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IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 88,120
VARNEY BUSINESS SERVICES, INC.,
Appellee,
v.
HARLEY W. POTTROFF,
Appellant.
SYLLABUS BY THE COURT
1.
Summary judgment is appropriate when the pleading, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought.

2.
When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case.

3.
On appeal of the granting of summary judgment, we apply the same rules as the district court in ruling on the motion for summary judgment, and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied.

4.
Standing is a question of whether the plaintiff has alleged such a personal stake in the outcome of a controversy as to warrant the invocation of jurisdiction and justify exercise of the court's remedial powers on his or her behalf. Standing to sue means that a party has a sufficient stake in an otherwise justiciable controversy as to obtain judicial resolution of that controversy.

5.
Actions shall be brought by the real party in interest. K.S.A. 60-217(a). In other words, an action shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced.

6.
It is the general policy of the law to permit mentally competent parties to arrange their own contracts and fashion their own remedies when no fraud or overreaching is practiced.

7.
A contract must be supported by consideration in order to be enforceable. Consideration is some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other. A promise is without consideration when the promise is given by one party to another without anything being bargained for and given in exchange for it.

8.
Covenants not to compete and covenants to compensate former employees are valid if ancillary to any lawful contract, reasonable, and not adverse to the public welfare. Freedom of contract is the driving force behind finding such to be enforceable.

9.
Four factors must be considered in determining whether a covenant not to compete or a contract to compensate a former employer is reasonable: (1) Does it protect a legitimate business interest of the employer? (2) Does it create an undue burden on the employee? (3) Is it injurious to the public welfare? (4) Are the limitations or provisions reasonable?

10.
Under the facts of this case, where the previous shareholder and officer of an association contracted to compensate

the association upon terminating his relationship with the association with a percentage of the revenue received from providing services to former clients of the association and there was no evidence of fraud or overreaching, the contract is reasonable and should be enforced.

11.
Contracts that are illegal or that violate public policy are void and unenforceable.

12.
Whether a restrictive covenant is contrary to public policy is a question of law over which this court has unlimited review.

13.
Points incidentally raised but not argued on appeal are deemed abandoned.

14.
The general rule is that prejudgment interest is allowable on liquidated claims. A claim becomes liquidated when both the amount due and the date on which such amount is due are fixed and certain or when the same become definitely ascertainable by mathematical calculation. The fact that a good-faith controversy exists as to whether the party is liable for the money does not preclude a grant of prejudgment interest.

15.
The allowance of prejudgment interest is a matter of judicial discretion subject to reversal only upon a showing of abuse of discretion.


