recognizing subscribers of newspapers constituted incorporeal property within scope of seller's agreement not to compete as a condition of sale of businessSummary of this case from Mar–Cone Appliance Parts Co. v. Mangan
Argued June 19, 1877
Decided September 18, 1877
Dorwin Remington, for the appellant.
J. Mullin, Jr., for the respondent.
It is unnecessary to approve all the proceedings and practice as a precedent to be followed in similar actions. The parties and persons interested have all had their day in court, with a full opportunity to litigate their respective interests, and no question has been raised, or is now raised, as to the propriety of the various steps taken, or the manner of bringing the case to this court, and I have not, therefore, considered the question of the correctness of the practice adopted. The action is by one partner against another for a dissolution of the partnership and an accounting, and the contention is between Flower claiming as owner or lienor of the good-will of the business and creditors.
The business of the partnership commenced in September, 1870, and consisted in carrying on the business of editing and publishing a newspaper in the county of Jefferson, called the Watertown Re-Union. A portion of the property, consisting of various printing material, had been delivered to Flower, the respondent, by order of the court, and the balance, with the subscription list, and good-will, had been sold by order of the court, when the action was referred to Allen C. Beach to hear, try, and determine the same. Subsequently the referee was authorized, among other things, "to hear and determine upon all claims that may be made upon the fund in the hands of said receiver."
Flower and Stephen Boon respectively claimed a portion of the fund as owners or lienors of portions of the property sold. The referee decided in favor of Flower to the extent of $3,000, and against Boon. Upon a motion to confirm the report, the Special Term reversed the finding in favor of Flower, which, upon appeal by him, the General Term reversed, and affirmed the decision of the referee. The receiver, representing the general creditors and the partners, appealed to this court.
The original contract of sale from Hall, then the owner of the Re-Union newspaper establishment to Warren, is dated September 2, 1870, and it is important to determine the nature of this contract, so far as it affected the title of the property constituting the newspaper establishment, and also as to whether the good-will of the concern was embraced in the transfer. The parties to this action, Moss and Boon, were the assignees of Warren, the vendee, under an agreement to abide by and perform all the obligations of his contract with Hall, and in 1873 Flower became the assignee of the contract from Hall, with the consent of Moss and Boon, so that for all purposes of legal construction in this proceeding, the contract is the same as if made by Flower instead of Hall as vendor, and by Moss and Boon instead of Warren as vendees. By the contract Hall agreed to sell to Warren the property in question under the following description: "The Watertown Re-Union establishment, including the presses, machinery, type of all description, newspaper and jobbing material, tools, implements, etc., appertaining to the said printing business, excepting real estate, and the accounts, notes and demands due said party of the first part." The contract then declares that the party of the second part is "to have full ownership when the conditions and stipulations of this agreement are fully performed." The consideration was $10,000, payable $1,500 at date, $1,500 in one year, and the balance in seven yearly installments. The vendee was to take possession as "tenant or bailee" and hold, use, and occupy the same as such until all of the conditions and stipulations of the agreement were fulfilled, and provision was made that the vendor might take possession for non-fulfillment of any of the stipulations. It was also agreed that the property should not be sold, except the worn out type, and the large power press; and in case of sale, other similar property was to be substituted, which was to be subject to the same rights and conditions as the property above mentioned. We must give effect to the contract as made and intended by the parties, and it seems to me that the transaction was intended as a conditional sale, and that the title of the property would not vest until the payment of the consideration. It is lawful for parties to make such an agreement. The provision that Warren is to have full ownership when he performs the conditions of the agreement, and the provision that he takes possession as "tenant or bailee" are inconsistent with the idea of the transfer of an actual title. No other security was taken upon the property, and the inference is reasonable that the owner intended to retain the title as such security. It is well settled that "when a condition of sale and delivery of goods is that the title shall not pass until the price is paid the vendee has no title in himself, nor can he convey any to a bona fide purchaser. (Story on Sales, § 457 a, and cases cited; 56 N.Y., 637.)
It cannot be doubted that the good-will of the establishment was embraced in the sale. Although not specifically mentioned, it constituted an element of value. The language could not be more comprehensive. "The Watertown Re-Union establishment," including presses, type, etc., necessarily covered everything of advantage pertaining to the business, and notably the subscription list, name of the paper, and other advantages incident to the property. Hall transferred, conditionally, all that he owned belonging to the establishment, and Warren succeeded to all his rights in the same, subject to the terms of the contract.
