Appeal by plaintiffs from Ferrell, Judge. Order entered 27 February 1981 in Superior Court, Burke County. Heard in the Court of Appeals 10 February 1982.
Clark, Judge. Judges Arnold and Whichard concur.
The sole issue presented to us for review is whether the court erred in denying plaintiffs' motion for a preliminary injunction to enjoin the foreclosure proceedings pending resolution of the action against defendant.
The burden is on plaintiffs to establish their right to a preliminary injunction. In order to justify issuance of a preliminary injunction, plaintiffs must show a likelihood of success on the merits of their case and either that they are likely to sustain irreparable loss unless the injunction is issued or that issuance is necessary for the protection of plaintiff's rights during the course of litigation. Pruitt v. Williams, 288 N.C. 368, 218 S.E.2d 348 (1975). Issuance of an injunction is a matter of discretion to be exercised by the trial court, after weighing the equities and the advantages and disadvantages to the parties. Its purpose is to preserve the status quo until trial can be had on the merits. Huskins v. Hospital, 238 N.C. 357, 78 S.E.2d 116 (1953). On appeal from an order granting or denying a preliminary injunction, this Court is not bound by the findings of fact of the trial court, but may review and weigh the evidence and find the facts for itself. Pruitt v. Williams, supra.
We think that plaintiffs' evidence was sufficient to show the likelihood of success at trial on the merits. Their evidence tends to show the following: that defendant violated company policies concerning reimbursement for business-related travel, entertainment and car expenses; that he retained duplicate checks for his salary that he was mistakenly issued due to clerical error; that he breached his fiduciary duties owed to the company and breached
his employment contract by not withdrawing as shareholder of firms doing business with plaintiffs and by conducting business with these firms to the profit and advantage of the other firms. The company's profits and goodwill suffered due to his inattention to his managerial duties and responsibilities and by the lack of inventory controls in his operation of the company.
The deed of trust executed by plaintiff Marantz specifically incorporates by reference the terms of the stock purchase agreement. In the stock purchase agreement defendant promised to use his "best efforts" to preserve the business and goodwill of the company. The promissory note also specifically recites that it is subject to the terms of the stock purchase agreement:
"This Promissory Note is issued under and is subject to all of the terms and conditions of the Agreement [stock purchase agreement] and all documents executed and delivered in connection therewith, and is secured by a Security Agreement as described in Article 3.5 of the Agreement and delivered to Payee pursuant to said Agreement.
The obligations of the undersigned to pay said installments shall be subject to the obligations of the parties as provided in the Agreement." (Emphasis added.)
The forecast of plaintiffs' evidence, therefore, indicates a likelihood that they will be able to establish that they were entitled to withhold payments on the note to defendant since defendant breached his employment agreement, his fiduciary duties and the stock purchase agreement.
Turning to the second element which must be proved by plaintiffs, we find that injunctive relief is necessary to protect plaintiffs' rights pending resolution of the original litigation. The note and security deed of trus, which defendant seeks to foreclose, were a part of the transaction involving the sale to plaintiffs of all the outstanding stock of Marantz Piano Company by defendant and others. The transaction included an employment contract in which defendant was hired as President and Chief Operating Officer of the piano manufacturing business. The defendant in his answer and counterclaim, ...