Slater v. Slater

The copartnership firm of J. & J. Slater, composed of John and James Slater, was formed in 1859 for the purpose of manufacturing and selling boots 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 employés 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 hi's deceased brother, whose interests are equal. The 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 (chapter 420, Laws 1897), 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, 1901, by the plaintiffs, as executrix and executor, respectively, of the deceased partner. The surviving partner was also one of the executors of the deceased partner, and he is sued both individually and as such executor. It is alleged in the complaint, among other things, that the surviving partner is proceeding in disregard of his duties and in violation of the rights of the representatives of the deceased partner, and is asserting an exclusive individual ownership of the copartnership name, and contends that the good will, apart from the name, is valueless. The appointment of a receiver and an accounting are demanded. The plaintiffs applied for the appointment of a receiver, and the court appointed the surviving partner, who qualified and entered upon the discharge of his duties. Upon the trial of the issues a decision was filed authorizing an interlocutory judgment, decreeing, among other things, a sale of the entire property and assets of the firm as a going concern, including the store and" basement of No. 1121 Broadway, and the store No. 27 West Twenty-Fifth street, being the premises occupied and used by the firm as its place of business during the last four years, which leases run until May 1, 1907, and including the lasts, patterns, bills receivable, entire stock on hand, and good will of the business, but not the right to use the firm name, which the court decided was not a firm asset nor part of the good will of the business of the firm, and that it passed to, and became the absolute property of, the surviving partner. The plaintiffs appeal from that part of the interlocutory judgment which

Partners are joint tenants of the stock in trade, but 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 (chapter 420, Laws 1897) provides as follows:

“When Partnership or Business Name may be Continued. The use of a partnership or business name may be continued in either of the following-cases: (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 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 such continued use where “the business” of the firm “continues to be conducted by some or any of the partners, their assignees or appointees.” Section 2i 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 would therefore seem clear that the statute fairly requires, as a basis for the use of the firm name, that the right to continue the firm business must be first lawfully required. This history of legislation is not inconsistent with this construction. The first statute enacted on this subject was chapter 281 of the Laws of 1833, which prohibited the transaction of business in the name of a partner not interested in the firm, and provided that, where the designation “and Company” or “and Co.” was used, it should represent an actual partner or partners, and made a violation thereof a misdemeanor. This was repealed by chapter 593 of the

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

The decree of the court and the interlocutory judgment, however, excludes from the good will the firm name, and adjudges 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 of the firm name, regardless of whether or not he purchases and continues the •business.

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 40 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 have 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 adopted 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. Enc. Law (2d Ed.) p. 1085; People v. Roberts, 159 N. Y. 70 , 53 N. E. 685 , 45 L. R. A. 126 . We have recently held, in Fisk v. Fisk (not yet officially reported) 79 N. Y. Supp. 37 , 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 it 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. 551; In re David [1899] 1 Ch. 384-386; Hegeman v. Hegeman, 8 Daly, 1 ; Knoedler v. Boussod (C. C.) 47 Fed. 465 ; Id., 5 C. C. A. 305 , 55 Fed. 897 , 20 L. R. A. 733 ; People v. Roberts, 159 N. Y. 81 , 53 N. E. 685 , 45 L. R.

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, bv 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 employés 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. No decision, other than those made at special term, has 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. Prac. 202 , hold that it becomes a firm asset; and others, among which is Mason v. Dawson (Sup.) 37 N. Y. Supp. 90 , 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 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. Eng. Ch. 174; Burchell v. Wilde, supra; In re David, 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, and advertising the fact that he is the successor, seems well sustained by authority. Cases last cited, and Levy v. Walker, 10 Ch. Div. 436, 449; Banks v Gibson, 34 Bev. 566; Sebastian, Trade-Marks, 223, 337; 2 Lindl, Partn. (Am. Ed.) 444; Pars. Partn. (4th Ed.) 243, note; Meecham, Partn. § 86; Turner, Partnership Agreements, 65. Whatever the common law may have been, it was undoubtedly competent for the legislature to prohibit or regulate the continuance- of the use of a firm name after dissolution. 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 case, and is not prejudiced. Whether

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 , 31 N. Y. Supp. 614 . 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 as-> serted 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. All concur; INGRAHAM, J., in result.