Schultz and Assoc. v. Ingram

248 S.E.2d 345 (1978) 38 N.C. App. 422

Howard SCHULTZ and Associates of the Southeast, Inc.
v.
Joe William INGRAM, Jr.

No. 7726SC1073.

Court of Appeals of North Carolina.

November 7, 1978.

Grier, Parker, Poe, Thompson, Bernstein, Gage & Preston by Sydnor Thompson, Heloise C. Merrill and Francis O. Clarkson, Charlotte, for plaintiff-appellee.

Tucker, Moon & Hodge by Robert B. Tucker, Jr., and John E. Hodge, Jr., Charlotte, for defendant-appellant.

HEDRICK, Judge.

Defendant assigns as error the clarifying order which sets forth the reasons for the preliminary injunction. Rule 65(d) of the North Carolina Rules of Civil Procedure requires that a preliminary injunction order "shall set forth the reasons for its issuance; shall be specific in terms; [and] shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts enjoined." The clarifying order tracks the original order with the exception of the following language:

"for the reason that the court is of the opinion that there is probable cause that plaintiff will be able to establish at the trial of this action that the covenant not to compete contained in the contract between the parties dated April 30, 1974 is enforceable against the defendant, that the defendant threatens to violate that covenant, and that there is reasonable apprehension of irreparable loss to the plaintiff unless injunctive relief is now granted."

Defendant contends that the original order is void because it does not comply with the requirements of Rule 65(d) and that the alterations to the original order, embraced in the clarifying order, are not within the ambit of Rule 60(a); thus the trial court lacked jurisdiction to clarify its order because notice of appeal had been filed.

In Uptegraff Manufacturing Co. v. International Union, 20 N.C.App. 544, 202 S.E.2d 309, cert. den., 285 N.C. 234, 204 S.E.2d 24 (1974), this Court stated that a Rule 65(d) order which omits the reasons for its issuance is only irregular, not void; thus the order binds the parties until it is corrected. To set aside an irregular judgment, a motion must be made before the court rendering such judgment and not on appeal. Collins v. Highway Commission, 237 N.C. 277, 74 S.E.2d 709 (1953). This rule is designed to allow courts to correct irregularities and to present the appellate court with all relevant facts on appeal. In the present case, the absence of a statement of the reasons for the injunction only renders the order irregular, not void, and should be corrected by the trial court and not on appeal.

The question next presented is whether this correction can properly be made under a Rule 60(a) motion. Rule 60(a) provides that "[c]lerical mistakes in judgments, orders or other parts of the record and errors therein arising from oversight or omission may be corrected by the judge at any time on his own initiative or on the motion of any party . . .." Generally, no substantive changes may be corrected by a 60(a) motion. 11 Wright & Miller, Federal Practice and Procedure: Civil § 2854 (1973). The Third Circuit has held that Rule 60(a) "permits the correction of irregularities which becloud but do not impugn" the judgment. United States v. Stuart, 392 F.2d 60, 62 (3d Cir. 1968). In the present case, the correction did not alter the effect of the order but did clarify the record for appeal. The defendant was not prejudiced by this correction because he was well aware of the facts in the case which would support the injunction. We, therefore, hold that the Rule 60(a) motion was proper to reform the order to comply with Rule 65(d).

Defendant next assigns as error the entry of the preliminary injunction. In order to be entitled to a preliminary injunction the moving party must show "(1) there is probable cause that plaintiff will be able to establish the right he asserts, and (2) there is reasonable apprehension of irreparable loss unless interlocutory injunctive relief is granted or unless interlocutory injunctive relief appears reasonably necessary to protect plaintiffs' rights during the litigation." Setzer v. Annas, 286 N.C. 534, 537, 212 S.E.2d 154, 156 (1975). On appeal, the enjoined party bears the burden of showing that the trial court erred as there is a presumption that the judgment is correct. Puett v. Gaston County, 19 N.C.App. 231, 198 S.E.2d 440 (1973). Neither the findings nor the conclusions of the trial court and the appellate court are binding upon the court at trial on the merits. Board of Provincial Elders v. Jones, 273 N.C. 174, 159 S.E.2d 545 (1968).

Defendant contends that there was no probable cause for the injunction because the affidavits were insufficient. He cites Rule 56(e) of the North Carolina Rules of Civil Procedure to support this proposition but that rule is not controlling. Rule 56(e) establishes the requirements for affidavits to support a summary judgment motion which is a final order. Rule 65 does not establish such requirements. Furthermore, an injunction under Rule 65 is a temporary order pending trial; thus the affidavits need not meet as high a standard as those for a summary judgment ruling. 7 Moore's Federal Practice ¶ 65.04(3) (1975). In this case, the affidavits, exhibits and pleadings were more than sufficient to support the preliminary injunction.

