Burgess v. Badger

The court held that the defendant had failed to establish his alleged counterclaim, and that he was not entitled to compensation for liquidating the business, and that the plaintiff was entitled to recover $11,559.67, the amount shown by defendant’s statement of April 29, 1892, less the items of $10,000 and $2,022.27, aside from an error in the item “ interest to date,” which was found to be $83 instead of $81.97—a difference of $1.03. But two questions are presented on this appeal: (1) Are the third and eighth findings of fact sustained by, or are they contrary to the weight of evidence ? (2) Is the defendant entitled to compensation for liquidating the affairs of the firm?

“(3) On September 15, 1891, the said firm was duly dissolved by mutual consent, the particular time of such dissolution being determined by the defendant.” "(8) The plaintiff, Burgess, complied with the provisions of the partnership articles requiring him to contribute such amount of capital to the firm from time to time as should be reasonably necessary for the requirements of the business of the firm, and duly complied with all the articles of partnership on his part.”

The plaintiff, in his complaint, alleges that the partnership was dissolved September 15, 1891, by mutual consent. The defendant, by his answer, admits that it was then dissolved, and alleges that it “ was dissolved because of the refusal of the plaintiff to contribute capital as agreed in said articles of copartnership.” June 10, 1891, the defendant wrote the plaintiff as follows:

“June.10th, 1891.

“My Dear Burgess: Yours rec’d. In talking with you the other day, I told you I thought the present copartnership ex

pired, underits articles, on Oct. 15th. In reading them over, I find it expires on six months’ written notice. Be it as it may, I do not think we shall have any trouble in terminating it, when it ■appears to be to the interest of all-concerned. * * *

Yours, ■ - ■ W. S. Badger.”

So far as the record shows, this was the first that was written or said between the partners about dissolving the firm. On the 15th of June," 1891, the partnership then" having existéd for eight months, the plaintiff notified the defendant, in writing, that the partnership would be dissolved six months from that date. Subsequently, and on the 15th of'September, 1891, the‘firm was!'dissolved. From this fact, and1 the other1 evidence, it is apparent that the dissolution, which occurred long before either partner -could have compelled it, was the result of a mutual agreement. The defendant alleges in his answer that‘he consented to the dissolution because the plaintiff had failed toi perform the second .article before quoted, for which he claims $25,000 damages. The fact that the defendant made up a certaiir statement of the- affairs' -of the firm- on the 29th of April, 1892, without preferring any-«claim for damagés, and never having suggested such ‘a claim until after the plaintiff refused to allow the two items-in his account, is-' a significant one, and greatly discredits the' validity of the defendant’s claim for damages. It is singular that the defendant failed to discover, or at least to complain, that the plaintiff had broken his covenant, to his damage in so large an amount, until a disagreement arose over the account. Without repeating the evidence which 'sustains the findings, we are of the opinion that the facts were well' founded, and that they are sustained by the evidence. This brings us to the question whether the defendant_was entitled to recover for winding up the affairs of the firm." Upon this issue the court found:

“(7) There was no agreement between the said partners that the defendant,' Badger, should be allowed any amount for liquidating the business, and no claim was made by the defendant Badger1 that he should be entitled to be paid any amount for liquidating the business before the rendition of the said account, on or about April 29, 1892, and the defendant is not- entitled to charge the plaintiff with any amount for liquidating the business."

This finding is amply sustained by the evidencé. The defendant did not testify that the plaintiff at any time agreed that compensation should be made for liquidating the affairs of the firm, and the plaintiff testified that there was no such agreement. On the contrary, he testified: “Mr. Badger said there should be no expense for collection. I offered to collect without any ■ expense. Mr. Badger said there would be no trouble and no expense.”

The defendant denied that he agreed to collect without compensation, or that the plaintiff offered to liquidate the affairs of the firm without compensation. The defendant testified :

“It was finally determined between Mr. Burgess and myself to dissolve the firm on the 15th of September, 1891. The stock of goods we had on hand at that date aggregated $300,000. The outstanding accounts owing us amounted to $495,059.94. The

trial balance shows that amount exactly. Mr. Burgess was here at the date of the dissolution, and talked the matter over with me. He wanted to put the settlement of the affairs of the business into the hands of a third party, and I declined to allow that. He then wanted to put it in the hands of a receiver, which I also declined.”

On his cross-examination he testified:

“ There was a conversation between us on this subject of who should do the liquidating, at my office, 105 Worth street, New York, or it might have been at lunch,—at one of those two places. I think we had several conversations on that subject. The whole subject of the matter was that he wanted to put this business into the hands of a third party to liquidate. He said a third party. He did not mention whom he wanted. I declined. Then he wanted to put it in the hands of a receiver. I declined to allow that. I told him the proper place to liquidate that business was where it was carried on; that is, where I wanted it to be done,—at the former store. It was Van Bergen Co.’s store after that. He finally consented to that. I have no recollection of saying that I wanted to liquidate that business because I was going on with these accounts, and I wanted to attend to collection with the old customers. The reason I put forward was, I thought the business would be liquidated better and cheaper there.”

Whether a partner is entitled to compensation for winding up or liquidating the affairs of a firm, after dissolution, has arisen (1) when a dissolution has occurred by operation of law, as by the -death of a partner; and (2) when a firm has been dissolved by the agreement of the partners. In the absence of an agreement, express or implied, that a surviving partner shall be paid for winding up the affairs of a dissolved partnership, he is not entitled to compensation for such services. Johnson v. Hartshorne, 52 N. Y. 173 -180; Ames v. Downing, 1 Bradf. (Sur.) 321; Denver v. Raone, : 99 U. S. 355 -358; Beatty v. Wray, 19 Pa. St. 516 ; Brown v. McFarland, 41 Pa. St. 129 ; Tillotson v. Tillotson, 34 Conn. 335 -366. Care should be taken to distinguish between the cases arising over claims for compensation for winding up the affairs of a partnership which has been dissolved, and those arising over claims for compensation for continuing, after the death of a partner, the business of the firm, pursuant to the articles, or with the consent of the personal representative of the deceased partner, who receives the profits arising from the continuation of the business. Robinson v. Simmons, 146 Mass. 167 , is a type of this class of cases. For stronger reasons, a liquidating partner in case of a voluntary dissolution of a firm, is not, in the absence of an agreement, entitled to compensation, because the condition does not arise by operation of law, but by his assent; and the rule tliat in such a case the liquidating partner, in the absence of an agreement, express or implied, is not entitled to compensation for winding up or liquidating the affairs of the dissolved firm, is too well settled to be questioned. Cou rsen v. Hamlin, 2 Duer, 513 ; Dunlap v. Watson, 124 Mass. 305 ; Story Partn. (7th ed.) § 331, note; T. Pars. Partn. (4th ed.) § 155, note 1; Colly. Partn. (Perkins’ ed.) § 199.

The judgment should be affirmed, with costs. All concur.