Appeal from Riley district court; PAUL E. MILLER, judge. Opinion filed December 20, 2002. Affirmed.
C. Brooks Wood, of Morrison & Hecker, L.L.P., of Kansas City, Missouri, argued the cause, and Erik P. Klinkenborg, of the same firm, and Joseph H. Cassell, of Cassell & Lower, LLC, of Wichita, were with him on the brief for appellant.
William L. Frost, of Morrison, Frost and Olsen, LLP, of Manhattan, argued the cause, and was on the brief for appellee.
The opinion of the court was delivered by
LOCKETT, J.: Defendant Harley W. Pottroff appeals the district court's grant of summary judgment in favor of Varney Business Services, Inc. (Varney), a corporation into which Varney & Associates, P.A. (Varney & Associates), a professional association, of which Pottroff was a previous officer and shareholder, had merged. In granting summary judgment, the district court found that the corporation had standing and was the real party in interest to bring the action. The action was based on an employment agreement that obligated signatories to pay a percentage of fees earned for services provided to former clients during the 5 years subsequent to terminating their relationship with the association. The district court interpreted and enforced the terms of the employment agreement and granted a money judgment to the corporation. On appeal, defendant claims (1) the corporation was not a real party in interest and did not have standing to assert a claim, (2) the corporation was not a party to the employment agreement, and the employment agreement was not supported by consideration; (3) the district court failed to evaluate the reasonableness of the employment agreement; (4) the employment agreement is contrary to public policy and illegal; (5) the employment agreement terminated and released the defendant from liability; (6) the district court erred in calculating the fees due under the employment agreement; and (7) the district court erred in awarding prejudgment interest.
The professional accounting firm of Varney & Associates, P.A., formerly Varney, Mills, Rogers, Burnett & Associates, P.A., was formed in 1977. On July 1, 1988, an officers' employment agreement (Employment Agreement or Agreement) was entered into by the 10 shareholders of the firm. Appellee Harley W. Pottroff was an officer/shareholder of the firm at the time. Article X of the Employment Agreement was entitled "AGREEMENT NOT TO COMPETE." It provided that all parties to the agreement, upon leaving the firm, could not, directly or indirectly, engage in the practice of public accounting or computer services in the city of Manhattan, Kansas, all other cities in which the firm maintained an official office, or within a 35-mile radius of such areas for a period of 5 years.
Pottroff was elected to serve as Chairman of the Board and Chief Executive Officer (CEO) of Varney & Associates in June 1994. At the July 1994 meeting of Varney & Associates' Board of Directors it was determined that revisions to the Employment Agreement were necessary. Pottroff was responsible for circulating suggested changes to the
Employment Agreement. The Board of Directors unanimously approved the revisions to the Employment Agreement
at its December 1994 meeting. All 10 shareholders signed the revised Employment Agreement. Article X of the 1988
version of the Employment Agreement effectively became Article IX of the revised agreement and retained the title of
"AGREEMENT NOT TO COMPETE." The article was amended to provide that all parties to the agreement that left
the firm for any reason were obligated to compensate the firm for the firm's clients that they provided services to over
the subsequent 5 years. Compensation to the firm was to be determined by a declining percentage schedule applied to
fees earned.

In an agreement dated May 8, 1996, Joseph Mills resigned as an officer/shareholder of Varney & Associates. In
addition to setting forth the amount Varney & Associates would compensate Mills for his shares of Varney &
Associates under the Employment Agreement, the agreement also provided that Mills agreed to abide by Article IX of
the Employment Agreement as modified, set forth the percentages of fees Mills would pay, and noted that the fees
earned by Mills in the performance of personal financial planning services were exempt from inclusion in the
calculation of compensation owed. All 10 shareholders signed the agreement.

At the June 18, 1996, meeting of the Board of Directors of Varney & Associates, the shareholders voted to approve
additional modifications to the Employment Agreement. Pottroff was still acting CEO of Varney & Associates at the
time. The approved modifications to Article IX stated:

"AGREEMENT NOT TO COMPETE

"It is understood and agreed that anyone who is allowed to be associated with this firm learns the business secrets of
the clients of the firm as well as those of the firm itself. It is, therefore, normal and prudent that the firm acquire
agreements from all employees restricting their activities after parting from the firm. Therefore, all parties to this
agreement agree and promise that if they leave the firm, terminate or are terminated, retire, for any reason, they will
compensate the firm for the firm's clients they provide service to for the subsequent five (5) years. The firm's clients
are defined as any client the firm provided service to or for in the year of or the year preceding the termination of the
stockholder/officer. The amount of the compensation paid to the firm will be the scheduled percentage of the fees
earned from the client by the terminated officer/shareholder. These amounts will be remitted to the firm not later than
60 days after the end of each year of the five year period subsequent to the officer's date of termination or resignation.
The firm has the right to audit the records of the terminated officers/shareholders.

Year 1-35%

Year 2-25%

Year 3-15%

Year 4-10%

Year 5-10%." (Emphasis added to show modifications from 1994 version.)

The modified Employment Agreement was signed by eight of the nine remaining shareholders. L. Gary Boomer did not
sign.

