Gracey v. Maddin , 1989 Tenn. App. LEXIS 62 ( 1989 )

OPINION

LEWIS, Judge.

Defendants have appealed from the Chancellor’s granting of plaintiff's motion for summary judgment and entering judgment prohibiting defendants’ use of a former law partner’s name “in any form or fashion.”

The material facts, which are undisputed, are as follows:

Hugh C. Gracey, Sr. was a widely respected lawyer who practiced law in various partnerships for more than thirty-five years in Davidson County, Tennessee.

On 23 April 1974, Mr. Gracey entered into a general partnership Agreement with John K. Maddin, Robert H. Cowan, Richard D. Bird, Michael Miller, and Don R. Bink-ley. The partnership was known as Gra-cey, Maddin, Cowan and Bird.¹ This partnership succeeded the firm of Gracey, Buck, Maddin and Cowan. On the same day “a side agreement was entered into between the partnership and Mr. Hugh Gracey, Sr.”

Mr. Gracey retired from the firm of Gra-cey, Maddin, Cowan and Bird on December 31, 1982. He died on February 15, 1984.

In 1977, Mr. Gracey determined that he wished to reduce his trial practice and, to that end, entered into an agreement with the defendants. This agreement was neither dated nor signed, but the parties agree it was in full force and effect and is as follows:

Effective with the calendar year 1978, as a replacement for the prior “side-agreement” between Hugh C. Gracey, Sr., and the firm, Gracey, Maddin, Cowan & Bird, and as an amendment to the general partnership agreement as respects the relationship of Mr. Gracey, Sr. to the firm, the arrangement between Mr. Gracey, Sr. and the firm [is] as follows:

Hugh C. Gracey, Sr. (Mr. Gracey) will participate in the net distributable income of the partnership, his percentage being fixed at twelve (12%) percent for the calendar year 1978, eleven (11%) percent for 1979, and ten (10%) percent for each of the years 1980, 1981, and 1982. This arrangement assumes reasonable activity on Mr. Gracey’s part, and is entered into with the understanding that there will be a pro-rata reduction of those percentages as partners are added to the firm, and that this represents a buy-out arrangement of all interests which Mr. Gracey has in the firm, leaving no residual or partnership income or assets to his widow or estate beyond the year involved, should his death occur within this period of time. The terms of the arrangements between Mr. Gracey and the firm for the calendar years 1983 and beyond, are to be determined and decided by and between him and the then partners in the firm.

The general partnership agreement provided that “the name of the law partnership created hereby shall be GRACEY, MADDIN, COWAN, & BIRD.” The agreement further provides that “[t]he death ... of a partner shall not terminate the Agreement, but the same shall continue in full force and effect” and “[u]pon a death the remaining Partners agree to reconstitute themselves as a continuing partnership....”

The 1977 agreement, which replaced the “side agreement” between Mr. Gracey and the partnership, provides that for the consideration of a declining percentage of the net income for the years 1978 through 1982 Mr. Gracey agrees to continue “reasonable activity” and to sell to the partnership “all interests which Mr. Gracey has in the firm.”

In order to determine the propriety of the Chancellor’s granting of the summary judgment, our inquiry is three-fold. First, do the remaining partners acquire the right to continue the use of the name of a retiring or deceased partner upon his retirement or death?

“A corporate or business name is generally held to be a capital asset.” 6 W. Fletcher, Cyclopedia of The Law of Private Corporations, § 2415 (Rev.Perm. ed. 1975). The partnership name is normally partnership property and an asset of the partnership. Partnership property is “all assets applicable to the payment of the partnership debts.” 59A Am.Jur.2d Partnership § 333 (1987).

The name by which patrons of a business associate their past satisfaction upon which they found their anticipation for future satisfaction is an element of good will. The name may be of the place of business, the name under which the business is conducted, or the brand or the tradename of the article produced. In the case of a brand or tradename, there may be no other element of good will, yet rights therein undoubtedly form what is generally known as good will. In fact, the name and the good will are often one and the same thing. But in some instances it is held that if the name consists in part of the owner’s personal name and has not become impersonal-ized, it does not form such a part of the good will as will be included therein impliedly.

38 Am.Jur.2d Good Will § 6 (1968).

“It is well settled, both in England and this Country, that the firm name of a co-partnership, as distinguished, from the name of an individual, is an element of the partnership enterprise, a substantial asset thereof, and passes with a sale of the partnership property and good will.” Twin City Brief Printing Co. v. Review Publishing Co., 139 Minn. 358, 166 N.W. 413, 415 (1918) (emphasis added).

