Lyon v. Lyon

• Court: California Court of Appeals
• Writing for the Court: LILLIE; WOOD, P.J., and FOURT
• Citation: Lyon v. Lyon, 246 Cal.App.2d 519, 54 Cal.Rptr. 829 (Cal. App. 1966)
• Decision Date: 18 November 1966
• Parties: , 152 U.S.P.Q. 719 Frederick W. LYON, Plaintiff and Appellant, v. Lewis E. LYON, Reginald E. Caughey, Charles G. Lyon, Leonard S. Lyon, Jr., John B. Young, Richard D. Lyon, Earl L. Martin and Robert Douglas Lyon, Defendants and Respondents. Civ. 29942.

Page 829

54 Cal.Rptr. 829

246 Cal.App.2d 519, 152 U.S.P.Q. 719

Frederick W. LYON, Plaintiff and Appellant, v. Lewis E. LYON, Reginald E. Caughey, Charles G. Lyon, Leonard S. Lyon, Jr., John B. Young, Richard D. Lyon, Earl L. Martin and Robert Douglas Lyon, Defendants and Respondents.

Civ. 29942.

Court of Appeal, Second District, Division 1, California.

Nov. 18, 1966.

William H. Neblett and Frederick W. Lyon, Los Angeles, for appellant.

Macdonald & Halsted, Alexander Macdonald, Richard D. Wells, Los Angeles, for respondents.

LILLIE, Justice.

A money judgment for plaintiff (on his complaint for an accounting and dissolution of a partnership at will) also permanently enjoined him (under defendants' cross-complaint) from using the firm name of 'Lyon & Lyon' in the practice of law and representing that he is now a partner thereof or in any way connected therewith. He appeals from that portion of the judgment based upon the trial court's finding that there is no 'good will' of the partnership, and ordering a permanent injunction.

In 1921 Frederick S. Lyon and (defendant) Leonard S. Lyon, Sr. (deceased prior to trial) formed a partnership for the practice of law under the firm name of Lyon & Lyon specializing in patent, trade-mark and copyright law. Later others joined the firm and after various reorganizations plaintiff Frederick W. Lyon became a partner in 1946. On January 1, 1955, a new partnership was formed and a new partnership agreement was executed by all partners including plaintiff and each of the nine named defendants (Exh. 1). (Leonard S. Lyon, Sr., was an active partner in the firm from January 1, 1955, until January 8, 1962; however, effective January 1, 1961, Exhibit 1 was orally modified to provide that he receive $5,000 per month until his retirement or death in lieu of a percentage interest in the profits of the partnership.)

On January 4, 1962, without the knowledge or consent of any of his partners and in breach of the partnership agreement (Exh. 1) and the fiduciary duties owed by him to his partners, plaintiff draw a counter check in the amount of $10,000 on the partnership checking account payable to himself, and attempted to deposit the proceeds in his personal account. Upon being advised of this by the bank on January 5, 1962, defendants instructed the bank to, and it did, stop payment. On January 8, 1962, defendants dissolved the partnership and formed a new one retaining the firm name of Lyon & Lyon effective January 8, 1962; it excluded plaintiff. Immediately thereafter, on January 8, 1962, plaintiff was given notice of the partnership dissolution.

In compliance with the provisions of Paragraph X of the partnership agreement (Exh. 1) controlling the rights of the parties upon dissolution, and under subparagraph (a), defendants caused to be prepared a full and accurate inventory and appraisal of the physical assets of the partnership; the parties stipulated to their money value as of January 8, 1962, and that plaintiff was entitled to 1/10th of said amount as his share. Further, defendants closed the books of the firm and caused all time slips and charges to clients to be prepared and billings for all accrued professional services rendered to be determined as of January 8, 1962; it was stipulated that plaintiff was entitled to 1/10th of the value of the accounts receivable actually collected. Other sums were determined and ordered paid to plaintiff. In compliance with Paragraph X(b) defendants delivered to plaintiff all of the books, papers, files and other documents belonging to, or in any manner connected with, the business of all clients represented by the firm in all instances where such clients directed and plaintiff requested that such books, papers, files and other documents be delivered to him; since January 8, 1962, plaintiff has represented and has continued to represent each such client.

