Hawkins Chemical, Inc. v. McNea, 10164

• Decision Date: 13 May 1982
• Docket Number: No. 10164,10164
• Parties: HAWKINS CHEMICAL, INC., Plaintiff and Appellant, v. Lloyd McNEA, R. F. Saunders, Dakco Distributors, Inc., and Mon-Dak Chemical and Supply Co., Defendants and Appellees. Civ.
• Court: North Dakota Supreme Court

Page 152

319 N.W.2d 152

HAWKINS CHEMICAL, INC., Plaintiff and Appellant, v. Lloyd McNEA, R. F. Saunders, Dakco Distributors, Inc., and Mon-Dak Chemical and Supply Co., Defendants and Appellees.

Civ. No. 10164.

Supreme Court of North Dakota.

May 13, 1982.

Pringle & Herigstad, Minot, for plaintiff and appellant; argued by Jan M. Sebby, Minot.

McGee, Hankla, Backes & Wheeler, Minot, for defendant and appellee Lloyd McNea; argued by Robert A. Wheeler, Minot.

Eaton, Van de Streek & Ward, Minot, for defendants and appellees Saunders, Dakco Distributors and Mon-Dak Chemical & Supply Co.; argued by Jonathan C. Eaton, Jr., Minot.

SAND, Justice.

This is a motion to dismiss an appeal arising out of a declaratory judgment action commenced by Hawkins Chemical, Inc. [Hawkins] to determine the rights of the parties arising out of a contract to purchase and a noncompetition agreement entered into between Hawkins and Lloyd McNea, R. F. Saunders, Dakco Distributors, Inc., and Mon-Dak Chemical and Supply Co., a wholly owned subsidiary of Dakco.

The noncompetition agreement in effect provided that in consideration for and as an inducement for Hawkins to purchase the assets related to Mon-Dak's chemical sales and distribution business and its janitorial business located at its Minot and Billings divisions, McNea (the manager of Mon-Dak), Saunders (the president of Dakco), Dakco and Mon-Dak agreed that for a period commencing on 1 March 1979 and terminating on 28 February 1987 they, together or individually or through any other business subsidiary, corporation or organization would not engage in any business competition, directly or indirectly, with Mon-Dak's Minot and Billings divisions in the states of Montana, North Dakota, South Dakota, Minnesota, Iowa and Wisconsin. One of the assets bought by Hawkins was the name and goodwill of Mon-Dak. The noncompetition agreement also provided that Hawkins would pay Mon-Dak a total of $218,000 for the restrictive covenant with $50,000 paid at closing and $56,000 annually for three years.

Hawkins' complaint alleged that the principal place of Mon-Dak's chemical sales and distribution business and its janitorial service was in Minot, North Dakota, and the complaint further alleged that in December of 1979 McNea commenced a chemical sales and distribution business, as well as a janitorial business, in Minot, North Dakota, contrary to the noncompetition agreement.

McNea separately answered and alleged as an affirmative defense that the noncompetition agreement restricted his right to engage in a lawful trade or business and was void or unenforceable. Saunders, Dakco and Mon-Dak filed an answer acknowledging the basic agreement and counterclaimed by alleging that pursuant to the agreement Hawkins agreed to pay Mon-Dak, now known as Dakco the sum of $218,000.00, of which only $50,000.00 has been paid.

The parties stipulated to the facts of the case, and after a bench trial the court issued its memorandum opinion which concluded that the noncompetition agreement was in derogation of Sec. 9-08-06, North Dakota Century Code, and was overbroad and unenforceable. The memorandum opinion stated that the defendant McNea may prepare partial findings of fact embodying the court's decision in this case. The attorney for Hawkins, Mr. Jan Sebby, then wrote a letter to the Judge and other counsel expressing doubt about the court's opinion. The court in response wrote a letter dated 17 December 1980 to all participating counsel, which concluded with the statement, "Whether the invalidity of the covenant abrogates Hawkins' obligation to pay beyond McNea's violation is, I feel, a matter to be left to either further proceedings in this case or in other litigation.... I will therefore hold in abeyance the execution of any findings of fact until I am informed of counsel's decision relating to these findings." Later the court issued an addendum to the memorandum opinion which concluded, "In all other respects, this Court's previous Memorandum Opinion shall remain intact and pursuant to Rule 54(b), Judgment shall be entered accordingly."

Revised findings of fact and conclusions of law were prepared and submitted to the court and executed on 11 March 1981. The conclusions of law, in part, stated:

"The Defendants are entitled to judgment dismissing Plaintiff's Complaint with prejudice and for their reasonable costs and disbursements.

