Richter v. Richter , 202 Ga. 554 ( 1947 )

1. Upon the death of one of the partners, a partnership is dissolved, and in the absence of agreement in the partnership articles or a permissive provision in the will of the deceased partner to continue the business, the surviving partner in concluding the partnership business has the right only to convert the assets of the partnership into cash, pay the debts of the firm, and make a distribution to the administrator of the estate of the deceased partner. The firm name is a part of the good will and is a partnership asset. The surviving partner is a trustee for the interest of the deceased partner.

2. If, in violation of the trust, the surviving partner organizes a corporation in which he owns a controlling interest, and appropriates the firm name as a part of the name of the corporation and conducts a business similar to that which had been carried on by the partnership, with the express or implied representation that it is the business of the dissolved partnership, a court of equity will enjoin the use of the partnership firm name by such corporation.

3. The administratrix of the deceased partner's estate has such an interest in the firm name of the dissolved partnership, and its value, that she can challenge the right of the surviving partner and others to use the trade name of the dissolved partnership in organizing a corporation which is engaged in a business similar to that carried on by the late partnership.

4. The question of nonjoinder of material or essential parties can not be raised by general demurrer.

5. A court of equity, in the absence of statutory authority, is without power to dissolve a private corporation.

No. 15806. MAY 14, 1947. REHEARING DENIED JULY 14, 1947. Justice Bell being disqualified, Judge Almand was designated for this case.

Mrs. Mary Bell Richter, individually and as administratrix of the estate of F. A. Richter, and others, filed a bill in equity against W. H. Richter and others. In substance, the petition as amended alleged: For a great number of years two brothers, by the names of F. A. Richter and W. H. Richter, carried on a business in Cairo. Georgia, under the firm name and style of Richter Bros., the business being that of buying and selling at wholesale and retail, the processing of pecans, and of selling farm produce and products and fertilizer and seeds. F. A. Richter died in 1945, and the firm was dissolved by his death. The plaintiff, Mrs. Mary Bell Richter, is administratrix of his estate, but there has been no final liquidation or distribution of the assets of Richter Bros, by W. H. Richter, the surviving partner. The name, "Richter Bros.," constituted an asset of the partnership and is of considerable value on account of its long-established standing in the business world and the line of business which the partnership enjoyed at the time of the death of F. A. Richter. The books, papers, and records of the partnership, including lists of customers, are in the possession of W. H. Richter, and constitute assets of Richter Bros., and are of considerable value as trade information in carrying on a business similar to Richter Bros.

In May, 1946, on petition of W. H. Richter, M. L. Richter, a member of his family, and J. P. Van Duzee, an employee of W. H. Richter, a corporate charter was granted in the name and style of "Richter Brothers Company Inc." W. H. Richter was the real owner of the stock of the corporation, and the other petitioners for incorporation were nominal members. The defendants purposely adopted the name Richter Brothers Company Inc. to mislead the public as to the identity of the corporation and cause the public to believe that they were dealing with the successor to Richter Bros., the partnership firm, and the use of the words, "Richter Brothers," in its corporate name will cause and has caused injury to the plaintiffs, who are now commencing and expect to carry on the same type and character of business as was conducted by the partnership. W. H. Richter has caused the corporation to be formed and has adopted the name in order to secure unfairly the use of the name, Richter Bros., in his new business, which was similar to the line of business of the partnership, and thereby to secure all the good will of the partnership. There were no brothers of the name Richter petitioning for a charter, and the corporation was carrying on a business at the same location which had been used by the partnership. The defendants were representing to the trade world and to the former customers of the partnership that the corporation was the successor to the partnership, and the defendants had advertised in a newspaper under the name Richter Brothers Company Inc., that it had been in the active produce business for nearly seventy years. It was charged that such conduct was unfair, unwarranted, inequitable, and illegal. On the division of the assets of Richter Bros., the defendant, W. H. Richter, was awarded the place of business, office site, and manufacturing plant, where the firm was formerly operated, but there has been no division of all the partnership assets, including the trade name, and neither the plaintiffs nor the defendants have the right to use the trade name in carrying on their respective businesses.

