Carr v. Carr

Decision Date31 May 1985
Docket NumberNo. 15177,15177
Citation701 P.2d 304,108 Idaho 684
Parties, 59 A.L.R.4th 1063 Elizabeth Mary CARR, Plaintiff-Respondent, v. Terry Arthur CARR, Defendant-Appellant.
CourtIdaho Court of Appeals

C.J. Hamilton (argued), Hamilton & Hamilton, Steve F. Bell, Coeur d'Alene, for defendant-appellant.

Sue S. Flammia (argued), Flammia & Solomon, Scott W. Reed, Coeur d'Alene, for plaintiff-respondent.

WALTERS, Chief Judge.

This appeal involves the disposition of property following a divorce decree. The issues concern the sale of a family business ordered by the magistrate in the action; the parties do not contest the division or distribution of any other assets. To resolve the parties' interests in the family business, the magistrate ordered a sale of the business and the proceeds divided between the parties. Orders by the magistrate, directing the husband to execute a sales agreement containing a covenant not to compete and to remove a sign on property adjacent to the business, were appealed by the husband to the district court. The district court affirmed. The husband appeals from the district court decision. We vacate the district court's decision in part and remand for redetermination of the value and the distribution of the business goodwill.

The issues presented on appeal may be stated as follows: (1) when a family business is sold to facilitate property distribution in a divorce, can a trial court order a spouse to agree to a noncompete clause in a sales agreement? (2) If so, can the trial court's order be enforced with a contempt proceeding? (3) What consideration should be given to the goodwill of a business ordered sold in a divorce action? (4) Can a trial court order a sign advertising a competing business to be removed from a former spouse's separate property until after the family business is sold? (5) Should either party to this appeal receive an award of attorney fees?

The background of this case is as follows. Elizabeth and Terry Carr were married in California in 1963. In 1975, the Carrs moved to Post Falls, Idaho, and purchased a one-half interest in the Husky Port Truck Stop located near Post Falls. They became sole owners of the truck stop in 1978. The business prospered under the Carrs' management; the physical plant was expanded and modernized, a shop to sell and service CB radios was added, tire and fuel sales increased, restaurant sales flourished. Terry Carr was manager of the entire operation except the restaurant, which was handled by Elizabeth. He worked twelve to fourteen hours a day at the business and was on call twenty-four hours a day. In 1979, Elizabeth Carr filed for divorce. Terry Carr counterclaimed and the cause was tried before a magistrate.

Evidence was submitted concerning the value of the assets and the amount of outstanding liabilities of the truck stop. From this evidence, the magistrate determined the business had a net worth of $761,309. The magistrate assigned no value to "goodwill," concluding that "no credible evidence was presented at trial to support a finding that the business possesses any good will upon which a value can be placed." Terry Carr was given sixty days to purchase Elizabeth Carr's community interest in the truck stop, measured by one-half its fair market value. For this purpose, the magistrate treated the net worth of the business, $761,309, as its fair market value. In the event Terry Carr did not purchase his ex-wife's interest, the magistrate ordered the property to be sold and the proceeds divided. Subsequently, Terry Carr did not purchase his ex-wife's interest in the truck stop, and efforts to sell the business to a third party commenced.

Prospective purchasers insisted on a provision in the sales agreement limiting Terry Carr's ability to open a competing business. One typical noncompete clause prohibited the Carrs for five years from opening a competing business within ten miles of Husky Port Truck Stop. Because Terry Carr owned property adjacent to the truck stop, he was opposed to a noncompete clause in any sales agreement, which would interfere with his planned use of the adjacent property. The magistrate ordered Terry Carr to execute a specific earnest money agreement containing a covenant to not compete and, when he declined to do so, the magistrate held Terry Carr in contempt of court. To prevent further contempt orders, Terry Carr did subsequently sign an earnest money agreement which contained a noncompete provision. 1 The magistrate also ordered Terry Carr to remove a sign announcing a new truck stop business to open on the property adjacent to Husky Port Truck Stop. On appeal, the magistrate's orders were affirmed by the district court.

