Dobbins, DeGuire & Tucker, P.C. v. Rutherford, MacDonald & Olson

• Decision Date: 06 November 1985
• Docket Number: No. 85-86,85-86
• Citation: Dobbins, DeGuire & Tucker, P.C. v. Rutherford, MacDonald & Olson, 708 P.2d 577, 218 Mont. 392 (Mont. 1985)
• Parties: , 52 A.L.R.4th 131 DOBBINS, DEGUIRE & TUCKER, P.C., Plaintiff and Appellant, v. RUTHERFORD, MacDONALD & OLSON, a partnership, et al., Defendants and Respondents.
• Court: Montana Supreme Court

Page 577

708 P.2d 577

218 Mont. 392, 52 A.L.R.4th 131

DOBBINS, DEGUIRE & TUCKER, P.C., Plaintiff and Appellant, v.RUTHERFORD, MacDONALD & OLSON, a partnership, et al Defendants and Respondents.

No. 85-86.

Supreme Court of Montana.

Submitted on Briefs June 28, 1985.

Decided Nov. 6, 1985.

Worden, Thane & Haines, Ronald A. Bender, Missoula, for plaintiff and appellant.

Mulroney, Delaney & Scott, P. Mars Scott, Missoula, for defendants and respondents.

WEBER, Justice.

Dobbins, DeGuire & Tucker, P.C., (Dobbins) sued Rutherford, MacDonald and Olson (defendants) as a partnership and individually for violation of a public accounting employment contract.The contract required payment to Dobbins if defendants obtained certain clients of Dobbins within 12 months after employment termination.Upon motion of defendants to dismiss the complaint for failure to state sufficient facts upon which relief could be granted, the Missoula County District Court dismissed the complaint.Dobbins appeals.We reverse.

The sole issue on appeal is whether the District Court erred in dismissing Dobbins' complaint.

The complaint alleged the following facts:

Between November 1978 and October 1980, defendants signed written employment contracts with Dobbins under which each agreed that certain restrictions would apply following termination of employment.The contracts in pertinent part stated:

5.If this Agreement is terminated and Employee enters into a public accounting business for himself, in partnership with one or more accountants ... Employee agrees as follows:

a. To pay to employer an amount equal to one hundred percent (100%) of the gross fees billed by Employer to a particular client over the twelve month period immediately preceding such termination which was a client of Employer within the twelve month period prior to Employee's leaving Employer's employment, but which client is thereafter within one year of date of termination served by Employee, Employee's partners, ...

b. Such sum shall be paid in monthly installments over a three year period, the first such installment being due within thirty (30) days of the date when Employee, Employee's partners, ... does work for a particular client, and which payments, exclusive of the initial payment shall include interest as hereinafter stated.

c. Such sum shall bear interest at the rate of eight percent (8%) per annum on the declining balance which interest shall commence the date first payment is due.Employee or his authorized representatives shall be allowed to prepay any such amounts in full, or in part, without penalty, provided that if paid only in part, that the monthly installments thereafter required shall not be reduced.

d. Employee agrees that he shall provide all records necessary to carry out the intent of this Agreement and shall report immediately to Employer when services have been provided a particular client.

6.Employee enters into this Agreement with full understanding of the nature and extent covered by the restrictive agreements contained in the immediately preceding paragraph, and Employee realizes that because of the unique nature of the business, this Agreement would not be entered into without the Agreements contained herein....

One of the defendants worked for Dobbins until September 30, 1983; the other two until October 31, 1983.While employed by Dobbins, the defendants became acquainted with Dobbins' clients.In November 1983, the defendants opened a public accounting office in Missoula where the Dobbins' office is located.Finally, the complaint alleges that the defendants have been engaged, and are now engaged, directly and indirectly through others, in accepting and soliciting accounting work from Dobbins' clients.The complaint also alleges that Dobbins has demanded an accounting, which the defendants have refused to give.The complaint prays for an accounting and payment of the sum determined to be due plus 8 percent interest.

The issue of whether the District Court erred in dismissing Dobbins' complaint turns on whether the above-quoted provisions of the employment contract are enforceable.Section 28-2-703, MCA, provides in pertinent part:

Contracts in restraint of trade generally void.Any contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided for by 28-2-704 or 28-2-705, is to that extent void.

Section 28-2-704, MCA, in substance provides that one who sells the goodwill of a business may agree to refrain from carrying on a similar business under certain conditions within certain areas.In a similar manner, Sec. 28-2-705, MCA, in substance provides that on dissolution of a partnership, partners may agree that a partner may not carry on a similar business within those areas.As pointed out by the District Court, neither Secs. 28-2-704 or -705 is applicable in the present case.

The District Court relied on J.T. Miller Co. v. Madel(1978), 176 Mont. 49, 575 P.2d 1321, in reaching its conclusion that the contract provisions were void under Sec. 28-2-703, MCA.In Madel, an insurance salesman signed an employment contract with the following covenants:

The Employee agrees and covenants that for a period of five (5) years after the termination of this Agreement, he will not directly or indirectly own, manage, operate, control, be employed by, participate in or be connected in any manner with the ownership, management, operation or control of any business which sells credit life, credit accident, health or other insurance to any customer of the Employer with whom the Employee has at any time had any...