Case Title: Susan Martin v. Mary S. Battistella

Citation: 

Docket Number: 1070394

State: alabama

Court: Alabama Supreme Court

Date: 2008-11-26T00:00:00Z

Document:
rel: 11/26/2008
Notice: This opinion is subject to formal revision before publication in the advance
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Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
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the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2008-2009
____________________
1070394
____________________
Susan Martin
v.
Mary S. Battistella
Appeal from Tallapoosa Circuit Court 
(CV-07-119)
BOLIN, Justice.
Susan Martin, doctor of veterinary medicine,  appeals
from a summary judgment in favor of Mary S. Battistella,
doctor of veterinary medicine.  We dismiss the appeal.
1070394
2
Facts and Procedural History
On May 27, 2005, Battistella sold her veterinary-medicine
practice in Alexander City to Martin.  The sales agreement
quoted a purchase price of $345,000; that price included (1)
$40,000 for equipment, furniture, and fixtures; (2) $282,000
for intangibles (including "goodwill"); (3) $18,000 for
inventory; and (4) $5,000 for a covenant not to compete.  The
covenant not to compete provided as follows:
"Provided that [Martin] is not in default under
this Agreement neither [Battistella], whether as a
principal, principal owner, part owner, owner,
interest holder, unit holder, stockholder, partner,
employee, 
independent 
contractors, 
contractor,
agent, or in any other capacity, nor any entity in
which [Battistella] has an interest, will for a
period of five (5) years after the Effective Date,
and within a fifteen (15) mile radius of the
Facility engage in the operation of a veterinary
medical practice or veterinary hospital or otherwise
perform veterinary services."
On June 12, 2007, Battistella filed a declaratory-
judgment action, naming Martin as a defendant and seeking a
determination of the enforceability of the noncompetition
clause because she wanted to open a veterinary health resort.
On July 18, 2007, Martin filed an answer along with a
counterclaim alleging that Battistella would be in breach of
the sales agreement if she opened a new veterinary practice
1070394
3
because Martin would no longer receive the "goodwill" of the
business.  Martin later amended her counterclaim, asking the
court to restore her to the condition she would have occupied
had Battistella not breached the sales agreement. Following a
hearing, the trial court, on September 12, 2007, entered an
order declaring the noncompetition clause unenforceable.
Battistella filed a motion for a summary judgment on
Martin's counterclaim.  On October 3, 2007, the trial court
held a hearing on Battistella's summary-judgment motion. On
October 10, 2007, the trial court entered a summary judgment
in favor of Battistella on Martin's counterclaim.  The trial
court's order provided, in pertinent part:
"[Martin] now alleges that [Battistella's]
opening of a competing business is a breach of the
contract in another manner.  Specifically, [Martin]
states 
that 
she 
purchased 
the 
goodwill 
and
intangibles 
from 
[Battistella] 
and 
that
[Battistella] has breached the agreement by the
potential opening of her new business which will
reduce the value of the goodwill and intangibles
that [Martin] purchased.  She is requesting monetary
damages for the alleged breach.
"[Martin's] claim is without merit.  The law
does not allow a restraint of a professional's
ability to practice his/her profession.  The Court
cannot allow economic damages against [Battistella]
for her lawful practice of veterinary medicine.  As
stated in Cherry, Bekaert & Holland v. Brown, 582
So. 2d 502 (Ala. 1991), the law does not allow a
1070394
4
restraint on the practice of a profession on a
monetary basis.  A breach of contract claim dealing
with the sale of goodwill and intangibles in this
manner would simply be a covenant not to compete
called by another name."
On October 25, 2007, Martin filed a motion to alter,
amend, or vacate the judgment, arguing that the trial court
erred in applying Cherry, Bekaert & Holland v. Brown, 582 So.
2d 502 (Ala. 1991), to the facts in this case.  Martin also
contended that the trial court failed to address the $5,000
