Case ID: nys_51/html/0573-01.html
Source: Caselaw Access Project
Author: {"author": "BARRETT, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

BRETT v. EBEL et al.
    (Supreme Court, Appellate Division, First Department.
    May 6, 1898.)
    1. Good Wilt,—Sale—Validity.
    A business good will may be sold by itself, and the sale is none the less valid because unaccompanied by any “plant” for the transaction of the business.
    
      2. Same—Restraint on Trade.
    In a contract for the sale of the good will of an established business in freighting vessels for Haiti, the seller covenanted that, for a certain term, he would not solicit freights or do any business with Port au Prince, “in or from any place in the United States east of the Mississippi river.” Held, that the covenant involved no unreasonable restraint of trade.
    3. Same—Anti Trust Act.
    A covenant by the seller of a good will, not to compete with the buyer within a specified region, creates a restraint which is merely ancillary to a lawful contract, and is therefore not in contravention of the federal “Anti Trust Act.”
    Appeal from trial term, New York county.
    Action by Pierre A. Brett against Martin G. Ebel and William Gr. Brett. From a judgment dismissing his complaint, plaintiff appeals.
    Reversed.
    The action was brought to recover the sum of ifSOO, under a contract between 1’ne plaintiff and the defendants, the material parts of which are as follows: “Whereas, both parties are engaged in the business of shipbrokers, chartering vessels for various ports in the West Indies and South America; and whereas, 11ic party of the second part (the plaintiff here) has built up a business in freighting vessels for Port au Prince, Haiti, and has established a line known as ‘Brett’s Line, Haiti Packets’; and whereas, the parties of the first part (the defendants here) are desirous of acquiring such business and said line: The party of the second part hereby transfers and sells to the party of the first part all his interest and good will in the business of freighting vessels for Port au Prince and said Brett’s Line. Haiti Packets (not including any right to use that name), and for the term hereinafter mentioned agrees not to solicit freights nor do any business with Port an Prince in or from any place or places in the United States east of the Mississippi river, except that he may, as a broker, effect charters for vessels to and from Port au Prince, and may sell to merchants merchandize for Port an Prince. * * * The parties o,f the first part agree to pay the party of the second part the sum of eighteen hundred dollars a year, in equal monthly payments in advance, beginning on the 7th day of November, 1S94, during the term hereinafter mentioned. This agreement shall continue in force for as long a time as shipments are made to Port au Prince by H. Becker & Co., of the city of New York, or their successors; but in no event shall the term he less than five years.” The plaintiff proved the execution of this contract and its performance upon his part. Thereupon he rested. The defendants’ counsel then moved to dismiss the complaint upon the ground ihat the contract was a nudum pactum; that the plaintiff had no good will or interest In trading vessels which he could sell; and that the contract was contrary to the act of congress passed July 2, 1890, entitled “An act to protect trade and commerce against unlawful restraints and monopolies.’’ The motion was granted, and plaintiff excepted. The plaintiff then asked leave to go to the jury upon the various questions presented by the evidence, but his request was denied, to which denial he excepted.
    Argued before VAN BRUNT, P. J., and BARRETT, RUMSEY, McLaughlin, and ingraiiam, jj.
    Edward B. Whitney, for appellant.
    William F. Randel, for respondents.
   BARRETT, J.

The defendants claim that the right to solicit freights to Port au Prince was not a right that the plaintiff could sell, and consequently that it furnished no valid consideration for the contract in question. The contention proceeds upon a misconception of the nature and scope, of the contract. What the plaintiff thus sold to the defendants was the good will of his freighting business. He had been engaged in this business for some 15 years, and he was well known in it. He testified that the best shippers to Port au Prince had always given him the preference in their shipments to that port. The business was a valuable one, and its good will was essentially desirable. The defendants also contend that the contract was without consideration, because no material “plant” was involved in the transaction. But the good will of a business may be sold independently. A physician may sell the good will of his practice without selling his office furniture or his surgical instruments. So a lawyer may sell the good will of his clientage without selling his library. The same rule applies to the good will of a mercantile business; in fact, to good will generally.

