Sallee v. Mason

Decision Date06 August 1999
Docket NumberNo. 55A01-9808-CV-311.,55A01-9808-CV-311.
Citation714 N.E.2d 757
PartiesMichael E. SALLEE, Sallee & Company, Appellant-Plaintiff, v. Judith MASON, Kent Mason, d/b/a Data Processing Center, Inc., Appellees-Defendants.
CourtIndiana Appellate Court

Michael L. Carmin, Andrews, Harrell, Mann, Chapman & Coyne, P.C., Bloomington, Indiana, Attorney for Appellant.

Stephen A. Oliver, Boren & Oliver, Martinsville, Indiana, Attorney for Appellees.



This case essentially involves three separate contractual disputes arising from the sale of an accounting practice and the subsequent employment of the practice's former owner and her husband. The accounting firm of Sallee & Company ("Sallee")1 appeals the grant of partial summary judgment in favor of Kenneth Mason ("Kenneth") on its claim for breach of employment contract. Sallee also appeals judgment in favor of Judith Mason ("Judith") on its claims for breach of contract for the sale of Judith's accounting business and breach of employment contract. Sallee raises several issues for our review which we consolidate and rephrase as: 1) did the trial court err in granting partial summary judgment on behalf of Kenneth; 2) was there sufficient evidence to support the trial court's determination that Sallee was the first to breach the contracts for the sale of Judith's accounting business and her contract of employment; and 3) did the evidence support the damages awarded for Sallee's breach of the contract for the sale of Judith's accounting business? On cross-appeal Judith asserts that the trial court erred in not awarding her damages consistent with Ind.Code § 22-2-5-2.

We affirm in part and reverse in part.

The relevant facts are that from 1971 until 1990, Judith was an established public accountant in Bedford, Lawrence County, Indiana. In 1990, Sallee began negotiating with Judith to purchase her accounting practice and to employ her. These negotiations culminated in Sallee and Judith executing a contract for the sale ("Sale Contract") of Judith's accounting business. Sallee and Judith also negotiated an employment contract ("Employment Contract") whereby Sallee agreed to employ Judith for ten years.

The Sale Contract and the Employment Contract contained provisions prohibiting Judith from directly or indirectly engaging in the practice of public accounting within an area consisting of Lawrence County and the counties surrounding it. The Sale Contract required Sallee to pay Judith $1,100.00 per month from January 15, 1991, until December 15, 1995. Payments of $1,092.12 per month were to begin on January 15, 1996, and continue for twenty years. If Sallee failed to make a monthly payment when due, it would be converted into an interest-bearing note payable within ninety days. If the note were not satisfied in full within ninety days, the Sale Contract was to terminate, and the noncompetition covenant would be rendered void. In the event of this scenario, Judith would be allowed to take former and new clients, along with their files, and begin to practice public accounting on her own.

The Employment Contract stated that Judith would be employed by Sallee for ten years. However, Sallee could discharge Judith by giving her thirty days written notice if she breached the Employment Contract, demonstrated a pattern of gross negligence or exhibited a decline in moral values. Sallee required Judith to work 2,280 hours per year. Judith was to receive an annual salary of $34,200.00, or $15.00 per hour, payable in bimonthly installments of $1,425.00. The Employment Contract mandated that Sallee review and adjust Judith's salary on an annual basis for cost of living increases beginning in January 1992. A provision was also included which permitted Sallee and Judith to modify the Employment Contract by written agreement and enforce any obligation notwithstanding allegations of waiver.

Sallee also entered into a written contract to employ Judith's husband, Kenneth. Kenneth's contract required him to work 2,100 hours per year. A covenant not to compete was also included which prohibited Kenneth from directly or indirectly engaging in accounting, bookkeeping, or payroll services within Lawrence County for a period of one month for each month he was employed by Sallee. Kenneth was further prohibited from providing any such service to any Sallee client for a period of two years following dismissal from employment. Sallee did allow Kenneth to accept full-time employment with a person or entity that was not a client of or in competition with Sallee.

Within one year of her employment with Sallee, Judith became dissatisfied with her working conditions. On January 1, 1994, Judith, Kenneth, and Sallee had a meeting regarding Judith's employment with the firm. During this meeting, Judith expressed her displeasure about working in excess of the 2,280 hours required by the Employment Contract and not receiving any additional remuneration for it.2 Although mentioned on several occasions, Sallee never responded to Judith's allegations that she had not been paid pursuant to the Employment Contract.

On November 4, 1994, Judith sent Sallee a memorandum asking for a meeting to discuss revisions of her Sale Contract and Employment Contract. Sallee agreed to discuss these items with her on November 8, 1994.3 Sallee and Judith discussed reducing her hours and accelerating payments under the Sale Contract. On March 4, 1995, Judith submitted a written proposal to Sallee regarding modification of her Employment Contract, requesting that Sallee respond in writing. During this time Sallee and Judith continued discussions regarding workload, stress, and the fact that Judith had mailed resumes in anticipation of procuring new employment. Sallee responded to Judith's memorandum on March 9, 1995, by stating that he would make some adjustments to her wages to get her through the tax season. He also acknowledged that Judith's Employment Contract mandated an annual cost of living adjustment which would be made retroactively beginning with the next payroll period. On March 20, 1995, Sallee and Judith met again. Sallee told Judith that if she stayed through the end of tax season, he would allow her to reopen her practice in Bedford and that after tax season, they "would just put those contracts on the table." R. at 729. As a result of Sallee's representations, Judith stopped looking for other employment.

Judith worked throughout the 1995 tax season. On May 9, 1995, the last day of a week-long vacation, Sallee delivered a letter of termination to Judith and Kenneth at their home. When Judith went to work the next morning, Sallee told her that she no longer had a job. Judith reminded Sallee of his promise that they would discuss renegotiating the contracts and permitting her to practice on her own in Bedford. In response, Sallee told Judith to clear her personal effects from her office and leave.

After being discharged from Sallee's employ, Judith and her son, Kent Mason ("Kent") incorporated Data Processing Center ("DPC") on May 15, 1995. The shareholders included Judith, Kent, and Chris Mason, another son. Shortly after incorporating, DPC's offices opened in Martinsville, Morgan County, Indiana. DPC employed Judith as a public accountant to provide tax services to individuals and businesses while Kent provided data entry, payroll, and billing services. By the end of the year, DPC had more than 300 clients, most of whom were Judith's clients prior to her merger with Sallee or her clients during her tenure with Sallee. Judith did not send notices to her clients regarding her separation from Sallee and the formation of DPC. These clients contacted Judith to ascertain where she and Kenneth had gone. In setting up new accounts, neither Judith nor Kent used information prepared by Sallee.

Sallee filed a four-count amended complaint against Judith, Kenneth, Kent, and DPC on November 20, 1996.4 Defendants filed their answer, and Judith filed a counterclaim for breach of the Employment Contract. On January 12, 1998, the trial court granted the defendants' partial motion for summary judgment, dismissing Kenneth as a party to the suit. Partial summary judgment was also entered on behalf of the defendants, allowing them to solicit residents of Lawrence County and provide them with tax preparation, payroll, bookkeeping, and accounting services. After a bench trial, the court entered judgment in favor of Judith and Kent on all four counts with the exception of Sallee's common law claim of indemnity. The trial court also granted judgment in favor of Judith on her counterclaim for breach of Employment Contract. This appeal followed. Additional facts will be provided where relevant.


Sallee first argues that the trial court erred in granting partial summary judgment on behalf of Kenneth. According to Sallee, Kenneth breached the covenant not to compete contained in his contract of employment with Sallee. We disagree.

When reviewing a grant or denial of summary judgment our well-settled standard of review is the same as it was for the trial court: whether there is a genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law. Landmark Health Care Assocs., L.P. v. Bradbury, 671 N.E.2d 113, 116 (Ind.1996). Summary judgment should be granted only if the evidence sanctioned by Ind. Trial Rule 56(C) shows that there is no genuine issue of material fact and the moving party deserves judgment as a matter of law. T.R. 56(C); Blake v. Calumet Constr. Corp., 674 N.E.2d 167, 169 (Ind.1996). The granting of a motion for summary judgment is inappropriate if the trial court must weigh conflicting evidence to reach a decision. Bond v. Peabody Coal Co., 450 N.E.2d 542, 546 (Ind.Ct.App. 1983). The appellant bears the burden of proving that the trial court erred in determining that there are no genuine issues of material fact and the moving party is...

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