181 Iowa 1013 | Iowa | 1917
1-a
“The right Avhich a shareholder in a corporation has by reason of his OAvnership of shares, is a right to participate according to the amount of his stock in the surplus profits of the corporation on a division, and ultimately, on its dissolution, in the assets remaining after payment of its debts.”
In Price v. Holcomb, 89 Iowa 123, speaking to a claim that, under the rule governing a purchase of trust property by the trustee, the holder .of the majority of stock cannot buy the property of the corporation, we said that such stockholder’s relation Avas not that “of agent or trustee, but a joint OAvner,” and, while “an agent or trustee, is charged with the interests of his principal or cestui que trust, and cannot have any interest adverse thereto. Not so, hoAvever, as to a stockholder. He has his OAvn interests to protect,
See Windmuller v. Standard Distilling & Distributing Co., 114 Fed. 491.
(a) By change in statute, a dissolution need no longer have unanimous support, hut it suffices if it have such vote as is stipulated in the articles of incorporation.
(b) Every stockholder impliedly agrees, in becoming a member, that the management and control of the corporate business and interest shall be vested in the majority, and that Platner v. Kirby, 138 Iowa 259, at 265, is sup-‘ ported by precedent in saying that “in this state we have recognized the right of a majority to determine whether the corporation shall be continued, or shall be wound up.”
(c) Such majority has a discretionary power in the matter of dissolving.
(d) While an article of incorporation majority may dissolve because the corporation is insolvent, it may do so though the corporation is not insolvent — which is as well the holding of Green v. Bennett, (Texas) 110 S. W. 108.
(e) Such majority may wind-up if, in its judgment, there is reason to believe that, at some time in the future, the business may not prove satisfactory, and that, when the acts of the majority are impugned by the minority, the courts will hold that the policy and wisdom of the act is a matter of business, and not judicial judgment, and will not set the judgment of the court against it.
1-b
That impossible relief is sought is, as said, no bar to possible relief. Indeed, it may fairly be held that, even where possible and impossible relief is sought in the alternative, the possible is not an alternative at all, but is all that is sought and expected. But, of course, even possible relief may not be due. In this case plaintiff alleges all he does as a reason why all done should be nullified — the equivalent of asking a rescission. The only specific prayer for a money judgment is for the sum got by Hanson for farm loan commission, which it is claimed he was improperly allowed to divert from his employer, the bank. There is not a suggestion in pleading that damages are sought for conversion of either property or good will of the old bank. Eescission and restoration by setting aside is the object. The brief points make no claim for damages, or complaint that the stock of plaintiff is worth more than defendants offer. It is doubtful, to say the least, whether appellant may, in argument, mend holds and change from .the claim that the sale is a nullity to one that damages are due because the purchase price is too small. See Pollitz v. Wabash R. Co., (N. Y.) 167 Fed. 145; Smith v. Stone, (Wyo.) 128 Pac. 612; Farmers’ Milling Co. v. Mill Owners Mut. Fire Ins. Co., 127 Iowa 314, 318; Donley v. Porter, 119 Iowa 542, 545; Hawes v. Swanzey, 123 Iowa 51; Schillinger Bros. v. Bosch-Ryan Grain Co., 145 Iowa 750, 758; Yoder v. Kalona Sav. Bank, 142 Iowa 219; Home Sav. Bank v. Morris, 141 Iowa 560; Wright v. Lieth, 146 Iowa 290; Criley v. Cassel, 144 Iowa 685; Farmers & Merchants Bank v. Wood Bros, & Co., 143 Iowa 635. But, as both parties
2-a
The great question is whether those who dissolved the corporation and wound it up and bought its tangible assets should be dealt with as if they had continued the old bank, had bought its good will, and not paid for‘it. The crux is whether defendants are in that position, and, if so, what is the value of this “good will.” We are of opinion they are not in that position. If the bank was dissolved, it ceased to be a going concern, and no good will was left-Appellants concede that this is the holding of Green v. Bennett, (Texas) 110 S. W. 108. Our leading case on the subject, Millspaugh Laundry v. First Nat. Bank of Sioux City, 120 Iowa 1, so holds when the business was ended by an authorized foreclosure: that the one who forecloses and thereby destroys the business has done no wrong, and cannot be guilty of a conversion of the good will, because the exercise of his rights worked that there was no good will to- convert. While selling the property of a party on foreclosure is not ordering a dissolution and a sale of the property in carrying out the dissolution, the two acts invoke the same rule: that, when a business is closed out, there is no good will left. The witnesses in this trial finally agreed, in substance, that the fact that the concern is no longer going will at least greatly reduce the value of the good will. We think it a fair view of the whole of the evidence that it would be of no value. It is held in Bell v. Ellis, 33 Cal. 620, Farwell v. Huling, (Ill.) 23 N. E. 438,
If there be in fact a dissolution, it does not matterthat surviving partners, in the absence of a restrictive agreement on their part, carry on the same line of business as was transacted by the firm, and at the same place, and they may do so without accounting for the value of such of the good will of said firm as thereby accrued to them. Lobeck v. Lee, (Neb.) 55 N. W. 650. This was held in Musselman & Clarkson’s Appeal, 62 Pa. St. 81, where, after a banking firm had dissolved 'and appointed a partner to liquidate, he, immediately following the dissolution, commenced banking in the firm’s house on his own account, and under the firm name, while at the same time settling the firm business at that place. It is said that, if he had sold the good will, he would have been obliged to have accounted for the value received; but, in the absence of such sale or agreement on his part to pay for it, and his not selling it as such, he was under no liability to pay for good will; that this is so because—
“There was no relinquishment of business by the partners. Their business expired by its own limitation. They had no exclusive right in the business that existed for a moment after the firm dissolved * * * ; and these are the criteria of property in good will under the English rule. Kennedy v. Lee, 3 Meriv. 441; Coll, on Part. 156; Story on Part., § 99.”
