Patterson v. Hare — 4 A.D. 319

Majority

p. 319

George Patterson, Appellant, v. Joseph Hare, Respondent.

Headnote

Partnership accounting—• liability where one partner sells all the assets—when the sale is not made in good faith.

In an action brought to procure a partnership accounting it appeared, among other things, that the defendant had sold all the property of the firm for §300, and the referee to whom the action was referred found that the sale was made in good faith and charged the defendant therefor with only §800, although the property was sold to the defendant’s brother at night, unexpectedly to the plaintiff, the defendant never having asked any one else to purchase the property, ■which was worth $1,000.

Held, that the sale-was fraudulent;

That, assuming that the defendant had an interest in the property similar to that of a mortgagee, and that a mortgagee could sell at private sale, such sale to be valid must be fairly made.

Appeal by the plaintiff, George Patterson, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of' the county of Rensselaer on the 1st day of July, 1895, upon the report of a referee, except from so much of said judgment as decides and -adjudges that the partnership between the plaintiff and defendant be dissolved.

Farrell & Finder, for the appellant.

C. D. Hudson, for the respondent.

In the fall of 1.890 the parties to this action formed" a co-partnership in the business of cutting, storing and selling ice. They

p. 320

obtained a léase for a site for an ice house and built one in December, 1890: They purchased • horses,-wggons and tools and entered upon the business and so continued until October 26, 1891. At this time, as the referee finds, the firm owned a lease of the premises used by them, in their business, two horses, two- ice houses, iee wagon and harness, ice tools and barn tools, all of which had been purchased by the firm within about one year previous, at a total cost, exclusive of the lease, of $1,829.15. The referee also finds “ that on or about said 26th day of October, 1891, the defendant, in good faith and with no intent to cheat or defraud said plaintiff, sold and transferred all of said firm property to his brother, John Hare, for a reasonable consideration, to wit, for the sum of $300, which sum was and is retained by said defendant.” -. This sale operated as a dissolution, as it practically included all the property used by the firm in carrying, on its business. The referee stated the accounts of the parties, charging the defendant with the $300 received by him on the sale to his brother, and upon the accounts so stated and settled he found due to the defendant from the- plaintiff the sum of $389.42, for which sum he ordered judgment against the plaintiff, with costs. Judgment was accordingly entered from which the appeal is taken.

The plaintiff in his supplemental complaint in effect charged that ■ the sale by defendant to his brother was a fraud upon the plaintiff’s rights-; that the property sold was worth not less than $1,800, and that defendant should be charged with its fair- market value. Hpon the issue made upon these allegations, the réferee made response in" the finding above quoted. The plaintiff claims that this finding is not'sustained by the evidence. If this contention be true, a new trial must follow, as the defendant is only charged with what lie received from his brother.

The sale was made in the night time and .the defendant testifies that he never asked any one else to purchase the property. It was not assented to by the plaintiff, and he liad no information that defendant would attempt to make any.such sale. The property, according to-the undisputed evidence, was worth more than $1,000.

A caréful consideration of the evidence leads us to the conclusion that the finding that the sale was made in good faith and with no intent to defraud the plaintiff, or for a reasonable consideration, is not sustained by the evidence.-

p. 321

It is argued on the part of the défendant that on an occasion when the defendant made an advance in excess of the advances made by the plaintiff, the plaintiff agreed with the defendant to give him an assignment óf his interest in the co-partnership assets as security. Assuming that the defendant had an interest in the property sold similar to that of a mortgagee, it would not follow that the sale in question would be valid. If a mortgagee has a right to make a private sale, it must be fairly made. (J ones on Chat. Mort. [4th ed.] § 790, and cases cited.)-

All concurred.

Judgment so far as appealed from reversed, new trial ordered, costs to abide the event. Referee discharged.