell’s leasing of property to plaintiffs competitor violated the terms of the agreement. This is a question of law, not a question of fact, and, therefore, I believe that the majority improperly concluded that a genuine issue of material fact existed for a jury to decide.
Furthermore, I believe the trial judge properly concluded that Bell’s conduct did not violate the anti-competition agreement. Covenants in restraint of trade are in direct derogation of our common law, and as such are generally disfavored, even so, our courts have recognized that they are necessary to preserve the value of the intangible assets of good will within a business. See, Kramer v. Old, 119 N.C. 1, 25 S.E. 813 (1896). In order for such a covenant to be valid it must be reasonably necessary to protect the legitimate interest of the purchaser, must be reasonable with respect to time and territory, and must not interfere with the interest of the public. Jewel Box Stores v. Morrow, 272 N.C. 659, 158 S.E. 2d 840 (1968). Such covenants should be strictly construed, and they should receive a construction that will effectuate the intention of the parties, and the parties’ intentions are to be determined by considering the whole of the covenants, rather than selected parts. Faust v. Rohr, 166 N.C. 187, 81 S.E. 1096 (1914).
Viewing the agreement as a whole, it is clear that it was the intention of the parties to prevent the sellers from engaging either directly or indirectly in a business which was in competition with the plaintiff. Research has revealed no North Carolina case which has decided whether the leasing of property to a competitor is a violation of a promise not to compete indirectly with a covenantee, however, the following cases may be helpful in making such a determination. In Kramer v. Old, 119 N.C. 1, 25 S.E. 813 (1896), the defendants sold their milling business to the plaintiff and entered into a covenant that they would “not continue in *584the milling business.” Defendants later secured stock in another milling company. Our Supreme Court found that such an acquisition was in violation of the covenant, but in dicta the court stated that “the courts will not restrain a party bound by such a contract from selling or leasing his premises to others to engage in the business which he has agreed to abstain from carrying on, or from selling to them the machinery or supplies needed in embarking in it. . . .” Id. at 12, 25 S.E. at 815.
Our Supreme Court has also found that it was not a violation of a covenant not to compete for a covenantor to sell part of his inventory to a third party, see, Jefferson Reeves & Co. v. Sprague, 114 N.C. 647, 19 S.E. 707 (1894), and, that it was not a violation of such a covenant for a covenantor to loan money to start a new firm to engage in competition with the covenantee. See, Finch Brothers v. Michael, 167 N.C. 322, 83 S.E. 458 (1914).
Plaintiff argues that these cases are not dispositive of this issue, because the covenants involved in those cases were not as broad or as specific as the covenant in the case sub judice. Instead, it urges acceptance of the reasoning of the California Court of Appeals found in Dowd v. Bryce, 95 Cal. App. 2d 644, 213 P. 2d 500 (1950). In Dowd the court found that the defendant’s leasing of land to one of plaintiffs competitors was a violation of an agreement not to indirectly compete with the plaintiff since it was “one link in the chain which creates the very competition which it was the object of the clause ... to prevent.” Id. at 647, 213 P. 2d 502.
The reasoning of Dowd is inapposite here because the covenant which the parties signed was much broader than in the case at bar in that the parties specifically had agreed that the seller would not sell any real property to a competitor of or one contemplating becoming a competitor of the covenantee. The agreement evidences an intention by the parties to prevent any actions which might subject the covenantee to any form of competition. Such is not the case in the agreement entered into between plaintiff and the defendants.
Based upon the reasoning of our Supreme Court in the cases cited herein and the parties’ intent as evidenced by the agreement, I conclude that the agreement entered into between the plaintiff and the defendants does not prohibit Bell from leasing *585property to a competitor of the plaintiff. Therefore, I find no error in the trial court’s denial of plaintiffs Motion for Summary Judgment.
Plaintiff also' argues that the judgment is improper because it awards the defendants Triplette and Lewis a judgment for the accrued interest even though they had not counterclaimed for such a judgment. The record reveals that plaintiff is correct in its assertion that Triplette and Lewis have not counterclaimed for the interest due. The judgment, therefore, should be modified to award only defendant Bell a judgment for the principal sum of $4,500 and interest thereon as set forth in the judgment.