The general definition of good-will given by Judge STORY is sufficiently explicit. He says: "This good-will may be properly enough described to be 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 influence, or punctuality, or from other accidental circumstances or necessities, or even from ancient partialities or prejudices."
The good-will of a newspaper establishment often constitutes its largest value. A majority of the subscribers are generally permanent. They become attached to the paper on account of its sentiments, whether political, religious or literary, and the ability and energy with which it is conducted. The habit of reading a particular paper periodically seems to stimulate a desire for its continuance. Subscribers, once obtained, are permanent customers, not only for the paper, but for advertising and job work.
There is one kind of good-will which has been said to be only a probability, that customers will resort to the old place; and another, far more valuable, when a retiring partner agrees not to engage in the same business in competition with the old establishment. The good-will of a permanent newspaper establishment is generally more tangible than either. The vendor Hall, would not have been permitted to appropriate the subscription list and name of the paper to his own use, for the reason that he had sold it, although he might, perhaps, have printed another newspaper at the same place.
The subscription lists are, in effect, contracts to buy the paper for a specified time, or indefinitely, and belong to and go with the establishment. The rights and privileges which go to make up the good-will of such a concern is property, although incorporeal in its nature. These views accord with the authorities. (Story on Part., § 99, notes and cases cited; 17 How., 510; 4 Paige, 479; 4 Sand. Ch. R., 405.)
The condition applied to all the property sold, including the good-will. Every thing sold was intended to be held to secure the purchase money.
The point is made that the order of the twentieth March was res adjudicata against the right of Flower to the good-will of the concern. Without determining whether this doctrine would, in strictness, apply to an order made upon special motion (see 5 Hill, 493, note a), it cannot, I think, be affirmed, that this question was in fact or necessarily adjudicated by that order. The subject of good-will is not expressly mentioned. It directs the receiver to deliver to Flower certain property specified in the papers, which was in the establishment on the second day of September, 1870, and authorized him to bring an action for property subsequently purchased. It also authorized Boon to bring an action, and it directed the receiver to sell all the property not thus delivered or taken by these authorized actions, and retain the proceeds subject to the order of the court. It did not profess to dispose of all the questions in the case.
The right of Flower to the material under the contract was evidently regarded as clear. Other questions were intended to be reserved, and were expressly reserved by the direction to retain the fund for future adjudication.
This is confirmed by the subsequent proceedings. The case was referred to hear, try and determine, and the referee was expressly authorized to hear any claims to the fund. This authority could only have been intended for the benefit of Flower and S. Boon, and they availed themselves of it by litigating their respective claims before the referee with the result before stated.
The fact that Flower did not specify good-will in his papers used on the motion is far from conclusive that he had no claim, or supposed he had none, to such good-will. He may have supposed that good-will would necessarily follow the other property as an incident, and he did claim it under the order of the twentieth of March, and made a demand of the receiver before he sold for the subscription lists, etc.
The Special Term had before directed the receiver to continue the publication of the paper, probably for the purpose of preserving the benefit of the good-will for whoever it might concern — for creditors, lienors or parties — and a delivery to Flower at that time would have been in conflict with this order. By the direction of the court, and the acquiescence of all parties, his claim was subsequently litigated and adjudicated.
I am of the opinion that the sale from Hall to Warren was conditional; that it embraced the subscription list and good-will of the establishment, and that Flower was entitled thereto until his debt was paid; and, it having been sold, that he is entitled to its value to the extent of paying his debt. This is the legal result — and it is just. From the findings of the referee, the presumption is that the good-will enhanced the price bid to an amount at least equal to its value as found, and this sum being for the purchase money of the property, it is right that the vendor, who, by the terms of sale, held the property for his security, should have the benefit of it in preference to general creditors, who are presumed to have given the firm credit, with knowledge of the situation.
The merits having been correctly decided, we think a proper disposition of the case is to affirm the decision of the General Term, and order judgment accordingly upon the report of the referee.
All concur, except RAPALLO, J., absent.
Order affirmed and judgment accordingly.