“The general rule is that a professional partnership the reputation of which depends on the individual skill of the members, such as partnerships of attorneys or physicians, has no good will to be distributed as a firm asset on its dissolution.” An-not, 44 A.L.R. 524 (1926).

In Slack v. Suddoth, 102 Tenn. 375, 52 S.W. 180 (1899), a dental partnership between two dentists was involuntarily dissolved. The Court was mainly concerned with whether the premises where the partnership was located was a part of the good will. However, the Court did discuss the reputation and professional standing of a partner as a part of the good will. The Court, in part, stated:

[I]t was every positive advantage acquired, arising out of the business of the old firm, whether connected with the premises where it was carried on, with the name of the late firm, or with any other matter carrying with it the benefit of the business of the old firm. But it is evident that this definition is too narrow when applied to the good will of a partnership to practice a profession, since it leaves out of view the advantage to be gained from the professional standing and reputation of the partners themselves, which constitutes the principal feature of value in such partnerships. Accordingly, it is insisted that there is no such thing as “good will” attaching to professional partnerships. Certainly there can be no forced sale or transfer in invitum of such good will so far as it is based upon professional reputation and standing, such as arises from the skill of physicians, dentists, attorneys, etc., whatever may be done as to such good will as arises out of location.

102 Tenn. at 378-379, 52 S.W. 180.

Further:

“Good will” implies something gained by consent, not something realized by force or coercion. We do not mean to hold that “good will” has no value and may not be the subject of a voluntary sale. On the contrary, we think it might be sold and is a valid consideration for a contract, and it has been so held in a number of cases.

102 Tenn. at 381, 52 S.W. 180 (citations omitted).

Thus a distinction arises regarding the transfer of the good will generally and the transfer of good will associated with the name of an individual in a professional partnership when the individual’s name is part of the professional partnership name.

We have found no case, nor have we been cited to one, which definitively answers the question of whether in a professional partnership an individual partner’s name is an asset of the partnership which the partnership may, without the individual’s consent, continue to use after the individual partner has left the partnership through retirement or death.

The issue is a difficult one to resolve. Does the partnership, in the absence of some agreement from the individual or his estate, nevertheless own a named partner’s individual name as part of the good will of the partnership?

In In re Brown, 242 N.Y. 1, 150 N.E. 581 (1926), Judge Cardozo addressed the issue of whether an accounting was due to a deceased partner where the survivors continued the partnership at the same place and in the same name.

In his discussion, Judge Cardozo pointed out “the distinction between names purely personal or individual, and names that had acquired, through the incrustations of time, a veneer of associations, artificial and impersonal.” In re Brown 150 N.E. at 583.

We find this distinction applicable to the instant case. The name “Gracey” is that of an individual and it has not gone through a metamorphosis where it has “practically become an artificial one, designating nothing but the establishment.” Id. (citations omitted).

We conclude under the facts and circumstances here that the use of Mr. Gracey’s name in the partnership of Gra-cey, Maddin, Cowan and Bird did not strip it of its individuality.

We recognize an individual’s name may become so associated with a partnership as to strip it of its individuality, thereby transforming it into part of the partnership good will. However, since we conclude no such alteration occurred here, the partnership does not have the right, in the absence of a voluntary agreement between Mr. Gracey or his estate and the partnership, to the continued use of Mr. Gracey’s name.

Our second inquiry is: Does a person have a property right in his name that he can sell or assign to third persons?

Rule 8 EC 2-11, Rules of the Supreme Court,² allows a “bona fide successor” firm to continue to use a retired or deceased partner’s name “if the use of the name is authorized by law or by contract, and if the public is not misled thereby.”

In State ex rel. Elvis Presley v. Crowell, 733 S.W.2d 89 (Tenn.App.1987), Judge Koch, writing for the Court, stated:

The appellate courts of this State have had little experience with the right of publicity. The Tennessee Supreme Court has never recognized it as part of our common law or has never undertaken to define its scope. However, the recognition of individual property rights is deeply embedded in our jurisprudence. These rights are recognized in Article I, Section 8 of the Tennessee Constitution and have been called “absolute” by the Tennessee Supreme Court. This Court has noted that the right of property “has taken deep root in this country and there is now no substantial dissent from it.”

The concept of the right of property is multi-faceted. It has been described as a bundle of rights or legally protected interests. These rights or interests include: (1) the right of possession, enjoyment and use; (2) the unrestricted right of disposition; and (3) the power of testimonial disposition.

In its broadest sense, property includes all rights that have value. It embodies all the interests a person has in land and chattels that are capable of being possessed and controlled to the exclusion of others. Chattels include intangible personal property such as choses in action or other enforceable rights of possession.