Since January 8, 1962, plaintiff has undertaken to practice law as a sole practitioner using the firm name of 'Lyon & Lyon,' thereby holding himself out to the United States Patent Office, the courts, and the general public as a member of a partnership practicing law under the name of 'Lyon & Lyon'; plaintiff has no partner; by his conduct he has represented that he is practicing law in association with defendants. Thus, the trial court found that by reason of plaintiff's use of the fictitious name of 'Lyon & Lyon' the public, the courts and the Patent Office are likely to believe that he is associated with or a partner in the firm of Lyon & Lyon in which defendants are partners, and are likely to be, and in some instances have been, deceived and misled by such use.

Relying upon Paragraph II of the partnership agreement (Exh. 1) providing that the partners shall be the joint owners of various assets including 'good will * * * heretofore acquired by the partnership,' section 14100, Business and Professions Code, and Smith v. Bull, 50 Cal.2d 294, 325 P.2d 463, appellant argues that the trial court erred in refusing to place any value on the good will connected with the partnership. As 'good will' he claims an interest in the proceeds of all business on hand at the time of dissolution, as reflected in the then current files of Lyon & Lyon, and a share of the expectation of future business of that partnership.

The trial judge based his conclusion that 'A partnership of attorneys at law has no good will to be distributed as a firm asset on its dissolution' ( 8) on certain findings--that the firm name of Lyon & Lyon identifies the individuals constituting the partners operating thereunder and any partnership good will represents an aggregate of the reputation, skill, learning and experience of such individual members and is incapable of being assigned a monetary value, that insofar as any such good will consists of the expectation of future business, it is so personal to such individual members that it cannot be dealt with as property, that the books, papers, files and other documents of such clients as were delivered to plaintiff and his continued representation thereof subsequent to January 8, 1962, constitute the entire chare of any good will of the firm of Lyon & Lyon to which he is entitled, and that for purposes of the accounting herein, the good will of the firm did not have any monetary value; and Little v. Caldwell, 101 Cal. 553, 36 P. 107, and Paragraph X (partnership agreement).

The trial court's findings are amply supported by the evidence. The firm of Lyon & Lyon consisted of ten practicing lawyers all specializing in patent, trade-mark and copyright law. The accounting procedures and division of work of the partnership reflect an apportionment of fees for legal services on the basis of work done. The firm rendered no contingent services; all fees for professional services were billed to clients as the end of each month as a result of which there was no business on hand at the beginning of any month for which all work done to date had not been billed. Immediately upon dissolution of the partnership, and in accord with the provisions of the partnership agreement, defendants closed the books and prepared all time slips and charges to clients and billings for all accrued professional services rendered as of January 8, 1962. (Freese v. Smith, 114 Cal.App.2d 283, 250 P.2d 261, relied on by appellant is here inapplicable; therein the books were not closed upon dissolution.) All billings after that date represented the work done by the new firm of Lyon & Lyon. In addition to preparing an inventory and appraisal of the physical assets of the partnership, defendants delivered to plaintiff the books, files, papers and other documents relating to the business of all clients represented by the firm in all instances where such clients so directed, and plaintiff requested; since January 8, 1962, he has retained and continued to represent all such clients. Plaintiff conceded in his testimony that his practice after January 8, 1962, was indentical with that which he had prior to said date, he has retained all such clients and has been competing in the practice of law with defendants. Thus the issue of 'unfinished business' is not here involved, the fees, work and current files having been apportioned under the partnership agreement. The manner in which the law practice of Lyon & Lyon was carried on by the partners reflects that highly personal and confidential nature of the relationship of each individual partner and the client--for whom he did legal business and to whom the client looked for legal services and responsibility. The great majority of clients who came to Lyon & Lyon came to the individual partner; the individual partner took care of the work and was responsible for it and maintained the account. In answer to the court's question concerning his opinion of the value of the good will of Lyon & Lyon on January 8, 1962, defendant Leonard S. Lyon, Jr., testified that the value was 'nothing'; 'that the good will in the sense that it can be subject to a valuation does not exist and by the nature of a law partnership cannot exist, because such good will as attaches to a legal partnership, attaches to the individuals as such, and if you apply the good will to the partnership itself, what you are doing is applying an aggregate of good wills.'

The nature of a professional partnership for the practice of law, the reputation of which depends on the skill, training and experience of each individual member, and the personal and confidential relationship existing between each such member and the client, places such a partnership in a class apart from other business and professional partnerships. The legal profession stands in a peculiar relation to the public and the relationship existing between the members of the profession and those who seek its services cannot be likened to the relationship of a merchant to his customer. (Barton v. State Bar, 209 Cal. 677, 682, 289 P. 818.)...