Bolz v. Myers

No. 80-411
IN THE SUPREME COURT OF THE STATE OF MONTANA
1982

DALE A. BOLZ and JUDY A. BOLZ,
Plaintiffs and Respondents,
VS .
MASON MYERS,
Defendant and Appeliant.

Appeal from: District Court of the Eleventh Judicial District,
In and for the County of Flathead
Honorable James M. Salansky, Judge presiding.
Counsel of Record:
For Appellant:
Hash, Jellison, O'Brien and Bartlett, Kalispeli, Montana
Kenneth E. O'Brien argued, Kalispell, Montana
For Respondents:
James Cumming argued, Coiumbia Falls, Montana

Submitted: June 21, 1982
Decided: September 14, 1982
Filed: SEP 14 1882
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.

Defendant Mason Myers appeals from an order and judgment
of the District Court of the Eleventh Judicial District,
Flathead County, the order finding him in contempt of court,
and the judgment awarding plaintiffs $25,802.50 in actual
damages plus $5,000 in exemplary danages. We affirm in part
and reverse in part.
This dispute began in mid-August of 1978, when Dale
Bolz went to the home of Plason Myers to discuss the purchase
by Bolz of the Kalispell Hearing Aid Center (KHAC). Also at
the meeting were Merle Myers and Michael Myers, wife and son
respectively of the defendant. At that meeting, agreement
was reached on a purchase price--$10,000 for KHAC and $20,000
for the building. There was no discussion at that time of
any covenant by Mason not to compete.
Bolz returned to the Myers household on August 31 with
two buy-sell agreements. Dale and Judy Bolz are shown as
purchasers, and Merle and Michael Myers as sellers in the
agreement of the sale of the building.
The document for the sale of the business was signed
only by Merle Myers as seller. That agreement apportions
$2,000 of the purchase price "toward the agreement not to
compete in the hearing industry within a 20 mile radius of
Kalispell, Montana."
Neither instrument was signed by Mason Myers. He told
Bolz at that time that he was not the owner of either entity,

and therefore could not sign. Bolz expressed a concern as
to what would keep Myers from going into competition with
him, and Myers gave him an oral assurance that he had no
intent to do so.
Thereafter, the parties agreed that the sale would not
become final until January 1, 1979, because of Xason Myers'
income tax considerations, In the meantime, arrangements
were made in accordance with the buy-sell agreement for Bolz
to work out of the XHAC office and to be trained by Mason
Myers to opera.te the business and to service clients. Bolz
paid rent of $100 per month.
After the signing, attempts were made by Solz to have a
comprehensive sale document prepared to complete the terms
of those instruments signed on August 31. Counsel was
obtained by both parties and a series of proposed contracts
was exchanged, none of which was found satisfactory between
the parties. It is clear from several of the contracts
proposed by Myers' attorney that Mason was considered the
owner of KHAC.
In December of 1978, Merle and Michael refused to close
the sale without some sort of approval from laason. At about
the same time, Mason informed Bolz that he intended to con-
tinue in business in competition with Bolz. Arrangements
were made by Mason to open a hearing aid business near KHAC,
to be run by James and Karen Myers, son and daughter-in-law
of Mason. These plans were kept secret from Bolz until he
had paid the full purchase price to Merle and Michael. That

