Stewart v. Robinson

The defendants are brought before the court as trustees and executors of the estate of Joseph Colwell,.

The seventh clause of the articles declared that: “ Should either partner die during the term of said copartnership the firm shall not be deemed dissolved thereupon, but the wife and. children of the decedent shall immediately succeed to his-interest, which, thenceforward, shall be prosecuted for the remainder of the term for the benefit of them and the surviving partner.- Either partner may designate by will what interest his wife and children, as between themselves, shall have in his said copartnership interest in the event of his death as aforesaid.”

Before the expiration of the stipulated time, and on the 18th of October, 1881, a further agreement was made that the copartnership should continue until dissolved by mutual consent or terminated by six months notice in writing by one party to the other, and that “in the event of the death of either, the business shall be continued by the survivor until the expiration of five years from the first day of February next, succeeding such death, the estate of the deceased partner to have the same share and interests in the profits, and to bear the same share of the losses of the business as would have been received and borne by the deceased partner had he lived,,

The firm business was thereafter continued under these instruments until the 1st day of June, 1882, when Colwell died, leaving children and a will. He appointed the above-named defendants executors and trustees, and gave them, in trust for his children, the greater part of his estate, and directed a distribution of the whole, making no reference to the business of the firm of S. S. Hepworth & Co., or to it in .any way, or to the agreement above set out, and revoking all other wills theretofore made by him. It also appeared that from the death of Colwell to September, 1887, the business of S. S. Hepworth & Co., was continued and carried on by •Samuel S. Hepworth, he assuming to do so under the agreements of February 23, 1877, and October 13, 1881. In the course of that business in September or October, 1887, or five years after Colwell’s death, he contracted debts with the plaintiffs and with other persons or firms, in the name of S. S. Hepworth & Co., for some of which he gave promissory notes in that name, and others of which rest in account.

On the 4th of October, 1887, Hepworth, individually and as ■surviving partner, was insolvent to the extent of about $500,000, and on that day made an assignment in both capacities for the benefit of his creditors. The individual debts of Colwell have been paid, and property remains in the hands of his executors. The plaintiffs, either as original creditors or by assignment, are the owners of the debts contracted by Hepworth and set out in the complaint, amounting in the •aggregate to about $15,000, and they seek to recover the .amount from the individual estate of Colwell, and in the meantime ask for the appointment of a receiver of his property, assets and estate, and an account thereof from the defendants as his representatives. Various defenses were interposed by them, but, so far as material upon this appeal, their effect

It is a general rule that a contract of partnership is dissolved by the death of one of the parties, whether entered into for a fixed time or not, and that after his death the former partner cannot bind the estate of the decedent by new contracts ; and although the partnership be expressly extended to executors, they could not be compelled to carry it on, and would be entitled to a dissolution and an account of the assets, subject to the liabilities of the firm incurred up. to the time of dissolution. These are familiar and well-settled principles. Here the representatives of the deceased partner were not to be partners with the survivor, nor were they to have anything to do with the conduct of the business or its management. On the contrary, the business is “ to be continued by the survivor.” We have only to inquire, therefore, whether the partnership agreements take the case out of the general rule.

The frame of the last articles shows that the parties contemplated and bargained for a continuance of the business for the term of five years from the first of February next preceding the death of either, but the residue of the clause containing this stipulation depends, to some extent, for its interpretation upon the preceding or original article. The second agreement refers to the first as containing the terms and conditions on which the business is to go on"; and looking there we find that the capital, however represented by money, tools, machinery or material, was not to exceed $4,000, and was to be provided by Colwell and to remain his individual property. That contribution made him an equal partner, and upon dissolution of the firm was to be repaid to him, with interest, before any division of surplus earnings should be made. . Death of a partner, however, was not as, of course, to work a dissolution, but the wife and children of the decedent were immediately

The general rule already adverted to does, upon the death of a partner, terminate the power of his associate or copartner to contract new debts on the credit of the firm. Assuming with the appellant that this general result of law may be varied by an express agreement, it will then depend upon the

The same doctrine was established in the courts of Connecticut at an earlier time (1829) in PithMs Gase (T Conn. 307); also cited with approval by Judge Story in Burwell v. Mandeville's Executors (supra).

