Ranch Hand Foods, Inc. v. Polar Pak Foods, Inc.

Decision Date26 March 1985
Docket NumberNos. WD,s. WD
Citation690 S.W.2d 437
PartiesRANCH HAND FOODS, INC., Respondent/Cross Appellant, v. POLAR PAK FOODS, INC., Jeremy P. Lumianski, and Lazar B. Jovanovic and James W. Hall, Appellants/Respondents. 35318, WD 35352.
CourtMissouri Court of Appeals

James E. Kelley, Jr., Smith, Gill, Fisher & Butts, Inc., Kansas City, for respondent/cross appellant.

David R. Frensley, Gary V. Fulghum, Ryder, Rose, Frensley & Shapiro, Kansas City, for appellants/respondents.

Before KENNEDY, P.J., and CLARK and NUGENT, JJ.

CLARK, Judge.

In this court tried case, plaintiff below, Ranch Hand Foods, Inc., recovered judgment for actual damages against all defendants and judgments for punitive damages against the individual defendants. In the aggregate, the judgments total $262,500.00. Nominally, this appeal is on behalf of all defendants, but the points raised, apart from complaint as to the evidentiary support for the damage award, are particularized only as to certain aspects of the case against certain defendants. Those points will be recited as their disposition is discussed. Ranch Hand has lodged a cross appeal, also to be discussed separately, in regard to an award made in favor of individual defendants Lumianski and Jovanovic.

The facts of the case, in contrast to the prolix documentation, pleadings, briefing and argument presented here and to the trial court, are relatively simple and are essentially uncontested. The crux of Ranch Hand's complaint, the factual underpinning for which the appellants do not deny, is that the individual defendants, Hall, Lumianski and Jovanovic, while in the employ of Ranch Hand and while serving as corporate officers of Ranch Hand, undertook to form a business to engage in competition with Ranch Hand. In the process, defendant Polar Pak was organized as a corporate vehicle to conduct the competing business and Ranch Hand trade was diverted to Polar Pak.

A major difficulty which virtually precludes conventional and orderly disposition of the appeal is the content of the trial court judgment when appraised as an ostensible disposition of Ranch Hand's four count petition. In that petition, relief was variously sought against the defendants, not all of whom were named in each count, on alternate theories of tort and contract, and for injunctive relief and actual and punitive damages. The judgment, however, made no reference to the petition counts or the alternate bases of possible liability. Instead, the trial court entered findings of fact favorable to Ranch Hand on all phases of the case, denied injunctive relief, awarded compensatory damages apparently on grounds of joint and severable liability against all defendants, and assessed exemplary damages particularized as to individual defendants. An understanding of the dilemma which this disposition poses requires a resurvey of the Ranch Hand petition counts preceded by a description of the roles of the participants in these corporate enterprises.

Defendant Hall was president of Ranch Hand at times material to the case. In 1975 in anticipation of the transfer of Hall to California as general manager of Savory Products, Inc., the parent company to Ranch Hand, a replacement manager for Ranch Hand was sought. The consequence was the employment of defendant Lumianski who commenced work for Ranch Hand January 5, 1976 and was elected vice-president. Defendant Jovanovic was first hired by Ranch Hand in 1971. He left for other employment in 1973, but returned to Ranch Hand in 1976 as vice-president of operations. Between January, 1976 and June 24, 1980, when the Polar Pak competitive venture was disclosed, Lumianski and Jovanovic were officers and employees of Ranch Hand. Each was summarily discharged on the last mentioned date. Hall, although continuing as president of Ranch Hand, was engaged in managerial duties for Savory Products after January, 1976. He was relieved of that position and also as president of Ranch Hand on April 10, 1980 for reasons apparently unrelated to the Polar Pak enterprise. The critical period for purposes of this suit commenced in February, 1980 when Hall, Lumianski and Jovanovic first met to plan the Polar Pak venture and continued thereafter as the scheme was implemented.