"There shall be a separate trial in regard to the counterclaim of R. F. Saunders, Dakco Distributors, Inc., and Mon-Dak Chemical and Supply Co. against Hawkins Chemical, Inc.

"LET JUDGMENT BE ENTERED ACCORDINGLY.

"Dated at Minot, North Dakota, this 11th day of March, 1981."

On 13 March 1981 judgment was entered in which the plaintiff's complaint was dismissed with prejudice and costs allowed to the defendants. The judgment, in part, also provided:

"There shall be a separate trial in regard to the counterclaim of R. F. Saunders, Dakco Distributors, Inc., and Mon-Dak Chemical and Supply Co. against Hawkins Chemical, Inc."

Notice of entry of judgment was served on the parties by mail on 23 March 1981. No appeal was taken at this time.

In the meantime the counterclaim was tried to the court and the court on 8 December 1981 issued its findings of fact, conclusions of law and order for judgment and on 9 December 1981 a judgment was entered in favor of Mon-Dak, now known as Dakco Supply Co., against Hawkins in the total sum of $112,724.44, including costs and disbursements. This judgment was amended to make it a total of $120,718.28 and the judgment was entered on 10 December 1981. Notice of entry of amended judgment was served upon the parties by mail on 9 December 1981. On 1 February 1982 Hawkins filed a notice of appeal from the amended judgment dated 10 December 1981 and the earlier judgment dated 13 March 1981.

Lloyd McNea, one of the defendants, moved this Court to dismiss Hawkins' appeal from the judgment entered on 13 March 1981 dismissing the complaint with prejudice on the basis that it involved the merits of the action and was separately appealable and that no appeal was taken therefrom within the time permitted by the statute and rules. McNea contends that the court complied with Rule 54(b), North Dakota Rules of Civil Procedure, and as a result the judgment of 13 March 1981 dismissing the complaint was a final judgment and the appeal should have been taken within the time specified [60 or 90 days, Rule 4, NDRAppP] and failure to do so renders the appeal ineffective.

Rule 54(b), NDRCivP, as pertinent to this matter, provides as follows:

"When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all of the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties." [Underscoring ours.]

The pertinent part of this rule is derived from the Federal Rules of Civil Procedure, consequently the construction placed upon this rule by the federal courts is entitled to appreciable weight by this Court. In re Estate of Elmer, 210 N.W.2d 815 (N.D.1973).

In Minch v. City of Fargo, 297 N.W.2d 785 (N.D.1980), Justice Pederson compiled the following cases in which this Court dismissed the appeal for lack of an appropriate Rule 54(b) order. Perdue v. Knudson, 154 N.W.2d 908 (N.D.1967); Berg v. Kremers, 154 N.W.2d 911 (N.D.1967); Mitzel v. Schatz, 167 N.W.2d 519 (N.D.1968); Hodny v. Hoyt, 224 N.W.2d 826 (N.D.1974); Melland Firestone, Inc. v. Streich, 226 N.W.2d 141 (N.D.1975). The compilation also discloses that this Court heard some cases in which a Rule 54(b) order was not a part of the record but the parties stipulated that noncompliance with Rule 54(b) be waived, in addition the record also disclosed that the subject matter was final: Zuraff v. Empire Fire & Marine Insurance Co., 252 N.W.2d 302 (N.D.1977); Crandall v. N.D. High School Activities Ass'n., 261 N.W.2d 921 (N.D.1978). These cases, however, are readily distinguishable from the instant case because the parties in those cases agreed and stipulated that the subject matter was final and that Rule 54(b) be waived; whereas in the instant case one of the parties is actively disputing the finality of the subject matter and has not agreed that Rule 54(b) requirements be waived or that they have been met.

Even though the parties cannot confer jurisdiction by stipulation, we nevertheless recognize the practical application of the concept that the parties can agree to be bound by the decision even though the court does not have jurisdiction. The expanded concept of arbitration supports this rationale. However, if one of the parties disagrees regarding compliance with Rule 54(b) and takes an active position that the requirements have not been met and that the court does not have jurisdiction, we cannot disregard Rule 54(b) and proceed with the appeal.

Because an order or judgment in a case involving multiple claims or issues, which were not all decided, is not appealable without first obtaining a Rule 54(b) order or certificate it might suggest that the time for appeal does not begin to run until all the claims or issues have been decided and the judgment has been entered thereon. However, case history discloses otherwise.

After a Rule 54(b) certification or order has been made...