The general subject of the construction of language giving-power or authority for the continuance of a trade, after the death of one member of a firm, has also been under consideration in this court and its conclusion expressed in the decision of Willis v. Sharp ( 113 N. Y. 586 ). Among other cases referred to was Burwell v. Mandeville's Executors (supra), and the general proposition there laid down restated. It was assumed that the courts, with reasonable unanimity, sustained as valid a direction in the will of a testator that his trade should be continued whether his business was that of a sole trader, or of a firm of which he was a member, but it was held that a mere power to carry on the testator’s trade, or to continue his business in a firm of which he was a partner,

These views were sustained upon authority. They require us to search for the intention of the deceased partner in the language used by him in giving his directions. In the case then before us ( Willis v. Sharp, supra) the testatrix, at the time of her death, was engaged in “ the merchant tailoring business,” and by will directed that after her death “some legitimate business should be carried on by her executors for the benefit of her son Harry, and that her husband, the defendant, should be retained as manager thereof at a salary of $1,500 a year;” and this was followed by a provision empowering her executors “ to sell or make such other disposition of my real and personal estate as the safe conduct of such business shall seem to require,” and in favor of a creditor who became such in the course of the business so carried on, we held that this provision indicated an intention to subject her general assets to the debts of that business, and that her general estate was bound by the debt contracted; but we also said: “ If, in this case, there was in the will simply an authority or direction to the executors to carry on a trade, and in pursuance of the power the executor continued the existing business, we think, under the authorities cited, the plaintiffs could have no remedy except to pursue the assets embarked in the trade at the death of the testatrix.”

In the case now before us the directions or authority are such only, as we said in the former case, would be insufficient to enable a creditor to reach the general assets of an estate. They are almost literally,, in every sense, substantially the same as those actually presented by Burwell v. Mandeville

First. The “ capital ” is fixed at $4,000, the sole property ,of Colwell.

Second. It is with that capital that “ the business of the «copartnership ” is to be conducted.

Third. The profits of the business are to be divided between -the parties at convenient periods.

Fourth. At the dissolution of the partnership, and the liquidation of its business, the cash capital is to be repaid before •any division of surplus earnings.

These terms and conditions are, by reference, incorporated into the new agreement on which the appellants rely. The ■second agreement repeats the same general language. In the .event of death “ the business ” shall be continued, i. e., “ the business. already described as employing a ceitain capital,” not an additional capital; and the profits and loss of the same “ business ” are to be shared in the same manner as if the deceased -partner were alive, with only one addition, viz., the survivor -might, if he thought necessary, in consequence of his partner’s •death, employ an additional clerk, the expense of whose employment should be borne by “ the share of the profits of the deceased partner.” Here are no words from which can be implied an intention to bring into the concern other capital, or make new debts a charge upon any assets outside of those already pledged to the business, of the firm. It is nothing more than an .authority to the surviving partner to continue an existing business, and, therefore, within the authorities cited, and upon reason‘and common sense, the plaintiffs cannot have the relief tthey seek in this action.

The respondents assail the validity of the agreement for any purpose. I do not think it necessary to determine the «question so raised. It is enough to dispose of the present .case that we find no language on the part of the deceased

The appeal in the ease second entitled is from a judgment of the General Term of the Supreme Court in the first judicial department, entered upon an order made December 12, 1888, which affirmed a judgment dismissing the complaint entered upon a trial at Special Term.

This action was brought by plaintiff as receiver of the firm of S. S. Hepworth & Co., to charge the executors and trustees under the will of Joseph Colwell, deceased, as copartners with S. S. Hepworth from the time of the death of said Colwell to October 4, 1887.

The facts are sufficiently stated in the opinion.

William C. Wallace for the appellant.

The articles of copartnership established valid contractual relations between the partners, which continued after the decease of Mr. Col-well, by which his whole estate was made liable for any and all debts incurred within the designated period. (In re Diez, 50 N. Y. 93 ; Blodgett v. Am. Nat. Bk., 49 Conn. 9 ; Hoyt v. Sprague, 103 U. S. 613 ; Warner v. Cunningham, 2 Ves. 33; 3 Dowl. Parl. Cas. 76; Balmain v. Shore, 9 id. 500; In re Northern Coal Mining Co., 16 Jur. 299; Beveridge v. Beveridge, 2 Pat. Scotch App. 1976; Powell v. Hopson, 13 La. Ann. 626 ; Duffield v. Brainerd, 45 Conn. 424 ; Butler v. Am. Toy Co., 46 id. 145; Toller on Exrs. 166; Story on Part. § 319a.) This contractual relation subjected the entire estate of the testator to the continued business of the partnership. (Kittowitz v. Alexander, 34 Tex. 689 .) Technically, under the law of partnership, the firm of S. S. Hepworth & Co., existing at the time of the decease of Mr. Colwell was dissolved, and a new firm was formed, in

It follows that the judgment appealed from should be affirmed, with costs.

All concur, except Earl, J., not voting.

Judgment affirmed.

William H. Arnoux for appellant.

A partner can, by an agreement sufficient and valid on its face, bind his property after his decease. (Blodgett v. A. Nat. Bk., 49 Conn. 9 ; Todd v. Weber, 95 N. Y. 181 .) A partnership may be made to survive a partner’s death. The executor or administrator would contribute the deceased partner’s estate and replace him in. the firm. (Parsons’ Principles of Partnership, § 71; Laughlin v. Lorenz, 12 Wright [Pa.] 275.)

William B. Ellison for Skellen et al., executors, etc., respondents.

The provisions in the original articles of copartnership, that upon the death of a member the copartnership should not be dissolved; that the wife and children of the deceased partner should succeed to his interest and the business should be by them prosecuted for the remainder of the term, are, in fact, only bargains for the creation of a new partnership when the old one ceases to exist upon the death of a partner. (Parsons on Copartnership, 439; Martine v. Inter. Life Ins. Co., 53 N. Y. 342 ; Savage v. Putnam, 33 Barb. 424 ; Edgar v. Cook, 4 Ala. 588 ; Briswold v. Waddington, 15 Johns. 82 .) The clause of the supplemental agreement upon which this action is founded was, in effect, an attempt to appoint, by an instrument vnter vivos, a person to take the control and management of a certain portion of the deceased partner’s property after his death, and which was not to commence until after that death ; such a provision was and is invalid. (Ross v. Hardin, 12 J. & S. 26; 79 N. Y. 91 .) The clause in question was testamentary in its nature. (4 Kent’s Com. 502 ; 2 Burrill’s Law. Die. 622; 6 Wait’s Actions and Defenses, 377.) The fact that the instrument is in the form of' a contract is immaterial. (Beach on Wills, §§ 18, 51;

Thomas Darlington and Joseph H. Choate for executors of Delamater, respondents.

There being no evidence that the executors ever took any part in the business they never became partners therein. (Wild v. Davenport, 48 N. J. 129 ; 5 Cent. Rep. 74; Richter v. Poppenhausen, 39 How. 83 ; 42 N. Y. 373 .)

Ralph E. Prime for S. F. Quick, assignee, and S. S. Hepworth, respondents.

Hepworth, in his capacity as survivor of the copartnership, composed of himself and the deceased

Samuel Jones for G. H. Robinson, respondent.

