Graca v. Rodrigues

This is an appeal taken on the judgment-roll from the judgment sustaining the defendant's demurrer *Page 297 to plaintiff's amended complaint, the order sustaining the demurrer being made without leave to the plaintiff to amend.

The purpose of the action is to restrain the defendant from conducting a grocery business within a certain locality in the city of Oakland, contrary to an express covenant by him not to engage in a like business within that area. The complaint alleges that the defendant, the original owner of the business, agreed with his immediate covenantees, their executors, administrators, and assigns, not thereafter to open or conduct any other grocery store or grocery business within a certain specified limited area; that thereafter said covenantees sold and transferred the grocery store and the goodwill thereof to one Luz, and assigned and transferred to him the bill of sale and the covenant and agreement just referred to; that Luz on or about February 26, 1916, sold and delivered the said grocery business together with the goodwill thereof to the plaintiff, and assigned and transferred to the plaintiff said bill of sale and agreement of defendant.

It thus appears from the face of the complaint that the plaintiff is the assignee of an assignee of the original covenantee of the defendant; and for this reason the defendant asserts that the complaint fails to state or show a cause of action in the plaintiff. It is argued in support of the defendant's contention that the action is one to enforce a covenant which is void for the reason that it is in restraint of trade, and does not come within the exception to section 1673 of the Civil Code provided in the section following. Those two sections read respectively as follows:

"Sec. 1673 Every contract by which any one is restrained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided by the next two sections, is to that extent void.

"Sec. 1674 One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business within a specified county, city, or a part thereof, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein."

It is argued that under the provisions of these sections the limit to which a covenant in restraint of trade can be carried is in favor of a person deriving title directly from the original purchaser. This position is sustained by the case ofJohnston v. Blanchard, 16 Cal.App. 321, 328, [116 P. 973], in which *Page 298 the court says: "While the appellant does not direct our attention to the fact or make any point thereon, reference to the judgment discloses that it is erroneous in this: that by its terms defendant is enjoined from engaging in or carrying on the business in the county of Los Angeles . . . so long as plaintiff, 'or his successors or assigns' continue in business." After quoting section 1674 of the Civil Code, the court, continuing, says: "Under the provision of this section of the code plaintiff, who derives his title to the business by transfer from W. W. Lee, who was the buyer from defendant, is entitled to have the contract enforced for his protection so long as he carries on a like business in the county, but such rights cannot be extended to his successors or assigns. It therefore follows that the judgment in so far as it refers to the successors or assigns of plaintiff is unwarranted, and to that extent erroneous."