The district court, finding the noncompete covenant to be reasonable, upheld the covenant and concluded that it was within the magistrate's discretion to enter an order directing Terry Carr to agree to the noncompete provision. The district court declined to award additional compensation to Terry Carr for his agreement to not compete, by alteration of the magistrate's distribution of property or its proceeds. The district court viewed the magistrate's order to remove the sign as effective only while the sale of Husky Port was pending. The district court observed that, once the sale was completed, Terry Carr was free to replace the sign although replacement of the sign could generate an action to enforce the covenant not to compete. The magistrate's order regarding the sign was therefore upheld. The district court also upheld the magistrate's authority to enforce its orders by contempt proceedings.

We turn first to the issues concerning the sale of the truck stop. Unless there are compelling reasons to divide community assets unequally, the division of community property in a divorce proceeding should be substantially equal. I.C. § 32-712. Here the magistrate found there were compelling reasons to make an unequal division of the community property owned by the parties. We have not been asked to review the propriety of that determination. In regard to the truck stop, the magistrate ordered that Elizabeth Carr should receive the first $4,846 from the proceeds of the sale of the business and the balance divided equally. The method by which the property is distributed is left to the discretion of the trial court, Koontz v. Koontz, 101 Idaho 51, 607 P.2d 1325 (1980), but ordinarily the trial court should divide the community property in such a way as to give each spouse the sole and immediate control of his or her share of the property. Parker v. Parker, 95 Idaho 876, 522 P.2d 788 (1974). Thus, to give each spouse the immediate control of his or her share of the property, the trial court may provide for the sale of community property so long as the sale order does not amount to waste of a community asset or provide that the property be sold for less than it is worth. Id. The trial court in a divorce proceeding may enforce its orders regarding property distribution with contempt proceedings. See Phillips v. District Court of the Fifth Judicial District, 95 Idaho 404, 509 P.2d 1325 (1973). 2

In this case, the trial court ordered Terry Carr to execute an earnest money agreement containing a covenant to not compete for five years and within ten miles of Husky Port. Terry Carr subsequently was held in contempt of court for failing to sign the earnest money agreement. 3 As noted, when the magistrate made findings of the values of the various properties owned by the parties, the magistrate was not able, because of a lack of credible evidence, to assign any value to the goodwill component of the truck stop. See Saviers v. Saviers, 92 Idaho 117, 438 P.2d 268 (1968); Loveland v. Loveland, 91 Idaho 400, 422 P.2d 67 (1967) (no error where trial court failed to divide value of goodwill of community business in divorce actions when the evidence was insufficient to establish value of goodwill). Subsequently, however, because of the demands by purchasers for a covenant not to compete, we believe the existence of the goodwill achieved a much greater significance in determining an appropriate division of the parties' property interests. In effect, by ordering Terry Carr to execute the noncompetition clause, the magistrate was requiring that the goodwill of the truck stop business be sold along with the tangible assets and the accounts receivable.

In instances where a party sells his business, and, in connection with such sale, agrees that he will not engage in the same or similar business in the same area for a particular and reasonable length of time, it is obviously the intention on the seller's part to sell the good will of the business, even though the contract, as in this instance, fails to expressly mention good will. [Citations omitted.]

Vancil v. Anderson, 71 Idaho 95, 101, 227 P.2d 74, 77 (1951). Given the trial court's authority in a divorce action to order the sale of a community business to effectuate property disposition, the issue is whether a trial court may require a business's goodwill to be included in the sale. We hold that it may.

Our Supreme Court long ago recognized that the goodwill of a business "is a species of property subject to sale by the proprietor, and which may be sold by order of court...." Harshbarger v. Eby, 28 Idaho 753, 761, 156 P. 619, 621 (1916), quoting Smock v. Pierson, 68 Ind. 405, 34 Am.Rep. 269 (1879). Goodwill is an intangible business asset not easily defined. The "good will" value of any business enterprise is that value which results from the probability that old customers will continue to trade or deal with members of an established concern. It is the probability that old customers will resort to the old place or seek old friends, and the likelihood of new customers being attracted to well-advertised and favorably known services or goods.

Good will is the advantage or benefit which is acquired by an establishment, beyond the mere value of the capital,...

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