Stewart v. Robinson

• Decision Date: 08 October 1889
• Citation: 115 N.Y. 328,22 N.E. 160
• Parties: STEWART et al. v. ROBINSON et al.
• Court: New York Court of Appeals Court of Appeals

115 N.Y. 328

22 N.E. 160

STEWART et al.

v.ROBINSON et al.¹

Court of Appeals of New York.

Oct. 8, 1889.

Appeal from supreme court, general term, second department.

PARTNERSHIP-LIABILITY OF DECEASED PARTNER'S ESTATE.

Articles of copartnership provided that the business should be conducted with a capital not exceeding a certain sum, furnished by one partner, and that upon the death of either partner ‘the business shall be conducted by the survivor’ for a specified period, decedent's estate to receive and bear the same share of the profits and losses ‘as would have been received and borne by the deceased partner, had he lived.’ Held, that on the death of the partner who furnished the capital, his general estate was not liable for debts contracted by the firm during the specified period after his death.

Ralph E. Prime, for appellants.

Wm. B. Ellison, for respondents.

DANFORTH, J.

The defendants are brought before the court as trustees and executors of the estate of Joseph Colwell, deceased. It appears that Colwell, in his life-time, and one Samuel S. Hepworth, carried on business as copartners under the name of S. S. Hepworth & Co., for the manufacture and sale of centrifugal machines and some other machinery, under articles of agreement, one of which was entered into February 22, 1877, and provided for the continuance of the partnership for five years from January 1, 1877, and for a capital in cash, not exceeding $4,000, to be furnished by Colwell, and to be represented ‘by the good-will of the business, its shops, fixtures, tools, machinery, and materials for manufacture, all of which should belong to and be his individual property,’ profits to be shared equally, and all losses of the business, including loss of capital, borne equally. Hepworth was to devote his time and personal attention to the business, but Colwell was not required to do so further than might be convenient for himself. The seventh clause of the articles declared that, ‘should either partner die during the term of said copartnership, the firm shall not be deemed dissolved thereupon, but the wife and children of the decedent shall immediately succeed to his interest in the business, which thenceforward shall be prosecuted for the remainder of the term for the benefit of them and the surviving partner. Either partner may designate by will what interest his wife and children, as between themselves, shall have in his said copartnership interest in the event of his death as aforesaid.’ Before the expiration of the stipulated time, and on the 18th of October, 1881, a further agreement was made that the copartnership should continue until dissolved by mutual consent or terminated by six months' notice in writing by one party to the other, and that, ‘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 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: 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 expense shall be charged to and shall be borne by the share in the profits of the deceased partner.’ The firm business was thereafter continued under these instruments until the 1st day of June, 1882, when Colwell died, leaving children and a will. He appointed the above-named defendants executors and trustees, and gave them, in trust for his children, the greater part of his estate, and directed a distribution of the whole, making no reference to the business of the firm of S. S. Hepworth & Co., or to it in any way, or to the agreement above set out, and revoking all other wills theretofore made by him. It also appeared that from the death of Colwell to September, 1887, the business of S. S. Hepworth & Co. was continued and carried on by Samuel S. Hepworth, he assuming to do so under the agreements of February 23, 1877, and October 13, 1881. In the course of that business, in September or October, 1887, or five years after Colwell's death, he contracted debts with the plaintiff and with other persons or firms in the name of S. S. Hepworth & Co., for some of which he gave promissory notes in that name, and others of which rest in account. On the 4th of October, 1887, Hepworth individually and as surviving partner was insolvent to the extent of about $500,000, and on that day made an assignment in both capacities for the benefit of his creditors. The individual debts of Colwell have been paid, and property remains in the hands of his executors. The plaintiffs, either as original creditors or by assignment, are the owners of the debts contracted by Hepworth, and set out in the complaint, amounting in the aggregate to about $15,000, and they seek to recover the amount from the individual estate of Colwell, and in the mean time ask for the appointment of a receiver of his property, assets, and estate, and an account thereof from the defendants as his representatives. Various defenses were interposed by them, but, so far as material upon this appeal, their effect depends upon the single question whether the general estate of Colwell was by virtue of the above agreements rendered liable for debts contracted by Hepworth in the firm name, after the death of Colwell. The trial court and the general term have held against the plaintiffs, and the defendants had judgment accordingly.

It is a general rule that a contract of partnership is dissolved by the death of one of the parties, whether entered into for a fixed time or not, and that after his death the former or not, and that after his death the former by new contracts, and, although the partnership be expressly extended to executors, they could not be compelled to carry it on, and would be entitled to a dissolution and an account of the assets, subject to the liabilities of the firm incurred up to the time of dissolution. These are familiar and wellsettled principles. Here the representatives of the deceased partner were not to be partners with the survivors, nor were they to have anything to do with the conduct of the business or its management; on the contrary, the business is ‘to be continued by the survivor.’ We have only to inquire, therefore, whether the partnership agreements take the case out of the general rule. The frame of the last articles shows that the parties contemplated and bargained for a continuance of the business for the term of five years from the 1st of February next preceding the death of either, but the residue of the clause containing this stipulation depends to some extent for its interpretation upon the preceding or original article. The second agreement refers to the first as containing the terms and conditions on which the business is to go on; and looking there we find that the capital, however represented, by money, tools, machinery, or material, was not to exceed $4,000, and was to be provided by Colwell, and to remain his individual property. That contribution made him an equal partner, and upon dissolution of the firm, was to be repaid to him, with interest, before any division of surplus earnings should be made. Death of a partner, however, was not as of course to work a dissolution, but the wife and children of the decedent were immediately to succeed to his interest in the business, which thenceforward was to be prosecuted for their benefit and that of the surviving partner. We do not need to ascertain...