The court adds that though, in its opinion, the rule has
As some of the authorities put it, the good will arising from the sale of the property exists only in cases where such sale is compellable by some of the members of the partnership or the association; that, therefore, on the death of one partner, the good will is not stock upon which the executor of that partner can comjiel a division, because he cannot compel a sale of the whole premises. Bradbury v. Wells, 138 Iowa 673, at 680, citing with approval Collyer on Partnership, Section 162.
In Slack v. Suddoth, (Tenn.) 52 S. W. 182, a firm of dentists dissolved partnership, and complainant notified defendant that the partnership was dissolved. But before giving this notice, or perhaps on the day after, he rented another office in the same building, and near the head of the stairway where the old offices were. On the next day after the dissolution, he advertised in the papers that the partnership was dissolved and he was located for practice in an adjoining room in the same building, and put his sign up at his office door. The other partner remained in éliarge of the old office, and used such of the furniture and instruments as he needed or wished. Complainant thereupon filed a bill to wind up the partnership, asked that a receiver be appointed to take charge of the lease and property and sell the same, and that he be allowed to start the bidding at $2,000. Relief was denied upon the ground that here is a case wherein no forced sale or transfer can be made of a good will, and that good will implies something gained by consent.
The very definitions of “good will” demonstrate that it belongs to none but a going concern which continues the business sold to it, — that “stays at the old stand,” — a business handled as something other than “a closing-up transaction.” Ott v. Boring, (Wis.) 121 N. W. 126. It is an element in the transfer “of a well-established business.” In re Graeser’s Estate, (Pa.) 79 Atl. 242. The most frequent definition of good will is that old customers will continue to be customers. Halverson v. Walker, (Utah) 112 Pac. 804; Brown v. Benzinger, (Md.) 84 Atl. 79.
Other cases on the rule of the prospect of the customers’ going back are Vonderbank v. Schmidt, (La.) 10 So. 616; Bergarnini v. Bastian, 35 La. Ann. 60; Succession of Journe, 21 La. Ann. 391; Chittenden v. Witbeck, (Mich.) 15 N. W. 526. Cruttwell v. Lye, 17 Ves. 335, says it is “the probability that the old customers will resort to the old place.” Williams v. Farrand, (Mich.) 50 N. W. 446; Meyers v. Kalamazoo Buggy Co., (Mich.) 19 N. W. 961 (20 N. W. 545). The Master of the Rolls, in Wedderburn v. Wedderburn, 22 Beav. 84, at 104, says: “It seems to be that species of connection in trade which induces customers to deal with a particular firm.” It is said in England v. Downs, 6 Beav. 269, at 276, “It is the chance or probability that custom will be had at a certain place of business in consequence.of the way in which that business has been previously carried on.” Story on Partnership, Sec. 90, speaks of an advantage or benefit acquired “by establishment * * * in consequence of the general public patronage and encouragement which it receives from custom or habitual customers.” It is said in Williams v. Farrand, (Mich.) 50 N. W. 446, that a retiring partner, in the absence of stipulation, and in addition to his interest in the tangible effects, parts simply with “the advantages that an established business possesses over a new enterprise. The old business is an assured sue
It is said in Cottrell v. Babcock Printing-Press Mfg. Co., (Conn.) 6 Atl. 791, at 797:
“By purchasing the good will merely, Cottrell secured the right to conduct the old business at the old stand, with the probability in his favor that the old customers would continue to go there.”
