White v. Jones — 1 Abb. Pr. 328

Majority

p. 328

WHITE against JONES.

New York Superior Court ;

General Term, November, 1863.

Headnote

Injunction.—Signs and Trade-marks.—Good-will.

A retiring partner, who releases and assigns all his interest in the good-will of the business of the firm to his co-partner, does not thereby relinquish the right to establish and carry on a business similar to that of the late find, so long as he does no act to mislead customers into the belief that he is carrying on business as the successor of the old firm; or, that, when dealing with him, they are dealing with such successor.

Nor does one who was formerly bookkeeper of the late firm, and who, upon its dissolution, unites with such retiring partner in establishing such new business, thereby become liable to an action, by the purchaser of the good will, for an injunction or damages.

Where the conditions of dissolution were such that the retiring partner had the right to open,-and attend to, for his own benefit, letters thereafter addressed to the late firm, upon certain subjects of business;—Held, that the mere fact that he opened, and answered, in his own name, and for his own benefit, two fictitious or “decoy” letters, addressed to the late firm at the instance of the plaintiff, their successor, and purporting to be upon business which the former had not the right to attend to, did not authorize the court to interfere by action and injunction.

This was an appeal by the plaintiff, from a judgment in favor of the defendants. -

The action was brought to restrain the defendants, who were Asahel Jones and Gilbert 0. Platt, from alleged interferences with the business of the plaintiff, and for damages therefor.

The cause was tried before Mr. Justice Robertson, without a jury, on the 15th of May, 1862.

For about four years prior to, and until the year 1860, the plaintiff, the defendant Jones, and one McCurdy, carried on in Kew York, Philadelphia, and elsewhere, the business of manufacturing and selling artificial teeth, and also instruments and articles used in dentistry, as partners, under the firm name, at first, of Jones, White & Co., and afterwards of Jones, White & McCurdy..

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In the year 1860, McCurdy left such firm, and shortly after-wards, on the' 18th day of December, 1860, the plaintiff, and the defendant Jones, entered into articles of copartnership, and subsequently carried on a similar business in the several cities mentioned therein, using in such business the firm name of Jones & White, until such new firm was dissolved, as hereinafter stated.

These articles provided, among other things, that the firm business should include the manufacture and sale of gold foil and plate, except in the city of New York, where that department of business was to be carried on as before by Jones, for his own benefit, exclusively. t,

For many years before the formation of the firm of Jones & White, and during its whole existence, Jones resided in New York, and exclusively superintended the business of such firm in New York, at No. 658 Broadway, and carried oh the branch of business in gold foil and plate at the same place, exclusively for his own individual benefit; while White resided in Philadelphia, and had charge of the business in that city, at which most of the manufacturing of the firm was done.

About the 26th of June, 1861, the firm of Jones & White was dissolved by mutual consent, by an instrument in writing, the plaintiff, White, purchasing all the interest of the defendant, Jones, including “the good-will of the entire business.” As a part of the consideration of this transfer, Jones agreed to take a large amount in the debts due the firm, contracted at, and due to, the New York house. The defendant, Platt, who had been the bookkeeper at the New York house, and well acquainted with its business and customers, was a subscribing witness to this agreement. »

From the time of the dissolution of the firm of Jones & White, the plaintiff continued the business of such firm at No. 658 Broadway, as their successor. And, shortly after the dissolution, the defendant Jones established, in his own name, at No. 710 Broadway, several blocks, and upwards of an eighth of a mile distant, a new business, which was substantially similar in kind to the business previously conducted by Jones & White, at No. 658 Broadway, and continued such new business in Tus own name. The complaint alleged that the defendant Platt was interested in this business with Jones; but upon the trial it appeared that he was not, being only employed at a salary.

Such new business differed from the business carried on by

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the firm, previous to its dissolution, in this, that the defendant Jones sold teeth manufactured by other persons, but did not himself manufacture them, whereas the sales of teeth by such firm were principally of those manufactured by it..