she had paid Battistella in exchange for Battistella's
agreement not to compete.  She also included testimony from
Battistella that Battistella had removed from the clinic
before the sale certain items valued at $2,500 that should
have been included in the sale.  On November 2, 2007, the
trial court granted Martin's motion in part, ordering that
Battistella repay Martin the $5,000 Martin had paid for the
unenforceable covenant not to compete and that she pay Martin
$2,500 for breaching the contract by removing items from the
practice that were part of the sales agreement.   Martin
appeals from that portion of the summary judgment entered in
favor of Battistella.
Standard of Review
1070394
5
"'"This Court's review of a summary judgment is
de novo. Williams v. State Farm Mut. Auto. Ins. Co.,
886 So. 2d 72, 74 (Ala. 2003).  We apply the same
standard of review as the trial court applied.
Specifically, we must determine whether the movant
has made a prima facie showing that no genuine issue
of material fact exists and that the movant is
entitled to a judgment as a matter of law. Rule
56(c), Ala. R. Civ. P.; Blue Cross & Blue Shield of
Alabama v. Hodurski, 899 So. 2d 949, 952-53 (Ala.
2004). In making such a determination, we must
review the evidence in the light most favorable to
the nonmovant.  Wilson v. Brown, 496 So. 2d 756, 758
(Ala. 1986). Once the movant makes a prima facie
showing that there is no genuine issue of material
fact, the burden then shifts to the nonmovant to
produce 'substantial evidence' as to the existence
of a genuine issue of material fact. Bass v.
SouthTrust Bank of Baldwin County, 538 So. 2d 794,
797-98 (Ala. 1989); Ala. Code 1975, § 12-21-12.
'[S]ubstantial evidence is evidence of such weight
and quality that fair-minded persons in the exercise
of impartial judgment can reasonably infer the
existence of the fact sought to be proved.' West v.
Founders Life Assur. Co. of Fla., 547 So. 2d 870,
871 (Ala. 1989)."'"
Gooden v. City of Talladega, 966 So. 2d 232, 235 (Ala. 2007)
(quoting Prince v. Poole, 935 So. 2d 431, 442 (Ala. 2006)).
Discussion
Martin did not appeal from the trial court's judgment
declaring the noncompetition clause unenforceable.  Instead,
Martin argues that simply because the noncompetition clause
was unenforceable the remainder of the sales agreement was not
rendered void.  She argues that because Battistella will be
1070394
6
operating a competing business, Martin will no longer receive
the "goodwill" she paid for under the sales agreement because,
she 
says, 
Battistella's 
former 
patients 
will 
go 
to
Battistella's new business.   
We note § 8-1-1(a), Ala. Code 1975, provides that
"[e]very contract by which anyone restricted from exercising
a lawful profession, trade, or business of any kind otherwise
than is provided by this section is to that extent void."  In
Friddle v. Raymond, 575 So. 2d 1038 (Ala. 1991), the parties
were veterinarians who were practicing veterinary medicine
pursuant to a partnership agreement.  One of the partners
agreed to sell the other partner his half of the partnership.
Under the terms of the sales agreement, the selling partner
agreed not to compete with the buying partner in the
veterinary-hospital business within six miles of the hospital
at which they had operated their practice for a period of
three years.  The selling partner began to practice within the
three-mile area shortly after signing the sales agreement. 
The 
buying 
partner 
sued 
and 
argued 
on 
appeal 
that
veterinarians are not "professionals" and are therefore not
prohibited by § 8-1-1 from entering into restrictive covenants
1070394
7
not to compete.  This Court held that veterinarians are
"professionals" and stated
"Although the remaining subsections of § 8-1-1
provide for exceptions to the general rule [stated
in subsection (a)], including an exception for the
sale of the good will of a business, this Court has
stated on numerous occasions that a 'professional'
cannot fall within these statutory exceptions. ...
This point is further supported by the Court's
observation that § 8-1-1 expresses the public policy
of Alabama that contracts that place a restraint on
trade are disfavored '"because they tend not only to
deprive the public of efficient service but also
tend to impoverish the individual."'" 
 