The prayers were that the defendants be restrained from using the name "Richter Brothers" as a part of the corporate name, and that the order of the court granting the charter to Richter Brothers Company Inc. be dissolved and declared null and void. The defendants filed demurrers, general and special, to the petition as amended, which were overruled by the trial court. 1. The trade name of a partnership is a part of its good will and is an asset of the firm. If, on the death of one partner, a dissolution results, the interest of the deceased partner, after payment of all debts, passes to the administrator. Code, §§ 75-208, 113-901. In the absence of a partnership agreement or a will of the deceased partner permitting the same, the surviving partner can not continue the business of the firm. Maynard v. Maynard,147 Ga. 178 (93 S.E. 289, L.R.A. 1918A 81). But he is under the duty of converting the partnership assets into cash, paying the debts, and accounting to the administrator of the deceased partner. Code, § 75-209; Huggins v. Huggins, 117 Ga. 152 (4) (43 S.E. 759). The surviving partner is a trustee of the interest of the deceased partner, and a fiduciary relation exists between him and the representative of the deceased partner's estate. Galbraith v. Tracy, 153 Ill. 54 (38 N.E. 937, 28 L.R.A. 129, 46 Am. St. R. 867); Valentine v. Wysor, 123 Ind. 47 (23 N.E. 1076, 7 L.R.A. 788); Russell v. McCall, 141 N.Y. 437 (36 N.E. 498, 38 Am. St. R. 807). See also Hutchins v. Page,204 Mass. 284 (90 N.E. 565, 134 Am. St. R. 656). So equity will set aside a bill of sale of the personal property from the surviving partner to himself, on proper application of the administrator of the deceased partner. Didlake v. Roden Grocery Co., 160 Ala. 488 (49 So. 384, 22 L.R.A. (N.S.) 907, 18 Ann. Cas. 430). Where the surviving partner caused a corporation to be formed, of which he was the virtual owner, equity will set aside a bill of sale of the assets and the lease by the surviving partner to the corporation as being violative of the trust imposed on the surviving partner. Mosher v. Lee, 32 Ariz. 560 (261 P. 35).

The firm name is a firm asset subject to sale as any other firm property. It is inseparable from the good will of the firm, and in the absence of contract, will, or estoppel, the estate of the deceased partner is entitled to a distribution with other assets of the firm. Slater v. Slater, 175 N.Y. 143 (67 N.E. 224, 61 L.R.A. 796, 96 Am. St. R. 605); Witkowsky v. Affeld,283 Ill. 557 (119 N.E. 630). Neither the surviving partner nor the administrator of the estate of the deceased partner, as conceded by the plaintiffs, has the right to use the trade name of the firm to the exclusion or injury of the other.

2. Where there has been no final sale or distribution of the partnership business, the surviving partner can not organize a corporation which he virtually controls by stock ownership, and carry on a line of business similar to that of the partnership, at the same location as the partnership, and represent to the former customers of the partnership, and to the public generally, that the corporation is a continuation of the partnership business. The corporation can not operate under the name that had been the firm name of the partnership, where objections are duly made by the proper parties at interest. Such operation would be a fraud upon the estate of the deceased partner, and a court of equity will preserve the rights and interest of the estate of the deceased partner. Bowman v. Floyd, 3 Allen (Mass.) 76 (80 Am. D. 55).

3. The defendants (now plaintiffs in error) insist that the firm of Richter Bros., the partnership, has been dissolved, that the plaintiffs (now defendants in error), though carrying on a similar line of business, are not using the name Richter Bros., that the defendants in carrying on a business similar to that of the partnership under the corporate name, Richter Brothers Company Inc., have a legal right to do so, and that the plaintiffs have no right to enjoin the use of the trade name, on the theory urged by the plaintiffs that the essence of unfair competition consists in the use of a trade name similar to another for the fraudulent purpose of leading the public to believe that in buying the goods of the corporation they are buying the goods of a competitor.