The plaintiff, supposing that letters addressed to Jones, White & McCurdy, and containing orders and money for himself as their successor, were received and opened by the defendants, employed a detective officer connected with the United States postal service, who sent through the post office two letters addressed to the firm of Jones & White, which purported to be business letters, and one contained a sum of money to pay for goods for which it contained an order. These letters came to the hands of the defendant Jones, and he answered them by mail, over his individual signature. The envelopes in which his answers were sent, contained his individual business card, or address. To one of these letters the officer replied, in his fictitious name, saying : '* * * “Tour terms are all.satisfactory, but “ you do not state whose make of teeth they are: are they the “ same as formerly, or a new make ? I sent my letter to Jones & “ White, but I .suppose they have dissolved since I had any busi- “ ness with them, which is some time since, and I suppose you “ carry on the business.” * ’* *

In answer to this, the defendant Jones wrote: * * * “ I “ will send you, if ordered, my own teeth, and, if not satisfac- “ tory, will take them back. * * * Anything in the dental “ line I can give—and I believe that twenty years’ experience “ in the dental business will be a sufficient guarantee of my “ character in this line. I shall be happy to receive your favors.”

In answer to the other of the decoy letters, the defendant Jones sent a package of the goods which it purported to require, by mail to the address specified therein, and enclosed therewith several envelopes with his individual address printed thereon, and also a bill of the goods as bought of him.

That package and its enclosure came afterwards, unopened, to the hands of the person by whom the decoy letter had been prepared and mailed, who was one of the employees of the post office, and the goods contained therein were, upon the application of the defendant Jones, restored to him, and he, thereupon, returned to such employee the sum of money which he had previously received for the same.

The judge found, as a fact, that “ except as hereinbefore stated,

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neither of the defendants, since execution of said instrument of dissolution, 'have received, opened, or sent letters or envelopes containing orders for goods from customers of the late firm of Jones & White, or from. others who had not previously' dealt with it, which were directed either to Jones & White, or to Jones, White & Co., or to Jones, White & McCurdy, or any letters intended for Jones & White, or for the plaintiff or their successor, or filled such orders, or sent goods as in such orders requested, or received moneys in payment therefor, or treated such orders as intended for them, or for said Jones.

And he found as conclusions of law:

First. That the “good-will” of the business of the late firm of Jones & White, and of the previous firms of which it was the successor, became, and was, by virtue of the articles of dissolution, the sole and exclusive property of the plaintiff, as successor of said firm.

Second.' The defendant Jones has not, since the execution of said agreement, violated the covenants and provisions therein contained, on his part to be done and performed, nor interfered with, or infringed upon the said good-will of the former firm, now belonging to the plaintiff as aforesaid.

Third. That said defendant Jones had the right to open any letter addressed to the firm of Jones & White, respecting the debts due to the said partnership of Jones & White in Kew York, at the time of its dissolution, and the business of manufacturing and selling gold foil and plate, since the dissolution of the said partnership, and had the right to receive and open and answer any letters addressed to the said firm, ¡\ylffch he did not have any reason to believe did not relate to such masters, if he . did not open the same for the purpose of fulfilling o!rders;,'there- ’ in contained, not relating to such matters.

Fourth. The defendant Platt is not in any manner a party to the articles of dissolution in the complaint set forth, and has not, since the plaintiff became entitled to the good-will of the business of the late firm of. Jones & White, infringed upon, or in any manner interfered with such good-will.

And I do accordingly adjudge, that the plaintiff is not entitled to the injunction in the complaint prayed for, restraining the I defendants, or either of them, as therein specified, or in any I manner; and that the plaintiff has sustained no damages which he is entitled to recover against the defendants, or either of

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them, and that the complaint should he dismissed with costs to be adjusted, and the injunction heretofore granted herein against the defendants dissolved.

Judgment against "White for costs was entered, from which the present appeal was taken.

Elbridge T. Gerry, and William Curtis Noyes, for plaintiff, appellant.

I. By the terms of the articles of dissolution an absolute vested right to the entire property of the concern, both real and personal, was conveyed to the appellant for a valuable consideration; and to prevent any misunderstanding as to the extent of property thus conveyed, “ the good-will of the entire business ” was specifically mentioned in the contract.

1. That “ good-will ” was partnership property, a legal subject of conveyance, and vendable to any one by all the partners; or by one to the other, as in this case (Marten v. Van Schaick, 4 Paige, 479; Dougherty v. Van Nostrand, Hoffm. Ch., 68; Smith v. Everett, 27 Beav., 446 ; S. C., 29 Law Jour. Ch., 236; Wedderburn v. Wedderburn, 2 Jurist [N. S.], 674; S. C., 22 Beav., 84; S. C., 25 Law. Jour. Ch., 710; Wade v. Jenkins, 7 Jurist [N. S.], 39 ; S. C., 2 Giff. Ch., 509 ; S. C., 30 Law Jour. Ch., 633 ; S. C., 3 Law Times [N. S.], 464).