occurred on March 9, 1979. James and Karen opened their
business on April 15.
Meanwhile, on February 13, 1979, Bolz br~ughtthis
action. Following a show-cause hearing on Bolz's request
for injunctive relief, the District Court issued a temporary
injunction, dated March 23, enjoining Myers from committing
the following acts:
"1, Informing Plaintiff's suppliers that Plaintiff's
credit is poor.
 "2. Indicating to potential customers of Plaintiff's
that Plaintiffs are incompetent or untrustworthy.
"3. Indicating to potential customers of Plaintiff's
that Defendant had never heard of Plaintiffs.
"4. Directing customers to Plaintiff's competitors.
"5, Not informing Plaintiffs of those potential
customers responding to Plaintiffs advertising and
promotions.
"6. Threatening Plaintiffs with driving Plaintiffs
out of business.
"7. Refusing to hold Plaintiff's mail for the
Plaintiffs.
"8. Falsely reporting to business associates of
Plaintiffs that Plaintiffs had refused to accept
Defendant's offer to sell for cash.
"9, Use of the name 'Kalispell Hearing Aid Center.'
"10. Carrying on a business in competition with
the Plaintiffs within a twenty ( 2 8 ) mile radius of
Kalispell, Montana."
On May 7, Bolz filed a petition seeking to hold Myers
in contempt of the court's order. Earlier, at the time
the purchase was conscmsted, Bolz had offered to drop his
damage action against Myers if Myers would agree not to
compete, but Myers refused. The trial ensued on all issues,
resulting in a permanent injunction against Mason Myers, a
finding of contempt and the award of damages.
The issues on appeal, listed in the order we will deal
with them, raise questions as to whether the District Court
erred:
1. By finding that Myers breached the August 30 contract
and interfered with contract rights held by Bolz?
2. By granting either a temporary or permanent
injunction against Mason Myers' competing in the hearing
aid business against Bolz?
3. By finding Myers in contempt of its March 23 order?
 4. In any aspect of its award of damages?
Initially, it is inportant to consider the District
Court's finding that Myers "was a true owner of said business

[KHAC] from their first negotiations in mid-August of 1978."
That is the linchpin finding in this case and there is
substantial evidence in the record to support it. Myers
held himself out as the true owner at the mid-August meeting,
and he conducted all negotiations for the sale. 2411 later

negotiations in regard to preparation of a comprehensive
sale document were likewise conducted by Myers. As noted,
several of the contracts prepared by Myers' attorney and
exchanged as part of this process denominate Mason Myers as
the seller of KHAC. These factors, along with flyers'

efforts to acquaint Bolz with routes, customers, and con-
tacts, are adequate to substantiate the court's finding. It
will not be set aside unless clearly erroneous. Rule 52(a),

Having made that determination, one which clearly

comports with the reality, we move on to the legal issues.
BREACH OF CONTRACT AND INTENTIONAL INTERFERENCE
The general rule is that the tort of intentional inter-
ference with contractual or business relationships may be
committed only by strangers to the relationships. Restatement
(Second) of Torts § 76624 (1977) provides:
"One who intentionally and improperly interferes
with the performance of a contract (except a
contract to marry) between another and a third
person, by preventing the other from performing
the contract or causing his performance to be
more expensive and burdensome is subject to
liability to the other for the pecuniary loss
resulting to him."
In Phillips v. Montana Education Association (1980),

-- Mont. , 610 P.2d 154, 37 St.Rep. 821, we recognized
the rule that imposes upon strangers to a contract a
duty not to interfere with its performance.
In this case the District Court determined, in its
conclusion of law no. 13, that Mason Nyers breached the
August 31, 1978 contract with Bolz, and "[interfered] with
Bolz' contract rights against Michael and Merle Myers" to
cause loss to Bolz. These two bases of liability are in-
compatible. On the one hand the District Court concluded
that Mason committed a breach of contract, which could only
mean that Mason was a party to the contract, and bound to
perform it. On the other hand, the District Court found
"interference" by Mason with Bolz' contract with others.
Interference can give rise to tort liability only if one
intentionally intermeddles with another's contractual or
business relations to which the one is a stranger. Restate-
ment (Second) of Torts § 766A, supra; Phillips v. Montana
Education Association, supra; Pelton v. Markegard (1978),
179 Mont. 102, 586 P.2d 306; Taylor v. Anaconda Federal
Credit Union (1976), 170 Mont. 51, 550 P.2d 151; Quinlivan
v. Brown Oil Co. (1934), 96 Mont. 147, 29 P.2d 374; Burden
v. Elling State Bank (1926), 76 Mont. 24, 245 P. 958. Myers
cannot be at one time on the same facts liable for breach of
contract to which he is a party, and also liable for the
tort of intentional interference in not performing that
contract.
Under the court's findings, Michael and Merle Myers
were merely contractual figureheads in the place of Mason
Myers. Therefore Mason could not be liable for intentional

interference with Bolz's contractual rights with blerle
and 14ichael Myers. Mason was not a stranger to that contract

