White v. Jones — 24 N.Y. Super. Ct. 321

Majority

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Samuel White, plaintiff and appellant, vs. Asahel Jones et al. defendants and respondents.

Headnote

1. 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 abandon the right to establish and carry on a business similar to that of the late firm, provided he does not commit any act to mislead customers into the belief either 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.

2. No one who was formerly in the employment of the displaced firm, but upon, its dissolution unites with such retiring partner in establishing such new business, becomes thereby subject to an action, by the purchaser of the good will, for an injunction or damages.

3. Where the conditions of dissolution were such that the retiring partner l\ad the right to open, and for his own benefit attend to business mentioned in, letters thereafter addressed to the dissolved firm upon certain business subjects, the mere opening and answering by him for, apparently, his own benefit but in his own name, two fictitious or “ decoy ” letters, addressed to the late firm, at the instance of the plaintiff, the successor to the good will, and purporting to be upon business, to which the former had no right under the terms of the dissolution to attend to, did not warrant an interference by the court by injunc- . tion or give such successor a right to any damages.

(Before Bosworth, Ch. J. and White and Monell, JJ.)

Heard November 2d and 4th, 1863;

decided November 28, 1863.

This was an appeal Tby the plaintiff from a judgment in favor of the defendants.

The action was brought to restrain the defendants (Asahel Jones and Gilbert 0. Platt,) from a certain supposed interference with the business of the plaintiff, and for damages therefor.

The cause was tried before Justice Robertson without a jury on the 15th of May, 1862. For about four years prior to, and until the year 1860, the plaintiff, one of the defendants (Jones) and one McCurdy, had carried on in New 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.” But in the year 1860 McCurdy quitted such firm. Shortly after-

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wards on the 18th' day. of December, 1860, the plaintiff and the defendant J ones entered into new articles of copartnership, under which they subsequently carried on a similar business, 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 Hew York, where that department of business was to be carried on as before, by J ones, for his own benefit exclusively.

For many years before the formation of the firm of “Jones & White,” and during its whole existence, Jones resided in Hew York, exclusively superintended its business in- Hew York, at Ho. 658 Broadway, carrying on such 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 manufactures of the firm were made.

About the 26th of June, 1861, the firm of “Jones '& White ” was dissolved ley mutual consent, By an instrument in writing, the plaintiff White purchased all the interest of .the defendant J ones, including “ the good will of the entire business.” In payment of part of the consideration of this transfer, Jones agreed to take a large amount of the debts due the firm contracted and due at Hew York. The defendant Platt, who had been in the employment of the Hew York branch', and was 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 Ho. 658 Broadway, as their successor. And shortly after the dissolution the defendant Jones established in his own name, at Ho. 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 Ho. 658 Broadway, and continued such new business in his own name. The complaint alleged that

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the defendant Platt was interested in this business with 3ones. On the trial it appeared that he was not, being only employed at a salary. Such new business differed from the business carried on by the .old firm, previous to its dissolution, in selling teeth manufactured by other persons, but not manufacturing them. Whereas the sales of teeth by the former firm were principally of those manufactured by it. Letters addressed to “ Jones, White & McCurdy,” and containing orders and money for the plaintiff as their successor, having been received and opened by the defendant J ones, the plaintiffs 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. 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. 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. * * * “ Your 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 business with them, which is some time since, and I suppose you cany on the business.” * '* *

In answer to this the defendant Jones wrote, * * * * “ I will send you, if ordered, my own teeth, and if not satisfactory, will take them back. * * * Any thing in the dental line I can give, and I believe that twenty years’ experience in the dental business will be a sufficient guaranty 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 inclosed therewith several envelopes with his individual address printed thereon, and also a bill of the goods as bought of him. That

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package and its inclosure 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 J ones 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, neither of the defendants since the 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 J ones.

And he found, as conclusions of law,

1. 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.

2. 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, or interfered with, or infringed upon the said good will of the former firm, now belonging to the plaintiff as aforesaid.

3. The said defendant J ones had the right to open any letter addressed to the firm of Jones & White, respecting the debts due to the said partnership of Jones and White in Hew 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, which he did not

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have any reason to believe did not relate to such matters, if he did not open the same for the purpose of fulfilling orders therein contained, not relating to such matters.

4. 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 he accordingly adjudged that the plaintiff was not entitled to the injunction prayed for in the complaint, restraining the defendants, or either óf them, as therein specified, or in any manner. And that the plaintiff had sustained no damages which he was entitled to recover against the defendants, or either of them. . And that the complaint should be dismissed with costs to the defendants to be adjusted, and the injunction heretofore granted therein 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 the 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. 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 vendible 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, Hoff. 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 R. N. S. 464.)

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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 he separated from it. (Story on Part. § 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, 710.)

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 J ones 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 J ones to any other portion of the business ; and these reservations to him, on well settled legal principles, were an exclusion of' all the rest. (Bennett v. Van Syckel, 4 Duer, 462 . 1 Platt on Cov. 55, 57. Seddon 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 Mess. & Weis. 862, 876, and authorities cited in Am. ed. Cooper v. Watlington, 2 Chitty, 321. S. C. sub nom. Cooper v. Watson, 3 Doug. 413 , in point.)

