Ross Clinic, Inc. v. Tabion

• Decision Date: 16 April 1981
• Docket Number: No. 3-1179A316,3-1179A316
• Citation: 419 N.E.2d 219
• Parties: ROSS CLINIC, INC., an Indiana Corporation, Appellant (Plaintiff Below), v. Napoleon C. TABION, Appellee (Defendant Below).
• Court: Indiana Appellate Court

Page 219

419 N.E.2d 219

ROSS CLINIC, INC., an Indiana Corporation, Appellant (Plaintiff Below), v. Napoleon C. TABION, Appellee (Defendant Below).

No. 3-1179A316.

Court of Appeals of Indiana, Third District.

April 16, 1981.

Robert F. Peters, Lucas, Clifford & Holcomb, Merrillville, for appellant.

George W. Carberry, Thomas, Burke, Dyerly & Cuppy, Merrillville, for appellee.

HOFFMAN, Presiding Judge.

On June 7, 1974 Dr. Napoleon Tabion, the defendant herein, entered into a one-year employment contract with Ross Clinic, Inc. of Merrillville, Indiana. Pursuant to the terms of the contract, Dr. Tabion began working on or about July 1, 1974. Difficulties soon arose and on October 16, 1974, Dr. Tabion gave written notice of the termination of his employment agreement. He ceased working for the Clinic in January of 1975 and in February, he joined another medical group in Munster, Indiana. This litigation was initiated by Ross Clinic to recover damages from Dr. Tabion for his alleged violation of the restrictive covenant and the liquidated damages provisions of his employment contract. These contractual restrictions read:

"16. MEDICAL PRACTICE RESTRICTION.

In the event that this Agreement is terminated by action of Doctor prior to the termination of this Agreement, or in the event that Doctor is offered a contract of employment, being one that would continue from year to year, which is declined by Doctor, a sum of $25,000.00 will be due and payable to the Clinic as liquidated damages in the event that Doctor engages in the practice of medicine in Lake County, Indiana, within the first year of the date of the termination of this Agreement. In the event that Doctor engages in the practice of medicine in Lake County, Indiana, within the second year after the date of termination, the sum of $12,500.00 will be due and payable to the Clinic as liquidated damages."

Following a trial before the court and a six-member jury, judgment was entered for the defendant and against the plaintiff. The defendant was also permitted to recover his costs and charges from the plaintiff.

Ross Clinic now brings this appeal, alleging numerous errors in the trial court's management of this case. The first two assignments of error both challenge the court's failure to decide or instruct the jury on the legality of the restrictive covenant and the liquidated damages clause. The appellant maintains that these are both purely questions of law for the court and should not be presented as issues to the jury. In reviewing a restrictive covenant, the Indiana Supreme Court has established the following standards:

" 'It is everywhere agreed that in order to be valid a promise imposing a restraint in trade or occupation must be reasonable. The question of reasonableness is for the court, not the jury; and in considering what is reasonable, regard must be paid to (a) the question whether the promise is wider than is necessary for the protection of the covenantee in some legitimate interest, (b) the effect of the promise upon the covenantor, and (c) the effect upon the public....' "

Donahue v. Permacel Tape Corp. (1955), 234 Ind. 398, at 408, 127 N.E.2d 235, at 239.

The length of time and the geographical area which are covered by the covenant can be decisive factors in the determination of reasonableness. The courts of this state have consistently held that "the ultimate determination of whether a covenant is reasonable is a question of law for the courts." Frederick v. Professional Bldg. Maintenance (1976), 168 Ind.App. 647, at 648, 344 N.E.2d 299, at 301.

