80 N.Y.S. 363 | N.Y. App. Div. | 1903
The copartnership firm of “ J. & J. Slater,” composed of John and James Slater, was formed in 1859 for the purpose of manufacing and selling hoots and shoes. The business was established that year in the city of New York and continued by the original partners until the 23d day of June, 1901, when John, the senior partner, died. Since that time the business has been continued by James as the surviving partner at the same place, with the same employees and in the same manner as before, but, as the trial court has found, with a view to closing out its affairs as a going concern for the benefit of himself and the estate of his deceased brother, whose interests are equal. Tlie surviving partner, however, asserted an exclusive right to continue the business and the use of the firm name; and, with that end in view, he entered into an agreement on the 4th day of October, 1901, with his nephew, the defendant John Slater, and with the defendant James S. Coyte, for the formation of a partnership as soon as the affairs of the old firm are settled “ to carry on the manufacture and sale of boots and shoes and merchandise,” such copartnership to terminate on the 1st day of May, 1907, and on said 4th day of October, 1901, they filed a certificate in the form provided by section 21 of the Partnership Law (Laws of 1897, chap. 420), declaring their intention to continue business under said firm name and caused a copy of such certificate to be published as therein provided. This action was commenced on the 23d day of December,
His attempt to become the successor to the business and to succeed to the exclusive use of the firm name under the statute was premature. Section 20 of the Partnership Law (Laws of 1897, chap. 420) provides as follows:
“ When partnership or business name may be continued.—The use cf a partnership or a business name may be continued in either of the following cases:
*452 “ 1. Where the business of any firm or partnership in this State, having business relations with foreign countries or which has transacted business in this State for not less than three years, continues to be conducted by some or any of the partners, their assignees or appointees;
“ 2. Where a majority of the members, general or special, of a general or limited partnership formed under the laws of this State, or of the stockholders of any corporation, domestic or foreign, which may theretofore have carried on its business within this State, and where said general or limited partnership or corporation has discontinued or shall be about to discontinue its business within the State, and where a majority of the partners, general or special, in either of such last mentioned copartnerships or of the survivors thereof shall be members of the new limited copartnership, or where a majority of the members of such copartnership theretofore existing or of the surviving members thereof or of the stockholders of such corporation shall consent in writing to the use of such firm or corporate name by the new limited partnership ; or
“ 3. Where any resident of this State dies, who at the time of his death and for at least five years immediately prior thereto conducted and carried on in his sole name any business in this State, or who at the time of his death so conducted and carried on any business having relation with other States or foreign countries the right to use the name of such person for the purpose of continuing and carrying on such business shall survive and pass and be disposed of and accounted for as part of the personal estate of such deceased person, and such business may be continued and carried on under such name by any person who comes into the legal possession thereof.”
The right of the survivor to use the firm name in the case at bar depends upon subdivision 1 of said section 20, which only authorizes su'ch continued use where “ the business ” of the firm “ continues to be conducted by some or any of the partners, their assignees or appointees.” Section 21 merely prescribes how the right may be secured and preserved. It is manifest that the Legislature intended to limit the right to the use of the firm name to “ some or any of the partners, their assignees or appointees,” who continue to conduct the business theretofore carried on by the firm.
It is, therefore, clear that before any one is permitted to continue the use of the firm name he must first acquire the business by purchase, voluntary or otherwise. The business is a firm asset, and if, as here, the parties do not agree upon a disposition of it, the court may decree its sale for the benefit of the creditors, if any there be, and all those having an interest in the firm. The business being a firm asset, the firm, if those interested do not agree otherwise, is entitled to all it can obtain therefor on a sale thereof and the surviving partner has no right to continue the business in the old firm name for his own benefit (2 Lindl. Part. [Text Book Series] *443), and he can acquire no right to the use of the firm name under the statute, except he be the purchaser on the sale. The defendant James Slater, by not appealing from that part of the judgment, concedes that the good will is a firm asset which may be sold; and such it unquestionably is. (Pollock Part. [6th ed.] § 39 ; All. Good W. 81; 2 Bates Part. § 672.)
