Walker v. Steers — 38 N.Y. St. Rep. 654

Majority

p. 654

Henry B. Walker et al., Ex’rs, Resp’ts, v. Delos Steers et al., Resp’ts. Frederick A. Saville et al., App’lts.

(Supreme Court, General Term, Fourth Department,

Filed May 8, 1891.)

Headnote

1. Will—Revocation by inconsistent contract.

Testator bequeathed to one S., who was his son-in-law and partner, an undivided interest in certain patents in consideration of carrying on the business of manufacturing and selling machinery under the same for ten years and accounting for one-half the profits thereof to a certain church, at the end of which period S. to become absolute owner of said patents and business. Thereafter testator and S. entered into new articles of partnership, to continue five years, by which S. was given a one-third interest in the patents, the profits to be divided in certain proportions, and providing that in case of the death of either before the expiration of the five years the business was to be continued by the survivor until the close of the term, with a similar division of profits, the firm name, good will and patents to then become the sole property of the survivor, provided that if S. was the survivor he should pay to the estate of testator a certain royalty on sales for a further period of fives years. Held, that the provisions of the contract were wholly inconsistent with the terms and nature of the bequest and revoked the same.

2. Partnership—Continuation of business on death of partner.

A provision in articles of copartnership for the continuation of the busi- . ness, in case of the death of one of the partners, by the survivor until the expiration of the prescribed term, is valid.

Appeal from certain portions of a judgment entered m Otsego county on the 10th November, 1890, upon the report of a referee.

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This action is brought for the construction of the will of Schuyler B. Steers, who died at Cooperstown, Otsego county, December 13, 1889, where he then resided. The will is dated July 15, 1886, and was duly admitted to probate by the surrogate of Otsego county on December 28, 1889.

In this will the testator, after providing for the payment of debts and funeral expenses, gave to his wife $50,000 and all his household furniture, horses, carriages and pictures, except his saddle-horse Daniel Boone. He then gave certain specific legacies to the amount of about $42,000. Then in the tenth clause of the will, after a bequest to his late son-in-law, the appellant Saville, of his saddle horse and his one share in the Hew Orleans Cotton Exchange, there came the following provision: “ I also give and bequeath to said Frederick A. Saville an equal undivided half interest in the new Mor-se cotton compress patents, dated May 28, 1878, May 23, 1882, and October 18, 1882. Also an equal undivided half interest in the Stewart and Steer and S. B. Steers’ patents for bale ejectors, and the S. B. Steers and L. C. Terry’s bale headers patents, together with all the compress patterns, tackle, etc. This bequest is in consideration that the said Saville will carry on the business of making and selling machinery under these patents for ten years after my decease, and that he will, after all the expenses of said business is paid, pay over and account at the beginning of each year for one-half the net avails and profits of the past year to the pastor and trustees of The First Presbyterian Church of Hew Orleans to found a fund to be kept invested by them, the income of which to be used by them to assist in the education of young men having the profession of a minister in view, or for city missionary work. And at the end of said ten years the said Saville to become the absolute owner of the patents and the business of making and selling them. And I further will and direct that no compensation shall be paid the said Saville for his time and services during said ten years, except his half of the profits.”

Then after giving to Saville a legacy of $10,000, and providing for the transfer to him of certain bonds given to his daughter on her marriage, and a legacy to another party of $5,000, there came the following:

“ Twelfth. I give and bequeath unto my beloved and good wife, Kate Clarke Steers,, all the rest, residue, and remainder of my property in trust, nevertheless, and to and for the following purposes, the same to be used to establish an institution in ornear the village of Cooperstown, to be called the Mary and Edward Steers Home, the object to be to provide a home for worthy, indigent persons, of one or both sexes, the style and character of such home to be decided and fixed upon by my beloved wife, together with my executors and the trustees of the Presbyterian church in Cooperstown. The building to be erected, and the residue of the money to be invested as an endowment fund for the support of said home.”

He then appointed the plaintiffs executors, of whom Saville is one, and authorized them to sell real estate.

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The wife of the testator died on the 1st June, 1888, so that the testator at his death left no widow, or child, or descendant of a child. His daughter, who was the wife of Saville, died before the will was made.

At the time of making the will, the testator and Saville were copartners in business, at New Orleans, in the state of Louisiana, under the firm name of S. B. Steers & Co. The business of the firm at that time was selling and operating cotton compresses, manufactured under the patents mentioned in the tenth clause of the will, and also doing business as cotton warehousemen. Steers had a two-thirds interest, and Saville a one-third interest in the business, and the patterns used in manufacturing compresses, and the tackle and machinery used in putting them up, were owned by the firm in the same ratio.