If Mason's actions constituted only a breach of contract

with Bolz, then Bolz's remedy is for breach of the contract
and not for the tort of intentional interference.
 The distinction to be made here on the facts as found
by the court is that Mason breached his contract with Bolz;
but he also went further and intentionally interfered with
Bolz's business relationships with third parties, who were
Bolz's customers or potential customers.
We have here nearly the same situation that faced the
Washington Supreme Qourt in Cherberg v. Peoples National
Bank of Washington (1977), 88 Wash.2d 595, 564 P.2d 1137.
There a landlord with a duty to repair premises under lease
to the plaintiff willfully failed to make repairs. The
landlord was sued by the tenant for the tort of intentional
interference. The Washington court referred to other cases
which had held the injured party to be limited to an action
for breach of contract, even though the breach of duty under
a lease or contract necessarily interfered with the injured
party's business relations with third parties. The Washington
court nonetheless in Cherberg held in effect that the
landlord's actions were not "privileged" and were therefore
a basis for liability in tort.
In a later case, the Washington Supreme Court explained
further its holding in Cherberg , saying:
"Although the parties to that lawsuit were also
parties to a contract, it was not that contract
upon which the claim of interference was based.
We held in that case that the defendant's intentional
and outrageous action in breaching that contract
interfered with the business relationship that
the plaintiffs had with their customers. The
defendant was a third party as to that relationship,
and thus not subject to contractual actions based
upon it." Houser v. City of Redmond (1978), 91
Wash.2d 36, 586 P.2d 482, 485.

The Restatement (Second) of Torts 5 767 (1977) sets
out factors to be considered in determining whether intentional
interference with contractual rights is "improper." (The
Restatement talks of "improper" actions in these cases
because its rule for liability requires interference by
the actor both "intentionally and improperly." Section

766A, supra.) Those factors are: (a) the nature of the
actor's conduct; (b) the actor's motive; (c) the interests

of the other with which the actor's conduct interferes; (d)

the interests sought to be advanced by the actor; (e) the
social interests in protecting the freedom of action of the
actor and the contractual interests of the other; (f) the
proximity or remoteness of the actor's conduct to the inter-
ference; and, (g) the relations between the parties.

The outrageous acts of Mason Myers are improper, considering
all such factors. In addition to breaching his ccntract to
sell the business of KHAC, he went far out of his way during
and after the transfer of the business to destroy Bolz's
business relationships with customers: interference with
Bolz's mail, denying to others that Bolz had an interest in

KHAC, false advertising, misrepresenting Bolz's credit
record, declaring Bolz to be an imposter to others, denying
Bolz's competency, using his position on the State Board of
Hearing Aid Dispensors to harrass Bolz and much else.
In order to establish a prima facie case of interference
with contractual or business relations, it must be shown
that the acts (1) were intentional and willful, (2) were
calculated to cause damage to the plaintiff in his or her
business, (3) were done with the unlawful purpose of causing
damage or loss, without right or justifiable cause on
the part of the actor, and (4) that actual damages and loss

resulted. Bermil Corp. v. Sawyer (Fla. App. 3rd Cir. 1977),
353 So.2d 579.

Thus on the facts in this case, it is established that
Mason Myers not only breached his contract with Bolz, but
Mason went f u r t h e r and i n t e n t i o n a l l y i n t e r f e r e d w i t h B o l z ' s

contractual o r business relationships with t h i r d p a r t i e s .

I t i s of no consequence t h a t t h e D i s t r i c t C o u r t had concluded

t h a t t h e i n t e n t i o n a l i n t e r f e r e n c e had been " w i t h Michael

and Merle Mason." The c o n c l u s i o n of t h e D i s t r i c t C o u r t t h a t

i n t e n t i o n a l i n t e r f e r e n c e had o c c u r r e d was c o r r e c t , and i t i s

i n m a t e r i a l what r e a s o n s t h e D i s t r i c t C o u r t gave f o r t h e

c o n c l u s i ~ n . Fergus County v. O s w e i l e r ( 1 9 3 8 ) , 107 Mont.