2. So that, although there was no express covenant in these articles by Jones1 not to set up any rival business, still one was implied, the good-will having been sold by him to White. He had no right to give any notice, or do any thing indicating that his was the old business, or which might interfere with White’s enjoyment of it. (Cruttwell v. Lye, 17 Vesey, Jr. 344. Howe v. Searing, 6 Bosw. 370 , per Moncrief, J.)

III. 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

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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. They first took lists of the customers of the firm, sought to induce the old clerks to leave White and go with them, 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.

2. All this was done secretly, White being ignorant of the matter, and supposing that the transaction between him and Jones was fair and honest. He did not even suspect the purloining of his orders by Jones until the detectives suggested it.

3. This fraudulent scheme of the respondents, which commenced before, was carried out by them subsequent to the sale. The business of White greatly decreased, which was attributable to no other cause. Jones opened and read letters addressed to the old firm, under the pretense that his ownership of the debts of the old firm secured to him on its dissolution, warranted such a course.

4. These facts bring the case completely within the rule of 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, Am. ed. p. 444, 220, per Sir W. Plumer. Gale v. Gale, 19 Barb. 249 .)

IV. Equity intervenes to restrain vendors from fraudulently depriving vendees of the benefits which would naturally result from a sale, and compels them to refund profits which they have usurped, besides holding them responsible for damages resulting from the fraud. (2 Hovenden on Frauds, 68, 240, 241. Nickley v. Thomas, 22 Barb. 652 . Green v. Folgham, 1 Sim. & Stu. 406.)

V. The respondent Platt was a particeps criminis, combining with Jones to carry out his fraudulent intentions and

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reaping bis advantage from a per centage 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. ■ (Hill. on Torts, 310, 311, and cases cited in notes. Longman v. Pole, M. & Malk. 223.)

VI.. 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 admissible to sustain the complaint; and finally in dismissing the complaint upon the facts proven, and dissolving the injunction previously granted.

Joseph H. Choate, for the defendants, respondents.

I. The case, made by the complaint is the only case before the court. .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. R. 623. Cruttwell v. Lye, 17 Ves. 346, 385. Churton v. Douglass, 1 H. V. Johnson, 176. Snowden v. Noah, Hopk. Ch. 347. Bell v. Locke, 8 Paige, 75. Dayton v. Wilkes, 17 How. Pr. 510 . Howard v. Henriques, 3 Sandf. S. C. R. 725. Howe v. Searing, 6 Bosw. 365 . Hitchcock v. Coker, 6 Ad. & El. 438, 446. Elves v. Crofts, 10 Com. B. 241. Harrison v. Gardiner, 2 Madd. Rep. 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.

1. The partnership articles and the agreement of dissolution show that about half' of all the business done at its Hew

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York branch by “Jones & White” consisted of Jones’ private business in the manufacture and sale of gold foil and plate, which, at the dissolution, reverted to Jones. Also, that at the dissolution, all the debts due to the firm at its New York branch became the sole property of J ones, and 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, 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.

2. 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 clerks of the post office, to get into the defendant’s hands 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 with 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.

3. 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 Judge Robertson, to form no ground work for the plaintiff’s action.

4. In view of the plaintiff’s connection 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. As the only means of effecting this, so that J ones might inadvertently fall into the trap, they were placed in a box where none but his own letters were ever placed, so as to get them into the hands of his messenger among a parcel of bis letters, so that they might escape notice.

5. It is obvious that by these transactions the plaintiff sus

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tained no damage. Nobody 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 the mistake was discovered, and in the case of the Cuba letter, the order and the profits of it belong by the agreement to Jones.

IY. 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. It has been attempted to be brought within the jurisdiction of equity and of the court by a trick, but for which the plaintiff could not have stated in his complaint a prima facie case. No court of equity will sanction an attempt by fraud or misrepresentation to bring a party or a cause within its jurisdiction. No 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 here.

2. He who seeks equity must show that he is ready to do equity. The plaintiff's whole course in the business has been inequitable and fraudulent. Instead of seconding the efforts of the plaintiff to have his letters kept separate, he purposely contrived 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 him.

3. Equity will not relieve a man against grievances which 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 pretense for bringing his action.

4. The plaintiff'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.

Y. 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 partnership, 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. (Cruttwell v. Lye, 17 Vesey, Jr. 344. Davis v. Hodgson, 25 Beav. 177. Churton et al. v. Douglas, 1 H. V. R. 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 “ J ones 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, &c. 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 J ones & 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 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 White, or with

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the person succeeding to the business of the late firm of White & Jones.

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

The evidence offered to be given by the witness Walker, was 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 of 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 letters and orders intended for the

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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 book keeper of Jones & White; well acquainted with its business, and then accustomed to deal with it, and knowing of the dissolution of that firm; the articles of dissolution and their contents, and having signed the same 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.

Judgment affirmed.

Cases cited

Gale v. Gale 19 Barb. 249 N.Y. Sup. Ct. 1855-01-22 p. 327
Nickley v. Thomas 22 Barb. 652 N.Y. Sup. Ct. 1856-09-09 p. 327
Dayton v. Wilkes 17 How. Pr. 510 N.Y. Super. Ct. p. 328, p. 330
Howe v. Searing 6 Bosw. 354 N.Y. Super. Ct. 1860-03-24 p. 330