In support of its contention that the trial court erred in failing to decide this issue, the appellant cites Waterfield Mortg. Co. v. O'Connor et al. (1977), 172 Ind.App. 673, 361 N.E.2d 924, in which this Court reversed a summary judgment granted in favor of the employee for the alleged breach of a restrictive covenant. While it is true that the Waterfield decision gives basic support to the plaintiff's position, the Court also stated:

"Reasonableness of the covenant being a question of law, its resolution must invariably rest on adequate facts. And, where the resolution of a question of law by the court depends upon an inquiry into the surrounding facts and circumstances, summary judgment should not be granted until the facts and circumstances have been sufficiently developed to enable the court to decide with reasonable certainty that it is making a correct determination of the law. American Mfrs. M. I. Co. v. American Broadcasting-Para. Th. (2d Cir. 1967), 388 F.2d 272, 280; Local U. No. 1423, Glaziers, Etc. v. P. P. G. Industries, Inc. (N.D.Ind.1974), 378 F.Supp. 991, 1000." (Emphasis added.) 361 N.E.2d at 926.

When a question of law rests on certain factual determinations, the court will be unable to render a decision on the legal issues until the factual determinations have been developed and resolved.

For this reason, the plaintiff's allegation of error on this issue must fail. A dispute in facts existed which precluded the court from making its decision on the legality of the covenant. The dispute concerned the reasonableness of the geographical area covered by the covenant. The plaintiff presented evidence, including a computer printout representing the geographical distribution of all patient accounts, which tended to show that the Ross Clinic service area included all of Lake County and, therefore, the covenant was reasonably intended to protect the Clinic's business. To the contrary, the defendant testified that he treated no more than ten patients from Ross Clinic at his new office. The defendant's evidence also tended to prove that less than 2% of the patients residing east of Cline Avenue, in the Ross Clinic service area, would cross over the imaginary boundary line at Cline Avenue and go to the west side of the county for treatment. The determination of the correct service area for Ross Clinic was a matter properly left for the jury's consideration. Therefore, no reversible error existed in the court's failure to decide the legality of the covenant and remove it from the jury's contemplation.

The interrelationship of legal and factual issues presented in this case places particular emphasis on the instructions to the jury. ¹ The appropriate course of action for a trial court confronted with this situation is discussed in Winney v. Board of Com'rs of Cty. of Vigo (1977), Ind.App. 369 N.E.2d 661, at 663-664.

"Certainly, if a claim presents only questions of law and presents no questions of fact, there will be no function for a jury. But issues of law which are properly left only to the court may be contained within a particular claim which also presents issues of fact.... In either case, issues of law within a claim for relief will be determined by the court, either by a separate decision or by instructions to the jury."

A very similar factual situation was presented to this Court in the case of Raymundo v. Hammond Clinic Ass'n (1980) Ind.App., 405 N.E.2d 65. The summary judgment entered by the trial court in favor of the clinic was reversed on appeal.

"The determination of the reasonableness of the covenant is a question of law for the court but it must be made upon the basis of the facts and circumstances surrounding each case. It depends upon a consideration of the legitimate interests of the covenantee which might be protected and the protection granted by the covenant in terms of time, space and the types of activity or conduct prohibited. Frederick v. Professional Building Main. Indus. Inc. (1976), Ind.App. (168 Ind.App. 647), 344 N.E.2d 299. The burden of proving the facts and circumstances which may justify relief rests with the party seeking to enforce the covenant. Waterfield Mortgage Co., Inc. v. O'Connor (1977) ( 172 Ind.App. 673), 361 N.E.2d 924; Frederick, supra.

"It is now well settled that if the restraint is greater than necessary to protect the covenantee, the contract is invalid. Thus, where trade secrets are not involved, a covenant which seeks to protect from competition an area greater than the area of the covenantor's business activities is unreasonable and unenforceable. Furthermore, a covenant which would restrict the covenantee beyond the area of his employment or prior operation is unenforceable notwithstanding the fact that the covenantor's business covers a much greater area. Donahue v. Permacel Tape Corp. (1955), 234 Ind. 398, 127 N.E.2d 235; Wiley v. Baumgardner (1884), 97 Ind. 66; Frederick, supra.

"The covenant in question seeks to restrict Dr. Raymundo from practicing medicine within a 25 mile radius of Hammond, Indiana except those areas outside the State of Indiana but including two Illinois cities. Dr. Raymundo's affidavit states that the clinic does not render substantial medical services to patients throughout the 25 mile area in that it does not serve the Gary- Merrillville area. The clinic, on the other hand, has stated that the clinic has a geographical service area which includes all areas within a twenty-five mile radius of...