Foyer Key Sung v. Ramirez

• Decision Date: 28 June 1983
• Citation: 467 N.Y.S.2d 486,121 Misc.2d 313
• Parties: FOYER KEY SUNG and Niema Young Sung, his wife d/b/a Del Bove Supermarket, Plaintiffs, v. Juan RAMIREZ, Lilliana Ramirez, Francisca Yolanda Fernandez, Defendants.
• Court: New York Supreme Court

Page 486

467 N.Y.S.2d 486

121 Misc.2d 313

FOYER KEY SUNG and Niema Young Sung, his wife d/b/a Del Bove Supermarket, Plaintiffs, v. Juan RAMIREZ, Lilliana Ramirez, Francisca Yolanda Fernandez Defendants.

Supreme Court, Trial Term Queens County, Part II.

June 28, 1983.

Thomas R. Cosgrove, New York City, for plaintiffs.

Jerome Plotner, Jamaica, for defendants.

MEMORANDUM

ALBERT H. BUSCHMANN, Justice.

This is an action for breach of contract in which the plaintiffs, Foyer Key Sung and Niema Young Sung, allege that the defendants, Juan Ramirez, Lilliana Ramirez and Francisca Yolanda Fernandez have breached a non-competing covenant contained in a Contract of Sale for a deli-grocery business executed between the aforementioned parties. The defendants have counterclaimed against plaintiffs for the balance of promissory notes, given by defendants as consideration for the sale of the business, interest on the balance and attorneys' fees. As an affirmative defense to the counterclaims, plaintiffs have alleged that they were fraudulently induced by defendants into entering the contract of sale.

The following constitutes the findings of fact and conclusion of law pursuant to CPLR 4213. Defendants had owned a deli-grocery store located at 289 Broadway in Staten Island, N.Y. On April 22, 1980, defendants had purchased the realty known as 1088 Castleton Avenue, located two and a half blocks away from the Broadway store. The Castleton building had been formerly operated as a grocery store.

During the summer of 1980, defendants had placed advertisements in a local newspaper in an attempt to solicit a purchaser for the Broadway store and a lessee for the Castleton building. Plaintiffs, after expressing an interest in the Broadway store, entered into a written contract for its sale on August 21, 1980. The contract and bill of sale contain, inter-alia, a covenant not to compete which in pertinent part provides; "And the Transferor (defendants here) covenants and agrees, to and with the Transferee (plaintiffs here) not to re-establish, re-open, be engaged in, nor in any manner whatsoever become interested, directly or indirectly, either as employee, as owners, as partners, as agent or as stockholders, director or officer of a corporation, or otherwise, in any business, trade or occupation similar to the one hereby sold, within the County of Richmond for 5 years."

At the closing on October 17, 1980, as part of the total consideration of $27,000.00 to be given in exchange for the business, plaintiffs executed and delivered to the defendants 23 promissory notes, bearing no interest.

On July 21, 1981, defendants leased the Castleton building and some equipment contained therein, to one Raphael Diaz. Pursuant to the lease, the premises were to be operated as a deli-grocery. On February 2, 1983, Diaz assigned the lease to one Henira.

Initially, the business acquired by plaintiffs showed weekly gross receipts which approximated those which had been represented by defendants in the local newspaper advertisement of the business. After the leasing to Diaz of the Castleton building, the weekly gross receipts of the Broadway business dropped about $4,000 per week. Plaintiffs have contended that such decrease was caused by the leasing of the Castleton building as a grocery store, allegedly in violation of the non-competing covenant, and that they have been damaged to the extent of $175,000 thereby.

On November 17, 1981, plaintiffs refused to honor one of the promissory notes due on that day. The notes contain an accelleration clause and provide that the makers agree to pay all costs and expenses of collection plus attorney's fees of 20% of the principal and interest due. Furthermore, the notes provide for interest of 10% per annum on the remaining balance, in the event of default. The balance owed by plaintiffs, as represented by the notes is $10,800.00.

It is well established that the purchasers of a business are entitled to protect the good will attached to the business through the use of a restrictive not-to-compete covenant. (Purchasing Associates, Inc. v. Weitz, 13 N.Y.2d 267, 246 N.Y.S.2d 600, 196 N.E.2d 245; Diamond Match Co. v. Roeber, 106 N.Y. 473, 13 N.E. 419.) These covenants generally purport to restrain the transferor of the business from competing with his transferee in a specified area and for a period of time. The only limitation placed on such covenants is that they be no more restrictive than is reasonably necessary to protect the transferee's newly acquired good will. Purchasing Associates, Inc. v. Weitz, (supra).

In the instant action, the covenant which requires that the defendants refrain from competing with the plaintiffs in the County of Richmond for a period of five years is not unreasonable, per se, either as to time or duration. Covenants not to compete for periods of time as long as 99 years have been upheld as valid. (Diamond Match Co. v. Roeber (supra.) Although the restrictive area specified in the covenant of the instant action, does appear to be somewhat over extensive, this fact does not prevent this court from enforcing the covenant in such an area as it finds to be reasonable. (Goldstein v. Maisel, 271 A.D. 971, 67 N.Y.S.2d 410.) The store which is allegedly in violation of the restrictive covenant opened only 2 1/2 blocks away from the plaintiffs' store. The court believes that an area of restriction which is reasonably necessary to protect the plaintiffs' good will certainly encompasses a circular area within a three block radius. Predicated upon these determinations this court now holds that the restrictive...