The counts of the Ranch Hand petition sought recovery against the defendants, Polar Pak, Hall, Lumianski and Jovanovic, as follows. In Count I it was alleged that Lumianski was bound by the express terms of a contract with Ranch Hand to refrain from engaging in competition with Ranch Hand for a period of two years following In Count II, Ranch Hand asserted that as corporate officers, Hall, Lumianski and Jovanovic owed a fiduciary duty to Ranch Hand which they violated by commencing the competing business of Polar Pak and soliciting business from Ranch Hand customers. The only relief prayed as to Count II was an injunction to restrain the individual defendants from participation in or employment by Polar Pak and for costs. No relief as such was sought in Count II against Polar Pak.

termination of Lumianski's employment. The participation by Lumianski as an officer, director and stockholder in Polar Pak was asserted to be a violation of that contract and, in consequence, Count I sought damages, costs and an injunction. Only Lumianski was affected by Ranch Hand's Count I claim.

In Count III, the claim was advanced that Hall and Jovanovic, joined later by Polar Pak, conspired with Lumianski to accomplish the breach of the employment contract between Ranch Hand and Lumianski. Injunctive relief, similar to that sought in Count II was prayed with the addition of a claim for injunction against Polar Pak.

Finally, in Count IV, Ranch Hand incorporated all previous allegations of the other counts and asked that compensatory and punitive damages be awarded against all defendants.

In findings of fact and conclusions of law which accompanied the judgment entry described earlier, the trial court found, in substance, that the restrictive covenant in Lumianski's employment contract was enforceable and was breached, that the individual defendants and Polar Pak conspired to breach the employment contract and that the individual defendants breached their fiduciary duty as employees and officers of Ranch Hand when they misappropriated trade secrets and solicited business for Polar Pak from Ranch Hand customers. It is impossible to ascertain whether damages were awarded on the Count I contract action, the Count II breach of fiduciary duty by the individuals as Ranch Hand officers, the Count III conspiracy to breach the agreement not to compete or a combination of the three.

Inexplicably, the trial court denied respondent the injunctive relief as prayed in Counts I, II and III of the petition, despite its determination of all factual issues necessary to that relief in favor of the complainant, Ranch Hand. 1

With this prelude, we turn to the points raised on appeal by defendants.

THE LUMIANSKI EMPLOYMENT CONTRACT

In their first point, appellants contend the court erred in finding Lumianski's covenant not to enter into a business competitive with Ranch Hand to be enforceable. To support this position, they argue that the restrictive covenant is to be tested under Kansas law where, they assert, the agreement would not be valid because no consideration supported Lumianski's promise not to compete with Ranch Hand for two years following cessation of his employment. This point necessarily affects not only the Count I claim against Lumianski for breach of contract but also the conspiracy claims in tort set out in Count III against all defendants. Obviously, if the contract is not valid for want of consideration, then a conspiracy to breach the contract does not give rise to a viable tort action. Appellants do not pursue this theory or raise any argument on the subject. For purposes of this opinion, the point is moot because we reject the contention that the contract fails for want of consideration.

Appellants' contention that the employment contract, and the non-compete clause in particular, are invalid rests upon two propositions, first, that Kansas law controls the evaluation of the contract and In National Starch, the court adopted the Restatement (Second) of Conflict of Laws, § 188, test which directs that in contract cases, the law of the state where the predominant contract interests lie will be applied. As factors to be considered, the court looks to the place of contracting, place of negotiation, place of performance, 2 location of subject matter and domicile of the parties. In the subject case, the majority of these factors are associated with Kansas. The Ranch Hand place of business was in Kansas, Lumianski was a Kansas resident and the contract services were to be performed in Kansas. Although no direct evidence on the subject was presented, there is reasonable ground to infer that the contract was signed in Kansas. The only factors associated with Missouri were Ranch Hand's incorporation in Missouri, use of a Missouri lawyer to draw the contract and the fact that Missouri customers were diverted by appellants from Ranch Hand to Polar Pak. As will hereafter appear, there is no fundamental disagreement between Kansas and Missouri law that continued employment after a restrictive agreement is signed supplies consideration for the promise, but for purposes of ruling the contention, we look to Kansas law.

second, that under Kansas law, this agreement fails for want of consideration. Respondent asserts that the contract is to be tested by Missouri law which would hold the contract valid. On the choice of law issue, both contestants cite National Starch and Chemical Corp. v. Newman, 577 S.W.2d 99 (Mo.App.1978).

As appellants pose the point of contract invalidity, they contend Lumianski received nothing in return for signing the employment...

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