In an agreement dated December 31, 1996, L. Gary Boomer resigned as an officer/shareholder of Varney &
Associates. The agreement acknowledged the "non-competition agreement" that was in existence and provided that
Boomer would pay Varney & Associates a declining percentage of all fees earned, net of client reimbursed expenses,
from Varney & Associates' clients over the next 5-year period. The declining percentage schedule was the same as that
set forth in Article IX of the Employment Agreement. Client reimbursed expenses were defined as "direct travel,
supplies, hardware and software associated with the delivery of client service." A list of Varney & Associates' clients
was attached to the agreement. The agreement also provided that Varney & Associates had the right to review records
of receipts and collections during this 5-year period. Unlike under the Employment Agreement, however, payment was
to be made within 30 days after the close of the calendar year. The agreement was signed by Pottroff, for Varney &
Associates, and L. Gary Boomer.

A supplemental termination agreement was subsequently entered into between Varney & Associates and L. Gary Boomer. The supplemental agreement provided that upon closing of a contract between L. Gary Boomer and Practitioners Publishing Company (Practitioners), Boomer would pay a lump sum of $300,000 to Varney & Associates rather than the declining percentage of fees earned over the next 5 years. The supplemental agreement was to be null and void if the contract was not closed by June 15, 1997. The supplemental agreement was signed by Pottroff, for Varney & Associates, and L. Gary Boomer.
On March 3, 1998, Pottroff entered into an agreement with Varney & Associates. The agreement noted that Pottroff had resigned as an officer and director of Varney & Associates effective August 31, 1997, and that Pottroff was to receive $108,734.17 for his 340 shares of Varney & Associates' stock. The agreement allowed Pottroff to surrender his shares of stock and absolve himself of future liability. The agreement also provided that Varney & Associates' right to recover any sums due pursuant to other agreements with Pottroff was not prejudiced.
On June 17, 1998, Century Business Services, Inc. (Century), a Delaware corporation, B.A. Acquisition Corp. (BA), an Ohio corporation, and the six remaining shareholders of Varney & Associates, entered into an "Agreement and Plan of Merger" (Merger Agreement). Pursuant to the Merger Agreement, Varney & Associates and its shareholders agreed to convert Varney & Associates from a professional association into a business corporation. The Merger Agreement further provided for Varney & Associates to merge into BA and for Varney & Associates to cease to exist. In completing the merger, BA was to change its name to Varney Business Services, Inc., an Ohio corporation.
The Merger Agreement provided that each officer of Varney & Associates would become an initial officer of Varney. The merger was contingent upon each shareholder entering into an employment agreement with Varney and upon Varney & Associates, CPA's, LLC (Varney CPA's), entering into an administrative services agreement (Services Agreement) with Varney. Varney CPA's was created immediately following the merger and was comprised of certified public accountants (CPAs) who were employees of Varney and Varney CPA's. Under the Services Agreement, Varney received 85 percent of Varney CPA's gross revenues as payment for services provided to Varney CPA's in the form of office space, equipment support staff, professional staff, and administrative staff. The Services Agreement was approved by the Kansas Board of Accountancy.
After this action was filed, Varney, pursuant to an asset purchase agreement, transferred this claim and the judgment to Varney CPA's. Appellee's motion to substitute Varney CPA's for the appellee was granted; however, the caption of the case remained the same for purpose of the pleadings. Thus, the present holder of the claim in this case appears to be the same entity that entered into the Services Agreement with Varney as a condition of the merger.
On June 16, 1999, Varney filed a petition in Riley County District Court alleging that Pottroff breached the Employment Agreement by failing to pay compensation as required by Article IX of the Agreement. After numerous pretrial motions, including motions for summary judgment and partial summary judgment by both parties, the district court granted summary judgment for Varney, finding: (1) Varney was a real party in interest and had standing; (2) Article IX of the Employment Agreement was enforceable; (3) the reasonableness of the Employment Agreement was not an issue in the case because Varney was not attempting to enforce a covenant not to compete; and (4) Varney was entitled to judgment for $383,999.43.
