Spiess v. Rosswogg — 48 N.Y. Super. Ct. 135

Majority

p. 135

CASPAR SPIESS, Appellant, v. CONSTANTINE ROSSWOGG, et al., Respondents.

Headnote

Partnership—when former partner deemed, trustee for firm, of renewal of firm lease to him individually.

Where the members of a firm, upon its dissolution, agree to carry on the liquidation of the business together, in the premises occupied by the firm, and thereupon one of the members and a third party, having knowledge of the facts, take, in their own names, renewals of the unexpired firm leases of the premises, without the consent of the other partners, such lessees hold said leases as trustees for the firm; this, though the original leases contained no covenants of renewal.

Before Sedgwick, Ch. J., and Freedman, JJ.

Decided April 3, 1882.

Appeal by plaintiff from judgment dismissing complaint, entered upon decision of a judge at special term.

The action was for judgment that the defendants should be declared to hold as trustee for a firm certain leases obtained by them in their own name.

The plaintiff and one of the defendants, viz. : Con

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stantin Eosswog, were copartners in business under the firm-name of Spiess & Eosswog. The firm held leases to end May 1, 1881, of the premises in part of which the firm business was done. On December 31, 1880, the partnership was dissolved, as the judge found. On January 3, 1881, the partners agreed to carry on the liquidation of the business together, upon the premises occupied by the firm, to work up the old stock and dispose of it. On January 14, 1881, the defendant Constantin Eosswog, and his son, the co-defendant, who had knowledge of the circumstances, procured new leases of the premises for three years from May 1, 1881. The complaint was dismissed.

G. H. Kracht and D. M. Porter, for appellant.

A lease taken by one partner in his own name inure» to the benefit of the firm, and the partner in whose name it is taken can be required to account to his copartners for its value ; and this is so, though the lease be obtained for a term to commence after the partnership, by its own limitation, is to terminate (Clegg v. Edmonson, 8 De G. McN. & G. 787 ; Mitchell v. Read, 61 N. Y. 132 ; Holridge v. Gillespie, 2 Johns. Ch. 30 ; Phyfe v. Wardell, 5 Paige, 268 ; Gibbs v. Jenkins, 3 Sandf. Ch. 131 ; Struthers v. Pearce, 51 N. Y. 357 ; Moody v. Mathews, 17 Ves. 185; Clements v. Hall, 2 De Gex & J. 173; Keeck v. Sanford, 2 Eq. Cases Abr. 741, and notes to the latter case in 1 Leading Cases in Equity, 32; Smith v. Day, 2 M. & W. 684 ; 2 Platt on Leases, 60 ; Feathersborough v. Fenwick, 17 Ves. 298). On principle, in many cases it is of little consequence whether the partnership is dissolved or not before the renewal, if the former partners become tenants in common, the result is the same ; or there may be other reasons, of a fiduciary nature, why the transaction cannot be entered into (Mitchell v. Reed, 61 N. Y. 123 ).

Stephen H. Olin, for respondent.

The fact in this case which the learned counsel for the respondent argues distinguishes it from those cases in which the partner taking a renewal of partnership leases has been held a trustee for the firm, is, that the defendant Constantin Rosswog obtained them after the firm was dissolved.

This dissolution did not annul or change those relations between the parties which are the basis of the obligation in such cases. After the dissolution, the original leases remained partnership property, for the purpose of liquidation. The obligation of each partner to deal with them, not for his individual benefit, but for the common or joint interest, remained. The trust, as to the use of partnership property, remained. Attached to these leases, as a part of their value, was the so-called expectation of renewal. This is deemed so actual and vital, that when a new lease is had, it is considered to be a graft upon the old. If there had been in the old lease a covenant in renewal, the defendant could not defend his taking the benefit of that individually, any more after, than before dissolution, while it remained the subject of division or disposition between the parties.

The parties were not mere tenants in common, when, sometimes, each may act for himself. As it has been pointed out, there were mutual obligations, extrinsic of the mere nature of the tenancy. Indeed, in looking at the case, it appears, that the title to the term of the lease, was not nominally in the individuals, but in the firm of Spiess & Rosswog.

The inference from this becomes stronger, when the relation of the firm leases to the good-will of the business is considered. The good-will was an asset of the firm and to be disposed of for the common benefit of the partners. It substantially was the probability, that the customers of the old firm would resort to the sue

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cessors of that firm. The value of the good-will would be materially affected by the successors of the firm being able, or not being able, to do business in the same premises. It is proper, then, that the expectation of renewal should remain, with the power of disposition of the good will-, and that neither party should sever them, for his own interest, or if he do obtain the new lease, he should hold it for the firm, that the two may be disposed of together.

On the argument, nothing was placed on the fact, that the new leases were to the son of Constantin Ross-wog and the latter. The rights of the parties were not affected by that.

For these reasons, I am of opinion that the 3 udgment should be reversed and new trial ordered, with costs of appeal to the appellant to abide event.

Freedman, J., concurred.

Cases cited

Struthers v. Pearce 51 N. Y. 357 N.Y. Comm'n App. p. 136
Mitchell v. Reed 61 N. Y. 123 N.Y. Comm'n App. p. 136