2. It was in the present case a definite interest,- consisting in an advantage arising from the fact of sole ownership to the exclusion of other persons. It was embodied in the firm name which was essential to its use, and could neither perish nor be separated from it (Story on Partn., § 99; 16 Am. Jurist, 87, article by Prof. Greenleaf; Kennedy v. Lee, 3 Meriv., 452; Collyer on Partn., § 161; Williams v. Wilson, 4 Sandf. Ch., 379 ; Smith v. Gibbs, 25 Law. Rep., 421 ; Fenn v. Bolles, 7 Abb. Pr., 202 ; 2 Lindley on Partn., 709-10).

II. There was an implied covenant by Jones in the transfer to White of all this property, that no act should be done by him to deprive White of the benefits accruing to him from such transfer.

1. By the articles of dissolution, the right was secured to Jones to carry on his manufacture and sale of gold foil, besides a reservation to him of certain debts due the old firm. They nowhere authorized any interference by, or right of Jones to any other portion of the business; and these reservations to him, on well settled legal priniciples, were an exclusion of all the rest

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(Bennett v. Van Syckel, 4 Duer, 462 ; 1 Platt on Covenants, 55, 57; Selden v. Senate, 13 East, 63; Aulton v. Atkins, 18 Com. Bench, 249 ; S. C., 2 Jurist [N. S.], 812 ; S. C., 25 Law Jour. Ch., 229; Ward v. Audland, 16 Mees. & W., 862, 876, and authorities cited in American edition ; Cooper v. Watlington, Chitty, 321; S. C., sub nom. Cooper v. Watson, 3 Doug., 413 , in point).

2. So that, although there is no express covenant in these articles by Jones not to set up any rival business, still one is implied, the good-will having been sold by him to White; and he had no right to give any notice, or do anything indicating that his was the old business, or which might interfere with White’s enjoyment of it (Crutwell v. Lye, 17 Vesey, Jr., 344; Howe v. Searing, 6 Bosw., 370 , per Moncrief, J.).

HI. The facts in the case, proven by the evidence and found by the court, show conclusively a fraudulent infringement by the respondents of rights acquired by White in the purchase of the property, and for the protection of which this action was brought.

1. Long before the sale, but while it was in contemplation, Jones and Platt secretly combined to secure for themselves a lucrative business out of the transaction, (a) They first took lists of the customers of the firm, and then sought to induce the old clerks to leave White and go with them, (b) Then they prepared advertisements of their intended new business,^ procured a store close by that of the old firm, and before White got possession, Platt made arrangements in Philadelphia to furnish Jones and himself with materials like those used by the old firm. (c) All this was done secretly, White being ignorant of the matter, and supposing that the transaction between him and Jones was fair and honest. Indeed, he did not even suspect the purloining of his orders by Jones until the detectives suggested it.

2. This fraudulent scheme of the respondents, which commenced before, was carried out by them subsequent tó the sale. {a) The business of White greatly decreased, which can be attributed to no other cause, (b) Jones opened and read letters addressed to the old firm, which he had no right to do," under the pretence that his ownership of the debts of the old firm, secured to him on its dissolution, warranted such a course. Indeed, he admitted this to the detectives.

3. These facts bring the case completely within the rule of

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Harrison v. Gardner, and show a deliberate fraudulent purpose when the contract of sale was made, to violate the understanding by which the property was transferred to White (Harrison v. Gardner, 2 Madd. Ch., 197, 220 [Am. Ed., p. 444], per Sir W. Plummer ; Gale v. Gale, 19 Barb., 249 ).

IY. Equity will intervene to restrain a vendor from fraudulently depriving his vendee of the benefits which would naturally result from the sale; and will compel him to refund profits which he has himself usurped, besides holding him responsible for damages resulting from the fraud (2 Hovenden on Frauds, 68, 240-1; Nickley v. Thomas, 22 Barb., 652 ; Green v. Folgham, 1 Sim. & 8., 406).

Y. The respondent, Platt, was a partieeps crimmis, combining with Jones to carry out his fraudulent intentions, and reaping his advantage in a percentage on profits fraudulently acquired. He is, therefore, jointly liable with Jones in damages, having joined in the commission of a tort, with full knowledge of the facts (2 Hillyard on Torts, 310, 311, and cases cited in notes ; Longman v. Pole, Moody & M., 223).

YI. The court below erred in not finding the facts set forth in the appellant’s exceptions, which were fully sustained by the evidence, in excluding certain portions of evidence which were relevant and admissable to sustain the complaint; and, finally, in dismissing the complaint upon the facts proven, and dissolv- ' jhg the injunction previously granted.

