Blut v. Katz
| Decision Date | 13 October 1953 |
| Docket Number | A--7,Nos. A--6,s. A--6 |
| Citation | 13 N.J. 374,99 A.2d 785 |
| Parties | BLUT v. KATZ et al. |
| Court | New Jersey Supreme Court |
Harry Chashin, Bayonne, argued the cause for appellant and cross-respondent (Hyman W. Rosenthal, Newark, on the brief; Marcus & Levy, Paterson, attorneys).
Hymen D. Goldberg, Tucson, Ariz., argued the cause for respondents and cross-appellants (Abram Waks, Paterson, attorney).
The opinion of the court was delivered by
We granted cross-petitions for certification in this cause, in which the dispute between the widow of a deceased partner and the surviving partners concerns her efforts to be paid for her deceased husband's share in the partnership business and the endeavors of the surviving partners to recover from the widow amounts paid to others to perform the work normally performed by the decedent.
In 1925 five partners executed a partnership agreement under which they conducted the United Shop Cap Company. The term was for a period of one year. Amongst other things, it provided for even distribution of the profits, weekly allowances to the partners, and the paying off of any partner who should voluntarily withdraw.
Before 1940 two partners withdrew, but no further agreement was executed by the remaining partners, and from that date until the death of the decedent they operated the business as equal one-third partners.
In 1946 the plaintiff's husband became ill and thereafter, until his death in 1949, rendered no services to the partnership business. During this time, however, he continued to receive his customary weekly salary and his share of other withdrawals, amounting in all to some $60,000. He also had free access to the books of the business and complete information as to its operation, and apparently approved the various financial reports.
After his death the widow insituted this action as executrix against the two surviving partners, seeking a dissolution of the partnership, an accounting, and the appointment of a receiver. A counterclaim was filed seeking to charge the account of the deceased partner with the cost of providing substitute help during his illness from 1946 to 1949. To avoid the appointment of a receiver, the defendants deposited $25,000 with the court to secure payment of whatever sum might be determined to be due to the plaintiff.
At the trial level, judgment was entered in the amount of $19,153 and interest for the plaintiff to the date of the defendants' deposit into court, and the counterclaim was dismissed. Blut v. Katz, 14 N.J.Super. 121, 81 A.2d 406 (Ch.Div.1951). The sum so arrived at represented the deceased partner's interest in the capital account at the time of his death. Good will was excluded as an asset of the partnership in calculating the deceased partner's interest.
On cross-appeals to the Appellate Division, it was there determined good will should have been included, and the cause was remanded to the Chancery Division to determine the value thereof, 24 N.J.Super. 165, 93 A.2d 775, 7779 Both sides are dissatisfied with the results and each appeals.
The first issue to be decided is the denial by both lower tribunals of the plaintiff's demand for an option to recover the profits earned after the dissolution which might be attributable to the use of her husband's capital by the defendants in continuing the partnership business. The demand was made pursuant to R.S. 42:1--42, N.J.S.A., and the briefs are replete with discussion of the meaning of the statute.
The Appellate Division reasoned thusly:
The plaintiff asserts this is erroneous because it gives 'a novel and unjustifiable interpretation' to the statute, and her consent to the continuation of the business is 'immaterial on the question of her right of election.'
The statute referred to deals with the liability of persons continuing partnership business without liquidation. It is abviously designed to protect the estate of a deceased partner from the demands of creditors in the event the executors see fit to liquidate. If the executor gives consent to the continuation of the partnership business without liquidation, then the estate's interest in the partnership is subjected to the claims of any new creditors.
It is contended the statutory plan requiring consent as therein outlined consistently provides that the Quid pro quo is the right to a proportionate share of the profits of the new partnership if the personal representative so chooses, for the assumption of the additional risk of claims of the new creditors. Without the personal representative's consent, it is said, no additional risk is assumed and the Legislature by its enactment, therefore, gave no right to a share of the profits.
