Douthart v. Logan

86 Ill. App. 294, 1899 Ill. App. LEXIS 230

• Court: Appellate Court of Illinois
• Decided: December 14, 1899
• Status: Published

Opinion

Mr. Justice Windes

delivered the opinion of the court.

As to the first question made by appellant, that there was a good will which was an asset of the partnership, there is an apparent conflict of authority. On the question of fact as to whether or not, under the evidence, there was a good will of the firm of F. G. Logan & Co., different conclusions might be reached by reasonable and fair-minded persons. After a careful consideration of the evidence, we can not say that the finding of the learned chancellor on this question of fact is manifestly contrary to his conclusion that there was in fact no good will. This being so, it is the duty of a court of review not to disturb the decree upon this point. Delaney v. Delaney, 175 Ill. 188; Biggerstaff v. Biggerstaff, 180 Ill. 407.

The Supreme Court of this State, in the case of Farwell et al. v. Huling, 132 Ill. 119, gives the following definition of good will: “ The good will of a partnership may be defined as every possible advantage acquired by the firm in carrying on its business, whether connected with premises, or name, or other matter.”

In 2 Lindley on Partnership, *439, the author says:

“ The term good will can hardly be said to have any precise signification. It is generally used to denote the benefit arising from connection and reputation; and its value is what can be got for the chance of being able to keep that connection and improve it. Upon the sale of an established business, its good will has a marketable value, whether the business is that of a professional man or of any other person.”

In Mechem’s Elements of Part., Sec. 87, the author quotes part of the above language from Mr. Lindley, and also the definition of good will as given in Story on Part., and further gives the definition of good will by Lord Eldon, viz.," “ The good will of a trade is nothing more than the probability that the old customers will resort to the old place,” and says that this definition is approved by Mr. Parsons in his work on partnership.

In Story on Part., Sec. 99, (7th Ed.), the author says:

“ 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 affluence or punctuality, or from other accidental circumstances or necessities, or even from ancient partialities or prejudices.”

The author, then proceeds to discuss different instances of the good will of different kinds of partnerships, and says further:

“ It seems that good will can constitute a part of the partnership effects or interests only in cases of mere commercial business or trades, and not in cases of professional business, which is almost necessarily connected with personal skill and confidence in the particular partner.”

In Parsons on Part. (3d Ed.), 286, the author says, in speaking of good will and the difficulty of giving a definition thereof, that a distinction has been taken between the interest of a partnership resting on the contracts of the firm with a third party and that which has no such foundation; but the author expresses a doubt as to whether this distinction rests on good authority or good reason. The same author, in this connection, says that the definition of good will above quoted from Lord Eldon, “is an exact statement of the legal meaning of good will.” The same author also says that a distinction has been taken between “ the good will of a partnership in trade and that of a professional partnership. Lawyers or physicians may become partners; but the good will attached to such a firm must be considered more as a personal than as a local thing. It is not a probability that the old customers will go to the old place, but to the same persons, wherever they may be.”

In 1 Collyer on Part., Sec. 117, the author recognizes the same distinction that Hr. Parsons does as to good will resting on contracts of the firm with a third party and that which has no such foundation, and says that founded'on special contract “ is a commodity on which a valuation may be fixed,” but as to the other class, no definite allowance can be made for it in case of the death of one partner, except in connection with the premises where the business was conducted, and the stock in trade. This, the author says, applies solely to a mercantile business. He further says:

“ In a business of a professional nature, as that of an attorney or apothecary, the good will attaches to the person, rather than to any other subject. Such part of it as is not personal is so small that equity will not regard it as matter of sale, even where the partnership is without articles. It seems clear, therefore, that upon the death of one partner the good will in these cases will survive to the survivor.”

In 2 Bates on Part., Sec. 668, the author says:

“ Good will is not strictly applicable to a professional partnership, for its business has no local existence, but is entirely personal, consisting in a confidence in the integrity and ability of the individual.”

The following cases support the statements of the text writers above quoted, to the effect that there is no good will, except in cases of commercial or trade partnerships, and does not exist in cases of professional business depending on the personal skill and confidence in the particular partner. Farr v. Pearce, 3 Maddock’s Rep. 74, which was a case of partnership between surgeons; Arundell v. Bell, 61 Law J., Pt. 1, 537, a partnership between solicitors; Austen v. Boys, 2 De Gex & J. 626, also a partnership between solicitors; Stuart v. Gladstone, 10 Law Rep., Ch. Div. 626-57, a case of partnership between India commission merchants; Rice v. Angell, 73 Tex. 350, a partnership between insurance agents; Tierney v. Klein, 67 Miss. 173-8, also a partnership in insurance agencies; Mandeville v. Harman, 42 N. J. Eq. 185, relating to a contract between physicians.

In the Stuart case, supra, the decision rests mainly upon the construction of articles of copartnership, but the master of the rolls, in considering what was the so-called good will of commission merchants, said he was unable to understand what the good will of a business of that kind could mean.

