McDonald v. Trojan Button Fastener Co. — 31 N.Y. St. Rep. 374

Majority

p. 374

John A. McDonald, Resp’t, v. The Trojan Button Fastener Co. et al., App’lts.^[1]

(Supreme Court, General Term, Third Department,

Filed May 26, 1890.)

Headnote

1. Partnership—Dissolution—Receiver.

The plaintiff and two of the present defendants H. & W. formed a co-partnership under the name “ Trojan Button Fastener Co.” and conducted it successfully. The copartnership agreement provided that the firm might be dissolved on thirty days’ notice. Such notice was given by H. & W. Before the thirty days expired, H. & W. formed a corporation, taking the same name and each becoming a trustee. To this they conveyed all the property and patents of the firm; the corporation assumed the charge of the business and excluded plaintiff. Held, that, as the continuing partner plaintiff was entitled to close the business and for that purpose to have and hold all its assets. That he should give security and until acts of hostility to the other former partners or the corporation were shown, no receiver would be appointed.

2. Same—Injunction.

Where a partnership is dissolved in this manner the continuing partner cannot enjoin his former partners from conducting the same business by a corporation and so far as the corporation is owner in whole or part, through the withdrawing partners, of patents, it may use them or license-others to do so; and it cannot be restrained from selling to persons, though customers of the old firm, common articles such as buttons or staples for buttons.

Appeal from order denying motion, for an injunction and from order denying motion for a receiver.

The defendants Ham & Wright in May, 1885, entered into a copartnership agreement with the plaintiff under the firm name of Trojan Button Fastener Co. to manufacture machines for that purpose. This agreement provided that the copartnership, could be terminated at any time upon thirty days’ notice by any party of a desire to do .so. The business was very profitable. On January 31, 1890, Ham & Wright served the notice above mentioned. On February 11, 1890, they formed a corporation taking the firm name and Ham & Wright became trustees thereof. Ham & Wright transferred to the corporation all the firm property and patents. The corporation sent out notices to the old customers of the firm and took every means to direct business to the corporation. . The corporation took all mail matter and excluded plaintiff from any share or right in the business, books, etc. Plaintiff obtained ■ an injunction. This was modified. The court held in substance that the plaintiff as the sole continuing partner was entitled to the possession of all the property of the firm, moneys, books, etc., in order to wind it up, but that defendants could not be restrained from using the firm name, citing Lathrop v. Lathrop, 47 How. Pr., 532 and Morgan v. Schuyler, 79 N. Y., 490 . It also held that the corporation could engage in the same business as the firm; that so far as the corporation, owned in whole or in part a patent the plaintiff could not restrain it from using the same or licensing others to use it; and that the corporation could not be restrained from selling articles in common use such as buttons and their staples to any person whether an old customer of the firm or not. The defendants asked upon a separate motion that a receiver be

p. 375

appointed. At special term the plaintiff was held entitled to close up the business but was required to give security.

N. C. MoaJc and B. A. Parmenter, for app’lts; Nelson Davenport, for resp’t.

There are two appeals before us in this case. The first is from the injunction order granted by Mr. Justice Fursman; the second from the refusal to appoint a receiver in the motion made before Mr. Justice Edwards.

Upon a consideration of all the facts before us we think that the injunction order was properly granted and should be affirmed, with costs.

In regard to the refusal to appoint a receiver, the court required the plaintiff to give security to the amount of $20,000. The court probably considered that the plaintiff, being one of the partners, should, under the circumstances, be allowed to close up the partnership business, on giving proper security.

.The defendants, however, insist that they could not with any convenience control the action of the plaintiff in such closing up the business, if he should not act properly; that if a receiver were appointed his action would be under control of the court.

We might, perhaps, appoint the plaintiff receiver and thus obviate the defendants’ objection to the present situation. But there might be this difficulty, viz., that on any sale of the partnership property made by the plaintiff in his capacity of receiver, he would be unable to be a purchaser in his private capacity. He would, therefore, be unable to protect himself against loss on such a sale. ¡1

Having this in consideration, we think it will be best not tt> ap- • point the plaintiff receiver, and not at the present time to appoint' any receiver. The partnership is ended, and it remains now the duty of the plaintiff, in whose control the property is, to close up the business as expeditiously as may be with due regard to the interests of all concerned.

In case the plaintiff shall neglect -to perform this duty or shall perform it improperly, it will be the privilege of the defendants to move again, on showing such facts, for the appointment of a receiver.

Each of the orders appealed from is affirmed, with ten dollars costs and printing disbursements, but with the privilege to defendants, on showing plaintiff’s neglect of duty in closing up the partnership, to renew the motion for the appointment of a receiver and with privilege also to the plaintiff to make the same motion. ■

Landón and Mayhám, JJ., concur.