R.S. 42:1--42, N.J.S.A., entitled 'Ascertaining value of interest of retired or deceased partner,' giving the right to profits, refers to 'conditions set forth in paragraph * * * 3 * * * of section 42:1--41 of this title * * *.' Paragraph 3 of R.S. 42:1--41, N.J.S.A., provides:
'When any partner retires or dies and the business of the dissolved partnership is continued as set forth in paragraphs '1' and '2' of this section, with the consent of the retired partners or the representative of the deceased partner * * *.'
R.S. 42:1--42, N.J.S.A., pointedly refers to paragraph 3 of R.S. 42:1--41, N.J.S.A., which, in turn, specifically provides for the consent of the retired partner or the representative of the deceased partner.
This is the manner in which the statute was construed by both lower tribunals, and in that construction we concur, even though research fails to disclose judicial adjudications in other jurisdictions buttressing this interpretation.
The only contrary thoughts we have encountered are expressed in an opinion construing the New York Partnership Act, identical with our own, M. & C. Creditors Corp. v. Pratt, 172 Misc. 695, 17 N.Y.S.2d 240 (Sup.Ct.1938), affirmed 255 App.Div.838, 7 N.Y.S.2d 662 (1938), appeal denied 255 App.Div. 962, 8 N.Y.S.2d 990 (1938), affirmed, no opinion, 281 N.Y. 804, 24 N.E.2d 482 (Ct.App.1939), where the writer, referring to the sections already discussed, says they could not have been intended to limit the rights of the representatives to require payment of the decedent's interest as of the date of death. Also, in Cahill v. Haff, 248 N.Y. 377, 162 N.E. 288, 289 (Ct.App.1928), the court, although finding consent express or implied by the representative and holding he was therefore entitled to receive the profits attributable to the use of his rights in the property of the dissolved partnership, by way of dictum opined: 'Probably the same thing is true if there be no consent.'
However, we have concluded in the case Sub judice that the statutory plan involves the giving of consent to the continuation of the partnership business before a deceased partner's representative can exercise the option to profits. Furthermore, consideration of merely the broad equitable doctrines applicable, without recourse to the statute, brings us to the same end result.
There is much authority sustaining the principle that, where one or more partners of a firm continue the business after the death of one of the partners, the legal representative of the deceased partner is entitled to his share of the profits made, Phillips v. Reeder and Prior, 18 N.J.Eq. 95 (Ch.1866); Drapkin v. Klebanoff, 137 A. 432, 5 N.J.Misc. 531 (Ch.1927), but this principle is not universally applied; it has many limitations and qualifications and is always subject to equitable considerations.
So, where the main success of the firm is due to the skill, time and diligence of the remaining partners, the application of the rule has been withheld upon the ground that it would be inequitable to do otherwise. Profits having been denied, interest on the amount involved...
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Dugan v. Dugan
...dissolution of a partnership goodwill has been recognized as an element in determining value for purposes of liquidation. Blut v. Katz, 13 N.J. 374, 99 A.2d 785 (1953). In Kanzler v. Smith, 123 N.J.Eq. 602, 199 A. 35 (1938), the Court of Errors and Appeals held that the legally contemplated......
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Blut v. Katz
...surviving partners through a cross-appeal say it was overvalued in certain respects. Further as to this litigation, see Blut v. Katz, 13 N.J. 374, 99 A.2d 785 (1953). The ruling of the trial court with respect to the matter of attorneys' fees was, we think, clearly proper. But at the risk o......
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Pennsylvania Greyhound Lines, Inc. v. Rosenthal
...condition; it was plainly not payment of the judgment itself within the intendment of the Contribution Law. Compare Blut v. Katz, 13 N.J. 374, 99 A.2d 785 (1953). II. But it is insisted that 'the immunity resulting from the husband-wife relationship between the injured person and one of the......
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Gull v. Van Epps, 93-0710
...ended upon the dissolution. Hilgendorf v. Denson, 341 So.2d 549, 551 (Fla.Dist.Ct.App.1977) (per curiam). See also Blut v. Katz, 13 N.J. 374, 99 A.2d 785 (1953) (where profits were primarily due to the surviving partners' skill and services, no part of them was allocable to the deceased's N......