The decree of the court and the interlocutory judgment, however, exclude from the good will the firm name and adjudge that :it belongs exclusively to the surviving partner. It is manifestly impracticable to thus separate the firm name from the good will. It is evident that the good will is of little value disconnected entirely from the firm name, and with the exclusive right to use the firm name outstanding in another. It follows from what we have already stated that the decision of the trial court is erroneous, in so far as it .adjudges that the surviving partner is entitled to the exclusive use
The important question .still remains to be determined as to how far, if at all, the right to the exclusive use of the firm name goes to any purchaser of the good will, even though he be not the surviving partner. It appears that for a period of more than forty years this firm did a successful, profitable business, which increased very rapidly during the later years. The right exists to continue the business at the same place for many years, and this undoubtedly adds to the value of the good will. It needs no argument to show that it must be a valuable good will. It is evident that there may be a good will incident to the premises where the right exists to continue business at a particular place specially adapted by favorable location ; also as an incident to the personnel of the firm where the right to use the firm name is acquired and authorized; also as an incident to the trade where the right to continue the particular business is acquired, and also as an incident to both place and trade, as here, where the right to continue the particular business at the old stand exists. (14 Am. & Eng. Ency. of Law [2d ed.], 1085; People ex rel. A. J. Johnson Co. v. Roberts, 159 N. Y. 70.) We have recently held in Fisk v. Fisk, Clark & Flagg (77 App. Div. 83) that the purchase of the good will of a business included the right to the purchaser to hold himself out as the successor to the business of the old firm. It is difficult to define all of the elements embraced in the term “ good will,” but is evident that the valuable elements of a good will are those which attract the customers. They are all — excluding from present consideration the right to continue the business in the firm name—included in the right to succeed to the business and to carry it on openly as the successor to the old firm. (Thynne v. Shove, 45 Ch. Div. 577; Burchell v. Wilde, [1900] 1 Ch. 557, 558; Matter of David cmd Matthews, [1899] 1 id. 384, 386; Hegeman & Co. v. Hegeman, 8 Daly, 1; Knoedler v. Boussod, 47 Fed. Rep. 465; sub. nom. Knoedler v. Glaenzer, 55 id. 897; People ex rel. A. J. Johnson Co. v. Roberts, 159 N. Y. 81.) Whether dependent upon person, trade or place, the good will is a property right which can be sold or assigned (People ex rel. A. J. Johnson Co. v. Roberts, supra), and which, on dissolution, the court will, as Lindley says (2 Lindl. Part. [Text Book Series] * 443), “ so
The plaintiffs argue that the reputation of the firm for honest, considerate dealing, courteous treatment of its customers, skillful workmanship, good quality and style of its goods, has held and increased its trade, and that its customers rely with confidence upon what it offers for sale. Assuming these facts to be true — of course, it will be for each intending purchaser to say how far he deems them true, and to what extent he is to be influenced thereby — can there be any doubt that the purchaser of the business, whether he be the surviving partner or not, will be able to hold a large part of this trade if he may lawfully inform the public by advertising or otherwise that he, as the successor to this firm, will continue its business methods and will continue to furnish to the trade the same high quality of stylish footwear, and will continue in his employ, so far as possible, the workmen and employees who have aided in making the business of his predecessors a success, and will in every way continue to deserve the confidence earned by them ? It thus appears that this is a valuable right.
There is a dearth of authority on the question as to whether the right to use the firm name passes to the surviving partner at common law. Ho decisions, other than those made at Special Term have been cited and we find none in this jurisdiction decisive of the question. Some of these Special Term decisions, among which is Fenn v. Bolles (7 Abb. Pr. 202), hold that it becomes a firm asset, and others, among which is Mason v. Dawson (15 Misc. Rep. 595; 72 N. Y. St. Repr. 123), hold that the right passes to the surviving partner, and the rule was so stated in Caswell v. Hazard (supra), but the question was not directly involved. The absence of controlling precedents is, doubtless, owing to the fact that this question is generally regulated by the copartnership articles, and the right to continue the use of a firm name has become more valuable of late years. The common-law rule seems to be established in England by recent decisions that it does not pass to the survivor, but is part of the good will and a firm asset. (Churton v. Douglas, 1 Johns. Ch. [Eng.] 174; Burchell v. Wilde, supra; Matter of David and Matthews, supra.) But the right of a purchaser of a business to use the firm name to the extent of holding himself out as its successor
It was doubtless competent for it to authorize the use of the firm name by a surviving partner who acquires the good will and the business. The estate of the deceased partner could not become liable in such ease and is not prejudiced. Whether the statute was designed to authorize a purchaser, other than a surviving partner, on dissolution by death, to continue the business in the firm name need not be authoritatively decided, for even if so, we think it should not be permitted in this case. The present rule in England seems to be that the purchaser of the good will is not entitled to use the style or name of the old firm, where that includes the name of a living person or if the use of it would expose the owner of the name to liability (Burchell v. Wilde, supra); and the surviving partner does not become the owner of the firm name, but it passes to the purchaser, who may enjoin its use by the survivor. (Matter of David and Matthews, supra.) The case at bar, relating as it does to an important branch of business law, should be considered and determined on its own special features. The firm has been dissolved by operation of law. Its assets are not being sold voluntarily, with all the members of the firm consenting to the terms of sale; but involuntarily, with the survivor objecting to a sale of the firm name. The firm name is neither artificial nor fictitious. It consists of the surname of both partners, with the initials “ J. & J.,” standing for John and James, prefixed. Does such a firm name form an essential, indispensable part of the good will ? Is it so intimately connected with it that the executors of the deceased partner may insist upon a transfer of it to the purchaser, and may he be given the right to use it not only without the consent, but against the protest of the survivor, who claims the right to the use of his own name in the same line of business, and also the right to the use of the firm name in his
The surviving partner was not entitled to compensation for his services in winding up the affairs of the firm. (Burgess v. Badger, 82 Hun, 488.) As receiver, his compensation was discretionary with the court. (Code Civ. Proc. § 3320.) The record does not present the facts concerning his administration as receiver, and consequently the disallowing of commissions or compensation cannot be reviewed. However, it appears that he erroneously asserted rights inconsistent with the rights of the representatives of the deceased partner, and this necessitated the receivership.
It follows that the interlocutory judgment should be modified as herein indicated, and as so modified affirmed, with costs to each party payable by the receiver.
Van Brunt, P. J., O’Brien and Hatch, JJ., concurred; Ingraham, J., concurred in result.
Judgment modified as directed in opinion, and as modified affirmed, with costs to each party payable by the receiver.