### No. 14957 IN THE SUPREME COURT OF THE STATE OF MONTANA 1980

LAR-CON CORPORATION, a Montana Corporation, Plaintiff and Respondent,

MURMAN PROPERTIES, LIMITED, a Canadian Corporation, JILL MURDOCH and DON MURDOCH, Defendants and Appellants.

Appeal from: District Court of the Eighteenth Judicial, County of Gallatin, Honorable W. 

### W. Lessley, Judge presiding. Counsel of Record: For Appellants: J. David Penwell argued, Bozeman,Montana For Respondent: 

### Larry Moran argued,Bozeman, Montana

submitted: February 25, 

### 1980 Decided:

# JUN1

## 6 

## 1980 Filed:

, 

# $gBB

### Mr. Justice Daniel J. 

### Shea delivered the Opinion of the Court.
DefendantMurman Properties appeals from a judgment of the Gallatin County District Court in favor of plaintiff Lar-Con Corporation which enforced a contract of sale of a business which provided in part for a percentage of gross sales of the business for a certain number of years. In seeking to avoid payments, Murman Properties, Jill Murdoch and Don Murdoch (thebuyers) contend that the Lar-Con Corporation (theseller), violated an agreement not to compete with the buyers in the grocery business. Although such termwas not part of the sales agreement, the buyers allege that itwas part of the sales agreement and that they would not have entered into this contract in the absence of such a provision. The trial court found, however, that the parties had discussed noncompetition before entering into the written agreement, and thatplaintiff had refused to make any such commitment. Assuming moreover, that the parties had orally agreed to enter into a noncompetition agreement and that par01 evidence was admissible to prove this point, the resulting agreement would nonetheless be unenforceable because it violated a statute which prohibits noncompetition agreements to extend beyond a county boundary. For this reason,we affirm the judgmentwithout reaching the subsidiary issues raised by the buyers. The buyers' claim in support of the alleged oral agreement that the seller induced the buyers to enter into the contract based on an oral representation that it would not compete and on the further representation that there was no need to integrate the noncompetition agreement into the sales contract. The buyers claim in this regard, -2-but did not allege the required elements of fraud as required by Rule 9(b),M.R.Civ.P. Rather, it appears that the main thrust of 

### itsdefense was the claim that the 

### sales contract should be reformed so astoreflect the actual agreement not tocompete. The sales agreement arose when the 

### seller decided to 

### sell one of 

### its two retailbusinesses atBig Sky, Montana. The 

### seller owned "Ernie's Deli" inthe Mountain Mall, which 

### is located inMadison County. The 

### seller alsoowned the Country Store inthe Meadow Village area, which 

### is located inGallatin County. These two businesses are, however, only 7.3 

### milesapart, although located in separate counties. In 1976 the 

### seller entered into an agreement with the buyers to

### sell the Country Store operation, located in Gallatin County. The Country Store sold gifts, apparel 

### items, and general grocery products. The sale included fixtures, furniture, goodwill and inventory. The 

### seller, however, continued toown and operate Ernie's Deli, located inMadison County. Ernie's Deli sold and served food for

on and off premises consumption. By the 

### terms of the sales contract, the buyers made

a cash payment atthe 

### timeof the sale and were required tomake additional payments tothe seller in the sum of 1.75% of the gross 

### sales for the years 1977, 1978, 1979, 1980 and 1981. The dispute arose when the buyers failed tomake the 1978 contract payment and the 

### seller then filed a lawsuit seeking toenforce the provisions of the sales agreement. The buyers then raised the alleged noncompetitionprovision as an affirmative defense, contending that the 

### seller had violated thisprovision, although it



### was not contained within the four corners of the sales agreement. -3-The underlying evidence relied on by the buyers to support a claimthat an agreement not tocompete had been violated, relates tothe decision of the sellerto continue operation of Ernie's Deli (locatedinMadison County) attwo locations in the Mountain Mall--one for the delicatessenbusiness, and the other for the grocery business. The effect of this splitwas topermit the 

### seller toenlarge the seating capacity of the delicatessen and toprovide more room for display of the grocery products atthe other location. The buyers assert that the expansion of the grocery business violated the alleged oral agreement not tocompete. The trial court found in favor of the 

### seller and ordered that the buyers account for and pay the 

### seller 1.75%of the year's profits from December 1, 1977 through November 30, 1978 and alsothat the buyers pay tothe 

### seller the 

### samepercentage for the years 1979 through 1981pursuant tothe provisions of the sales agreement. In meeting the buyers' contentions, the trialcourt specifically found that the written contract entered into between the parties excluding any reference toa noncompetition agreement, was natinduced by the seller's fraud. Indeed, the trial court found that theparties had discussed a noncompetition agreement before entering into the written contract but that the 

### seller would not agree to such 

### a provision. As previously stated, the alleged noncompetition agreement could not be enforced inany event, because to do sowould violate section 28-2-703, MCA, which provides that a noncompetition agreement can be enforced only as
an exception tothe general policy provisions contained in section 28-2-703, which provides that contracts made in -4-restraint of competition arevoid. The exceptions contained in section 28-3-704, MCA, permit an agreement not tocompete toexistonly where 

### it 

### is confined toa particular cityor county, or a part of a cityof county. Here, although the businesses areonly 7.3 

### milesapart, they 

### are indifferent counties, and thus the alleged noncompetition agreement could not be enforced inany event. See Treasure Chem. v. Team Lab. Chemical Corp. (1980), -Mont

# . - 

## , 609 P.2d 285, 37 St.Rep. 573. Assuming the desirability of exceptions tothe rule that agreements not tocompete arevoid, 

### it cannot be doubted that a statutewhich provides that such agreement cannot be enforced inmore than one county, totally ignores modern day reality. But that is a legislative problem. Judgment 

### is affirmed.



# ............................. Justice We Concur: 

## ~jd&f Justice