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: JUN 1 6 1980 

Filed: , $gBB 
Mr. Justice Daniel J. Shea delivered the Opinion of 

the Court. 

Defendant Murman 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 (the buyers) contend that the 

Lar-Con Corporation (the seller), violated an agreement 

not to compete with the buyers in the grocery business. 

Although such term was not part of the sales agreement, 

the buyers allege that it was 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 that plaintiff 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 judgment without 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, 

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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 its defense was the claim that 

the sales contract should be reformed so as to reflect 

the actual agreement not to compete. 

The sales agreement arose when the seller decided to 

sell one of its two retail businesses at Big Sky, Montana. 

The seller owned "Ernie's Deli" in the Mountain Mall, which 

is located in Madison County. The seller also owned the 

Country Store in the Meadow Village area, which is located 

in Gallatin County. These two businesses are, however, 

only 7.3 miles apart, 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 to own and operate Ernie's Deli, located 

in Madison 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 at the time of the sale and were required 

to make additional payments to the 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 

to make the 1978 contract payment and the seller then 

filed a lawsuit seeking to enforce the provisions of the 

sales agreement. The buyers then raised the alleged noncompetition provision as an affirmative defense, contending 

that the seller had violated this provision, although it 

was not contained within the four corners of the sales 

agreement. 

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The underlying evidence relied on by the buyers to 

support a claim that an agreement not to compete had 

been violated, relates to the decision of the seller to 

continue operation of Ernie's Deli (located in Madison 

County) at two locations in the Mountain Mall--one for 

the delicatessen business, and the other for the grocery 

business. The effect of this split was to permit the 

seller to enlarge the seating capacity of the delicatessen 

and to provide more room for display of the grocery products 

at the other location. The buyers assert that the 

expansion of the grocery business violated the alleged oral 

agreement not to compete. 

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 also that the buyers pay to the 

seller the same percentage for the years 1979 through 

1981 pursuant to the provisions of the sales agreement. 

In meeting the buyers' contentions, the trial court 

specifically found that the written contract entered into 

between the parties excluding any reference to a noncompetition agreement, was natinduced by the seller's 

fraud. Indeed, the trial court found that the parties 

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 in any event, because to 

do so would violate section 28-2-703, MCA, which provides 

that a noncompetition agreement can be enforced only as 

an exception to the general policy provisions contained in 

section 28-2-703, which provides that contracts made in 

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restraint of competition are void. The exceptions 

contained in section 28-3-704, MCA, permit an agreement 

not to compete to exist only where it is confined to a 

particular city or county, or a part of a city of county. 

Here, although the businesses are only 7.3 miles apart, 

they are in different counties, and thus the alleged 

noncompetition agreement could not be enforced in any 

event. See Treasure Chem. v. Team Lab. Chemical Corp. 

(1980), - Mont . - , 609 P.2d 285, 37 St.Rep. 573. 

Assuming the desirability of exceptions to the rule 

that agreements not to compete are void, it cannot be 

doubted that a statute which provides that such agreement 

cannot be enforced in more than one county, totally ignores 

modern day reality. But that is a legislative problem. 

Judgment is affirmed. 

............................. Justice 

We Concur: 

~jd&f Justice