Platt v. Platt — 11 Abb. Pr. 110

Majority

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PLATT against PLATT.

Supreme Court, First Department, First District;

General Term, December, 1870.

Headnote

Discovery and Inspection oe Partnership Books.—Eeeect oe Transeer oe Partnership Interest.

In an action to set aside a sale of partnership assets by one partner to the other, and to have the plaintiff’s rights as a partner declared to be still subsisting, the plaintiff is not, before judgment, entitled, as a partner, to a general inspection of the books of the firm.

William H. Platt and others, executors of Nathan C. Platt, deceased, brought an action in the supreme court against George W. Platt, for the purpose of setting aside releases and conveyances made by Nathan 0. Platt to the defendant.

The complaint alleged that the deceased and defendant were in partnership, and that the defendant, by fraudulent representations, induced the deceased to dissolve the partnership, and to convey, without any consideration, all his interest in the partnership property to the defendant.

Pending the action, the plaintiffs petitioned for the discovery and inspection of the partnership books, and an order accordingly was granted; the judge holding that the plaintiffs were entitled to the order, since they represented a deceased partner, citing Kelly v. Eckford, 5 Paige, 548, as in point.

From this order, the defendant appealed to the court at general term.

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S. P. Nash, for defendant, appellant.

I. The decision appealed from proceeded on the ground that Nathan 0. Platt, deceased, was a partner at the time of his death. This was a mistake as to the facts. After a transfer of the whole partnership interest from one to another, the parties cease to be partners, and the former partnership property is held, as between each other, as individual property.

II. If the dissolution was fraudulently brought about, the' transfer is, of course, voidable, but it is not void, until found, after adjudication, so to be. This order assumes facts which remain to be proved. In Kelly v. Eckford (5 Paige, 548), the suit was brought by the assignees of one of the partners, who had the books and papers in their possession. The partnership had never been settled, and the bill was filed for an account, and the defendants needed access to their own books, in order to answer.

III. The case of Phelps v. Platt ( 54 Barb., 557 ) is the same in principle as this case, and controls it. That was a creditor’s bill to set aside the same transactions complained of here. If the executors succeed in the suit, they must administer the fund realized primarily for the benefit of the creditors (Bate v. Graham, 11 N. Y. [1 Kern.], 237), and if the creditors proceed, they can enforce only the executor’s rights.

The proper course is a subpoena to the defendant to produce the books at the trial.

William R. Martin, and James Emott, for plaintiffs, respondents.

I. The plaintiffs represent a deceased partner, and are entitled to an inspection of the partnership books and papers (Kelly v. Eckford, 5 Paige, 548). The alleged dissolution of the partner.ship does not defeat this right. (1.) Whether this dissolution was actual and bona fide, or fraudulent, is the question in the case. (2.) The right to discovery and

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inspection, continues to the time of the actual dissolution. (3.) The fact that the plaintiff’s testator had transferred his interest in the firm to the defendant, does not change the rule, where the object is to recover partnership property, of which the executors claim he was improperly deprived.

II. This is not a fishing application. It relates to documents, entries, and accounts, which are admitted to exist, and. are material to the cause of action. The evidence which we wish to discover will not only disprove the defendant’s case, but will also prove our own (Scott v. Walker, 22 Eng. Law & Eq., 134; Bluck v. Gompertz, 6 Id., 524).

The learned judge below treated the case as if it were one of mere dissolution of partnership, and applied the rule which would obtain in such cases* that whichever partner holds possession of the books, does so for the benefit of both parties, and cannot exclude the other from using them. I think he overlooked the fact that the testator had put an end to his right to the use of the books, and that the possession of the defendant was exclusively for his own benefit. Eathan C. Platt had parted with his interest in the partnership and conveyed it to the defendant. While that sale stands, the plaintiffs have no rights in the property. While that sale stands, the books belong to no one but the defendant,—and while they belong exclusively to him, no one else has the right to a general inspection of them. To grant such general inspection now, is to give to the plaintiffs, before trial, what they can only claim after, by prevailing in the suit, the sale shall have been declared void, and the partnership re-established, and the property

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declared to belong to them and the defendants jointly.

I think the order below was wrong, and should be reversed.

Order reversed

Footnotes

* Present, Cardozo and G. G. Barnard, JJ.