Joseph H. Choate, for defendants, respondents.

I. The case made by the complaint is the only case before the . court, and that is simply for a violation of the articles of dissolution. The transfer by one partner of the good-will of the firm business does not, without an express agreement to that effect, bar him from establishing and carrying on a similar business, in his own name, and from employing, as a stranger might do, in fair competition, all the legitimate modes of advertising and advancing the new business (Davis v. Hodgson, 25 Beav., 177; Cooke v. Collingridge, Jac., 623; Crutwell v. Lye, 17 Ves., 346, 385 ; Churton v. Douglass, 1 H. V. Johnson, 176 ; Snowdon v. Noah, Hopk. Ch., 347; Bell v. Locke, 8 Paige, 75; Dayton v. Wilkes, 17 How. Pr., 510 ; Howard v. Henriques, 5 Sandf. S. Ct., 725; Howe v. Searing, 6 Bosw., 365 ; and vid. Hitchcock v. Coker. 6 Ad. & El., 438, 446; Elves v. Crofts, 10 Com. B., 241; Harrison v.

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Gardner, 2 Madd., 197 [Am. Ed., p. 444] ; Shackle v. Baker, 14 Ves., 468). In Williams v. Wilson ( 4 Sandf. Ch., 379 ), the injunction was probably made mutual by consent.

II. The defendant, Jones, never covenanted or agreed to refrain from carrying on the same business elsewhere—and the plaintiff has wholly failed to show any violation on his part of the articles of dissolution.

III. As to the letters. An examination of the partnership articles and the agreement of dissolution, shows that about onelialf of all the business done at its Hew York house by Jones & White consisted of Jones’ private business in the manufacture and sale of gold foil and plate, and that this, at the dissolution, reverted to Jones. Also, that at the dissolution, all the debts due to the firm at its Hew York house became the sole property of Jones, and that the settlement of them was left to him. He had, therefore, undoubtedly the exclusive legal right, after the dissolution, as found by the court, to receive and open and keep all letters addressed to the firm relating to either of those subjects; and a right, in common with the plaintiff, to open and read all letters addressed to the firm, coming into his hands, for the purpose of ascertaining whether they were his or not. By a roguish device, for the purpose of entrapping the defendant into a seeming violation of his rights, the plaintiff, some four months after the dissolution, entered into a conspiracy with some of the clerks of the post-office, to get into the hands of the defendant counterfeit letters and orders to the firm, in the hope that, by inadvertence or otherwise, he might fill the orders, and so furnish the plaintiff some ground which he had not yet found on which to seek the interposition of a court of equity. The results of this dishonest manoeuvre constitute the sole basis of the plaintiff’s alleged grievances.

The acts of the defendant, in all these instances, even had they not been the result of inadvertence) which upon the evidence they clearly were, and had the transactions been genuine, are clearly shown in the opinion of Robebtsox, J., to form no ground-work for the plaintiff’s action.

But, further than this, in view of the plaintiff’s connexion with all those transactions, it is obvious that all those letters were ’written and sent by the plaintiff to the defendant, with the intent that they should be opened and read, and the orders filled by him, and as the only means of effecting this, so that Jones

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might inadvertently fall into the trap, to insert them in a box where none but his own letters were ever placed, and to get them into the hands of his messenger among a parcel of his letters, so that they might escape notice.

Moreover, it is equally obvious that by these transactions the plaintiff sustained no damage, biobody was deceived. The Chilicothe customer and the Concord customer were none but the plaintiff; the money received by Jones in the one instance was refunded as soon as discovered; and in the case of the Cuba letter, the order and the profits of it belong by the agreement to Jones.

IV. But, in -addition to the utter failure of merits, there are general rules of equity which imperatively required that the plaintiff’s action should be dismissed, as it was.

1. Because it has been attempted to be brought within-the jurisdiction of equity and of. the court by a dishonest trick, but for which the plaintiff could not have stated in his bill a prima facie case, bio court of equity will sanction an attempt by fraud or misrepresentation to bring a party or a cause within its jurisdiction. bTo plaintiff can successfully invoke the aid of equity unless his own hands are clean, and his own conscience pure in the business that brings him there.

2. Because he who seeks equity .must show that he is ready to do equity; but the plaintiff’s whole cause in the business has been inequitable and fraudulent; instead of seconding the efforts of the defendant to have his letters kept separate, he purposely contrives a plan to confuse the firm’s letters "with those of the defendant, in the hope that the latter in an unwary moment might open and answer some that did not belong to Mm.

