Read v. Mackay

It is to be regretted that the near approach of the expiration of the copartnership of the parties to this action by limitation so urgently calls for an early decision of this motion; that the discussion of the important and interesting questions involved at deserving length is prevented, save at the expense of serious delay to many other matters now awaiting the .court’s attention. The parties to this action are copartners, doing business as bankers and brokers under the firm name of Vermilye & Co., and the plaintiff seeks to restrain the defendants’ use of the name after the 31st day of March, 1905, the day upon which the partnership will cease, according' to agreement. The relief sought in the action is an injunction and a direction for the sale of. the good will of the partnership to the highest bidder, and at the outset, therefore, the question is presented whether this firm name may be treated as an asset, as part of the good will of the business, and sold as a part of the partnership property in invitum. It appears that this banking and brokerage business was established in the year 1833 under the name of “Carpenter & Vermilye,” and that about the year 1863 the name “Vermilye & Company” first commenced to be used as a firm name, and has been continued as the name of successive partnerships since that time; the right to use the name having been accorded by agreement. The name has thus been carried on by successors of the founder of the business, and, the present partners being unable to agree as to its disposition at the conclusion of the partnership now subsisting, this controversy has arisen. Is this firm name transferable to a purchaser promiscuously selected, and should a court of equity extend its aid to effect such a transfer? These questions must, for obvious reasons, have a controlling effect upon the plaintiff’s main prayer for relief. If answered affirmatively, would the transfer not afford an effectual means of deceit ? A banker of established reputation would have little, if any, • need of another’s name. ■ Is it not likely, therefore, that the highest bidder would be one most in need of it and least entitled to wear it? Courts of equity are constituted to dispense justice upon ethical principles. Hence their repugnance to the exercise of authority discordant with the dictates of a sound morality, and which may become a means of deceit. What suggestion of morality, intuitive or inductive, supports the claim that one person should be permitted by purchase to assume the good repute of others ? I say good repute, for in that only is the value of a firm name to be found which has remained personal to the members of the firm collectively. The absence of any sanctioning principle led the courts in the earlier definitions of the good will of business to carefully eliminate the firm name, and to confine the good will to advantages flowing from sources other than the name under which the business was conducted.

“Good will may be said to be those intangible advantages or incidents which are impersonal, so far as the grantor is concerned, and attach to the thing conveyed. Where it consists of the advantages of location, it follows an assignment of the lease of location. Again, it may not depend at all upon location, as in the case of a newspaper, and it would follow an assignment of all interest in the plant, property, effects, and business. A partnership name may become impersonal, after the death of the parties, and it is then treated like a fictitious or corporate name. A surname may become impersonal when it is attached to an article of manufacture, and becomes the name by which such article is known in the market, and the right to use the name may in consequence follow a grant of the right to manufacture that article.’’

The latter part of this quotation suggests the development of the law, as expressed by judicial opinion, in its efforts to adjust itself to a change of conditions, to which I shall next refer. With the growth and expansion of trade the courts recognized the facts that a firm name may be so used as to became impersonal to the individuals conducting the business, and in course of time indicate commonly the kind or quality of the article made or dealt in, rather than the personal attributes of the makers or dealers; and that in such a case the firm name, since its use would no longer tend to deceive, may properly be deemed a part of the good will, to be transferable with and as a part of the latter. This view culminated in this state in the decision of our court of last resort in Slater v. Slater, 175 N. Y. 143 , 67 N. E. 224 , 61 L. R. A. 796 , 96 Am. St. Rep. 605 , which was to the effect that the business name of a firm of shoe manufacturers and dealers was a part of the good will of the business, subject to compulsory sale, with the good will, upon the death of one of the partners, for the benéfit of his estate. The court, however, seemingly guarding against the claim that its conclusion was meant to be of general application, carefully predicated the decision of the facts of the case in hand. At most, therefore, the adjudication last alluded to is authority for the contention that in the case of tradesmen, where the firm name has ceased to point to the personal attributes of the partners, and has become impersonal to them, it will constitute a part of the good will, and is capable of transfer to and for the use of the purchaser of such good will. This is because the name in such a case has acquired some of the constituents of a trade-mark. It remains, however, that if the trade-mark conveys the meaning that the article dealt .in is made under the continued supervision of its former owners, persons of known skill, so that its use by another might lead to a fraud, that courts of equity

“It seems plain that if a banking house had acquired a name, such as that •of Baring Brothers, though there were no partner of the name of Baring, it would, on general principles of law, and. independent of a statute preventing the use of fictitious names, have a property in such name, without reference to the particular place where the business was carried on.”

As a general proposition, the words used would be quite correct, as they were in relation to any matter before the court in that case, since a firm would certainly have the right to protect its firm name as against .an unauthorized use by others. The cases of Melersh v. Keen, 28 Beav. 453, and Smith v. Everett, 27 Beav. 446, had to do with the regulation of matters between partners by agreement, and had no bearing •upon the question of a sale of the name of a banking partnership in invitum. Sections 20 and 21 of the Partnership Law, Laws 1897, pp. 561, 562, c. 420, which provide for the continuation of a partnership name under certain conditions, certainly do not have the effect of making every partnership name the subject of an involuntary sale. The statute neither creates nor enlarges any right of property, and does not invest the parties to a partnership agreement with any intangible rights of property (Hazard v. Caswell, 93 N. Y. 259 , 269; Caswell v. Hazard, 121 N. Y. 484 , 496, 24 N. E. 707 , 18 Am. St. Rep. 833 ); and there is nothing to suggest a legislative intent that a firm name, which because of the character of the firm is not a part of the good will, should become so through this enactment. Its effect is no more than to remove the penal consequences of the use of a fictitious name, or the names of persons not actually members of the firm, upon compliance with the conditions prescribed. Vermilye & Co., the business name of this partnership, is the symbol used to denote the personal integrity and business qualities of the present partners, the parties to this action, and this symbol cannot be detached from the personnel of the partnership, and sold as an asset with the good will, as I view the case. There must be imported into the articles of a partnership, the business of which is dependent upon the personal attributes of the members of the firm and the confidence of its patrons therein, a mutual understanding that with the termination of the partnership the use of the firm name shall come to an end, unless the partners have otherwise expressly provided, which is not here the case; the articles providing merely for the relinquishment of all claim to the firm name by a partner upon retirement, and being silent as to the disposition to be made of the name upon the expiration of the period for which the partnership was made to endure. While my conclusion is that the plaintiff cannot eventually succeed upon his prayer for a sale of the firm name to the highest bidder, still an injunction should issue to prevent the defendants’ unauthorized use of the name as against the plaintiff after this partnership comes to an end. The plaintiff has an interest in the name, whether it be that of ceasing its use or continuing it, which, as the subject of an agreement between the partners, has a value, although it would have no substance in legal contemplation for the purposes of a realization by public sale, and not

Motion for injunction granted. The question of security may be determined upon the settlement of the order to be entered hereon.

Motion granted.