§ 105. Remedies.-The purchaser of a a goodwill whose enjoyment of it is interfered with may have his remedy either at law or in equity. These remedies are administered on the same general principles which apply to other cases of unfair competition, and which are discussed elsewhere in this book. The jurisdiction of equity in this class of cases is predicated upon the fact that the injury is continuing, that its further operation can only be restrained by the exercise of the injunctive power of the chancellor, and that damages at law afford no adequate compensation for the injury. If, however, the plaintiff resorts to an action at law, the measure of his damages is well defined by the Supreme Court of Missouri: "If plaintiffs lost less than the defendant made, they can not recover the whole of defendant's profits; if plaintiffs lost more than the defendant made, they would not be limited to defendant's profits. What the plaintiffs have lost by the defendant's breach of covenant, and not what the defendant has gained thereby, is the legal measure of damages in this case." 47 The parties to a contract for the sale of a goodwill may provide in the contract for a fixed amount of damages. In the absence of fraud, the sum so fixed will be adopted as the measure of damages by the court.48 Where the parties have so agreed upon the amount of damages, the vendee, in case of a breach of covenant, has an adequate remedy at law, and injunction will not lie.49 48-Tode v. Gross, 127 N. Y. 480-487; 13 L. R. A. 652; 28 N. E. Rep. 469; 40 N. Y. S. R. 300; Dakin v. Williams, 17 Wendell, 447; Bagley v. Peddie, 16 N. Y. 469; Wooster v. Kisch, 26 Hun, 61. 49-Martin v. Murphy, 129 Ind. 464-467. Unless the defendant is insolvent, which fact will make a case for injunctive relief. Pickett v. Green, 120 Ind. 584. The general doctrine that equity will not interfere to restrain a person from doing an act which he has agreed not to do, when liqui dated damages has been provided in case he does the act, is subject to this qualification: "The question in every case is, what is the real meaning of the contract? And if the substance of the agreement is that the party shall not do a particular act, and that is the evident object and purpose of the agreement, and it is provided that, if there is a breach of this agreement, the party shall pay a stated sum, which does not clearly appear to be an alternative which he has the right to adopt instead of performing his contract, there would seem to be no reason why a court of equity should not restrain him from doing the act, and thus carry out The remedy is for the recovery of the sum so fixed.50 § 106. Breach of covenant not to re-engage. It is no defense to such an action that there was no separate consideration for the covenant, if it was a part of a transaction involving the sale of a stock of merchandise, without mention of goodwill.51 The sale of the stock of merchandise is of itself a good consideration for the covenant not to reengage.52 This rule is based upon the right of the vendor to have "the freest opportunity to obtain the largest consideration for the sale of that which is his own." 1753 A valuable consideration must exist to support the covenant, but where such a consideration is shown, the question of the adequacy of that consideration is foreclosed, because of the peculiar nature of the subject-matter of the contract.54 the intention of the parties. In other words, naming a sum to be paid as liquidated damages does not in itself conclusively establish that the parties contemplated the right to do the act upon payment of the compensation, and make an alternative agreement for the benefit of the party who has done what he had agreed not to do." Endicott, J., in Ropes v. Upton, 125 Mass. 258-261. It has been held in Canada that in event of a breach of such a contract the vendee has his election to enjoin the vendor or recover the amount named as liquidated damages. Snider v. McKelvey, 27 Ont. App. 339. 50-Martin v. Murphy, 129 Ind. quoted and followed in Fleischman v. Rahmstorf, supra. All 54 "It is contended in behalf of defendant that the covenant to refrain from practice is not supported by an adequate consideration. authorities appear to agree that a valuable consideration must be established to support a covenant of this nature, even though the covenant be under seal; but the weight of authority is clearly to the effect that if a valuable consideration is found to exist, the adequacy of that consideration will not be inquired into. The authorities to that effect are collected by Mr. Freeman in his note to Angier v. Webber, 92 Am. Dec. at page 754. The adjudicated cases involving covenants of this nature have almost uniformly arisen in connection with the sale of a business, and it has been found impracticable to inquire as to the extent to which the purchase price entered into the covenant of the vendor not to engage in an opposition business. In the present case no sale occurred. The evidence discloses The act of a vendor in accepting employment as a clerk, agent or manager for a rival of his vendee is a breach of his covenant not to re-engage in the trade.55 In actions for the breach of such covenants, a provision. in the contract of sale for liquidated damages will be enforced according to its terms, unless the amount so stipulated to be paid as damages is so unjust, oppressive or disproportionate to the actual damages sustained as to be abhorrent to a court of equity.56 The reason for this rule is that this is "a class of cases where it is next to impossible to prove the full extent of the damages.'' 