3. Because equity will not relieve a man agamst grievances wMch he has brought upon himself; nor help, him to relief to which he can perfectly well help himself. Had the plaintiff taken half as much pains to keep his letters out of the defendant’s hands as he did to get them into them, he would have had no pretence for bringing his action.

4. Because the plamtiff’s evidence shows that the grievance complained of no longer existed; before the trial the plaintiff had wholly ceased receiving letters'directed to the firm.

V. As to the defendant Platt no evidence was offered. He had a plain right to choose his own master. He has no interest in the defendant Jones’ business, and had no hand in any of the acts complained of.

The sale by Jones to White, on the dissolution of their copartnership, of his interest in it, and “the good-will of the entire business,” did not deprive Jones of the legal or equitable right to engage in, and prosecute a similar business, in the vicinity of the place of business of the dissolved firm. This seems to be so well settled, that nothing more is necessary than to refer to some of the prominent cases, affirming this doctrine (Crutwell v. Lye, 17 Ves. Jr., 344; Davis v. Hodgson, 25 Beau., 177; Churton v. Douglas, 1 H. V. Johnson, 176 ; Howe v. Searing, 6 Bosw., 354 ; Dayton v.Wilkes, 17 How. Pr., 510 ).

The complaint does not allege that the defendant, in prosecuting his business at 710 Broadway, represents it to be the same business which the dissolved firm carried on at 658 Broadway, or that he is conducting business at 710 Broadway, as successor to the late firm of “ Jones & White.” On the contrary, it avers that “ Jones has established a similar business, in all respects, to that of the old firm, in his own name, * * and still continues to carry on such business in his own name, * * such business being, in all respects, similar to that conducted by the said firm of Jones & White.”

That Jones has opened letters, etc., directed to “ Jones & White,” • “ Jones, White & Co.,” and to “Jones, White & Mc-Curdy,” intended for the plaintiff; that such letters were from customers of the late firm of Jones & White, and contained orders for goods; and that Jones has filled said orders, and received payment for the goods ordered.

Judgment is prayed that Jones be enjoined from receiving or opening any letters or orders directed as aforesaid, or from filling the orders, or from, in any way, interfering with the business of the former firm, or the good-will thereof; and for damages.

The defendant has a right to establish and carry on, in his own name, a business similar to that of the late firm, so long as he does no act to lead customers into the belief that he is carrying on business as the successor of the old firm, or that, when dealing with him, they are dealing with White, or with the person succeeding to the business of the late firm of Jones & White.

.To such loss of anticipated business or profits as the plaintiff may be subjected by the prosecution by Jones of a similar business, in his own name, conducted as the law will permit him to conduct it, the plaintiff must submit. If the good-will of the

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business of the dissolved firm should prove less valuable, by such means, than the plaintiff estimated, it is his misfortune, and the law will not undertake to idemnify him, by enjoining Jones from prosecuting a similar business.

The- evidence offered to be given by the witness, Walker, wras properly rejected. The conversation offered to be proved, is not stated in the offer to have been made in the hearing of the plaintiff.

The. complaint does not allege that Jones, to induce White to enter into the contract of dissolution, represented that he did not intend to engage in a similar business in competition with, or in opposition to the plaintiff. It does not intimate the existence of any contract not evidenced by, or embodied in, the written contract of the 26th óf June, 1861. It does not attempt to raise any question of fraud by White, in obtaining the execution of that written contract. The case made, and the right to the relief sought, are founded on the rights growing out of the agreement which that expression imports, and its supposed violation.

The complaint does not allege that Jones has issued circulars, or published advertisements, the continuance of which should be enjoined. ,

The only relief prayed for, not disposed of by the views already stated, is an injunction restraining the defendants from receiving and opening letters addressed as stated in the prayer for relief, and from filling the orders. •

The evidence relating to this branch of the case warrants the findings of fact as found at’special term.

The only misconduct charged in the complaint against Platt, besides the opening of orders intended for the plaintiff, and filling such orders, is his forming a partnership with Jones, in the business conducted at ¡No. 710 Broadway, and continuing such partner, and interested in said business, having been the bookkeeper of Jones & White, well acquainted with its business, and those accustomed to deal with it, and knowing of the dissolution of that film; the articles of dissolution and their contents, and having signed the sime as a subscribing witness.

Except the allegation of opening letters and "orders, and filling the orders, no misconduct is imputed to him in the complaint.

The facts found in respect to the matter last-named, • do not authorize the court to interfere by action and injunction.

The judgment should be affirmed.