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Laporte v. Bott

Decided: April 29, 1980.


On appeal from Superior Court, Law Division, Essex County.

Fritz, Kole and Lane. The opinion of the court was delivered by Kole, J.A.D.


[173 NJSuper Page 591] The executors of the estate of John H. LaPorte (the estate) instituted this action against Charles G. Bott (Bott), a partner of John H. LaPorte before the latter's death. John H. LaPorte

was and Bott is an accountant. The object of the action is to recover damages by reason of Bott's servicing and collecting fees from clients of the former partnership. The estate appeals from an adverse judgment.

After LaPorte died a series of related events and agreements occurred in September 1971. Thus, on or about September 1, 1971, the Bott-LaPorte partnership was dissolved under an agreement between Bott and the estate (hereafter, "the dissolution agreement"). In paragraph 4 of that agreement it was provided that the estate would have (1) exclusive ownership of all records with respect to all accounts and clients of that partnership as of August 31, 1971 and (2) the exclusive right to transfer such records and client lists, as well as the right to service such clients and accounts, to any accounting firm selected by the estate under such terms and conditions as were deemed in the best interests of the estate; and Bott "shall not solicit or service such clients or accounts for a period of five years from the dissolution date [August 31, 1971], without the prior written consent of the executors and the accounting firm or firms succeeding to such clients and accounts." In connection with this agreement Bott and the estate appear to have contemplated two substantially simultaneous agreements: one by the estate with the accounting firm of Herdman and Cranstoun, Penney & Co. (H&C) for the sale and transfer of the former LaPorte partnership client accounts (hereafter, "the LaPorte clients") and the other between Bott and H&C under which Bott would become a partner in H&C as of September 1, 1971. The September 1, 1971 agreement between the estate and H&C (hereafter, "the estate-H&C agreement") required H&C to pay the estate a 15% commission on all sums collected for services rendered to the LaPorte clients listed on a schedule attached to the agreement during the same five-year period set forth in paragraph 4 of the dissolution agreement, September 1, 1971 through August 31, 1976, less certain out-of-pocket expenses described in the agreement and a schedule attached thereto

(paragraph 10(a)). Since Bott was not a signatory to the estate-H&C agreement, the trial judge denied plaintiff's application to allow it in evidence.

In so ruling he erred. The proofs and fair inferences therefrom reasonably show that the agreement was part of the fabric of the essentially tripartite contractual transaction that occurred in September 1971 involving the estate, H&C and Bott. Additionally, one of the provisions of such agreement properly could serve as a measure of damages to the estate in the event it was found to have a legally protectible interest as against Bott in the LaPorte clients serviced by Bott after he left the H&C partnership. Further, it contains a list of LaPorte clients that were sold against which those serviced by Bott after he left could be compared.

It is true that when viewed in isolation, essentially for the reasons given by the trial judge, the covenant contained in paragraph 4 of the dissolution agreement by Bott not to solicit or service the clients or accounts of the former partnership with LaPorte for a period of five years from the August 31, 1971 dissolution date, without the prior consent of the estate and the accounting firm succeeding to such clients and accounts, is unenforceable.

But this covenant may not be considered in isolation. It seems to be a facet of an integrated tripartite arrangement in which the LaPorte clients were sold and transferred to H&C and appears to have been designed to protect the estate's rights in those clients for the five-year period involved. Had the estate-H&C agreement been allowed in evidence, there might have been sufficient proof to show that all of the parties to the entire transaction, including the estate and Bott, intended that (1) the estate have a sufficiently protected interest in the clients' accounts it sold to H&C to assure its being compensated in accordance with the estate-H&C agreement for the entire five-year period set forth in that agreement and in the Bott dissolution agreement, and (2) Bott would not have the right to interfere with or limit that interest by servicing, without compensating

the estate, any such clients for the balance of that period merely by reason of his having left H&C. So viewed, the noncompetition clause of the dissolution agreement may be enforceable so as to permit the assessment of damages against Bott for a violation thereof after he terminated his relationship with H&C. Indeed, there is evidence that in a conversation with one of the estate's executors Bott recognized this obligation to pay for the LaPorte clients previously served by H&C that he serviced after his departure from H&C.

Thus, the record before us, as expanded by the agreement erroneously excluded from evidence, requires that the series of agreements entered into on or about September 1, 1971 be considered as part of one transaction relating to the same subject matter and in effect as one instrument, and permits the provisions in one to be explained or limited by reference to the other. This is so even though the parties to the documents are not the same provided the several instruments were known to all the parties and were delivered on or about the same time to accomplish an agreed purpose. Schlein v. Gairoard , 127 N.J.L. 358, 360 (E. & A.1941). See, also, Lawrence v. Tandy & Allen , 14 N.J. 1, 6 (1953). The estate thus appears ...

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