Hagenaers v. Herbst — 30 A.D. 546

Majority

p. 546

Lionel Hagenaers, Respondent, v. Robert Herbst, Appellant.

Headnote

Partnership — wrongful dissolution of it by one partner—action for an account ing— effect of an agreement to submit to arbitration the question as to the damages recoverable by the retiring partner.

In an action brought for an accounting between parties who had been copartners under an agreement made the 18th day of April, 1888, which was to continue to June 30,1893, and by which the plaintiff was to receive a certain percentage of the profits and an annual compensation at the rate of $3,000 per year, until June 30, 1890, and for each succeeding year the same sum with an increase of $500 over éach preceding year, and the defendant was to receive as compensation $6,000 per year, the plaintiff claimed damages for the dissolution by the defendant of the partnership on April 18, 1891, at which time an agreement was entered into between the parties reciting that the partnership 1 ‘ has this day

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been dissolved by mutual consent,” and that the parties have agreed to “submit to arbitration the question what their respective interests in the said copartnership of Herbst Bros, are, and, also, what compensation, if any, either party is entitled to in consequence of the dissolution of the partnership.”

In computing the damages the plaintiff was allowed only the salary or compensation fixed by the agreement for the unexpired term, less the amount earned by the plaintiff in the meantime, and was refused interest and the percentage of the profits.

Held, that as the agreement of dissolution made it a condition that the compensation to which either party was entitled in consequence of the dissolution should be determined, the question as to the damages sustained by the plaintiff subsequent to the dissolution of the firm, was properly considered.

Semble, that one partner may maintain an action against his copartner for damages arising out of the premature dissolution of the articles of copartnership.

Appeal by the defendant, Robert Herbst, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Hew York on the 23d day of December, 1896, ujion the report of a referee.

Wm. H. Page, Jr., for the appellant.

W. C. Percy, for the respondent.

This was an action for an accounting. The parties were formerly copartners, doing business as commission merchants in the city of Hew York, under an agreement made the 18th day of April, 1888, which was to continue until June 30, 1893. The plaintiff was to receive a certain percentage of the profits and an annual compensation at the rate of $2,000 per year until June 30, 1890, and for each succeeding year the same sum with an increase of $500 over each preceding year; and the defendant was to receive as compensation $6,000 per year. Pursuant to this agreement they carried on business under the firm name of Herbst Brothers until the 18th day of April, 1891. In addition to other items of credit claimed by the plaintiff was one for damages for the dissolution of the partnership prior to the expiration of the term, which the plaintiff claimed was brought about by the wrongful and unjustifiable conduct of the defendant towards him, to the extent that he was finally excluded from his office at the firm’s place of business and literally forced out of the firm, such action on the part of the plaintiff, it was

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charged, being resorted to for the purpose of breaking up the copartnership and compelling a dissolution. The plaintiff’s contention is that the dissolution was agreed to by him upon the distinct understanding and agreement that he should receive from the defendant damages for such dissolution. The defendant insists that the dissolution was by mutual consent, and that, therefore, the plaintiff was not entitled to any damages for1 such dissolution, in support of which proposition he relies upon the maxim, volenti non fit ivguria.

Looking at the agreement of the 18th of April, 1891, which recites that the partnership “ has this day been dissolved by mutual consent,” we find as one of the conditions that the parties thereto “ agree to submit to arbitration the question what their respective interests in the said copartnership of ITerbst Brothers are, and also what compensation, if any, either party is entitled to in consequence of the dissolution of the partnership.” In accordance with the terms of this dissolution agreement an arbitration was had, but because the award of the arbitrators was informal and indefinite it was set aside by the General Term. Thereafter the plaintiff repeatedly requested the defendant.to submit to arbitration, which requests were refused, and this action was, therefore, brought for an accounting. After issue joined, a reference was ordered, and upon such reference the referee has found “ that towards the end of January, 1891, the defendant offered the plaintiff the sum of $1,000 if he would consent to a dissolution of the partnership, which offer the plaintiff refused; that thereupon and down to the 18th day of April, 1891, the defendant adopted a course of action which rendered it virtually impossible for the plaintiff to participate in the business of the firm, although he was anxious to do so; that finally, and on or about the 18th day of April, 1891, by order of the defendant, the plaintiff was absolutely excluded from his own office at the firm’s place of business. That such action on the part of the defendant was unjustifiable and wrongful, and was resorted to by him for the purpose of breaking up the copartnership and compelling a dissolution of the same.” In computing the damages the referee allowed only the salary or compensation fixed by the agreement for the unexpired term, less the amount earned by the plaintiff in the meantime, and refused to allow interest or

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any percentage of the profits. If it was proper to allow anything, it is clear that the snm fixed was not excessive.

The question presented, therefore, is whether the referee had the right to consider the question of damages suffered by the plaintiff subsequent to the dissolution of the firm. As already indicated, this depends upon whether the defendant is right in his contention that, by reason of the dissolution by consent, the plaintiff has lost all right to any damages or compensation. We think that the referee decided correctly that the consent was to be considered in connection with the other terms in the agreement of dissolution, one of which provided for a submission to arbitration of the differences of the parties, and expressly made it a condition that the compensation to which either party was entitled in consequence of the dissolution should be determined. The insistence that the compensation thus provided for was not intended to cover the item of damage which the plaintiff sought in this action, and which has been awarded him by the referee, we think is untenable. The provisions for dissolution and for arbitration, and for what should be included therein, were part and parcel of the same transaction. And when we take the language of the contract itself, together with the plaintiff’s testimony that there was to be no dissolution without arbitration, which is not denied, we see little ground upon which to support the defendant’s contention. That one. partner may maintain an action against his copartner for damage for premature dissolution and violation of the articles has been settled, and the rule of damages adopted by the referee was as favorable as the defendant had a right-to expect. We think, therefore, that the referee was correct in the view taken as to his right to determine this question, and as his finding in this regard is amply supported by the evidence we do not think it should be disturbed.

The judgment appealed from should, therefore, be affirmed, with costs.

Barrett, Patterson and McLaughlin, JJ., concurred.

Judgment affirmed, with costs.