O'Brien v. O'Brien

• Decision Date: 19 June 1942
• Citation: 294 Ky. 793,172 S.W.2d 595
• Parties: O'BRIEN v. O'BRIEN et al.
• Court: Kentucky Court of Appeals

172 S.W.2d 595

294 Ky. 793

O'BRIEN v. O'BRIEN et al.

Court of Appeals of Kentucky

June 19, 1942

As Modified and Extended on Denial of Rehearing March 26, 1943.

As Extended on Denial of Further Rehearing June 25, 1943.

Appeal from Circuit Court, Jefferson County, Chancery Branch, First Division; Churchill Humphrey, Judge.

Suit by Patricia R. O'Brien against Edwin J. O'Brien, Jr. and others, to rescind an executed contract of sale of the plaintiff's deceased husband's interest in the partnership of E. J. O'Brien & Company, on ground of fraud and deceit. From an adverse judgment, the plaintiff appeals.

Judgment affirmed.

Wilbur M. Brucker, of Detroit, Mich., Rodes K. Myers and John B Rodes, both of Bowling Green, H. B. Kinsolving, Jr., of Shelbyville, and John M. Berry, of New Castle, for appellant.

Crawford Middleton, Milner & Seelbach, Thomas A. Barker, Allen McElwain, Dinning & Clarke, and Davis, Boehl, Viser & Marcus, all of Louisville, for appellees.

STANLEY, Commissioner.

This is a suit by Mrs. Patricia R. O'Brien, sole beneficiary of the will of her late husband, John A. O'Brien, to rescind an executed contract of sale of his interest in the partnership of E. J. O'Brien & Company, upon the ground of fraud and deceit. It is prosecuted against his former partners, who are his brothers, and the executors of the will of his mother who had also been his partner. The administrators with the will annexed of John A. O'Brien, who declined to bring the suit, are also parties defendant. The case involves much more than a simple bargain and sale. There are perplexing complications not presented in an ordinary case of this kind. Other than important questions of partnership values and accounting, there is involved a compromise and settlement of claims based upon John A. O'Brien's will and a trust of the proceeds of $200,000 life insurance. After an extensive trial, the chancellor denied the plaintiff's prayer for relief, and she appeals. As the contract was between strong business men of large influence on the one side, and a widow, inexperienced in business and finance on the other, we have scrutinized every point with that degree of care which such circumstances demand of a court of justice. But to keep the opinion within reasonable bounds, we omit much detail and relate only the more important matters in general. We can state but little more than our conclusion as to some of the facts.

The business of the partnership is probably the largest of its kind. It is that of loose leaf tobacco brokers and wholesale merchants, with its principal office in Louisville. It has branches in other states and connections and transactions abroad. The business was established in 1880 by Edward J. O'Brien. As his sons grew to manhood they were associated with him and later became his partners, first in a limited way and afterwards in full. Edward J. O'Brien died in 1928. Amended articles established a partnership between his widow, daughter and four sons. The daughter sold her interest to her brothers, and from January 23, 1931, the firm consisted of the following, with their respective percentages of interest, namely, the mother, Mrs. Elizabeth G. O'Brien, 15 percent; each of the four sons, Edwin J. O'Brien, Joseph B. O'Brien, James G. O'Brien and John A. O'Brien, 21 1/4 percent. These are the basic percentages upon which the distribution of profits was made. The proportions of the capital investment were different by reason of the difference in withdrawals and charges against the partners' respective accounts, the aggregate balances of which constituted the firm's capital. In addition to large investment in the physical properties of the firm and those of its wholly owned subsidiaries, and seasonably in tobacco, the company held title to stocks and bonds averaging through the course of later years around $1,000,000 in value. It appears that some of the personal affairs of each partner were handled by the company's bookkeeping staff or were cleared through his account.

Edwin J. O'Brien was the manager and guiding genius of the business. James spent most of his time in France and elsewhere in Europe where the company had large contracts, including those with the French government, which had been a profitable customer for forty years. Joseph had an independent, individual business and did not participate actively in the management of the partnership. John, the deceased, was the youngest brother. The degree of his activities in the company's affairs from the time he left college about 1922 until 1932 is not certain. Late in that year he ceased all activity because of the condition of his health. He died January 1, 1934, at the age of 34 of tuberculosis to which alcoholism was a contributing factor.

