Potter v. Ahrens

California Supreme Court Jan 11, 1896 No. L. A. No. 92Published

Before: Fleet

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Holding. The court held that a contract provision stipulating a specific sum as liquidated damages for the breach of a non-compete agreement is enforceable when the actual damages are difficult to ascertain, and that the remaining partner of a dissolved partnership is entitled to enforce such a covenant.

Issues

Whether a contract provision for liquidated damages in a non-compete agreement constitutes an unenforceable penalty.
Whether a remaining partner of a dissolved partnership has standing to enforce a covenant not to compete.
Whether there was sufficient evidence to support the finding that a spouse had an interest in the business sold.

Disposition. affirmed

Quotations verified verbatim against the opinion

“the subject matter of the contract in this case was such as in its very nature, in case of a breach, to render the proof of damages extremely difficult, if not impossible, and to manifestly make a case for liquidated damages.”

“The plaintiff was entitled to stand strictly upon the terms of the covenant, and, having shown a breach, he was properly awarded the amount fixed by the parties as his just redress.”

“It inures by its terms to the remaining partner in case of dissolution of the firm; and plaintiff is clearly the “ remaining partner” within the terms of the instrument.”

Synopsis

Sale—Good Will—Written Contract— Estoppel op Married Woman AS Vendor.—Where a husband and wife join in the sale of a business and goodwill, and they both covenant and agree with the vendees that neither of them will engage in or carry on a like business in the city where the business was conducted, the wife is estopped by the written contract of sale executed by her from denying her interest or title in the business or goodwill sold.

Id.—Evidence op Ownership—Conplict.—Where the evidence showed that the wife assisted her husband in carrying on the business sold, that they were apparently conducting it together, and that the business was community property, such evidence, taken in connection with her execution of the contract of sale jointly with her husband, is evidence tending to show ownership in her; and the testimony of the defendants that she was not interested in the property or the sale simply raised a conflict, which it was the province of the trial court to determine.

Id.—Stipulation por Liquidated Damages—Evidence—Breach op Contract.— A contract for the sale of a business and goodwill, containing a covenant of the vendors not to engage in a like business in the same city, may properly stipulate a specified sum as liquidated damages for breach of the covenant, and such stipulation is not to be construed as a penalty; hut the evident intention of the parties must control, and the plaintiff is not required to prove anything more than a breach of the contract in order to recover the stipulated damages.

Id.—Recovery by Remaining Partner—Construction of Contract.— Where the covenant not to engage in business was made with the vendees as partners, and expressly provided that in case of dissolution of the partnership the covenant should inure to the benefit of the remaining partner, and, in case of a sale of the business by the partnership, should inure to the benefit of their assigns, the provision cannot be limited to a stipulation to pay the partners jointly, or the assigns of both of them; but it inures by its terms to the remaining partner in case of dissolution of the firm, and such remaining partner may recover the stipulated damages without an assignment from the firm.

Van Fleet, J. The court found, substantially as alleged in the complaint, that on the second day of May, 1893, the defendants were engaged in the business of preparing, dealing in, and vending all kinds of foreign and domestic delicacies for the table, such as prepared [678]meats, breads, cakes, pies, canned goods, and other household supplies of the kind; and were on said date the owners of a stock of such goods, together with furniture, ranges, etc., used by them-in said business, at their place of business in the city of Los Angeles. That on said date defendants sold to plaintiff and one Andrew Wood their said stock of goods, furniture, etc., and the goodwill of the business, for the consideration of three thousand dollars; that upon the payment of said sum, and in consideration thereof, the defendants executed and delivered to said purchasers their certain contract in writing, wherein it was provided that “ the said F. Ahrens and Cresence Ahrens covenants and agrees with the said Anson H. Potter and Andrew Wood that neither of us will engage in or carry on a like business in the city of Los Angeles, nor work for or assist anyone to engage in or carry on a business of the same kind or like nature. And in case of a dissolution of the partnership of the said Potter & Wood, this covenant shall inure to the benefit of the remaining partner, with like effect as though there had been no dissolution of partnership; and this covenant shall, in case of a sale of-the business by said Potter & Wood, inure to the benefit of their assigns, with the same like force and effect as it would be to the said Potter & Wood had no sale been made; and in case of a violation of this covenant the said F. Ahrens and . Cresence Ahrens agrees to pay' to the said Potter & Wood, or to their assigns, the sum of three thousand dollars ($3,000) as liquidated damages. This covenant shall be binding for the space of six years from the date of the consummation of the said sale.” That plaintiff and said Wood carried on said business for a time, but thereafter, on June 10, 1893, they dissolved partnership, and Wood sold and delivered to plaintiff his interest in said stock, business, and goodwill, and the latter has since continued said business at the same place. That on November 28, 1894, the defendant, Fred Ahrens, disregarding his said agreement, opened a store in said city, near plaintiff’s place [679]

Potter v. Ahrens

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