Opinion
July Term, 1903.
Charles P. Wortman, for the appellant.
John F. Nash, for the respondents.
It was found by the learned referee upon evidence which fully sustained such finding that all the newspaper advertisements by the defendants in which the words "Successors to Freeman Freeman" appeared had been discontinued by them before any request had been received from the plaintiff so to do; that no use of the plaintiff's individual name had been made by them or by any one in their employ, by their authority, knowledge or consent, and that "the defendants have not done any acts calculated to deceive, delude, mislead or impose upon the public to the injury of the plaintiff;" consequently the sole question to be considered upon this review pertains to the right of the defendants to, in good faith, advertise themselves by a store sign or otherwise as "successors" to the firm of Freeman Freeman.
It was determined by the learned referee that the defendants possessed this right, and to sustain such conclusion it is now contended by the respondents that it was a right which passed to the trustee under the assignment in bankruptcy as one of the elements constituting the good will of the bankrupt concern, and that it was subsequently acquired by them when they purchased the assets of the late firm and those of the individual members thereof.
It is apparent, therefore, that in considering the correctness of this conclusion it is important to determine at the outset the essential characteristics of what is known in the commercial world as the good will of a trade or business.
Mr. Story, in his work on Partnership (7th ed. § 99), defines it as "the advantage or benefit which is acquired by an establishment beyond the mere value of the capital, stock, funds or property employed therein, in consequence of the general public patronage and encouragement which it receives from constant or habitual customers, on account of its local position or common celebrity, or reputation for skill or affluence or punctuality, or from other accidental circumstances or necessities, or even from ancient partialities or prejudices."
Thus a merchant may acquire a reputation for fair dealing or for the superior quality of the goods he sells, which gives him an advantage over rival dealers, or the location of his place of business may be such as to attract customers beyond that of his competitors in trade, and these, as well as other like circumstances, secure to him the good will of the trading public, which, it is needless to add, is a valuable adjunct to his business. It is something incorporeal, it is true, but it is, nevertheless, properly regarded as a species of property, and as such an appreciable part of the assets of the owner. It sometimes happens that the good will of a business, as, for instance, a newspaper establishment, constitutes the greater part of its value, and it may be the subject of contract and sale the same as any other species of property. ( Boon v. Moss, 70 N.Y. 465; White Corbin Co. v. Jones, 79 App. Div. 373.)
In the case of a partnership it was formerly the rule that its good will was somewhat of the nature of a joint tenancy and that it belonged to the survivor upon dissolution ( Hammond v. Douglas, 5 Ves. Jr. 539); but the more modern rule is that it is an asset of the firm which may be sold or disposed of like any other asset for the benefit of creditors of the firm or of the partners jointly. ( Dougherty v. Van Nostrand, Hoff. Ch. 68; Dayton v. Wilkes, 17 How. Pr. 510; Slater v. Slater, 78 App. Div. 449; affd., so far as this particular question is involved, 175 N.Y. 143.)
If then the good will of an establishment is, as we have seen, an assignable asset, we see no reason for claiming that in the present case it did not pass to the trustee in bankruptcy, the same as did the stock of cloths or other property belonging to the late firm of Freeman Freeman; for, by the express provisions of the Bankruptcy Law, such trustee upon his appointment and qualification became vested with the title of the bankrupt as of the date when he was adjudged a bankrupt to all "property which prior to the filing of the petition he could by any means have transferred, or which might have been levied upon and sold under judicial process against him." (30 U.S. Stat. at Large, 566, § 70, subd. a, ¶ 5.)
This language is very comprehensive and is evidently designed to embrace every species of property which a bankrupt may possess, and if the "good will" of his business is something which can be either transferred or levied upon, it certainly seems to be included within the express terms of the statute above quoted.
It is asserted in the 16th volume of the American and English Encyclopædia of Law (2d ed. at p. 723) that "the good will of a business is a well-recognized species of personal property which will pass to a trustee in bankruptcy or insolvency," and this statement of the rule is not without authoritative decisions to support it. ( Williams v. Wilson, 4 Sandf. Ch. 379; Hegeman Co., v. Hegeman, 8 Daly, 9; Cutter v. Gudebrod Brothers Co., 44 App. Div. 605, 611.)
In the case last cited this question was not directly passed upon, but it was intimated pretty strongly by the court that had it been necessary it would have been held that the defendant therein acquired the right to advertise itself as the successor of the assignor in a general assignment for the benefit of creditors by reason of its purchase from the assignee of the assigned estate.
But upon the assumption that the good will is an asset, it hardly seems necessary to cite authorities in support of the proposition last advanced, for bankruptcy itself worked a dissolution of the firm of Freeman Freeman; and inasmuch as it deprived its individual members of all their interest in the firm property, neither one of them had the right to advertise himself as a successor to the firm, and yet this right continued to exist somewhere and was vested in some person, and that person must of necessity have been the trustee of the bankrupt estate. With this much determined, it must be conceded that it passed to the defendants, who by purchase secured to themselves the same title which the trustee obtained by operation of law.
It is further urged, however, in opposition to this contention that the defendants failed to obtain title because there was no express mention of good will in the property sold to them, but it is virtually conceded that they succeeded to all the bankrupts' estate, and if so their purchase embraced the good will of the establishment, although not specifically mentioned therein. ( Boon v. Moss, supra.)
We think it only necessary to add that if we are right in the views we entertain, the plaintiff has no standing in court to maintain this action, inasmuch as he has parted with any right, title or interest which he ever had in and to the good will of the firm of which he was formerly a partner.
The judgment appealed from should be affirmed.
All concurred; HISCOCK, J., in result only.
Judgment and order affirmed, with costs.