The articles of co-partnership of date January 23, 1931 (then amended and readopted on the withdrawal of Mrs. Marie O'Brien Michael, daughter and sister of the other partners), provided that the firm should continue for a term of 50 years if any two of the members should live so long. Important provisions of the partnership agreement are as follows:

"Article 5. The death of any partner hereto shall not terminate the partnership.

"Article 6. In the event of the death of any partner his or her interest shall remain in said partnership until Five (5) years after such occurs, and in the event the surviving partners, before the expiration of Five (5) years, elect to admit the representative of said estate to membership, then papers shall be drawn in accordance with this Agreement and the terms at that time agreed upon, but until the admission of such representative to the firm, the estate, or its representative, shall be a silent partner only and shall not be entitled to participate in the management and the personal representative shall accept statements rendered by the partnership as final and conclusive. In the event the estate elects to withdraw from the partnership at the expiration of Five (5) years, then the interest of said decedent shall be the value of the interest, as shown by the books of the Company, or by appraisement, plus profits and interest if any."

Thus the death of John A. O'Brien did not work a dissolution of the partnership, as is ordinarily the case, and his estate continued in the partnership until there should be a sale of that interest or a termination of the partnership by agreed dissolution or incorporation as is elsewhere provided for in the articles of co-partnership.

It is necessary to refer to some apparently shameful occurrences for an understanding of conditions and negotiations for the purchase and sale of the estate's interest.

For sometime there had been an estrangement between John and his brothers, especially Edwin and Joseph. They denied this, but its existence is clearly established, the degree only being uncertain. According to a friend he had said he had not spoken to his two brothers since their father's death in 1928. Early in 1933 John went to what is called a physical training camp in New York for several weeks. He had been there in 1931. Not long after his return to Louisville an attendant from that institution came to care for him in his home. He improved to such an extent that in April he went to the firm's office for a day or so, but did not continue going because, as he reported, of the attitude and mistreatment of his brother, Edwin. On the afternoon of June 20, 1933, while his attendant was away on vacation and his wife absent for a half hour or so, John disappeared from home. Mrs. O'Brien and her attorney went to the company's office that afternoon to inquire about her husband and Edwin refused to tell them anything. Mrs. O'Brien located him at the home of his brother, Joseph. She and two friends went there the next morning but were denied admittance, being told by both Mr. and Mrs. Joseph O'Brien that he was too ill to see anyone. They had the same experience on a later visit. On both occasions there were four khaki-clad armed men in the hall and on the outside. Mrs. O'Brien tried repeatedly to see her husband or talk with him over the telephone but she did not succeed. On August 3rd she found him in the Seelbach Hotel in a very bad condition. His doctor testified that he had not expected him to live through the night. The only denial of all this is Joseph O'Brien's testimony that when he went home from the office one afternoon, between June 20th and 25th, he found his brother, John, there; that he left and returned when he pleased, and finally left when Mrs. Joseph O'Brien went to North Carolina about the middle of July. There is no intimation throughout this large record of any other than an affectionate relation between John and his wife, whom he married in 1925.

During this period of his absence from home, namely, on July 7 1933, John A. O'Brien executed a trust agreement with the Louisville Trust Company as trustee, undertaking to dispose of the proceeds of $200,000 life insurance. It omitted his wife, who was named in the policies as either sole beneficiary or an annuitant during her life. These policies or most of them had been acquired in 1928, within less than three years of his marriage. The trust was for the benefit of any child or children, but if none lived to be 25 years of age or had died without descendants the entire trust estate was payable "in equal shares to such of the blood relatives of the assured as shall then be partners in the firm of E. J. O'Brien & Company." On the same day John A. O'Brien executed a will bequeathing to his wife his automobile, household goods, and one-half of his personal estate, "including one-half of my interest in the partnership of E. J. O'Brien & Company." The disposition of the remainder was the same as that provided...