Our courts have recognized that a person’s “business,” a corporate name, a trade name and the good will of a business are species of intangible personal property.

Tennessee’s common law thus embodies an expansive view of property. Unquestionably, a celebrity’s right of publicity has value. It can be possessed and used. It can be assigned, and it can be the subject of a contract. Thus, there is ample basis for this Court to conclude that it is a species of intangible personal property.

Id. at 96-97 (citations omitted).

A person has a property right in the use of his name which he may assign.³

This brings us to our third inquiry: whether under the agreement entered into between Mr. Gracey and the partners Mr. Gracey assigned to the remaining partners the right to use his name after his retirement and/or death.

The retirement provision of the general partnership agreement provides in pertinent part:

The firm may continue to use the retired Partner’s name in the name of the Partnership, on letterheads, directory listings, etc. either as “active” or “of counsel” as may be determined appropriate by the PARTNERS.

This provision contemplates the use of a partner’s name during retirement only. He may be listed as “active” or “of counsel.” It goes without saying that a deceased partner may be listed as neither.

The 1977 agreement which replaced the “side agreement” provides that for the consideration of a declining percentage of the net income for the years 1978 through 1982, Mr. Gracey agreed to sell to the partnership “all interests which Mr. Gracey has in the firm.”

The 1977 agreement goes on to provide that “[t]he terms of the arrangements between Mr. Gracey and the firm for the calendar years 1983 and beyond, are to be determined and decided by and between him and the then partners in the firm.” The 1977 agreement covers only the years 1978 through 1982. The partners and Mr. Gracey agreed that for the years 1983 forward the terms “are to be determined and decided by and between” Mr. Gracey and the partners. So far as this record shows, no agreement was made for the years 1983 forward.

If the use of Mr. Gracey’s name is covered by “all interests which Mr. Gracey has in the firm,” he assigned the use of his name for the years 1978 through 1982. For the years 1983 forward, the parties agreed they would enter into further negotiations.

We agree with the Chancellor that “[a] strong inference arises from the fact that although provisions for the use of the name are made in the event of retirement, there is no comparable provision in the event of death.”

The judgment of the Chancellor in granting plaintiff’s motion for summary judgment is affirmed with costs assessed to defendants and the cause remanded to the Chancery Court for the collection of costs and any further necessary proceedings.

TODD, P.J., concurs. KOCH, J., dissents in separate opinion.

1 . After the execution of the general partnership agreement on April 23,1974, the following original partners and later admitted partners left the law firm:

Mr. Hugh Gracey, Sr. retired December 31, 1982, and died on February IS, 1984.

Robert Cowan, an original partner, left the firm in early 1987.

Richard Bird, an original partner, left in early 1987.

Don Binkley, an original partner, died January 3, 1980.

Hugh Gracey, Jr. was admitted to the firm on January 1, 1980, and left the firm December 31, 1986.

Jim Wickel was admitted January 1, 1981, and left July 15, 1984.

Patrick Ruth was admitted to the firm on January 1, 1983, and left March 13, 1986.

Barry Howard was made a partner January 1, 1984, and left December 31, 1986.

William Tate was admitted January 2, 1987, and left March 31, 1987.

The present name of the law firm is Gracey, Maddin, Miller and McCune.

2 . EC 2-11. The name under which a lawyer conducts his or her practice may be a factor in the selection process. The use of a trade name or an assumed name could mislead laypersons concerning the identity, responsibility, and status of those practicing thereunder. Accordingly, a lawyer in private practice should practice only under a designation containing his own name, the name of a lawyer employing him, the name of one or more of the lawyers practicing in a partnership, or, if permitted by law, the name of a professional legal corporation, which should be clearly designated as such. For many years some law firms have used a firm name retaining one or more names of deceased or retired partners and such practice is not improper if the firm is a bona fide successor of a firm in which the deceased or retired person was a member, if the use of the name is authorized by law or by contract, and if the public is not misled thereby. However, the name of a partner who withdraws from a firm but continues to practice law should be omitted from the firm name in order to avoid misleading the public.

3 . Subsequent to the events which brought about this controversy the General Assembly enacted Chapter 945, § 3, Pub.Acts, 1984, which has been codified as Tenn.Code Ann. § 47-25-1103, and is as follows:

Property right In use of name, photograph, likeness. — (a) Every individual has a property right in the use of his name, photograph, or likeness in any medium in any manner.

(b) The individual rights provided for in subsection (a) shall constitute property rights and shall be freely assignable and licensable, and shall not expire upon the death of the individual so protected, whether or not such rights were commercially exploited by the individual during the individual’s lifetime, but shall be descendible to the executors, assigns, heirs, or devisees of the individual so protected by this part.