Bayer v. Bayer, 82-523

• Citation: 465 A.2d 900,123 N.H. 780
• Decision Date: 31 August 1983
• Docket Number: No. 82-523,82-523
• Parties: , 44 A.L.R.4th 669 David M. BAYER et al., Executors and Co-Trustees of the Estate of Charles Bayer v. Sam BAYER, et al.
• Court: New Hampshire Supreme Court

Page 900

465 A.2d 900

123 N.H. 780, 44 A.L.R.4th 669

David M. BAYER et al., Executors and Co-Trustees of the Estate of Charles Bayer v. Sam BAYER, et al.

No. 82-523.

Supreme Court of New Hampshire.

Aug. 31, 1983.

Baker & Hayes, Lebanon (William A. Baker, Lebanon, on the brief and orally), for plaintiffs.

Devine, Millimet, Stahl & Branch P.A., Manchester (Joseph A. Millimet, Manchester, on the brief and orally), for defendants.

PER CURIAM.

The plaintiffs, executors and co-trustees of the estate of their father, Charles Bayer, appeal from a dismissal by the Superior Court (DiClerico, J.) of certain actions relating to the operation of two family-owned corporations and a retail clothing store. We affirm.

The plaintiffs' decedent, Charles Bayer, was a partner with his brothers, Sam and Jack Bayer, in a retail clothing business known as Merit Clothing Company (Merit) in Claremont. The decedent was also a director of and stockholder in JSC Realty, Inc., and Eagle Merchandise, Inc., which were similarly owned and operated by the three brothers.

On June 15, 1953, the Bayer brothers, in their capacities as partners in Merit, entered into a "buy-sell" agreement which provided for the valuation and disposition of a partner's share upon his death or retirement from the business. The agreement was expressly made binding upon the parties, "their respective heirs, executors and administrators."

On April 20, 1954, the parties entered into a formal partnership agreement relative to the Merit partnership which incorporated by reference the terms of the "buy-sell" agreement. The partnership agreement provided that "[t]he death or retirement of any partner shall not dissolve the partnership as to the other partners ...." It further stated that:

"All disputes and questions whatsoever which shall, either during the partnership or afterwards, arise between the partners or partner and the representatives of any other or others, touching these articles ... or any account, valuation, or division of assets, debts, or liabilities to be made hereunder ... shall be referred to Harry Bayar [the partners' fourth brother] of New York City as arbitrator, and his decision shall be binding and final ...."

Until 1970, the brothers appear to have run the various family businesses without substantial disagreement. The Merit partnership tax returns for 1970 and 1971, however, indicated a significant change in the structure of the partnership. Although the 1970 partnership return showed the value of the business as being divided equally among the partners' capital accounts, it also stated that only Sam and Jack continued to work at the business full time. The 1971 partnership return listed only two partners, Sam and Jack, between whom the business was evenly divided. However, the balance sheet included in the 1971 return indicated a liability for "[m]ortgages, notes, and bonds payable in 1 year or more" in the amount of $79,576.40. The defendants contend that this account payable represented Charles' liquidated, but unpaid, partnership share.

In 1972, the defendants' present counsel sent two letters to Charles, Sam, and Jack concerning the status of Charles' share of the Merit partnership. The first of these letters, dated September 11, 1972, and mailed at Sam's behest, recommended that the brothers' arrangement concerning Charles' liquidated partnership share be put in writing. The letter further stated:

"As I understand the arrangement, since Charles has retired from work, he has continued to draw the same as each of the other brothers has drawn, just as though he were still active in the business. However, you have agreed to consider this as payment against his capital account. The precise amount that has been drawn by Charles, either in the form of cash, clothing or other benefits, does not appear to be recorded anywhere, and therefore I think it would be desirable if this amount could now be determined and each year, at the end of the year, the credits against the capital account of $80,776.20 should be posted so that the balance due to Charles would be kept current.

If you think this letter correctly recites what your understanding is, I suggest that each of you endorse your consent on the bottom hereof, and keep a copy for yourself and return the original to me for filing."

The second letter, dated September 25, 1972, modified the statement of the brothers' financial arrangement as embodied in the first letter:

"Since writing my letter of September 11, Harry has called me and explained to me that I was in error in saying that there was no precise record of the amount due to Charles shown on the balance sheet. Harry points out that although there is no identification [of] a debt to Charles, there is recorded on the balance sheet of the income tax return as of the end of 1971, the sum of $79,576.40 representing notes payable in one year or more. This will be adjusted from year to year as the books are closed, and therefore I guess satisfies the requirement that there be a current account of the obligation to Charles.

I assume it could be brought up to date at any time by Harry by carrying forward the drawings during the course of any calendar year.

If this letter and the previous one correctly embodies everybody's understanding I suggest that they be endorsed and returned to me for filing and safe keeping for the future."

There is no evidence that either of the above letters was endorsed or returned by the parties as the defendants' counsel had suggested. The plaintiffs do not, however, dispute the fact that the letters were written to Charles, Sam, and Jack.

A letter was sent to the plaintiffs' counsel on April 18, 1973, in which the defendants' counsel restated what appeared to the brothers to be their then-current financial arrangement:

"I assume you have copies of the partnership agreements of June 15, 1953 and April 20, 1954. I think you will find, if you examine them, that under the terms thereof, the allocation of funds as reflected in the partnership agreements is correct. While Charles was in the business, he was getting his full partnership share like his two brothers. After he retired from the business, he still was allowed to draw funds, but they were charged against his capital account. This was required because he was no longer active in the business and therefore was not entitled to share in the earnings as such.

If you will examine page 4 of the return for April 1971, which is on a 1970 form, you will see that at the end of the fiscal year, Charles had a capital account of $80,776.21. If you will examine page 4 of the return for fiscal April 1972 (on a 1971 form), you will see that Charles' capital account is omitted, but there is a new entry under item 17 of the balance sheet represented by notes payable in one year or more in the amount of $79,576.40. I am informed by Harry Bayer, the accountant, that that is Charles' capital share as existing at the time of his retirement. I think the accountant had the absolute right to do this under the terms of the agreement, and I hope you will be able to explain it to Charles."

On April 22, 1977, Charles Bayer died. The parties agree that from 1971 until December 1977, Charles Bayer or his estate received regular weekly payments, which the defendants credited against Charles' liquidated capital account.

Between March 24 and May 23, 1980, David and Henry Bayer, as executors and co-trustees of the estate of their father, Charles Bayer, brought three separate actions in equity: one against Sam and Jack Bayer in their capacities as partners in Merit, one against JSC Realty, Inc., and one against Eagle Merchandise, Inc. In these suits, the plaintiffs alleged that the defendants wrongfully excluded their father from the three businesses and mismanaged the two corporations. The plaintiffs sought damages, dissolution of the defendant corporations, and an accounting of the decedent's share of the Merit partnership and of both corporations.

The defendants moved to dismiss all three actions on the ground that they were barred by RSA 508:4 (Supp.1981), RSA 556:7, and RSA 556:15, the applicable statutes providing for the survival and limitation of actions. On February 16, 1982, the superior court granted the defendants' motion to dismiss, except as to "any cause of action which may exist as a result of defendants' cessation of certain weekly payments that were being made."

Subsequently, the plaintiffs requested a hearing, claiming that the court's decision was "plainly erroneous" with respect to the defen...