575 So. 2d at 1040.  
In Gilmore Ford, Inc. v. Turner, 599 So. 2d 29, 31 (Ala.
1992), this Court defined "goodwill" as follows:
"'Goodwill' has been defined as the advantage or
benefit acquired by a business beyond the mere value
of the capital, stock, funds, or property employed
therein, in consequence of the general public
patronage 
and 
encouragement 
it 
receives 
from
constant and habitual customers, on account of its
local position, common celebrity, reputation for
skill, affluence, or punctuality, or from other
accidental circumstances or necessities, or even
from ancient partialities or prejudices. See Collas
v. Brown, 211 Ala. 443, 100 So. 769 (1924); see,
also, 38 Am.Jur.2d Goodwill § 1 (1968).  Goodwill is
property of an intangible nature and constitutes a
valuable asset of the business of which it is a
part, unless in a particular instance it is too
uncertain and contingent in nature to be appraised.
38 Am.Jur.2d, supra, § 3.  It is well settled that
goodwill, being property, is transferable and may be
bought and sold in connection with the sale of a
1070394
8
business; it is not essential, however, that the
contract for the sale of a business expressly
mention the goodwill of the business. Covenants not
to compete that are designed to protect the goodwill
of a business being sold imply a sale of the
goodwill. 38 Am.Jur.2d, supra, §§ 9, 10; Yost v.
Patrick, 245 Ala. 275, 17 So. 2d 240 (1944).'"
Martin cites Salisbury v. Semple, 565 So. 2d 234, 236
(Ala. 1990), in support of her position.  In Salisbury, one
doctor agreed to sell his practice to another doctor.  The
buying doctor agreed to pay $900,000 in monthly installments
over a period of 11 years.  The agreement provided that 30% of
the purchase price was considered to be payment for the
purchase of the goodwill of the practice.  The selling doctor
agreed not to compete with the existing practice.  The buying
doctor stopped making payments and filed a declaratory-
judgment action seeking a declaration that the purchase
agreement was void and unenforceable because it contained a
covenant not to compete.  The buying doctor did not allege
that the covenant not to compete had been violated.  Instead,
he alleged that the practice of medicine is a profession, that
the covenant not to compete was therefore unenforceable, and
that, because, he contended, 70% of the purchase price for the
purchase agreement was for the covenant not to compete, he was
1070394
9
obligated to pay only 30% of the sales price.  This Court
stated:
"[The buying doctor] admits that the [selling
doctor] has not violated the covenant not to
compete.  Furthermore, [the buying doctor] received
[the 
selling 
doctor's] 
medical 
practice, 
the
fixtures, the optical business, and the goodwill, as
contemplated by the contract.  In short, [the buying
doctor] has received all the he bargained for.  We
hold that [the buying doctor] ... is now estopped
from refusing to perform his obligation to pay the
agreed purchase price under the contract simply
because it contains a covenant not to compete.  We
note that any other result would be particularly
inequitable in view of the fact that the covenant
not to compete was included in the contract a [the
buying doctor's] request."
565 So. 2d at 236.
Martin argues that as was the case in Salisbury, the
remainder of the sales agreement (excluding the noncompetition
clause) is enforceable.  She argues that because Battistella
will breach the contract with regard to the sale of the
goodwill of the business when she opens her new clinic, Martin
should be allowed to recover from Battistella based on a
breach of the sales agreement.  Martin contends that
Battistella received all that she bargained for, less the
$5,000 for the covenant not to compete, and that Battistella's
new clinic will take away business from Martin, who, under the
1070394
10
sales agreement, was to receive the "goodwill" of the business
for five years.
Battistella argues that Martin's damages are speculative
because, Battistella says, Martin presented no evidence
indicating that she would be damaged by Battistella's new
clinic.  Battistella contends that Martin  has only speculated
that she may be entitled to damages once Battistella opens her
new clinic and Battistella's former patients may choose to go
to Battistella's new clinic rather than the clinic Martin
purchased from Battistella.  Martin argues that Battistella
impaired the goodwill of the clinic by building a new clinic
and that that portion of the purchase price allocated to
goodwill should be the amount of her damages.  "Total
destruction of the goodwill is not to be presumed from the
mere breach of the contract not to compete; hence, it has been
held erroneous to base a recovery on an amount representing
the portion of the purchase price regarded as having been paid
for the goodwill, in the absence of evidence that such amount
corresponds with the actual loss sustained."  Annot. 127
A.L.R. 1152 (1940).  
1070394
11
In Howard v. Taylor, 90 Ala. 241, 8 So. 36 (1890), the
defendant sold the plaintiff his bar and its fixtures,
together with the goodwill of the business, an unexpired lease
on a house out of which the business was operated, and an
agreement by the defendant not to carry on the same business
at any other place in town.  The defendant then started a
competing business, and the plaintiff sued.  The trial court
declared that among the elements of damages might be loss of