The contract in question involved no unreasonable restraint of trade, within the rules laid down in Match Co. v. Roeber, 106 N. Y. 473, 13 N. E. 419. The plaintiff’s" covenant here was necessary to effectuate the object of the sale of his good will. If such a covenant were illegal, it would seriously affect the sale of any man’s business, where the element of good will entered into the transaction. The covenant in question is generally an important incident of every such sale. The probability, or even the possibility, of subsequent competition on the seller’s part, would certainly prevent him from securing the full value of his property from any sensible or prudent purchaser. The covenant here is the ordinary one attached to such sales, and it is clearly valid. The rule laid down in the case cited has been frequently reaffirmed, and it is now the settled law of this state. Hodge v. Sloan, 107 N. Y. 244, 17 N. E. 335; Leslie v. Lorillard, 110 N. Y. 519, 18 N. E. 363; Tode v. Gross, 127 N. Y. 480, 28 N. E. 469; Underwood v. Smith (Com. Pl.) 19 N. Y. Supp. 380, affirmed 135 N. Y. 661, 32 N. E. 648; Francisco v. Smith, 143 N. Y. 488, 38 N. E. 980.

The remaining question is whether the contract is invalid under what is known as the federal “Anti Trust Act.” The defendants claim that it is invalidated by the first section of that act, which provides as follows: “Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal.” 28 Stat. 209. It was held by the supreme court of the United States in the case of U. S. v. Trans Missouri Freight Ass’n, 166 U. S. 290, 17 Sup. Ct. 540, that these prohibitory provisions apply to all contracts in restraint of interstate or foreign trade or commerce, without exception or limitation, and that they are not confined to those in which the restraint is unreasonable. The opinion in that case, however, must be read in the light of its facts. The contract there was not founded upon or connected with any sale of property or good will. Thus the restraint was not ancillary to any lawful contract. The particular contract there under consideration was one which was entered into between competing railroads, for the purpose of thereby affecting traffic rates for the transportation of persons and property. We find nothing in the opinion to warrant the extreme view taken by the defendants here. On the contrary, we find language suggestive of the opposite, and certainly the more reasonable, view. “A contract,” said Judge Peckham, at page 329, “which is the mere accompaniment of the sale of property, and thus entered into for the purpose of enhancing the price at which the vendor sells it, which, in effect, is collateral to such sale, and where the main purpose of the whole contract is accomplished by such sale, might not be included within the letter or spirit of the statute in question.” It should be observed that the act which was there under consideration was entitled “An act to protect trade and commerce against unlawful restraints and monopolies.” The word “contract,” in the first section, is joined with the words “combination” and “conspiracy,” thus plainly indicating the mischief aimed at by congress. The history of that act emphasizes this view. It. was clearly aimed at the so-called “trusts,” or monopolies, now so familiar in this country, whose main object was the restraint of trade. The intention was undoubtedly to declare every contract illegal which was in the line of these evils. But it certainly was not intended to prohibit a man from selling his business in the ordinary way, and from thereupon obtaining the full value thereof through the instrumentality of an incidental covenant not to compete with the purchaser within some limited area. The rules upon this subject are very fully and clearly stated and the cases reviewed in U. S. v. Addyston Pipe & Steel Co., 85 Fed. 271. The covenants which are generally upheld are there classified by Judge Taft, and that under consideration is within the first of the classes to which he refers, namely, covenants “by the seller of property not to compete with the buyer in such a way as to derogate from the value of the property or business sold.” In our judgment, the present contract is not in contravention of this federal act. It certainly is not within its spirit. If that act were to be construed literally and technically, so as to embrace such a contract as the present, it would involve consequences most 'harmful to the commercial community,—consequences which, in our judgment, were never contemplated by the lawmakers. We think, therefore, that the dismissal of the complaint was erroneous, and that the judgment appealed from should be reversed, and a new trial ordered, with costs to the appellant to abide event. All concur.