Adams v. Empire Laundry Machinery Co. — 22 N.Y. St. Rep. 271

Majority

p. 271

Alonzo P. Adams, App’lt, v. The Empire Laundry Machinery Company, Resp’t.

(Supreme Court, General Term, Third Department,

Filed March 26, 1889.)

Headnote

1. Partnership—Agreement—Construction of—Liability of partnership.

The defendant company, consisting of plaintiff, one Shorey and others, was formed as a copartnership, and continued to transact business until dissolved by mutual consent. During the existence of the partnership, two machines were purchased by the firm, and subsequently a judgment therefor was recovered against the members, which was paid by the plaintiff, who took an assignment thereof. Afterwards, the plaintiff, Shorey and others, entered into an agreement, which provided that Shorey was to organize another corporation, and which provided further that “he (Shorey), shall cause said corporation to assume the liabilities of the defendant corporation.” But "ho liability for the debts of the partnership was assumed by the corporation in excess of the assets received by it. Such liability was not assumed by the corporation, nor was any resolution adopted to that effect. Held, that the mere fact that' the corporation received by transfer, the assets of the partnership, does not have the effect of charging it with the payment of the debts of such partnership, in the absence of any assumed liability.

‘3. Same—Facts necessary to be proved.

Held, that the plaintiff would, in any event, be compelled to establish affirmatively, the fact that the assets exceeded the liabilities of the partnership, in order to meet the requirement of the agreement.

Appeal by the plaintiff from a judgment entered upon the report of a referee, in favor of the defendant.

Ward & Cameron, for app’lt; Marcus T. Hun, for resp’t.

J.—The

The Empire Laundry Machinery Company, ■consisting of the plaintiff, Alonzo P. Adams, George L. Shorey and Frank Everhart, was formed as a co-partnership, February 1, 1883, and continued to transact business in that capacity, until July 1, 1883, when said partnership was dissolved by mutual consent, as evidence of which the parties executed the following:

“New York, July 16, 1883.

The within partnership, is hereby dissolved, by mutual consent.

GEORGE L. SHOREY,

A. P. ADAMS,

FRANK EVERHART.”

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During the existence of such partnership, two laundry machines were purchased by such firm, of Churchill & Peterson, at the price of $250. Subsequently, Churchill &. Peterson recovered a judgment therefor agairist the members-of said co-partnership, for the sum of $301.29, damages- and costs, and the plaintiff Alonzo P. Adams was compelled to pay the same, and took an assignment of such judgment. On the 16th day of July, 1883, the said George-L. Shorey, Alonzo P. Adams, Frank Everhart and Henry S. Porter, entered into an agreement as follows:

“Exhibit L.”

Agreement entered into between George L. Shorey,, Alonzo P. Adams, Frank Everhart and Henry S. Porter,, this 16th day of July, 1883: .Said Shorey shall cause to be-organized in Massachusetts a corporation, with a capital off $10,000 in cash, which he shall cause to be paid, the corporation issuing 100 shares of stock at $100 par value, the bulk of which stock Shorey shall take himself. He shall make one of the other subscribers hereto a director; shall cause said corporation to assume the liabilities of the Empire Laundry Machinery Company, and of the Laundry Machinery and Supply Company, if said liabilities are exceeded by the assets, which are to be assigned to the corporation. He shall give each of said other parties an option for one year to buy twenty-five shares of said stock, for $106 a share, dividends to go with same, and said other-parties agree to pay cash within one year, as aforesaid. The corporation shall pay for the benefit the said firms-have received from the use of the patterns, the cost of reproducing the same; and all patterns shall be considered used where the machines are advertised in the cataloguesof said firms, and the owners of said patterns shall be-credited with their share of said sum as soon as possible,, on the corporation books.

The parties hereto agree that for five years neither will' do for himself,, or in any manner, directly or indirectly, participate with others in any business the same, or similar to that of the corporation; but this agreement shall not prevent any party hereto from manufacturing for the-corporation.

The corporation contemplated by the foregoing agreement was formed, and it seems that the assets of the co-partnership were transferred to such corporation. The-plaintiff contends that, having paid the judgment which was the debt of the co-partnership, he became a creditor of such corporation by virtue of the following provision contained in such agreement: “He (Shorey) shall cause said corporation -to assume the liabilities of the Empire Laundry

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Machinery Company and of the Laundry Machinery and Supply Company, if said liabilities are exceeded by the-assets which are to be assigned to the corporation.”

The referee in his report finds as follows: “ That the evidence given upon the trial herein fails to establish that said corporation, the • defendant herein, ever assumed the.habilites of said co-partnership, The Empire Laundry Machinery Company, or said liability of said co-partnership to said firm of Churchill & Peterson, or ever agreed or became liable to pay the same, or bound or liable to indemnify the plaintiff against the payment thereof.

We fail to discover in this case any agreement on the part of the corporation to assume or pay the debt which, the plaintiff claims in this action. The agreement provides that Shorey should cause the corporation to assume the liabilities of the companies therein specified. The corporation did not do it by any act which we can discover; no resolution was adopted to that effect, nor did the corporation take any action which even pointed towards such a result. It will be observed that the corporation was not. confined to the members of the co-partnership, but included others. The mere fact that the corporation received by transfer, the assets of such partnership did not. have the effect to charge it with the payment of the debts of the co-partnership, in view of the facts disclosed herein. Such liability was not assumed by the corporation, nor was-the debt in question contracted by such corporation, for any of the purposes thereof. The plaintiff paid the debt of' the partnership and not of the corporation, with a knowledge presumably of all the facts relating to the transaction, as he was a member of the partnership and of the corporation. We do not perceive that Shorey took a step in the direction of causing the corporation to assume the debts of the partnership, by which any liability therefor was assumed by or created against such corporation. Hence, in view of all the facts and the law applicable thereto, the referee very properly decided that the plaintiff had failed to establish a cause of action against the defendant.

Furthermore, by the terms of the agreement, no liability for the debts of the partnership was to be assumed by the corporation in excess of the assets received by it, and the plaintiff would, in any event, be compelled to affirmatively establish the fact that such assets exceeded the liabilities of such partnership in order to meet the requirement off such agreement. The referee refused to find that the assets exceeded such liabilities, and we are satisfied that the evidence is not such as to require this court to hold.

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that the referee erred in refusing to find such fact as requested by the plaintiff. It appears that all the members of such copartnership at the time of the dissolution of said firm in an agreement signed by them, provided as follows: ■“H. S. Porter shall adjust the accounts.” It appears that Totter did investigate, and state an account in regard to the assets and liabilities of said copartnership, and reached the result showing that the debts exceeded the assets, and such statement ■ is contained in the printed case. The plaintiff contends that such statement is erroneous in some particulars, which the defendant denies, and we are con-' winced that the evidence bearing upon that question is not such as to call upon us to adjudge that the plaintiff has established the fact that such assets were an excess of the liability, and thus reverse the conclusion of the referee in that respect. Our examination of this case has produced the conviction that no error has been committed by the referee which calls for a reversal of the judgment, and that the same should be affirmed, with costs.

Learned, P. J., and Landon, J., concur.