This partnership continued till the 14th June, 1889, at which date the parties executed under their hands and seals and duly acknowledged articles of agreement, “ for the governing of their copartnership business and relations,” whereby they agreed to become copartners “ under the firm name of S. B. Steers & Co., in the business of manufacturing and selling the Morse cotton compressor and its attachments, of operating compresses and warehouses for the compressing and storing of cotton, and of transacting all kinds of business heretofore conducted by the firm, said copartnership to commence and date as of May 1, 1889, and include all business transacted since that time, and to continue for the full term of five years.” To that end, they thereby contributed to the copartnership the existing assets of the firm of S. B. Steers & Co., and assumed their existing liabilities, and also contributed their and each of their interests in and to the Morse cotton compressor patents owned by them or either of them as said firm or individually, such assets and liabilities so contributed and assumed to be held, owned and borne in proportion of two-thirds to Steers and one-third to Saville, each agreeing to devote their time and energies to the business as far as they were able, and share and divide the profits and losses thereof as follows: For the first two years in the proportion of two-thirds to Steers and one-third to Saville and thereafter equally. The agreement also provided that, “ In case of the death of either copartner before the time hereinbefore limited for the termination of the copartnership, the firm business shall notwithstanding be continued by the survivor until said full term of five years shall have expired, the profits and losses of said full term to be shared and divided between said survivor and the estate of said deceasde copartner in the proportion and on the basis above agreed, so that the estate of said deceased copartner shall receive the same benefit from the business as though said copartner had lived. But at the expiration of said five years the interest of said deceased co-partner shall cease and wholly determine, and all assets, profits and losses then existing, save only the firm name, good will and said patents, shall be divided between said survivor and the estate of said deceased copartner in the proportion and on the basis above agreed, that is to say, all assets, profits and losses, in what

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ever form existing, being earned or made prior to the expiration, of the first two years of the copartnership, shall be divided in the proportion of two-thirds to the said Schuyler B. Steers or his estate, and one-third to the said Frederick A. Saville or bis estate, and all assets, profits and losses, in whatever form existing or applied, earned and made after the expiration of said first two years shall be divided equally. The firm name, good will and said patents, shall not be sold or divided, but shall be and become the sole property of the survivor, who may thereafter continue the business for his own benefit in the firm name. But in case said Frederick A. Saville shall be such survivor and shall continue the business, then it is further agreed that for a further period of five years he shall pay to the estate of Schuyler B. Steers a royalty of $3,000 for every compress sold. This agreement shall bind the heirs and representatives of the respective parties.”

The value of the estate left by the deceased after the payment of debts and expenses is about the sum of $100,000, consisting of both real and personal, the personal not being sufficient to pay the legacies and was not at the date of the will, which fact was known to the testator. It is not found what was the amount of property invested by Steers in the firm. There is evidence that his interest was estimated at $20,000 to $30,000. The firm was •somewhat embarrassed financially on June 14, 1889, to the knowledge of both parties. Prior to that date and after the date of the will, Saville had acquired a one-third interest in the real estate used in the business.

The referee, among other things, decided that all that part of the tenth clause which provided for a continuance of the partnership business after the death of the testator and the payment of a portion of the avails to the New Orleans church, including the bequest of the patents, patterns, tackle, etc., and the business of making and selling as therein described, was revoked by the provisions of the contract of June 14, 1889, and all the rights which Saville has acquired in and to said business and property are such as arise out of the provisions of that contract, excepting the interest therein which was theretofore vested in him independent of the provisions of the will; that Saville, as surviving partner, is •entitled to retain in bis hands and under his control all the assets and property of the firm for the purpose of discharging its liabilities and performing its obligations, and, if be fulfils the terms of the contract, will be entitled to the benefit of the provisions in his favor, but cannot as survivor create any debt or obligation for which the separate estate of the testator can be made liable; that the bequest in the twelfth clause is void for indefiniteness and uncertainty in regard to the beneficiaries of the proposed trust and the manner of its execution, and is also inoperative by reason of the death of the sole trustee.

Saville and the First Presbyterian Church of New Orleans, its pastor and trustees appeal

Charles T. Brewer, for app’lts; James A. Lynes, for resp’ts.

The contention of the appellants is, that the decision of the referee, so far as he holds that the tenth clause of the.will is revoked by the contract of June 14, 1889, is erroneous. The theory of the respondents is, that the provisions of the contract are wholly inconsistent with that part of the will, and, therefore, amount to a revocation within § 48 of title 1, chapter 6, part. 2 of the Revised Statutes. 4 R. S., 8th ed., 2549. The theo'ry of the appellants is, that the contract is not wholly inconsistent, and also that it is not a valid instrument The real question, in substance, is, whether the New Orleans church shall, under the will,, share in the future avails of the business, or whether, under the-contract, they shall be paid to the estate generally and be distributed as general assets, thus, in effect, benefiting the residuary legatee, or, if the residuary bequest is invalid, then going to the-next of kin.

