No. 80-411 IN THE SUPREME COURT OF 

### THE STATE OF MONTANA 1982

DALEA. 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, Judgepresiding. 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

Filed:

# SEP14

# 1882 Submitted: June 21, 1982 Decided: September 14, 1982

### Mr. Justice John C. Sheehy delivered the Opinion of the Court.

DefendantMason Myers appeals from an order and judgment of the District Court of the Eleventh Judicial District, Flathead County, the order finding him in contemptof 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 inmid-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 respectivelyof the defendant. At that meeting, agreement

was reached on a purchase price--$10,000 for KHAC and $20,000 for the building. Therewas no discussion at that time of any covenant by Mason not to compete. Bolz returned to the Myers household onAugust 31with 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 thebuilding. 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 industrywithin a 20 mile radius of Kalispell,Montana." Neither instrumentwas 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 whatwould keep Myers from going into competitionwith him, and Myers gave him an oral assurance that he had no intent to do so. Thereafter, theparties agreed that the salewould not

### become final until January 1, 

### 1979,because of Xason Myers' income tax considerations, In themeantime, arrangements were made in accordancewith the buy-sell agreement for Bolz to work out of the XHAC 

### office and to be trained by Mason Myers to opera.tethe business and to service clients. Bolz paid rent of $100per month. After the signing, attemptswere made by Solz to have a comprehensive sale document prepared to complete the terms of those instruments signed onAugust 31. Counselwas obtained by both parties and a series of proposed contracts was exchanged,none of which was found satisfactory between theparties. It is clear from several of the contracts proposed by Myers' attorney thatMason was considered the

owner of KHAC. InDecember of 1978,Merle and Michael refused to close the salewithout some sort of approval from laason. At about the same time,Mason informed Bolz that he intended to continue in business in competitionwith Bolz. Arrangements

weremade by Mason to open a hearing aid business near KHAC, to be runby James and Karen Myers, son and daughter-in-law of Mason. Theseplans were kept secret from Bolz until he had paid the full purchase price to Merle and Michael. That occurred onMarch 9, 

### 1979. James and Karen opened their business onApril 15. Meanwhile, on February 13, 1979, Bolz br~ught this 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 ispoor."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 Plaintiffswith driving Plaintiffs out of business. "7. Refusing to hold Plaintiff's mail for the Plaintiffs. "8. 

### Falsely reporting to business associates of Plaintiffs that Plaintiffshad refused to accept Defendant's offer to sell for cash. "9, 

### Use of the name 'KalispellHearingAid Center.' "10. Carrying on a business in competitionwith the Plaintiffswithin a twenty (28) 

### mile radius of Kalispell,Montana." On May 7, Bolz filed a petition seeking to hold Myers in contemptof 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 againstMason Myers, a 

### finding of contempt and the award of damages. The issues on appeal, listed in the orderwewill deal with them, raise questions as to whether the District Court erred: 1. By finding thatMyers 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 themid-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 contacts, are adequate to substantiate the court's finding. It will not be set aside unless clearly erroneous. Rule 52(a),

Havingmade that determination, onewhich clearly comports with the reality,we move on to the legal issues. BREACH OF CONTRACTAND INTENTIONAL INTERFERENCE The general rule is that the tort of intentional interferencewith contractual or business relationshipsmay be committed only by strangers to the relationships. Restatement

(Second) of Torts § 76624 (1977)provides: "Onewho intentionallyand improperly interferes with the performance of a contract (excepta 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 interferewith 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 incompatible. On the one hand the District Court concluded thatMason committed a breach of contract, which could only mean thatMason was a party to the contract,and bound to perform it. On the other hand, the District Court found "interference"by Mason with Bolz' contractwith others. Interference can give rise to tort liability only if one intentionally intermeddleswith another's contractual or business relations to which the one is a stranger. Restatement (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 CreditUnion (1976), 170Mont. 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 forbreach 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 interferencewith Bolz's contractual rightswith blerle and 14ichaelMyers. 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 contractwith Bolz; but he alsowent further and intentionally interferedwith Bolz's business relationshipswith third parties, who were Bolz's customers or potential customers. We have here nearly the same situation that faced the Washington SupremeQourt in Cherberg v. Peoples National Bank of Washington (1977), 88

### Wash.2d 595, 564 

### P.2d 1137. There a landlordwith a duty to repair premises under lease to the plaintiffwillfullyfailed to make repairs. The landlordwas sued by the tenant for the tort of intentional interference. TheWashington 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 contractnecessarily interferedwith the injured party's business relationswith third parties. The Washington courtnonetheless in Cherberg held in effect that the landlord's actionswere not "privileged"and were therefore