466, 86 P.2d 4 1 0 , 120 A.L.R. 1457; J o h n s t o n e v . Sanborn

( 1 9 6 0 ) , 138 Mont. 467, 358 P.2d 399. W e t h e r e f o r e uphold

t h e view of t h e D i s t r i c t Court t h a t Mason Myers had committed

a t o r t of i n t e n t i o n a l i n t e r f e r e n c e with Bolz's c o n t r a c t u a l

relationships.

INJUNCTION

Mason Myers a l s o a p p e a l s from t h e i s s u a n c e by t h e

D i s t r i c t C o u r t of an i n j u n c t i o n a g a i n s t him on March 23,

1979, e n j o i n i n g him from committing t h e a c t s which w e have

h e r e t o f o r e enumerated.

Mason's c ~ n t e n t i o n st h a t t h e i n j u n c t i o n was improper i s

d i r e c t e d mainly t o t h e a n t i - c o m p e t i t i v e p r o v i s i o n of t h e

purchase c o n t r a c t . 3e c o n t e n d s t h a t s e c t i o n 28-2-703, MCA,

f o r b i d s any r e s t r a i n t of b u s i n e s s ; t h a t t h e e x c e p t i o n found

i n s e c t i o n 28-2-704, MCA, does n o t a p p l y t o him b e c a u s e h e

was n o t a s e l l e r under t h e c o n t r a c t ; and t h a t Merle Myers,

h i s w i f e , who d i d s i g n t h e c o n t r a c t , c o u l d n o t b i n d Mason

n o t t o compete i n b u s i n e s s a g a i n s t Bolz.

A s we i n d i c a t e d , t h e D i s t r i c t C o u r t found t h a t llason

Myers was a t r u e owner o f KHAC, and t h a t t h e g o o d w i l l of

KHAC was i n c l u d e d i n t h e a s s e t s s o l d , and t h a t Mason i s

bound by a l l t h e t e r m s of t h e c o n t r a c t s i g n e d by Bolz and

Merle on August 31, 1978.
 It is true that section 28-2-703, MCA, makes void
contracts which restrain anyone from exercising a lawful
profession, trade, or business. It is also true that where
the goodwill of a business is sold, section 28-2-704, MCA,
allows a contract to contain a provision that the seller
will not carry on a similar business within a specified

county, city or part thereof so long as the buyer carries on
a like business therein. This Court requires strict compliance

with these statutes. J. T. Miller Co. v. Madel (1978), 176
Mont. 49, 52, 575 P.2d 1321, 1323.
The contract required Mason Myers, as seller, not to
carry on a business in competition with Bolz within a 20
mile radius of Kalispell, Montana. This provision is within
the statutory exception provided in section 28-2-704, MCA,
unless the 20 mile radius from Kalispell would encompass a
portion of a county other than Flathead, the county in which
Kalispell is located. No attempt was made by Mason to
demonstrate that the 20 mile radius exceeded the county
boundaries.
Mason's contentions that he was not the seller and

therefore not b o ~ n dby the agreement not to compete are of
course overridden by the findings of the District Court
which found him to be the true owner and seller of KHAC. It
was proper, therefore, for the District Court to enjoin
Mason from violating his contractual obligations in attempting
to carry on a business in competition with Bolz within the
area specified.
Even so, Mason contends that if he were the true owner
of KHAC, then his wife Merle had no power to bind him to a
provision not to compete and that the statutes of frauds
(sections 28-2-903 (1)(d), 30-2-201, and 30-11-210, MCA)
operate to bar his liability on the contract. The District
Court met this objection by concluding that Mason Myers had
ratified the contract by his ccnduct in this case.
We have held that a principal who accepts the benefits
of an agency transaction cannot later deny the agency, that
the principal ratifies the transaction by receiving the
benefits, and he is estopped to deny the agency. First
National Bank of Miles City v. Nunn (1981), - Mont . I

