No. 79-117
IN THE SUPREME COURT OF THE STATE OF MONTANA
1980
TERRY BALDWIN,
Plaintiff and Appellant,
VS .
ALAN STUBER,
Defendant and Respondent.
Appeal from: District Court of the Eighth Judicial District,
In and for the County of Cascade.
Honorable John McCarvel, Judge presiding.
Counsel of Record:
For Appellant:
Cameron Ferguson, Great Falls, Montana
For Respondent:
Thomas Baiz, Great Falls, Montana
Submitted on briefs: February 27, 1980
9eciSed: APR 2 g -1980
Filed: APR 2 :J
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
Terry Baldwin appeals from a judgment entered in his
favor and against Allan Stuber. A judgment for the value of
goodwill associated with a barbershop sale was entered by
the District Court, Eighth Judicial District, Cascade County.
The facts giving rise to this cause are set forth in
Baldwin v. Stuber (1979), Mont . , 597 P.2d 1135, 36
St.Rep. 1170, and need not be exhaustively repeated here.
Baldwin brought this cause against Stuber for breach of
contract resulting from a contract of sale and purchase of
Baldwin's barbershop business. Following judgment for
Stuber, Baldwin appealed to this Court. We vacated the
District Court's judgment and remanded the cause back to the
District Court for a determination of the reasonable value
of the goodwi:l.l:associated with the shop's location. Baldwin
v. Stuber, supra.
Upon remand, the District Court averaged Baldwin's net
income from the barbershop for the years 1974, 1975 and 1976
arriving at a figure of $10,258.33. Since Baldwin rented
the shop on a month to month tenancy at the time this cause
arose, the District Court divided the average net annual
income figure by twelve to arrive at a net income average
for one month of $854.86. In addition, the only evidence of
the amount of goodwill associated with the shop's location
was Baldwin's testimony he lost thirty to forty per cent of
his business when he changed locations. Consequently, the
District Court multiplied the average net income figure for
one month by forty per cent to arrive at a sum of $341.94 as
the reasonable value of goodwill associated with the shop's
location. Judgment for this amount was then entered in
favor of Baldwin, and he filed a timely notice of appeal
from the judgment.
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The sole issue upon appeal is whether the District
Court erred in determining the value of goodwill attributable
to the shop's location. We hold that it did.
The goodwill of a business is the expectation of continued
public patronage. Section 30-13-121, MCA. There is no
immutable rule for determining the value 'of goodwill.
Consequently each goodwill case must be determined on its
own facts and circumstances, and the determination of the
value of goodwill is a question for the trier of fact, the
District Court here. Spheeris v. Spheeris (1967), 37 Wis.2d
497, 155 N.W.2d 130, 135.
Here, the District Court placed too much emphasis on
the fact Baldwin held his shop under a month-to-month tenancy
at the time this cause arose. Unquestionably, Baldwin's
enjoyment of the shop under such an arrangement was subject
to interruption at any time in the future, provided the
proper statutory procedures were followed. However, from
March 1974 until July 1, 1979, when Stuber surreptitiously
procured a five year lease of the shop from the lessor,
Baldwin held the shop under various rental arrangements.
There is no indication in the record that the lessor was
dissatisfied with Baldwin as a tenant. Similarly, there is
no indication the lessor would not have been willing to give
Baldwin a five-year lease of the shop. Accordingly, the
District Court improperly restricted the reasonable value of
goodwill associated with the shop's location to a one month
period.
While there is no rigid rule for determining the value
of goodwill, the best indicator is the purchase price agreed
upon in a voluntary arm's length transaction. Spheeris v.
Spheeris, supra. Here, Baldwin and Stuber executed a selling
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agreement on March 8, 1977. As we noted in Baldwin's first
appeal, an implied contract was created between Baldwin and
Stuber. Baldwin v. Stuber, supra, 36 St.Rep. at 1175.
Under this contract, Baldwin agreed to sell his barbershop
business to Stuber for $7,000. The three elements comprising
this purchase price were the goodwill associated with the
shop's location, Baldwin's furniture and fixtures and the
shop's telephone connection.
After learning that Stuber surreptitiously signed a new
lease of the shop's location with the lessor, Baldwin went
to the shop, removed all of his fixtures and furniture and
disconnected the telephone. The value of these items was
$3,000. Thus, Baldwin's recovery should be limited to a base
contract price of $4,000. Moreover, the only evidence of
the amount of goodwill associated with the shop's location
was Baldwin's testimony concerning a loss of thirty to forty
percent of his customers due to the change in location.
Therefore, we hold Baldwin should have judgment against
Stuber in the amount of'$1,600 which represents the value of
goodwi.11 attached to the shop's location.
The judgment of the District Court is reversed, and the
cause is remanded to the District Court with the directions
to make findings and enter judgment consonant with this
opinion. Costs to appellant.
Justice
We Concur: