Stewart v. Robinson — 15 N.Y. St. Rep. 830

Majority

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James Stewart and George Stewart, Appl’ts, v. George H. Robinson and others, as Executors, etc., of Joseph Colwell, deceased, etc., Resp’ts.

(Supreme Court, General Term, Second Department,

Filed May 14, 1888)

Headnote

1. Partnership—Death op one partner—When executors mat continue IN THE BUSINESS.

Colwell and Hepworth were copartners, doing business under the firm, name of S. S. Hepworth & Co. In 1881, the term of five years limited in the agreement for the duration of copartnership, drawing toward the end, the same parties entered into an agreement to continue the copartnership indefinitely. The third paragraph was as follows: “In the event of the death of either partner, 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 parties to have the same share and interest 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 agreement was executed in October, 1881. In May, 1882, Colwell died, leaving a last will and testament, which was admitted to probate. By_ his will, Colwell disposed of his whole estate, but made no mention in it of the partnership, and giving no power to his-executor to continue the business. The surviving partner carried on the business under the partnership agreement, and failed. This action is brought in equity to obtain distribution of the estate of Joseph Colwell, deceased, in payment of the debts of the creditors of S. S. Hepworth & Co., on the ground of the insolvency of the firm and of the surviving partner, S. S. Hepworth. Held, that the death of a partner absolutely ends the partnership agreement, in the absence of words continuing it after -

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death. An executor cannot carry on a business without express authority to do so by the will. The clause in the contract had no greater effect than to permit the surviving partner to take five years to close up the partnership, without intending or fairly meaning that the general estate of the-testator was to be bound for the new debts credited by the surviving partner after his death, other than those incurred in closing up the business.

2. Wills—Direction to apply estate to a partnership for a number-of years—Effect of.

A direction by the testator to apply his estate to a partnership for five years, would be clearly illegal as against his creditors and even his. next of kin and devisees.

Appeal from a judgment dismissing plaintiffs complaint.. The trial was before Mr. Justice Dykman, at Westchester county special term.

R. E. and A. J. Prime and Burns, plaintiffs’ attorney; Samuel Jones, attorney for defendant; George H. Robinson, William B. Ellison, attorneys for the other executors defendants.

—The case shows that there were two-agreements of partnership between Joseph Colwell, deceased,, and Samuel S. Hepworth. By the first agreement, Colwell owned the stock, and Hepworth received half the profits for the sole management of the business. In the agreement it-was provided that the wife and children of a deceased partner should succeed to his share therein for the remainder of the term, which was for five years. The deceased partner-had the right to designate by will the interests of the wife and children as between themselves. The next agreement is based upon a continuation of the partnership indefinitely “ upon the same terms and conditions as those which have previously existed,” with the right to either party to terminate the partnership by a six months’ notice. In this last agreement is contained this clause out of which the question presented arises. In the event of the death of either, the business shall be continued by the survivor until the expiration of five years from the 1st day of February next, succeeding such death. The estate of the deceased partner to have the same share and interest on the profits, and to bear the same share of the losses of the business as would have been required and borne by the deceased partner had he lived; provided, however, that if the survivor shall think it necessary to employ an additional clerk in consequence of the death of the deceased partner, in such case the expenses shall be charged to, and shall be borne by the share in the profits of the deceased partner. Colwell died, leaving a will disposing of his whole estate, and made no mention in it of the partnership, and giving, consequently, no power to the executor to continue the business. The surviving partner carried on the business under the partnership agreement and failed in business. The business was carried on under the old firm name, and the plaintiffs are persons who are

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creditors of the partnership with debts contracted subsequent to Colwell’s death.

The question therefore is, whether the general estate of Colwell is holden for these debts. The authorities are by no means clear. It is definitely settled that death absolutely ends the partnership agreement in the absence of words continuing it after death. Martine v. International Life Insurance, 53 N. Y., 339 .

An executor cannot carry on a business without express authority to do so by the will. Hartnett v. Wandell, 60 N. Y., 347 .

An executor cannot bind the estate through a contract having for its object the creation of a new liability not founded on the testator’s contract. They take testator’s property as owners and must account for it to those entitled to distribution. Schmittler v. Simon, 101 N. Y., 554 .

In the partnership agreement the surviving partner carried on the business after Colwell’s death, under an express agreement made by the testator and the executors took the property of deceased as owners, without power to continue the partnership, and without power to appropriate any of the property of deceased in aid of its performance and during its continuance. A direction by the testator to apply his estate to a partnership for five years would have been clearly illegal as against his creditors, and even his next of kin and devisees. The clause in the contract, I think has no greater effect than to permit the surviving partner to take five years to close up the partnership, without intending or fairly meaning that the general estate of testator was to be bound for the new debts credited by the surviving partner after his death, other than those incurred in closing up the business.

Nothing but the most clear and unambiguous language demonstrating in the most positive manner that the testator intended to have his general assets liable for all debts contracted in the continued work, after his death, and not merely to limit it to the funds embodied in that work would justify the court in arriving at such a conclusion, for, from the manifest inconvenience thereof, and the utter improbability of paying off the legacies bequeathed by the testator’s will or distributing the residue of the estate, without in effect saying, at the same time, that the payment may be recalled, if the trade should become unsuccessful or ruinous. Burwell v. Cawood, Executor, 2 How. U. S. Rep., 577.

This language is used, it is true, in regard to a will, but the meaning as well applies to contracts. The case shows reasons for such a construction. The property all belonged to deceased, and no expectation of a total loss can be im

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puted to him by the extension, and the clause itself provides that the clerk was to be charged “to the share” of the profits of the deceased partner. The clerk was not to be a general charge.

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

Pratt, J., concurs; Dykman, J., not sitting.

Delemater v. Hepworth.

—This case, is similar in its facts to Stewart v. Robinson, and upon the conclusion in that case, should be affirmed, with costs.