Finelli v. Sica , 66 Misc. 2d 68 ( 1971 )

Max Bloom, J.

This is an action for injunctive relief to

enforce a restrictive covenant ancilliary to the sale of a corporation. Defendant was the sole owner of all of the shares of a corporation. She sold all of the shares of stock to the plaintiff and another. The agreement contained a covenant that defendant would not engage in any business of a similar kind or nature within the City of New York for a period of three years.

Difficulties ensued between the plaintiff and her copurchaser. A receiver of the corporation was appointed and the corporation was dissolved. Plaintiff has obtained employment as manager of a concern in the same business as the dissolved corporation and will acquire an interest therein upon payment of certain.

funds. Prior to the expiration of the stipulated period defendant has gone back into a competing business, under a name similar to that of the dissolved corporation, and now competes directly with plaintiff’s employer.

Where there is a sale of a business which involves the transfer of its good will as a going concern, an incidental covenant by the seller not to compete with the buyer after the sale will be enforced (Wirth & Hamid Fair Bookings v. Wirth, 265 N. Y. 214 ; Hackenheimer v. Kurtzmann, 235 N. Y. 57). This rule is grounded on the premise that a buyer of a business should be permitted to restrict his seller’s freedom of trade so as to prevent the latter from recapturing and utilizing by his competition the good will of the very business which he transferred for value (Purchasing Assoc. v. Weitz, 13 N Y 2d 267, 271 ; Lynch v. Bailey, 300 N. Y. 615, affg. 275 App. Div. 527 ; Diamond Match Co. v. Roeber, 106 N. Y. 473). Here, however, there has been an abandonment of that business. It was dissolved and no longer exists. That being the case, the granting of the injunction would not serve any useful purpose. It would drive the defendant out of business without corresponding benefit to the now defunct corporation (Greenebaum v. Ripley, 22 N. Y. S. 2d 385). Accordingly, judgment is granted in favor of the defendant.