By § 47 of the title above referred to, it is provided that a conveyance, settlement, deed or other act of a testator, by which, his estate or interest in property, previously devised or bequeathed by him, shall be altered, but not wholly divested, shall not be deemed a revocation of the devise or bequest of such property, but such devise or bequest shall pass to the devisee or legatee the actual estate or interest of the testator which would otherwise descend to his heirs or pass to his next of kin, unless in the instrument by which such alteration is made the intention to revoke is declared.

Section 48 is as follows: “ But if the provisions of the instrument by which such alteration is made are wholly inconsistent with the terms and nature of such previous devise or bequest,, such instrument shall operate as a revocation thereof, unless such provisions depend on a condition or contingency, and such condition be not performed or such contingency do not happen.” So-that in the present case, although the testator was not wholly divested of his interest in the property, still the contract, if valid, would operate as a revocation, if its provisions were wholly inconsistent with the terms and nature of theabequest.

The testator, at the time of making the will, was the entire owner of the patents there referred to. A partnership then existed between him and Saville that was engaged in selling and. operating cotton compressors manufactured under the patents. The testator had a two-thirds interest in the business and Saville a one-third, and the patterns, tackle and machinery were owned by the firm in the same proportion. This partnership was formed, in September, 1885, but whether for any definite time does not. appear. By the will Saville is given an undivided half of the-patents, patterns, tackle, etc., in consideration that he will carry on the business of making and selling machinery under the patents-for ten years after the testator’s decease, and pay annually to the New Orleans church one-half of the net avails and profits, Saville, at the end of the ten years, to become the absolute owner of the patents and the business of making and selling them.

By the contract, the partnership was to continue for the definite period of five years from May 1, 1889. By its terms Saville be

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came the owner of one-third of the patents. The profits and losses were to be divided for the first two years in the proportion of two-thirds to Steers and one-third to Saville and thereafter equally.

In case of death of either before the expiration of the five years the firm business was to be continued by the survivor to the end of the term, the profits and losses to be divided in the same proportion as if both had lived, and at the close of the term there was to be a division in the same proportion of all the assets, profits and losses then existing except that the firm name, good will and patents should become the sole property of the survivor, and he might thereafter continue the business for his own benefit in the firm name. If, however, Saville was the survivor, and should continue the business, it was agreed that he should pay the estate of Steers a royalty of $3,000 for every compress sold.

Both the will and the contract related to the business of making and selling machinery under the same patents. The will provided for a ten years term and the final ownership by Saville of the patents and the business. The contract, in the contingency of Saville being the survivor, provided for the same result at the end of five years, with a provision on his part to pay the estate of Steers a royalty for a further period of five years. The will provided for the payment by Saville of one-half the net profits to the New Orleans Church for the ten years; the contract provided for the payment to Steers or his estaté of two-thirds the profits for two years and one-half for the balance of the time. The contract •covered the whole subject The continuance and closing up of the business, the division of the assets and profits, and the final ownership of the patents, were all provided for. The patents expired in 1898, before the termination of the operation of the contract. Nothing was, therefore, left for the will to act upon. It may, therefore, be well said that the provisions of the contract are wholly inconsistent with the terms and nature of the bequest There would seem to be no doubt about the intention of Steers. The situation had materially changed after the date of the will. There was a change in the ownership, and the firm had become financially embarrassed. Very clearly the design of Steers was that the contract should take the place of the provision of the will. The estate is entitled to have the contract, if valid, carried out Saville himself is in the attitude of claiming benefits under it

It is not claimed that the New Orleans Church can take the proceeds under the contract. See Beck v. McGillis, 9 Barb., 59 , and cases there cited; McNaughton v. McNaughton, 34 N. Y., 203 .

It is further claimed by the appellants that the contract, so far as it provides for the continuance of the business by the survivor with a division of the profits and losses for the full term, is void. This question is not raised in the answers of the appellants or by any request for findings. We will, however, assume that the question is before us. The cases of Ross v. Hardin, 79 N. Y., 84 ; Nat. Bank of Newburgh v. Bigler, 83 id., 52, and Stewart v. Robinson, 115 id., 328; 26 N. Y. State Rep., 117, are cited on the subject. It is not claimed that either of these cases decide