profits, if there were evidence from which such amount might
be ascertained with reasonable certainty, and the diminution
of the value of the property sold.  However, this Court held
that it was error for the trial court to instruct the jury
that the plaintiff was entitled to recover the difference
between the value of the fixtures, together with the right to
lease the house, and the agreed-upon sales price, because such
an instruction was based upon the theory that total
destruction of goodwill necessarily resulted from the breach
of contract and the incorrect assumption that the mere fact
that because the defendant was engaged in the same business in
the same town the plaintiff suffered damage to the extent
indicated without proof of actual injury and its extent.  The
1070394
12
Court stated: "[A] violation of the promise not to engage in
the same business does not necessarily work the total
destruction of the good-will nor deprive plaintiff wholly of
its enjoyment and benefit."  90 Ala. at 245, 8 So. at 38.   
In the present case, Martin's damages are speculative in
nature.  There is nothing in the record to show that any loss
or harm to Martin has occurred, because Battistella has not
yet opened her clinic.  In her original counterclaim, Martin
stated that Battistella's alleged breach of the sales
agreement caused her "significant monetary damages."  However,
the only particularized description of those damages appears
in Martin's amended counterclaim, in which she states:
"If this Court declares paragraph #27 Covenant
Not to Compete null and void as requested in
Plaintiff's Complaint for Declaratory Judgment, the
Good Will purchased by [Martin] from the Plaintiff
in the amount of $282,000.00 is a loss. ... The
market value of the practice is based upon what it
will earn in the future, which is based on historic
data and page 13 'Intangible Assets' primarily
refers to Goodwill, blue sky, etc. ... [I]ncluded in
this is a Veterinary Medical Practice, the market
location, continuity of service of place and name,
competition or lack of it, low rate of client
turnover, reputation for quality medical care, or
any other thing that established or particular
veterinary practice as 'the place where it is
preferable to do business,' can be considered
contributing to the intangible asset value.  Dr.
Battistella would be competing against [Martin] at
1070394
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her new address, 8610 Kowaliga Road, Eclectic,
Alabama, which is 13.9 miles from Wayside Animal
Hospital and within the fifteen mile radius of the
Covenant Not to Compete. [Martin] will suffer
damage[] 
each 
time 
Dr. 
Battistella 
provides
Veterinarian services to clients of Wayside Animal
Hospital that Dr. Battistella sold [Martin] in the
Agreement of Sale.  This will continue until in the
expiration of the Covenant Not to Compete expires on
June 30, 2010."
Martin makes a similar statement in her brief to this Court on
appeal:
"Obviously, Dr. Battistella's new clinic is
going to take away business from Dr. Martin.  The
goodwill Dr. Martin was to receive for five (5)
years from Dr. Battistella, while she was not
competing with her is now gone.  Dr. Battistella's
old clients will go to her new office and reduce the
retention of clients."
Martin's brief at 21.  Thus, Martin argues that she expects to
lose business once Battistella opens her facility.  However,
she has not presented this Court with any evidence to indicate
that Battistella's facility had even opened or that Martin has
lost any clients or suffered any monetary damages in
anticipation of that opening.  In fact, when asked during her
deposition whether she had, at that time, "lost any patients
or income as a result of Mary's potential opening," she
responded that she did not know.  When asked whether she had
suffered significant damage as alleged in her counterclaim,
1070394
14
she repeatedly responded that she did not know.  From this
testimony and the arguments in the briefs, it appears that
Martin's breach-of-contract claim is based on the expectation
of a future event.  "Ripeness is defined as '[t]he
circumstance existing when a case has reached, but has not
passed, the point when the facts have developed sufficiently
to permit an intelligent and useful decision to be made.'" Ex
parte Safeway Ins. Co. of Alabama, Inc., [Ms. 1061613,
February 29, 2008]     So. 2d    ,     n. 5 (Ala.
2008)(quoting Black's Law Dictionary 1353 (8th ed. 2004)).
This case has not reached that point as Martin as only
speculated as to what her damages may be. 
 "Damages can be awarded only where they are reasonably
certain and not based upon speculation."  Industrial Chem. &
Fiberglass Corp. v. Chandler, 547 So. 2d 812, 820 (Ala. 1988).
Accordingly, because Martin's breach-of-contract claim is not
ripe, the trial court was without jurisdiction to review her
counterclaim at this time, and the appeal is dismissed.   
APPEAL DISMISSED.
Cobb, C.J., and See, Lyons, Stuart, Smith, Parker, and
Murdock, JJ., concur.
Woodall, J., dissents.
1070394
15
WOODALL, Justice (dissenting).
As the trial court held, Dr. Battistella may lawfully
resume the practice of veterinary medicine.  If she chooses to
do so, Dr. Martin, as the trial court correctly held, will be
entitled to no economic damages as a matter of law.
Consequently, I would affirm the summary judgment in favor of
Dr. Battistella.  Therefore, I respectfully dissent from the
dismissal of this appeal.