It is true that, in the absence of fraud, contract, or estoppel, every man has the right to use his own name in any legitimate way, either as the whole or part of the corporate name, and courts of equity will not interfere with such use where confusion only results from the similarity of the names. Carter v. CarterElectric Co., 156 Ga. 297 (119 S.E. 737). But if the name is used to deceive or mislead the public so as to palm off the goods of one on the representation, by the use of the name, as the goods of another or to deprive another of his rights, equity will interfere upon the showing of such unfair competition. Carter v. Carter Electric Co., supra; Saunders System Atlanta Co. v.Drive It Yourself Co. of Ga., 158 Ga. 1 (123 S.E. 132); Bates Mfg. Co. v. Bates Numbering Machine Co., 172 Fed. 892; Charles S. Higgins Co. v. Higgins Soap Co., 144 N.Y. 462 (39 N.E. 490, 27 L.R.A. 42, 43 Am. St. R. 769); P. J. Tierney Sonsv. Tierney Bros., 130 Misc. 428 (224 N.Y. Supp. 144); Peck Bros. Co. v. Peck Bros. Co., 113 Fed. 291 (62 L.R.A. 81), certiorari denied, 187 U.S. 643 (23 Sup. Ct. 843,47 L. ed. 346).

In the Saunders case, supra, the court, in dealing with the right of the corporation to use a trade name adopted and used prior thereto by another corporation, held: "In such a case it is not essential to the maintenance of suit to enjoin unfair competition that the plaintiff should show that he has the exclusive right to a corporate or trade name; but the allegation and proof of an interest in the good will of the business is sufficient, as it is the property in the good will of the business which is protected in all cases of unfair competition."

In the Peck case, supra, the court said: "Here the artifice consisted not in using one's own name, but in assuming falsely the name ``Peck Bros.,' there being no brothers of that name in the corporation. The name manifestly was then assumed for the purpose of obtaining the good will of the established business of the Connecticut corporation, resulting, failing the acquirement by purchase of the business, good will, and trade name, in fraud upon the public and injury to the legitimate proprietors of the business and trade name."

There being no special demurrer on the ground of misjoinder of parties, it is unnecessary for us to decide in this case whether the plaintiffs as individuals are entitled to an injunction against the defendants. The interest of the administratrix of the estate of the deceased in the good will of the partnership, which includes the trade name, is sufficient to support a charge of unfair competition in the use of the trade name by the corporation. The value of the property interest of the estate in the trade name is vitally affected in its use by the corporation, when it represents that the corporation is but a continuation of the partnership business.

Counsel for the plaintiffs concede in their brief that the defendants in the use of the corporate name have the right to use the name of "Richter," and that they have no objection to the corporation's trade name as long as it does not contain the descriptive word "Brothers." We therefore hold that, as against the general demurrer, the petition as amended states a cause of action for equitable relief against the defendants' use of the word, "Brothers," as a part of the corporate name.

4. In the absence of a special demurrer on the ground of nonjoinder of proper or essential parties, the contention of the defendants that the relief prayed for could not be granted because the corporation was not made a party defendant can not be entertained. Burkhalter v. People's Bank, 175 Ga. 744 (3) (165 S.E. 749); Roberts v. Burnett, 164 Ga. 65 (7) (137 S.E. 773). Though the question is not before us, there is authority that, in such an action as this, the corporation is not an indispensable party. Elgin National Watch Company v. Loveland, 132 Fed. 41.

5. By general demurrer and a special demurrer to paragraph 16 of the petition, the defendants challenge the right of the plaintiffs to have the corporation dissolved. A court of equity, in the absence of statutory authority, is without the power to dissolve a private corporation. Gibson v. Thornton, 107 Ga. 545 (33 S.E. 895). The trial court, therefore, erred in overruling this ground of the demurrers. This court finds no error in the rulings on the other special demurrers.

Judgment affirmed in part, and reversed in part. Jenkins, C.J., Duckworth, P.J., Atkinson, Wyatt, Head, and Candler, JJ.,concur. Bell, J., disqualified.