a 

### basis for liability in tort. In a later case, the Washington SupremeCourt explained further its holding in Cherberg

## , saying: "Althoughthe parties to that lawsuitwere also parties to a contract, it was not that contract uponwhich the claim of interferencewas 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 defendantwas 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 determiningwhether intentional interferencewith contractual rights is "improper." (The Restatement talks of "improper"actions in these casesbecause its rule for liability requires interferenceby the actor both "intentionallyand improperly." Section 766A, supra.) Those factors are: (a)the nature of the actor's conduct; (b)the actor'smotive; (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 interference; 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 relationshipswith customers: interferencewith 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, butMason went further and intentionally interfered with Bolz's contractual orbusiness relationshipswith thirdparties. It isof no consequence that theDistrict Court had concluded that the intentional interferencehad been "withMichael and Merle Mason." The conclusion of the DistrictCourt that intentional interferencehad occurredwas correct, and it is inmaterialwhat reasons theDistrictCourt gave for the conclusi~n.Fergus County v. Osweiler (1938), 107Mont. 466, 86 P.2d 410, 120 A.L.R. 1457; Johnstone v. Sanborn (1960), 138Mont. 467, 358 P.2d 399. Wetherefore uphold the view of the DistrictCourt thatMason Myers had committed

a tortof intentional interferencewith Bolz's contractual relationships. INJUNCTION Mason Myers alsoappeals from the issuanceby the District Court of an injunction againsthim on March 23, 1979, enjoininghim from committing the actswhich we have heretofore enumerated. Mason's c~ntentions that the injunctionwas improper is directedmainly tothe anti-competitive provision of the purchase contract. 3e contends that section 28-2-703, MCA, forbids any restraintof business; that the exception found in section 28-2-704, MCA, does not apply tohim because he

was not a seller under the contract; and thatMerle Myers, hiswife, who did sign the contract, could not bind Mason not tocompete inbusiness against Bolz. As we indicated, the District Court found thatllason Myers was a trueowner of KHAC, and that the goodwill of KHAC was included inthe assets sold, and thatMason is bound by alltheterms of the contract signedby 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 thatwhere 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 similarbusiness within a specified county, city orpart 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 competitionwith Bolz within a 20 mile radius of Kalispell,Montana. Thisprovision iswithin the statutory exception provided in section 28-2-704,MCA, unless the 20 mile radius from Kalispellwould encompass a portion of a county other than Flathead, the county inwhich Kalispell is located. No attemptwas 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 bo~nd by the agreement not to compete are of course overriddenby 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 fromviolating 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

(sections28-2-903 (1)(d)

### , 30-2-201, and 30-11-210, MCA)

### operate to bar his liability on the contract. The District Court met this objectionby concluding thatMason Myers had ratified the contractby his ccnduct in this case. We have held that a principalwho accepts the benefits of an agency transaction cannot later deny the agency, that the principal ratifies the transactionby 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 itselfmay be required to be inwriting. 72Arn.Jur.2d p. 

### 913-914, Statute - 

### of Frauds, § 

### 389. It is clear thatwhen the District Court here spokeof "ratification"ithad inmind the equitable principle that the statuteof fraudsmay not itself be an instrumentof fraud or used to cloak fraud. 73Am.Jur.2d p. 

### 198, 199, Statute of -

### Frauds,5 

### 562. The statute is intended toprevent fraud, not aid it. Equity may restrain interference with rights acquired under a contract sufficiently or wholly performed. 73Arn.Jur.2d p. 200, Statute 

### - of Frauds, 5 

### 563. The fraud againstwhich the courtswill grant relief, notwithstanding the statuteof frauds, includes situations such as this,where the buyer has made an irretrievable change inposition, or the defendant has secured an unconscionable advantageor inflicted an unjust and unconscionable loss upon the plaintiff. This is more than themere moral wrong involved in the refusal to perform a contractwhich by

reason of the statute of frauds cannot be enforced. 73 Am.Jur.2d p. 202, Statute - 

### of Frauds, S 

### 564. 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 toenter 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 Courtproperly issued the injunction againstMason 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), 123Mont. 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 10percent 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 intentionalinterference with the business relationships of Bolz. Since tort is involved, exemplary damageswhere 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 themany 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 costbecause of misrepresentations claimed against Myers thatmoved 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 loanwas soughtby Bolz to finance the purchase of Myers' business. No objectionwas made in the District Court to the undisccunted figure of increased interest cost. The award on this itemwe 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 repairsbusiness 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 havemade, Bolz testified, 35 sales of hearing aids fromwhich 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 foundationand 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 lostprofits from a promotional campaign advertisement and from claimed loss ofwalk-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. Silfvastv. 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 thewrong and whether suchprofit would have been derived at all. Tri-tron International v. Velto (9thCir. 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 computationand the best evidence availableunder the circumstanceswill support a reasonably \closeestimate of the loss by a District Court. Smith v. Zepp (1977),173Mont. 358, 370, 567 P.2d 923, 930. But no damages are recoverablewhich are not clearly ascertainable both in nature and origin, and only profitswhich are reasonably certainmay be awarded. Smithv. FergusCounty (1934),98 Iqont. 377, 386, 39 P.2d 193, 195." The District Court awarded Bolz $9,000.00 for loss of December 1978promotional campaign business. The foundation for this itemwas the testimony of Bolz. The promotional campaignwas conducted at a local shoppingmall. 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. Therewere 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 towork 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 lostbattery 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