Statement. This is an action to reform a contract and to enjoin defendant from engaging in the grocery business at a certain location in Devils Lake, North Dakota. Defendant has appealed from the judgment and demands a trial de novo in this court.
The facts necessary to be stated are: — The defendant owned two lots and a store building situated on what is known as the West Side in the city of Devils Lake, N.D. There for about one year and two months he had conducted a grocery business. Plaintiff, previous to the grocery business so maintained by defendant, apparently had worked for several years for an antecedent party who had likewise conducted a grocery business in the building concerned. On February 25th, 1922, defendant leased to plaintiff the two lots and building and also the fixtures in the building, for a term of two years and for a rental of $60 per month. In the lease there was also an agreement by plaintiff to purchase the groceries and merchandise at regular wholesale prices and at the end of two years defendant agreed to repurchase the stock of goods then on hand not exceeding $400.00. On the back of this lease there was the further agreement that the plaintiff would not put in any grocery business along certain named streets on the West Side in the vicinity of where the store is located. Pursuant to this leasing and sale they operated the store in defendant's *Page 142 building until about the month of November, 1923. Then plaintiff initiated arrangements to build a store building on adjacent lots (two lots intervening) and there to conduct a grocery business when the lease with defendant expired. Some officers of a wholesale grocery company, viewing these proceedings, made representations to the parties that it would be inadvisable to have two grocery stores in the neighborhood. These officers proceeded to bring the parties together and as a result of their efforts arrangements were made for the sale of the building owned by defendant to plaintiff. Pursuant to plaintiff's evidence, on a certain Sunday, defendant agreed that if plaintiff bought the store he would not put in a store on the West Side. Pursuant to the testimony of one Crawford, salesman of the wholesale grocery company, defendant stated to the manager of the company that if plaintiff bought the building he would not put in a store. Likewise, one Johnson, manager of the grocery company, testified that defendant stated that if plaintiff bought the building he would not start a store, and if he did not, he would start a store; that the defendant did not state where he would start this store nor how long he would refrain from starting a store. Defendant's testimony in this regard is to the effect that his statements to Johnson were that he would not go into the store business just then if he sold the building. He denied making any agreement with plaintiff not to put a store in on the West Side. On Monday following, namely, on Nov. 19th, 1923, at a local bank in Devils Lake, N.D. a contract was made between the parties whereby defendant agreed to sell to plaintiff the two lots upon which the store building was situated for a consideration of $3000, including the fixtures and furniture situated in the building. This contract, signed by the parties, contained no reference to any agreement by defendant not to again engage in business. Later, in April, 1924, defendant, in his home, immediately across the street from this building, made preparations to again start in business by putting in shelving and making arrangements to secure certain goods and merchandise. Thereupon, this action was instituted. Some evidence was offered to the effect that the building and fixtures, including the lots, were worth $2500 and that the balance of $500 represented the good will of the grocery business that had been maintained at this location for some considerable period of time. Defendant contested this testimony by *Page 143 evidence to the effect that the building and lots and furniture were worth the total amount of $3000. The trial court made findings to the effect that the parties on Nov. 19th, 1923, made an agreement for a good and sufficient consideration that defendant would not engage in a line of business similar to and in competition with the business of plaintiff on the West Side of the city of Devils Lake; that the physical property purchased by plaintiff was not worth to exceed $2500 and that the difference, namely, $500, represented the good will and the promise of defendant not to engage in the grocery business again on the West Side in such city. As conclusions, the court ordered an injunction of restraint to issue. In a memorandum opinion the trial court states that the real understanding between the parties, pursuant to the oral agreement, was that defendant should not again engage in business, namely, start another grocery store in the West Side in that city, and that the territory known as the West Side was well understood to refer to a distinct territory in the city of Devils Lake. Further, that defendant possessed a good will in connection with the business that he previously maintained at the location, and that by the oral agreement he distinctly sold this good will to plaintiff and, therefore, he ought now to be restrained from detracting or from impairing the good will so sold to plaintiff.
Opinion. The oral contract, sought to be enforced, is in restraint of trade and is void unless it falls within the recognized exception permitting reasonable restraints of trade.
The statute provides that one who sells the good will of a business may agree with a buyer to refrain from carrying on a similar business within a special county, city or part thereof, so long as the buyer, or any person deriving title to the good will, carries on a like business therein. Comp. Laws 1913, § 5929.
The prime question involved in this appeal is whether the oral contract, if made as alleged, involved and covered the good will of the business, namely, the grocery business, on the West Side in the city of Devils Lake. From the admitted facts contained in the record it well appears that defendant owned the building and had conducted a grocery *Page 144 business therein for a period of about one year and two months. He leased the building to plaintiff for two years and sold to him the grocery business with an agreement to repurchase the same at the expiration of two years. In addition, plaintiff agreed, in this lease and sale of the store, not to start any grocery store on certain streets on the West Side of Devils Lake. It is evident that plaintiff either considered that this agreement was invalid, or intended, regardless, to start his grocery business in his own building and in a new location. Further, it appears from the record that plaintiff apparently had theretofore been working in this building for a party who conducted a store prior to its operation by defendant. Accordingly, after the execution of this lease and the sale of the grocery business, defendant retained the ownership of the building and the right to repurchase the grocery business. Defendant became the owner of the grocery business and conducted the same in the building mentioned. In the face of these facts, the parties in November, 1923, before the expiration of the lease, made a written agreement to sell the building owned by defendant. In accordance with the oral contract, as found by the trial court to have been on the day before this written agreement was executed, defendant agreed not to engage in the grocery business on the West Side. The record wholly fails to show that there was any sale of the good will of this grocery business made, in terms, by defendant to plaintiff. The sale or transfer of a good will can be created upon the facts only through implying that the physical property sold was of less value than the consideration paid and that therefore the difference must represent good will and that this good will so represented by such value was a part of the consideration in the transfer of the building. Upon the facts in this case, we are of the opinion that the plaintiff has failed to establish any sale of the good will of a grocery business. At the time of the sale of the building defendant, as heretofore stated, did not own the grocery business. He simply possessed the right, at the end of four months, to purchase the grocery business. It is true that then he might have become possessed of the good will of such grocery business. It may be true, further, that there was a so-termed good will existing in connection with this location, but plaintiff purchased the location. Already he had the grocery business. Further, when the sale was made, plaintiff had initiated the starting of *Page 145 another grocery business; then he was seeking to lessen competition by the elimination of defendant in the business of grocery man at the old location in his own building; Good Will was not mentioned, specifically, in the sale of the building, nor so far as the evidence shows, in any of the oral talks had between the parties. Furthermore, the testimony of plaintiff, concerning the oral talks, does not extend further than to the effect that defendant stated that if plaintiff bought the building he would not start a store on the West Side. The other witnesses wholly fail to establish that defendant agreed otherwise than that he would not start a store if plaintiff bought the building. We are of the opinion that the alleged oral contract asserted in the record, being in restraint of trade, is insufficient to establish or show, in connection with the sale of the building, a sale of the good will of the grocery business by defendant to plaintiff as conducted in such building. Siegel v. Marcus, 18 N.D. 214, 20 L.R.A.(N.S.) 769, 119 N.W. 358; Mapes v. Metcalf, 10 N.D. 601, 88 N.W. 713; Prescott v. Bidwell, 18 S.D. 64, 99 N.W. 93; 13 C.J. 473, 477, 480; 3 Williston, Contr. §§ 1636, 1637. In our opinion the judgment should be reversed and the action dismissed. It is so ordered.
JOHNSON, NUESSLE, and BIRDZELL, JJ., concur.