In the Austen case, supra, the court say:

“ The term good will seems wholly inapplicable to the business of a solicitor, which has no local existence, but is entirely personal, depending upon the trust and confidence which "persons may repose in his integrity and ability to conduct their legal affairs.”

In the Mandeville case, supra, the court, in speaking of good will in the case of a professional business, says: “ Professional-skill, experience and reputation are things which can not be bought or sold. They constitute part of the individuality of the particular person and die with him.” * * * “ The practice of a physician is a thing so purely personal, depending so absolutely on the confidence reposed in his personal skill and ability, that when he ceases to exist it necessarily ceases also, and after his death can have neither an intrinsic nor market value.” This was a case of alleged good will based upon contract, but the contract was held to be void, as being in restraint of trade.

In Scudder v. Ames, 142 Mo. 187, 230, which was a partnership in the business of pork packing and commission, the court held that there might in such a business be a good will, but that because the surviving partner was under no obligation to retire from business because of the dissolution of the partnership, it was of no appreciable value, and therefore that the administratrix should not be charged with anything on account thereof.

In Williams v. Wilson, 4 Sand. Ch. (N. Y.) 405, the court held that there was a good will in a business which was in part that of a private asylum for the insane and in- part a boarding house for emigrants, and the receiver was directed to sell the lease of the premises where the business was conducted with the good will and the movables which belonged to the institution.

In the case of Webster v. Williams, 62 Ark. 101, the court recognizes the right of physicians who were partners to contract with reference to the good will of their professional business, and holds such a contract to be valid, but does not discuss the question as to whether good will could exist in such a business independent of a special contract.

In Dwight v. Hamilton, 113 Mass. 175, a contract, by which a physician sold his “ practice and good will,” was held to be valid and binding upon the parties thereto.

Mumerous other cases may be found in the books in which contracts with reference to the good will of different lines of business have been upheld and enforced, and' we have no doubt that good will, as it relates to a business which depends upon the personal skill or confidence of customers in the partners, exists and is a proper subject of contract; but as said by Mr. Collyer: “ Such part of it as is not personal is so small thkt equity will not regard it as matter of sale,” except its value is recognized and determined by special contract of the parties.

In Sheppard v. Boggs, 9 Neb. 257, the court decreed an accounting including the good will in a partnership between insurance agents. This is the only case to which our attention has been called, or which we have been able to find, in which it has been held that a good will existed as to other than purely commercial or trade partnerships, or which were in part businesses of that nature, except by virtue of a special contract which recognized the existence of such an asset of the partnership.

In the case of Raymond v. Vaughan, 17 Ill. App. 144-9, the court, in speaking of a partnership between sugar brokers, says: “ The good will was an element of value, and even though there had been a dissolution the appellant might be required to account ” (citing cases); but an examination of this case shows that there was no question of good will to be decided, but only an accounting as between the partners as to business done. An examination of the cases cited shows that they do not refer to good will except as connected with a commercial or trade business. As appears from the statement preceding this opinion, the evidence was that the business was largely personal in its nature. Each partner had his particular friends and clients, who confided in him and trusted to his judgment, and therefore gave their business to him, and in many instances the customers were known only to the particular partner with whom they did their business; their names did not appear on the firm books, and they were known to the other partners only by numbers which appeared on their books. We see no reason why there should be a good will to such a business which could exist independent of a special contract, more than in a business purely professional, as in case of a physician or attorney at law. We conclude, therefore, that' as matter of law, under the evidence in this case, there was no good will of which a court of equity would take cognizance in the absence of a special contract.

It follows that there was no error in the exclusion by the chancellor of the evidence offered as to the value of the good will.

As to the lease of the firm office and the wire leases, we are of opinion that the evidence is clearly to the effect that they were of no value, and it would have been a useless thing to have required their sale. The same is true as to the open trades which were not inventoried; and besides we are further of opinion that the estate of Mr. Butters realized far more by the method adopted with regard to these trades than it could possibly have done by their sale.

As has been stated, appellees, after October 10, 1896, did an entirely new business, after having fully accounted with and paid to appellant all the interest of the estate of Butters in the late firm of F. G. Logan & Co., and were under no obligation to account to appellant for the profits of any such new business conducted by them. We think that in this regard the decree of the chancellor was correct.

The decree, however, in requiring appellees to account to appellant for six thirty-seconds instead of one twenty-fourth of the net profits of the business of F. G. Logan & Co. from August 12th to October 10, 1896, was, in our opinion, erroneous. Appellant was only entitled to that proportion of the net profits during this period which the capital contributed by Mr. Butters bore to the whole capital of the firm. His capital was one twenty-fourth of that of the firm. Holmes v. Gilman, 138 N. Y. 369-79; Freeman v. Freeman, 142 Mass. 98-104, Robinson v. Simmons, 146 Mass. 167-76.

The decree of the Circuit Court is in all things affirmed, except as to the allowance to appellant of six thirty-seconds of the said profits from August 12th to October 10,1896, in which respect it is reversed, with directions to modify it so as to allow appellant one twenty-fourth of such profits. Appellant will pay all costs of the Circuit Court and of this appeal. Affirmed in part and reversed in part.