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Smith v. Burkitt

August 05, 2003

BILLY SMITH AND BRENDA SMITH, PLAINTIFFS-APPELLANTS,
v.
FRED BURKITT AND DOROTHY BURKITT, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Franklin County. No. 01-L-114 Honorable Joe Harrison, Judge, presiding.

The opinion of the court was delivered by: Justice Welch

PUBLISHED

The plaintiffs, Billy Smith and Brenda Smith, appeal from an order by the circuit court of Franklin County dismissing their complaint filed against the defendants, Fred Burkitt and Dorothy Burkitt. The plaintiffs alleged in their complaint that they had purchased a business from the defendants and that the purchasing agreement contained a covenant not to compete that prohibited the defendants from engaging in a business that competed with the purchased business. The plaintiffs further alleged that the defendants had breached the covenant not to compete by engaging in a business that competed with the business purchased by the plaintiffs. In dismissing the plaintiffs' complaint, the circuit court held that the agreement between the parties did not include the sale of goodwill but that even if it did, the covenant not to compete was unreasonable and unenforceable. For the reasons that follow, we reverse and remand.

On September 16, 1999, the plaintiffs and the defendants entered into a contract entitled, "Agreement for Sale of Business Assets and for Warranty Deed." The agreement noted that the defendants owned a partnership business "previously doing business" as "Burlap and Lace." The agreement provided for the sale of the following to the plaintiffs: "[A]ll right, title[,] and interest in the assets of said business, plus the buildings and real estate on the terms and conditions herein set forth, all as set out on Exhibit A, Exhibit B[,] and Exhibit C, attached hereto." Exhibit A lists two fixtures. Exhibit B describes the real estate. Exhibit C is a list of inventory that includes several items such as quilts, a doll buggy, wicker tables, several rockers, and beds. Nothing in the agreement provides details about the nature of the business "Burlap and Lace."

The agreement stated a purchase price of $60,000. The amount consisted of $10,000 for the fixtures, $22,000 for the two buildings, $2,000 for the land, and $26,000 for the inventory. A clause in the agreement specifically excluded from the sale "all other business assets not specifically listed herein." The agreement also provided as follows: "[F]rom the date of this Agreement through and until Closing, *** Seller shall preserve intact its business organization and use its best effort to keep available the services of its present officers and key employees and to preserve the good will of those having business relationships with it." The covenant not to compete (the non-competition clause) in the agreement provided as follows:

"Seller covenants and agrees that they [sic] will not, within the geographical limits of Franklin County, Illinois, engage in any business competitive with Purchaser for a period of five (5) years. Directly or indirectly engaging in business of Purchaser or in any competitive business shall include engaging in business as owner, partner[,] or agent[] or as employee of any person, firm[,] or corporation."

On November 16, 2001, the plaintiffs filed a complaint alleging that the defendants had violated the non-competition clause by engaging in a business that was competing with the plaintiffs' business. No details were provided regarding exactly how the business activities of the defendants competed with the plaintiffs' business. The complaint simply provided that the business purchased from the defendants involved the sale of arts and crafts.

On November 30, 2001, the defendants filed a demand for a bill of particulars seeking precise details about what business activities the defendants had allegedly engaged in that were competing with the plaintiffs' business. On December 21, 2001, the plaintiffs filed an answer stating that the defendants were manufacturing, advertising, selling, and distributing dolls in Franklin County, Illinois, that are the same line of goods purchased by the plaintiffs from the defendants.

On January 29, 2002, the defendants filed a motion to dismiss the plaintiffs' complaint. The defendants claimed that the non-competition clause in the agreement is "too vague and indefinite to enforce since it is not possible to determine from the contract which business activities are being restricted." The defendants asked the circuit court for a strict construction of the agreement because the agreement had been prepared by the plaintiffs' attorney, "who did not discuss the [non-competition clause] with the [d]efendants at any time before said [a]greement was executed."

On June 14, 2002, following a hearing, a transcript of which is not contained in the record, the circuit court granted the defendants' motion to dismiss. The circuit court strictly construed the agreement against the plaintiffs and ruled, "The [non-competition] [c]lause *** is too vague and indefinite to interpret and enforce since it is not possible to determine from the [a]greement which business activities are being restricted, and therefore, the [non-competition] [c]lause is not reasonable and is totally void ***." The circuit court also ruled that the agreement did not include the sale of any goodwill but that if it had, the circuit court would have reached the same conclusion regarding the enforceability of the non-competition clause. On August 23, 2002, the circuit court denied the plaintiffs' motion to reconsider.

The only issue raised by the plaintiffs on appeal is "whether the circuit court abused its discretion in granting the defendants' motion to dismiss." However, within this issue, the plaintiffs present two arguments. First, the plaintiffs contend that the circuit court erred in concluding that the agreement did not include the sale of goodwill. The plaintiffs argue that goodwill was transferred as an incident to the business and that if goodwill was not included in the sale of the business, then there would not have been a need for a non-competition clause. Second, the plaintiffs contend that the circuit court erred in ruling that the non-competition clause was unenforceable. The plaintiffs argue that the non-competition clause is "reasonable" and that a "nearly identical" non-competition clause was found enforceable in Jackson v. Hammer, 274 Ill. App. 3d 59 (1995).

In response, the defendants contend that the circuit court did not err in ruling that goodwill was not included in the sale of the business. The defendants argue that the agreement was for the sale of specified assets and real estate and that the agreement did not include the sale of a "business." The defendants contend that because the agreement was not for the sale of a business, there was no goodwill transferred. The defendants point out that a restrictive covenant is designed to protect the purchaser in the enjoyment and possession of the goodwill of the ongoing business transferred and that because there was no sale of a business or goodwill, the non-competition clause is unreasonable. Second, the defendants contend that the circuit court did not err in ruling that the non-competition clause is unenforceable, even if the agreement did involve the sale of goodwill. The defendants contend that the clause is unreasonable because it is not possible to determine from the clause which business activities are being restricted. The defendants argue that the non-competition clause could be construed to mean any type of any conceivable business activity and that, therefore, it is unreasonable and unenforceable.

We begin our analysis by first determining the appropriate standard of review. Although the plaintiffs argue that the circuit court "abused its discretion" in granting the defendants' motion to dismiss, we review a circuit court's decision to grant a motion to dismiss under a de novo standard of review. In the instant case, the defendants' motion to dismiss cites section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2000)). However, based on the arguments of the parties and the analysis of the circuit court, it appears that the parties and the trial court analyzed the issues pursuant to subsection (a)(9) of section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619(a)(9) (West 2000)). Section 2-619(a)(9) allows a dismissal when "the claim asserted *** is barred by other affirmative matter avoiding the legal effect of or defeating the claim." 735 ILCS 5/2-619(a)(9) (West 2000).

The term "affirmative matter" as used in section 2-619(a)(9) has been defined as a type of defense that either negates an alleged cause of action completely or refutes crucial conclusions of law or conclusions of material fact unsupported by allegations of specific fact contained in or inferred from the complaint. Krilich v. American National Bank & Trust Co. of Chicago, 334 Ill. App. 3d 563, 569 (2002). Accordingly, our review is conducted de novo because the circuit court dismissed the complaint pursuant to section ...


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