628 P.2d 1110, 1116, 38 St.Rep. 869. Under the statute
of frauds, it is true that ratification itself may be required
to be in writing. 72 Arn.Jur.2d p. 913-914, Statute -
of
Frauds, § 389. It is clear that when the District Court
here spoke of "ratification" it had in mind the equitable
principle that the statute of frauds may not itself be an
instrument of fraud or used to cloak fraud. 73 Am.Jur.2d p.
198, 199, Statute of Frauds, 5 562. The statute is intended
-

to prevent fraud, not aid it. Equity may restrain interference
with rights acquired under a contract sufficiently or
wholly performed. 73 Arn.Jur.2d p. 200, Statute - Frauds, 5
of
563. The fraud against which the courts will grant relief,
notwithstanding the statute of frauds, includes situations
such as this, where the buyer has made an irretrievable
change in position, or the defendant has secured an uncon-
scionable advantage or inflicted an unjust and unconscionable
loss upon the plaintiff. This is more than the mere moral

wrong involved in the refusal to perform a contract which by
reason of the statute of frauds cannot be enforced. 73
Am.Jur.2d p. 202, Statute - Frauds, S 564.
of The rule is based
upon principles of estoppel.
For the same reasons, Mason Myers'reliance upon section
28-10-203, MCA, which requires that 'I. . . authority to
enter into a contract required by law to be in writing can

only be given by an instrument in writing" is misplaced.
We find that the District Court properly issued the
injunction against Mason Myers.
CONTEMPT
Under section 3-1-523, MCA, the District Court's contempt
judgment is final and conclusive. It can be reviewed on a
writ of certiorari, but there is no appeal. State v. State
Judicial Dist. (1950), 123 Mont. 447, 453, 215 P.2d 279, 283.

DAMAGES
The District Court awarded the following items of

general and special damages to the plaintiffs:
(1) Increase in interest costs because of an interest
rate increase from 10 percent to 12 1/2 percent for a total

of $6,212.50 during the time Mason failed to perform.

(2) Lost profits from employee sales, $4,000.00.

(3) Lost battery sales and repairs, $375.00.
(4) Lost apartment rent, $215.00.
(5) Loss of profits from December 1978 promotion,
$9,000.00.
(6) Loss of walk-in sales, $3,C00.00.
(7) Lost sales from delay depriving Bolz of his
bargain, $3,000.00.
The total general and special damages awarded was
$25,802.50. The District Court also awarded punitive damages
of $5,000.00.
Mason's argument against punitive damages is that the
allegations of contractual interference are not supported,
and that there is no showing of willful, wanton and malicious
acts on the part of Mason.
We have already explained that under the facts found by
the court here, Mason was guilty of the tort of intentional
interference with the business relationships of Bolz.

Since tort is involved, exemplary damages where the defendant
has been guilty of oppression, fraud or malice, actual or

presumed, may be given in addition to actual damages.
Section 27-1-221, MCA.

In addition to the many acts found by the court that
could be construed to be oppressive or malicious, the court
further found that Mason had committed fraud on Bolz by
falsely representing that he, Mason, did not intend to
compete with Bolz and by secretly intending to establish his
son and daughter-in-law in business in competition to the

KHAC business which Mason had sold to Bolz. We will not
disturb the court's award of punitive damages.
The other elements of damages, however, need some
attention from us.
Mason Myers claims error in the award of $6,212.50

resulting from an increase in interest rates Bolz had to
assume in obtaining a loan for the purchase. Myers contends

(1) Bolz could have obtained the loan in September 1978,
instead of the following March, and (2) Bolz had agreed to a
closing date of January 1, 1979 in the contract. He also
contends the award should have been discounted to present
value. The District Court allowed the testimony of interest
rate increased cost because of misrepresentations claimed
against Myers that moved the closing date from September to

January. Mason Myers' argument that Bolz could have obtained
the loan in September regardless of Mason Myers' actions is
specious, since the loan was sought by Bolz to finance the
purchase of Myers' business. No objection was made in the
District Court to the undisccunted figure of increased

interest cost. The award on this item we therefore affirm.
 We likewise affirm as substantiated in the record and
as proper items of recovery, the award of $375.00 for the
battery sale and repairs business lost by Bolz through the
delay, and the lost apartment rentals of $215.00.

