Court Opinion

ID: 9575168
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:12:13.249102+00
Date Added: 2024-06-11T12:48:04.813021
License: Public Domain

Justice Meyer
dissenting.
I cannot agree with the majority that the leasing of property to a potential competitor violates the particular covenant not to compete which is the subject of this action. If the plaintiff wanted protection from leases to competitors it could have bargained for that protection and specifically included it in the lease or covenant.
The majority characterizes Dr. Bell’s act in accepting a note for the first two months rent as “loaning money to Snook to enable him to set up his competing business.” This is nothing short of a complete mischaracterization of the facts. In reality, the evidentiary forecast demonstrates simply that, because of the lessee’s financial inability to pay the first two months rent, Dr. Bell took a promissory note for it. The majority also carelessly concludes that Dr. Bell “positioned himself to receive profits from Snook’s business in the form of rents paid out of the profits made from competing with plaintiff.” This is but another mischaracterization of the facts. Dr. Bell’s lease did not call for a sharing of the profits of Snook’s business, nor was Dr. Bell’s right to receive rents in any way tied to the profits or losses of Snook’s business. Snook’s “intent to repay” the note from funds generated by PBS, as noted by the majority, is legally irrelevant to the question of whether a breach has occurred in this case. Dr. Bell was to receive rents, the source of which was not specified in the lease, and the rents were to be paid regardless of the success or failure of the business or whether it even continued in existence. The relationship between Dr. Bell and Mr. Snook is that of landlord and tenant and nothing more. The majority should feel no need to bolster its holding in this way. The only real foundation for the holding that Dr. Bell has violated his covenant not to compete is the bare act of leasing the adjoining property to Mr. Snook.
I emphatically dissent from the majority’s unnecessary establishment of a new rule that a covenantor who complies with the letter of his covenant not to compete may nevertheless violate it by violating “the spirit” of the covenant. I shudder to think of the number of cases that will come to our courts under this new rule. As authority for its new rule the majority cites language from a *232twenty-year-old California court decision which upheld a covenant not to compete in the same city “so long as the purchaser continues in business,” a provision without any time restriction and one which the courts of this state would not enforce. Harrison v. Cook, 213 Cal. App. 2d 527, 530, 29 Cal. Rptr. 269, 271 (1963). Remarkably, the majority cites as being in “accord” the North Carolina case of Tillis v. Cotton Mills and Cotton Mills v. Tillis, 251 N.C. 359, 111 S.E. 2d 606 (1959). Tillis not only is clearly not in accord with the California decision, it did not even involve a covenant not to compete. Tillis was an action by a contract carrier to recover for the breach by a shipper of an executory contract for the shipper’s alleged frustration of performance by the carrier of the executory contract.
Moreover, the establishment of this new rule concerning violation of “the spirit” of a covenant not to compete is completely unnecessary to the majority’s final holding. The majority concludes that “Bell’s behavior breached both the letter and the spirit of the contract.” Having found a violation of the “letter” of the covenant, it was unnecessary to even address, much less hold, that the covenant could be violated by a violation of “the spirit” of that covenant. This Court should not decide the important issue of whether an act which might violate only “the spirit,” as opposed to the letter, of a covenant not to compete constitutes a breach of such a covenant until it is directly presented and is fully briefed and argued.
For the foregoing reasons, I cannot vote to remand this matter for entry of summary judgment for the plaintiff.
Justice MITCHELL joins in this dissenting opinion.