In Austen v. Boys, 4 Jur. (N. S.) 719, 721, it was said:
“Where a trade is established in a particular place, the good will of that trade means nothing more than the sum of money which any person would be willing to give for the chance of being able to keep the trade connected with the place where it has been carried on. * ' * * It seems to have been intended to describe that interest which the retiring partner would have had if he had remained in the partnership, and which, by his retirement before its termination, he was willing to relinquish to the continuing partner.”
In Angier v. Webber, 14 Allen (Mass.) 211, this is said:
“These facts show that the defendants have done acts which tend directly to deprive the plaintiff of the benefit of the reputation of the old.firm, to take away from him the patronage which appertained to it, and to draw away the business of its habitual customers to which he had acquired a right by the purchase of the good will.” .
How can there be customers continuing to deal with a closed-out establishment? As said by Mr. Justice Ladd in Millspaugh Laundry v. First Nat. Bank of Sioux City, 120 Iowa 1, if, by lawful conversion, the business is at an end, and the property disposed of, there cannot be left for appropriation that probability that customers might con
2-c
Much of the law which treats good will as a thing of tangible value rests upon the holding that he who buys good will gets the benefit of eliminating a rival in the business bought; that the seller is bound not to impair the continued success of the business whose good will he transferred. See Smith v. Gibbs, 44 N. H. 335, 346; Labouchere v. Dawson, L. R. 13 Eq. 322; Cottrell v. Babcock Printing-Press Co., (Conn.) 6 Atl. 791; Churton v. Douglas, Johns. Eng. Ch. 174; Dwight v. Hamilton, 113 Mass. 175; Munsey v. Butterfield, 133 Mass. 492; French v. Parker, (R. I.) 14 Atl. 870, at 873; Rice v. Angell, (Texas) 11 S. W. 338; Brown v. Benzinger, (Md.) 84 Atl. 79; Howard v. Taylor, (Ala.) 8 So. 36; Knoedler v. Boussod, 47 Fed. 465; Meyers v. Kalamazoo Buggy Co., (Mich.) 19 N. W. 961 (20 N. W. 545); Williams v. Farrand, (Mich.) 50 N. W. 446, 451.
The fact that it is so often made the test of value that good will means that having established a happy reputation would make it probable old customers and new ones will resort to the business that has been sold, and that the breach consists of impairing that probability and absolving those same customers in a rival business established, is an irresistible argument for the proposition that, when the authorities define what good will is, and what its value is, they have reference to a going business that has been transferred, and the owner of which complains of interference therewith, either while the business is still going, or because its going qualities have been destroyed or impaired by the one who sold the going business. See Smith v. Gibbs, 44 N. H. 335, 343, 345; Jackson v. Byrnes, (Tenn.) 54 S. W. 984; Nelson v. Hiatt, (Neb.) 56 N. W. 1029, 1032; Howard v. Taylor, (Ala.) 8 So. 36; Bradbury v. Wells, 138 Iowa 673.
It is quite difficult to appreciate rivalry in or an im
2-d
The four cases most relied on by plaintiffs, Knapp v. Reed, (Neb.) 130 N. W. 430, at 434, Inman v. Inkster, (Neb.) 134 N. W. 265, Lindemann v. Rusk, (Wis.) 104 N. W. 119, and Moore v. Rawson, (Mass.) 70 N. E. 64 (85 N. E. 586), are not applicable. All have a central holding which, though differing as to circumstances and detail, is the same in all; and that is: If one partner or one managing stockholder in effect oust the other, seize the corporation or partnership business or property, and carry on the business as his own, he is to be dealt with as liable to account, among other things, for a conversion of the good will.
III. The case could well be disposed of on the ground that the plaintiffs have estopped themselves by laches and acquiescence. But we have determined that, in view of the nature of the law questions presented on this appeal, the decision thereof should not rest upon that ground. See Cowell v. City Water Supply Co., 130 Iowa 672; Watkins v. National Bank of Lawrence, (Kan.) 32 Pac. 914; Beidenkopf v. Ins. Co., 160 Iowa 629, 649; Baker v. Seattle-Tacoma Power Co., (Wash.) 112 Pac. 647; Smith v. Stone, (Wyo.) 128 Pac. 612; Kessler v. Ensley, (Ala.) 141 Fed. 130; Jones v. Bonanza Min. & Mill. Co., (Utah) 91 Pac. 273.
The decree is — Affirmed.