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the question. At most they suggest some doubts. In the Boss; case the action was brought to recover the value of services rendered by plaintiff, at the request of defendant’s intestate, in the-care of certain property intermediate the death and the appointment of an administrator. Church, Ch. J., in the opinion, says: “It is very clear, I think, that a person cannot by a contract supersede or contravene the laws in respect to the. management and devolution of property in cases of intestacy.. The statute has provided a mode of doing this by will, but the requirements of the statute must be complied with.” He, however, sees no reason why a party may not make a valid contract-for the care of his property from his death to the appointment of an administrator. This question however was not passed upon, the plaintiff being beaten upon another ground. In the Bank of Newburgh case, it was held that a surviving partner had no authority to bind the estate of the deceased partner. by new accommodation endorsements or by renewal of old endorsements-of that character made in the lifetime of the deceased, although there was a provision in the articles of partnership that the survivor should continue to carry on the business for the benefit of both parties for a specified time after the death, it being said that the authority thus conferred, if held to be operative, would not be sufficient In the Stewart case there was a provision like the one-in the present case, and the question was whether the estate generally of the deceased was liable for new debts contz-acted by the-survivor. It was held not, it being said not necessary to determine the question raised by the respondents that the agreement was not valid for any purpose.

In the Matter of Laney, 50 Hun, 15 ; 18 N. Y. State Rep., 463,. the agreement was that in case of the death of any of the parties before the expiration of the term, which was seven years, the co-partnership should not be dissolved, but be continued by the survivor under the same firm name to the expiration of the term and' the share of the deceased partner in the profits be paid to his representative. One of the partners died in about two years. In an accounting by his administrator, who was also one of the survivors, it was expressly held that the agreement was valid and the-account was settled on that basis. It was said that under the agreement it was the duty of the survivors to continue the business for the benefit of the estate of the deceased as well as for their own benefit during the time fixed by the ai'ticles, and that by virtue of its prescribed contribution to the capital stock, the estato is entitled to its share of the profits according to the provisións of the contract This case was affirmed by the court of appeals without opinion. 119 N. Y., 607 ; 28 N. Y. State Rep., 977. In Scholefield v. Eichelberger, 7 Peters 594 , it is said that there is no doubt that the liability of a deceased partner as well as his interest in the profits of a concern may by contract be extended beyond his death. This doctrine Judge Story endorses in Burwell v. Mandeville's Ex'r 2 How., 576 . In Wild v. Davenport, 48 N.

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of a partner his capital shall remain in the business until the expiration of the prescribed term is binding as well upon the estate of the deceased as upon the surviving partner. Many other cases are to the same effect Gratz v. Bayard, 11 Sergeant & Rawle, 41. McNeish v. Hulless Oat Co., 57 Vt., 316 ; Goodburn v. Stevens, 5 Gill, 22 . And so are the text books. Story on Part., § 319 a; Parsons on Part., 2d ed., 469; Lindley on Part., 866.

We must, therefore, assume, I think, that the parties had a right to make the contract in question and that it is operative unless there is something in the further objection by the appellants that the contract attempts to create an illegal suspension of the absolute ownership of personal property, and also an unlawful accumulation “of the interest, income or profit of personal property,” in violation of the provisions óf title 4, chapter 4, part 2 of the Revised Statutes. 4 R. S., 8th ed., 2516. We are referred to no case which sustains the proposition that the statute referred to applies to an ordinary contract for a partnership, or for the continuance of the business of a partnership by a survivor to the end of a term. While all the partners are alive, they have full control, and there- is no suspension of absolute ownership. Upon the death of one, the survivors become the legal owners of the assets, take them, not as trustees, but as survivors holding the legal title, subject to the equitable right of the representatives of the deceased partner to have the assets applied according to the terms of the partnership. Williams v. Whedon, 109 N. Y, 333 ; 15 N. Y. State Rep., 265. So that in the present case there was no suspension of absolute ownership. The survivor, either alone or in connection with the representatives of the. deceased, could transfer the absolute title. Inalienability can only exist when there are-no persons in being who can convey a title. Wetmore v. Parker, 52 N. Y., 459 , 460. See, also, Garvey v. McDevitt, 72 N. Y., 563 ; Murray v. Murray, 7 N. Y. State Rep., 394. The power to convey at any time existed; the time when to convey depended upon the exigencies of the business.

Nor was there any direction for the accumulation “ of the interest, income or profit of personal property,” within the statute. There was nothing to prevent the division of profits, if any were earned, before the expiration of the term. It was, therefore, within the control of the survivor and the representatives of the deceased. There might never be any profits to divide. If there were any, it would hardly be proper to call them the profits of personal property. They would be the profits of the business and depend very largely on the skill and energy of the partner in charge. In fact, in this case, the main elements apparently would be the skill of the survivor on the one hand and the value of the patents on the other.

It follows that the contract was valid. No other questions are presented by the appellants. The judgment should be affirmed.

Judgment affirmed, with-costs.

Hardin, P. J., and Martin, J., concur.