Myers attacks the award of $4,000.00 for lost profits
from employee sales. Bolz had intended to employ a salesman
who would have made, Bolz testified, 35 sales of hearing
aids from which Bolz would have derived $158 per sale, for a
total of $5,530.00. The District Court reduced this item to
$4,000.00. Myers claims again that nothing prevented Bolz
from hiring the employee, and that Bolz' overhead expenses
were not submitted. At trial the objections raised to this
evidence were lack of foundation and no foreseeability. 3olz
substantiated his claim on this item through the testimony
of the proposed employee. The evidence sustains the finding
of the District Court.
More substantial problems arise out of the awards for

lost profits from a promotional campaign advertisement and

from claimed loss of walk-in sales. In the case of Stensvad
v. Miners and Merchants Bank of Roundup (1982), - Mont.
, 640 P.2d 1303, 39 St-Rep. 27, we said:
".. . Damages for loss of profits may be awarded
if not speculative. Silfvast v. Asplund (1935),
99 Mont. 152, 161, 42 P.2d 452, 456. The rule
that prohibits speculative profits does not
apply to uncertainty as to the amount of such
profits but to uncertainty or speculation as
tc whether the loss of profits is the result
of the wrong and whether such profit would have
been derived at all. Tri-tron International
v. Velto (9th Cir. 1975), 525 F.2d 432, 437.
Once liability is shcwn, that is the certainty
that the damages are caused by the breach, then
loss of profits on a reasonable basis for
computation and the best evidence available under
the circumstances will support a reasonably
\close estimate of the loss by a District
Court. Smith v. Zepp (1977), 173 Mont. 358,
370, 567 P.2d 923, 930. But no damages are
recoverable which are not clearly ascertainable
both in nature and origin, and only profits
 which are reasonably certain may be awarded.
Smith v. FergusCounty (1934), 98 Iqont. 377,
386, 39 P.2d 193, 195."
The District Court awarded Bolz $9,000.00 for loss
of December 1978 promotional campaign business. The foundation
for this item was the testimony of Bolz. The promotional
campaign was conducted at a local shopping mall. Advertising
brochures were obtained by BolZ, and gift certificates to be

applied to hearing aid purchases were distributed to "leads."
Because he had no office to work from, Bolz contended that
he lost the benefit of these leads. There were 150 leads,
and based upon national averages, he "figured" 50 sales at
$489.00 per sale for a total of $24,450.00. He deducted
$9,000,00 for cost of goods and promotion, leaving a lost
net profit figure of $15,450.00. The District Court reduced
this item to $9,000.00.
We conclude from the record that the estimate of sales
lost by Bolz from the promotional effort is entirely
speculative. Neither his business nor that conducted by
Myers before him justified sales in that number for that
period of time. There is no deduction for overhead, if he

had an office to work from. We vacate the award of $9,000.00
as speculative, and place in lieu thereof the lost cost of
advertising for the promotion of $500.GO as the record

shows. In other words, we award Bolz what the record shows
he lost in expenses for the promotion as a natural and
direct item of damage flowing out of Myers1 actions, and
reject the contended loss of profits on that item as speculative.
The District Court further awarded Bolz $3,000.00 for
loss of walk-in sales. Appellant does not directly attack
this item in his briefs. It finds support in the evidence
based on the experience of Bolz in the business, and is not
otherwise exorbitant for the period of time involved.
We sustain this item of award.
 The final item of damages awarded, $3,000.00 for lost
sales from delay and depriving Bolz of his bargain as of
September 1, 1978, has no foundation in the record to
support it. It appears to be duplicative of other awards
made by the District Court. We therefore vacate that award.
Accordingly, we modify the judgment of the District
Court and as modified. we affirm. The District Court, on
remittitur, shall enter judgment in favor of Bolz in the
following sums: $6,212.50 for increased interest cost;

$375.00 for lost battery sales and repairs business; $215.00

for lost rentals; $4,000.00 for lost employee sales; $500.00
for loss of promotion expenses; and $3,000.00 for loss of
walk-in sales, for a total of $14,302.50 general and special

damages. We also affirm the award of punitive damages.
Since appeal does not lie from a contempt conviction,
we take no action on that phase of this case.
Each party shall bear his or her own costs on this
appeal.

We Concur:

-- --
Chief ~ustrce