57 In the absence of such a stipulation, the valuation of the goodwill will be determined on a basis of the average profits, less interest on the capital invested.58 that when the partnership agreement here in question was made defendant was already a partner of complainant. The present agreement continued their partnership relation under new terms and also admitted to the partnership an additional partner. So far as the evidence discloses, it is indeed difficult to discern wherein the new partnership agreement can be said to have been beneficial to defendant; but, considered as an engagement involving the partnership relation of the three partners for a future period of time, it is, I think, impossible to here determine that the benefits and disadvantages flowing from its mutual covenants were inadequate to support the engagement of defendant to refrain from practice at the place and during the time specified at the termination of the partnership." Leaming, V. C., in Marvel v. Jonah, 81 N. J. Eq. 369; 86 Atl. Rep. 968. 55-Fleischman V. Rahmstorf, supra; Smith v. Webb, 176 Ala. 596; 58 So. Rep. 913; 40 L. R. A. (N.S.) 1191; Knowles v. Jones, 182 Ala. 187; 62 So. Rep. 514; Meyers v. supra. 57-Per Curiam, Kelso v. Reid, 145 Pa. 606; 23 Atl. Rep. 323; 27 Am. St. Rep. 716. To the same e feet are McCurry v. Gibson, 108 Ala. 451; 18 So. Rep. 806; Streeter v. Rush, 25 Cal. 67; Potter v. Ahrens, 110 Cal. 681; 43 Pac. Rep. 388; Newman v. Wolfson, 69 Ga. 764; Holbrook v. Tobey, 66 Me. 410; Cushing v. Drew, 97 Mass. 445; Geiger v. Cawley, 146 Mich. 550; 109 N. W. Rep. 1064; Canady v. Knox, 43 Wash. 567; 86 Pac. Rep. 930; Martin v. Murphy, 129 Ind. 464; 28 N. E. Rep. 1118. 58-Seaich V. Mason-Seaman Transp. Co., 156 N. Y. S. 579. As to In a suit upon a note given in payment for a business with its real and personal property and goodwill the defendant will not be permitted to offer testimony as to the value of the separate items of personalty and realty; 59 this for the reason that "the vendor who sells the goodwill of a business guarantees nothing; for, in the nature of things, he can give no assurance that the patronage of the place will continue.'' 60 Of course fraudulent representation as to earning capacity of the goodwill may be shown in defense of such a suit.61 In a suit for damages for breach of the covenant not to re-engage, it is a defense that the plaintiff failed to pay the purchase price in full, but the defense can not be set up without a showing that, before re-engaging, the vendor put the plaintiff in default by tendering back that part of the purchase money he had received.62 Where there are no damages stipulated, and no substantial injury is proven, the plaintiff is entitled only to nominal damages.63 "The loss of profits, if there are data from which the amount may be ascertained with reasonable certainty, the diminution in value of the property sold, all may be regarded as elements of the damages which go to make up the measure of recovery. 64 Where the defendant has re-engaged in business in violation of a covenant against his so doing, the case is one where "the law will not nicely attempt to limit the amount of reparation, but will extend the line of relief so as to embrace all the consequences of the wrongdoer's act, although quite re the method of valuation of goodwill of a corporation for the purpose of assessing a transfer tax, see In re McMullen's Estate, 157 N. Y. S. 655. That a year of abnormal profits should be disregarded, see In re Welch, 137 N. Y. S. 941. 59-Harschbarger v. Eby (Idaho), 156 Pac. Rep. 619. 60-Johnson v. Friedhoff, 27 N. Y. Supp. 982. 61-Butler v. Alter, 139 N. Y. S. 882. 62-Moorman & Givens v. Park erson, 131 La. 204; 50 So. Rep. 122. 63-Taylor v. Howard, 110 Ala. 468; 18 So. Rep. 311; Breeding v. Tandy, 148 Ky. 345; 146 S. W. Rep. 742. 64-Howard v. Taylor, 90 Ala. 241-244; and to the same effect see Burckhardt v. Burckhardt, 42 Ohio St. 474; Mitchell v. Read, 84 N. Y. 556; Mellersch v. Keen, 28 Beavan, 453; Rawson v. Pratt, 91 Ind. 9; Lashus v. Chamberlain, 6 Utah, 385; Gregory v. Spieker, 110 Cal. 150; 42 Pac. Rep. 576. mote from the original transaction." 65 The measure of the vendee's damages will be the amount of profits lost during the term by reason of defendant's unlawful competition, and if, in addition, the goodwill of the business at the end of the term is worth less than it would have been but for defendant's unlawful act, the vendee is entitled to recover that amount.66 The vendee can not recover the profits realized by the vendor through his breach of the contract.67 For the greater part the remedies open to the owner of a goodwill whose rights are invaded are administered by courts of equity. But injury to a goodwill may be effected in many various ways, for each of which an appropriate remedy will be found either at law or in equity. Thus where a defendant's goodwill has been destroyed by a wrongful attachment, he will be allowed compensation therefor in an action for damages against the attaching creditor.68 In an action at law a petition which alleges that plaintiff has purchased defendant's business and goodwill, and that the defendant agreed not to re-engage in the same line of business for two years, and that in violation of his agreement, he has re-engaged in the same line of business during such period, and thereby damaged plaintiff, has been held good on demurrer.69 The action for damages for breach of contract involving goodwill is governed by the general principles involved in similar actions in trademark cases, which are considered elsewhere in this book. A contract for the sale of a business and goodwill will be rescinded if the vendor has falsely stated facts in regard to the value of the goodwill; as where he has represented that his receipts or profits from the business were greater than they actually had been, 70 or that the premises sold have 65-Dow v. Electric Co., 69 N. H. 312; 41 Atl. Rep. 288; 42 L. R. A. 569. 66-Salinger v. Salinger, 69 N. H. 589; 45 Atl. Rep. 558; Buckhardt v. Buckhardt, 36 Ohio St. 261; Verges v. Forshee, 9 La. Ann. 294; Stewart v. Challacombe, 11 Ill. App. 379; Moorehead v. Hyde, 38 Iowa, 382. 67-Gregory v. Spieker, 110 Cal. 150; 42 Pac. Rep. 576. 68-Miller v. Beck (Iowa), 72 N. W. Rep. 553. 69-Erwin v. Hayden (Texas), 43 S. W. Rep. 610. 70-Dobell v. Stevens, 3 B. & C. 623; Cruess v. Fessler, 39 Cal. 336. |