Pottroff filed a notice of appeal. This court has jurisdiction by transfer on its motion pursuant to K.S.A. 20-3018(c).
Real Party in Interest and Standing
Pottroff asserts that Varney, the surviving corporation of the merger, is not the real party in interest and did not have standing. Alternatively, Pottroff asserts that the deposition testimony of Michael Rogers, the CEO of Varney and former shareholder of Varney & Associates, raises a genuine issue of fact as to this issue. Varney contends, however, that it is the real party in interest and has standing.
The standard for granting and reviewing the grant of summary judgment is well established.
"'Summary judgment is appropriate when the pleading, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, we apply the same rules and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied. (Citation omitted.)'" Arctic Financial Corp. v. OTR Express., Inc., 272 Kan. __, 38 P.3d 701 (2002) (quoting Bergstrom v. Noah, 266 Kan. 847, 871-72, 974 P.2d 531 [1999]).
It is important to first note the evidence before the district court when summary judgment was granted. At that time, Rogers' deposition testimony was that, as president and CEO of Varney & Associates and as lead person responsible for negotiating the merger, the intent of Varney & Associates was to transfer all assets, which included the claim against Pottroff that arose out of the Employment Agreement, to the surviving entity of the merger. Additionally, section 3.2.20 of the Merger Agreement, entitled "Contracts and Agreements," required Varney & Associates and its stockholders to list all agreements to which Varney & Associates was a party on Schedule 3.2.20. Schedule 3.2.20 listed, among other things, the following: (1) the agreements between Varney & Associates and Pottroff dated March 3, 1998, and December 31, 1996; (2) the termination of the supplemental termination agreement between Varney & Associates and L. Gary Boomer; and (3) the May 5, 1996, agreement with Joseph Mills. None of these agreements were assigned a value on the schedule. As a result of the merger, each of the six shareholders of Varney & Associates received Century stock valued at $640,000 in exchange for their 347 shares.
In granting partial summary judgment to Varney on this issue, the district court found that Varney was a real party in interest and had standing. In reaching this conclusion, the district court relied upon the fact that Varney became vested with all the property and causes of action previously held by Varney & Associates pursuant to K.S.A. 17-6709.
Pottroff subsequently filed a motion for relief from judgment, which asserted that new evidence warranted the setting aside of the prior order of partial summary judgment. The new evidence was a contradictory deposition statement by Michael Rogers. At a subsequent deposition, Rogers testified that he and the other former shareholders of Varney & Associates had an interest in the amount of money recovered from Pottroff and that there was an agreement with Century that the money recovered from Pottroff was the "property of the original owners" of Varney & Associates. Minutes later, Rogers testified that the original shareholders of Varney & Associates did not have a direct financial interest in payments made by Pottroff and that he did not believe that there was any agreement between the former shareholders of Varney & Associates and Century as to the disposition of this money. The deposition continued:
"Q. [Defense counsel]: So then you are telling me that any such payment will come into [Varney] simply as income and be treated the same as any other income to that company?
"A. [Rogers]: Have to be.
"Q.: Well, it wouldn't have to be if there was an understanding to the contrary. And that's my question, is there an understanding to the contrary?
"MR. FROST [Plaintiff's counsel]: Wellgo ahead.
"Q.: Sir?
"A.: There's no written agreement.
"Q.: Well, what's the oral understanding?
"A.: When we merged with Century we had to deliver five hundred thousand dollars of hard assets. Anything above that was to come to us. They would not value that asset as part of the five hundredwe put up five hundred thousand and thenso that is an asset that is still of the Varney Business Services, but whether I have a direct interest or not, I don't know.
"Q.: Well, it's going to come back to you because they didn't count ityou provided five hundred thousand, you and the others-

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