This case differs essentially from the case of Stewart v. These Defendants (supra, p. 328), and from that of Delamater v. The Same {post, p. ), and especially because in the former there was no claim that the executors of Colwell became partners with Hepworth, and in the other there was an explicit declaration that no such relation existed, whereas in the present case it is made a distinct ground of right to a recovery that the business was conducted by “ Samuel S. Hepworth, and the said executors as copartners, under the firm name of S. S. Hepworth & Co., from the time of the death of Colwell down to October 4, 1887. Indeed, the plaintiff’s case rests upon the truth of this allegation. His claim is “ that a valid partnership was formed which continued until the failure of S. S. Hepworth & Co.; that the executors were partners in that company after they qualified.; that a certain mortgage given by Hepworth, as surviving partner, to the executors was invalid," because the estate of Colwell was liable for the debts of the firm, and for other reasons; that certain instruments, assignments, mortgages, etc., given by Hepworth are invalid; that, therefore, the plaintiff is entitled to a decree establishing the lien of his judgment as superior to these incumbrances.”

The plaintiff sues as receiver, appointed upon an application made in supplementary proceedings by certain creditors of S. S. Hepworth & Co., who had recovered judgment against Hepworth and the executors as copartners, in actions nominally against them all, but in which the summons was served upon Hepworth alone. The defendants answered, and upon trial of the issues at Special Term, the complaint was dismissed, and upon appeal by the plaintiff to the General Term the judgment of the Special Term was affirmed.

It is undoubtedly the fact that the death of Colwell dissolved the firm of S. S. Hepworth & Co. Hepworth from that moment, as surviving partner, became, in the eye of the law, the sole and absolute owner of its assets. He, and not Colwell’s representatives, was the one to wind up the concern, to sue and to be 'sued, to pay the debts of the firm and do all other acts in any way relating to it. (Nehrboss v. Bliss, 88 N. Y. 600 .) He was bound to account for the proceeds, and the estate of the deceased partner was also liable on all antecedent engagements. The dissolution had respect to the future, however, and the estate was not liable for debts thereafter contracted. Indeed, this action does not proceed upon the theory that it was. It is put in motion upon the ground that a new firm was formed, of which the executors were members. The téstator did not so ordain either by will or contract. His agreement for the continuance of the business and a distribution of profits to his estate did not amount to that (Holme v. Hammond, L. R., 7 Ct. of Ex. 218), nor did the executors agree to such arrangement. They did not act as partners. They dealt with the surviving partner as others might have done. They loaned him money; they took security for its repayment from him, he acting, as he had a right to do, as surviving partner. The estate of Colwell had a pecuniary interest in the winding up of the concern, and so

There is nothing to show that any relation of principal and agent existed between them, or that there was any contract of copartnership, or that they so conducted that, even as to third parties, they constituted themselves partners.

We find nothing within the record to give any color to the plaintiff’s assertion that “ the executors of Colwell, in their representative capacity, became partners ” with Hepworth.

First. The agreement between Hepworth and Colwell provides only that upon the death of either “ the business shall be continued by the survivor.” It excludes the idea that the representatives of the partner dying shall come in, or that a new firm shall be formed, or that the place of the decedent shall, in any sense, be filled. His death, the agreement suggests, may throw a greater burden on the survivor, and in that case “ the survivor, if he thinks it necessary, may employ an additional clerk.” Such is the contract. Greater clerical and subordinate force, a new "employe, but neither a new principal nor associate. There is nothing in the agreement, therefore, which continues the partnership or calls for a new "one.

Hor is there any force in the observation that the estate is to share in the profits and losses of the continued business. The agreement does not involve the general assets of the decedent, but is confined to that specific portion which, by the partnership articles, is devoted to it. (Stewart v. Robinson, supra.) Ho additional fund is appropriated from the effects of the deceased partner. The fund reserved from his property by contribution to the firm in its original formation remains. It is neither enlarged nor diminished. The plaintiffs, therefore, derive no aid from the agreement. Their action is not against the survivor, nor do they pursue any fund within his control.

■Second. They proceed against parties whom they describe as

Heither-legal nor equitable considerations require that the judgment appealed from should be disturbed. It should, therefore, be affirmed, with costs.

All concur, except Earl, J., not voting.

Judgment affirmed.