The defendant next contends that the plaintiff has shown no irreparable loss by virtue of his activities. He asserts that if he has violated the restrictive covenant, monetary damages are sufficient to compensate the plaintiff for its loss. Nevertheless, in Forrest Paschal Machinery Co. v. Milholen, 27 N.C.App. 678, 220 S.E.2d 190 (1975), this Court held, on similar facts, that the defendant could be enjoined from competing with a former employer pending trial. The Court noted that the defendant utilized confidential information of the employer in the competing business. In the present case, Mr. Barker's affidavits and exhibits suggest that the defendant had access to and would use certain confidential information in his own accounts payable auditing. These allegations were sufficient to support the trial court's finding of irreparable loss as the dissemination of the plaintiff's information would be harmful to its business.

Defendant claims that the assignments of the "Sub-Associate Agreement" were invalid as it was a contract for personal services, he had no notice of the assignments and he did not consent to them. Normally, executory contracts for personal services are not assignable. Atlantic and North Carolina Railroad Co. v. Atlantic and North Carolina Co., 147 N.C. 368, 61 S.E. 185 (1908). Nevertheless, personal service contracts may be assigned when the character of the performance and the obligation is not altered. Munchak Corp. v. Cunningham, 457 F.2d 721 (4th Cir. 1972). In Munchak, the Fourth Circuit ruled that a basketball player's contract could be assigned and the restrictive covenant enforced. The Court saw no way in which the assignment of the basketball franchise and the player's contract to successive corporate owners would affect the duties and obligations of the player. In the present case, the affidavits tend to show that the assignments of the "Sub-Associate Agreement" did not affect the defendant's duties and obligations. Furthermore, Mr. Barker, in his affidavit, states that the defendant performed audits scheduled by the plaintiff, cashed checks drawn on the plaintiff and was visited by Mr. Barker in the course of his work. In addition, the defendant had been working for the plaintiff for over two years prior to his resignation. These factors support the trial court's conclusion that there was probable cause that the plaintiff would succeed on the issue of assignment at trial.

We now turn to the question of the validity of the restrictive covenant itself. In order for a restrictive covenant to be enforceable it must be "(1) in writing, (2) entered into at the time and as a part of the contract of employment, (3) based on valuable considerations, (4) reasonable both as to time and territory embraced in the restrictions, (5) fair to the parties, and (6) not against public policy." Asheville Associates, Inc. v. Miller, 255 N.C. 400, 402, 121 S.E.2d 593, 594 (1961). Defendant contends that the restrictive covenant is unenforceable because it is unreasonable in time, territory, and activity restricted, it is unfair, and it is against public policy. We hold otherwise. The time limit of two years is reasonable, in view of the nature of the plaintiff's business, because confidential information given to the defendant is viable for that period of time. The covenant, and the addendum, specifically restrict only businesses which compete with the plaintiff and thus the covenant is reasonable in light of the plaintiff's sole business of accounts payable auditing.

The territorial restraint is also reasonable and not unduly vague. The restrictive covenant does not give any geographic limit other than "any area or areas from time to time constituting the Principal's or Associate's area of activity in the conduct of their respective businesses, as of the date of said termination." Nevertheless, the contract, in an earlier section, establishes that the Associate operated in the southeastern area of the United States in the states of North Carolina, South Carolina, Georgia, Florida, Tennessee, Alabama and Mississippi. At the time of the defendant's termination these states, except Mississippi, also comprised the plaintiff's area of operation. We believe this contract is sufficient to support a preliminary injunction enforcing a restrictive covenant for this area. The facts presented fully support the plaintiff's contention that it operated in these states and that the defendant's attempts to compete were affecting the plaintiff's business in areas other than North Carolina. Defendant contends that the territorial restriction is vague in that it includes both the Principal's and the Associate's areas of business. Although the areas are not enumerated separately, we believe that the restrictive covenant can be enforced as to the Associate's area of business without altering or amending the contract. In Welcome Wagon, Inc. v. Pender, 255 N.C. 244, 120 S.E.2d 739 (1961), it was stated that a court cannot reform the contract by reducing the territory restricted. Nevertheless, if the parties have made divisions of the territory, a court can enforce the reasonable restrictions and refuse to enforce those which are not reasonable. In the present case, the geographic area of operation of the Associate and that of the Principal are set out specifically in other parts of the contract and are sufficiently distinct. Since the plaintiff seeks only to enforce the covenant as to the Associate's area of operation, the court may enforce that section without considering the validity of the Principal's territorial restriction. We further hold that this contract is fair and not against public policy.

Defendant's last assignment of error contends that the $10,000 bond posted by the plaintiff is insufficient to cover his damages in the event the defendant succeeds at trial on the merits. The setting of bond is within the trial court's discretion and no appeal lies from this determination. Bynum v. Board of Commissioners, 101 N.C. 412, 8 S.E. 136 (1888).

We find that the trial court did not abuse its discretion in ordering a preliminary injunction. The evidence as presented in the pleadings, affidavits and exhibits was sufficient to support a finding of probable success at trial and irreparable loss if the preliminary injunction were not granted.

Affirmed.

ARNOLD and WEBB, JJ., concur.