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Bauer v. Sawyer

MAY 19, 1955.




Appeal from the Circuit Court of Kankakee county; the Hons. C.D. HENRY, ROSCOE C. SOUTH, and JAMES V. BARTLEY, Judges, presiding. Reversed and remanded, with directions.


Rehearing denied June 10, 1955.

This is an appeal from a decree dismissing an amended complaint for injunction to restrain the defendant, Dr. Sawyer, a medical doctor, from practicing medicine and surgery or radiology within the City of Kankakee, Illinois, and within a radius of twenty-five miles therefrom, for a period of five years from March 31, 1954.

The amended complaint is based upon an alleged violation of a partnership agreement, to which Dr. Sawyer is a party, by his allegedly breaking the contract on or about May 17, 1954, by opening a suite of offices for the practice of medicine and surgery in the City of Kankakee, the defendant Dr. Sawyer having on February 25, 1954, given notice of his withdrawal from the partnership concerned, effective March 31, 1954. The partnership agreement involves twelve medical doctors, including the defendant, Dr. Sawyer. Five of the doctors, parties to the partnership agreement, appear as plaintiffs, with seven of the doctors, parties thereto, as defendants. All of the defendants except the defendant Dr. Sawyer, admit the entire allegations of the complaint and ask no relief against Dr. Sawyer or against any of the other parties to the suit.

It appears that the defendant Dr. Sawyer was paid by the partnership the sum of $7,451 in cash at the time of his withdrawal, and at the same time the remaining partners executed and delivered to the First Trust & Savings Bank of Kankakee, as escrow agent, in full payment of the balance due him, a promissory note signed by all the remaining partners for an additional $7,451 payable to the order of P.W. Sawyer, due on or before April 30, 1955, with interest at 3% per annum until paid, with the privilege of making prepayment of all or part thereof, and that that note is now in the possession of the escrow agent. Dr. Sawyer thereupon assigned all his interest in the partnership to the remaining partners. The defendant Dr. Sawyer in his answer admits the breach of the agreement. None of the eleven remaining partners, plaintiffs or defendants, ask the court to direct the escrow agent to deliver that note for $7,451 to them, the makers, for cancellation. The answer of the defendant Dr. Sawyer, while admitting the breach, does not waive the right to take the note, if unpaid pursuant to its terms, from the escrow agent in full payment of the designated value of $18,267.50, being the value of Dr. Sawyer's interest in the partnership at the time of his withdrawal in accordance with the terms of the agreement, the agreement providing that such voluntarily withdrawing partner should, under these circumstances, receive 80% of the value of his interest therein (the foregoing $7,451 cash and $7,451 note representing 80% of the $18,267.50 value of his interest).

The plaintiffs-appellants have raised several propositions or issues, but admit they may all be condensed into four questions —

1. Was the contract signed by Dr. Sawyer contrary to public policy?

2. Is the provision in the contract concerning the note a provision for penalty or liquidated damages?

3. Even if for liquidated damages, will injunction lie?

4. Does the fact that the five plaintiffs constitute less than a numerical majority of the partners deprive them of their equitable remedy?

The defendant-appellee Dr. Sawyer's theory of the case is that —

1. The provision in the contract against resumption of practice by a withdrawing partner is void as against public policy;

2. The provision in the contract whereby Dr. Sawyer will forfeit $7,451 upon certification by the remaining partners that he has resumed practice in Kankakee, is a provision for liquidated damages;

3. Under the agreement Dr. Sawyer had the alternative right to refrain from resuming practice or pay liquidated damages;

4. In view of the liquidated damages provision plaintiffs had an adequate remedy at law and injunction will not lie;

5. Plaintiffs as a minority of the remaining partners have no right to maintain the suit as individuals;

6. Plaintiffs did not allege or prove irreparable damages;

7. Plaintiffs on the whole record failed to show a clear case entitling them to injunctional relief.

This case was heard by the court on the pleadings and one stipulation, the pleadings being the amended complaint for injunction, the answer of the defendant, Dr. Sawyer, and the separate answers of the six other remaining partners who are made parties defendant and claim no relief against anyone, and the reply of plaintiffs to the answer of the defendant Dr. Sawyer to the amended complaint. The stipulation was to the effect that (at the time it was filed, October 15, 1954) there are approximately seventy medical doctors actively engaged in the practice of medicine within twenty-five miles of and including the City of Kankakee, about 2/3rds of whom are general practitioners and that in that area the approximate population is 90,000. There was no other evidence.

Any determination of the issues in this case necessitates a review of some of the principal cases already decided in the State of Illinois and in other jurisdictions pertinent to the issues. Leading cases in Illinois having application to this case, and cited, are: Linn v. Sigsbee, 67 Ill. 75; Ryan v. Hamilton, 205 Ill. 191; Storer v. Brock, 351 Ill. 643; VanSant et al. v. Rose et al., 260 Ill. 401; and Hursen v. Gavin, 162 Ill. 377.

In Linn v. Sigsbee, supra, the agreement prevented a doctor from practicing within a certain township and within six miles of his then residence, being unlimited as to time; the court upheld the provision in a suit at law for damages and states, p. 80:

"The rule is well settled that any partial restraint of trade, or an agreement not to transact business at specified places, or with particular persons, or beyond a limited distance, or not to practice medicine within reasonable bounds, if there be some legal consideration for the restraint, will not invalidate the agreement. If there is a reasonable limitation only, and a consideration capable of supporting the agreement, it will be upheld. . . . The contract must be construed by the court and its reasonable character and the consideration for it, determined."

In Ryan v. Hamilton, supra, there was a suit for injunction to restrain the defendant, a physician, from practicing general medicine, in or within eight miles of the Village of Viola, Mercer county, Illinois, by reason of a provision forbidding such in a written contract relating to the sale of defendant's practice, and the court upheld the provision and, there being a consideration for the agreement, the court affirmed the decree allowing an injunction and reversed the Appellate Court which had decided the other way. In its opinion the court said, pp. 197, 205:

"The principles of law applicable to this case are the same as those governing the specific performance of contracts in restraint of trade. That contracts in general restraint of trade are generally held to be illegal is beyond controversy. But the rule admits of well defined exceptions, and among the exceptions are contracts of the kind and character presented in this case. Contracts of this class, where the limitation as to territory is reasonable and there exists a legal consideration ...

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