Cahill v. Haff

• Citation: 162 N.E. 288,248 N.Y. 377
• Parties: CAHILL v. HAFF.
• Decision Date: 05 June 1928
• Court: New York Court of Appeals

248 N.Y. 377

162 N.E. 288

CAHILL

v.HAFF.

Court of Appeals of New York.

June 5, 1928.

Action by Maudella Mae Cahill, as executrix, etc., against Harmon B. W. Haff. From a judgment of the Appellate Division (222 App. Div. 764, 225 N. Y. S. 800) modifying, and, as modified, affirming, a final judgment of the Special Term entered upon the report of a referee in favor of plaintiff, defendant appeals.

Judgment of Appellate Division and of the Special Term reversed, and new trial granted.

Appeal from Supreme Court, Appellate Division, Second Department.

Abel E. Blackmar and Pierre M. Brown, both of New York City, for appellant.

Henry M. Earle, of New York City, for respondent.

ANDREWS, J.

[1][2] Before 1913, William P. W. Haff was engaged in the wholesale coal business. In that year Harmon B. W. Haff, a son, became his partner. The father died in 1919. Until that date the partnership continued. It is clear that the surviving partner may be required to account for the firm transactions and for transactions requisite to wind up the firm business. That at least he must do. Whether he must do more depends upon the agreement made between father and son in 1913, and upon various other considerations. If the son, for example, continues the partnership business, with no accounting, retaining and using therein capital belonging to the estate of the father, with the consent, express or implied, of his representatives, the latter are entitled at their option to receive the profits attributable to the use of his rights in the property of the dissolved partnership. Partnership Law (Cons. Law, c. 39), § 73, merely a statement of the pre-existing law; Pollock on Partnership, p. 133. Probably the same thing is true if there be no consent.

Conceding that there should be an accounting in this case, the first question for us to consider is its extent. In other words, between what dates is it to be required? As we have said, the partnership agreement was executed in 1913. It is a long document. The father admits the son to partnership in an existing business. The partnership is to begin on September 17, 1913, and to continue until 60 days after notice in writing of dissolution given by one party to the other. The capital, consisting of ‘the capital and moneys standing to his credit’ on the books of the business was to be contributed by Haff, Sr., but Haff, Jr., was to contribute thereto all of his share of the profits exceeding $5,200 annually. Upon dissolution the son was to receive the amount so contributed by him, and the father the balance, and ‘the business.’ At no time and under no circumstances is good will to be considered an asset. Profits and losses are to be shared equally. Upon the death of Haff, Sr., ‘his entire interest in the firm shall be disposed of in accordance with the provisions of his last will and testament read in connection with this agreement.’ This collateral agreement is not important. If he subsequently changed his will, as happened, the son's remedy, if he has one, is an independent proceeding. Another provision, however, is more material. ‘In the event,’ it says, of the death of Haff, Sr., the capital and moneys standing at that time to his credit upon the books of said firm shall remain in the business, which shall be conducted by the son ‘and the estate’ of the father ‘equally, as provided in the will of’ the father ‘to which reference is hereby made.’ The son ‘shall then be and become entitled in his own right to one half of the joint capital of said firm * * * and to one half of the profits from the date of such death, and the estate’ of the father ‘shall be entitled to the other half of said capital and the other half of said profits.’ Again, any ‘partnership’ between son and estate may be terminated on 60 days' notice, and either son or estate may liquidate the partnership. A will, so referred to and made a part of the agreement in so far as it refers to the conduct of the business after the father's death, was executed the same day. Its provisions are not unlike the agreement. The son is to have half the assets and capital of the firm. The executors, the son and testator's wife, are to be guided by the agreement as to the conduct of the business. The intent of the testator is that his estate and his son shall be equal partners in the business, which shall be continued as long ‘as it shall be advisable and profitable,’ and ‘shall share equally in profits and losses.’ But he directs his son to defer to the wishes of his wife ‘on any question connected with the management of the estate, it being my intention that her desires and judgment shall control as to the interest of my estate in said business.’

[3] So the partnership started off. Under the agreement it could be terminated upon 60 days' written notice. After the death of Haff, Sr., the arrangement, whatever it was, could be ended in 60 days by any notice. Notwithstanding this clause, however, either party might repudiate it at any time. Then it ended. No agreement can prevent this result. No one can be forced to continue as partner against his will. He may be liable for breach of contract. Nothing more. Partnership Law, § 62. Or the court may decree a dissolution where one partner has willfully and persistently breached the partnership agreement. Section 63. In the absence of such a decree, however, where one partner, in violation of the agreement, has ended the partnership, material violation of the agreement by the other would be a defense were damages asked of the former for breach of contract.

[4] For some years the business continued without dispute. In 1917, however, when trouble between father and son seems to have arisen, Haff, Sr., revoked his will of 1913 and made a new one. By it he bequeathed his property, ‘including my interest in the coal business,’ to trustees for the benefit of life tenants and remaindermen named thereon. He authorizes the trustees also to sell or exchange any of the property held in trust. This must include ‘my interest in the coal business.’ The trustees named are a Mr. Brown and a Mr. Felton.

It is difficult to see why this does not destroy the provisions of the earlier will and the agreement as to the continuance of the business after the death of Haff, Sr. They contemplated its continuance under the direction of the son individually, and the son and the wife as executors, until a 60-day notice given by the son or by the executors at the request of the wife, the son and the executors having each a half interest. Now, a half interest passes to trustees. They have no authority to continue the business. What they get is ‘my interest in the coal business'-Mr. Haff's equity in capital and profits. It is their duty to liquidate it promptly. It would seem that under these circumstances the arrangement as to what was to happen after Mr. Haff's death was ended. It was that the business was to be continued under the control of the son and the executors. We need not determine the relation of the parties had it been done. As the trial court finds without objection, the original partnership ended when Mr. Haff died. He might have provided that the survivor retain his capital in and manage the business for a period. Doubtless then the amount so retained would be at the risk of the business, but the estate would be liable for nothing more. He and his son might also agree that at his death a new partnership should arise between his son and his executors and the business be conducted at the general risk of his estate. Stewart v. Robinson, 115 N. Y. 328, 22 N. E. 160, 163,5 L. R. A. 410. The first supposition is not borne out by the language used. Both the agreement and the will assume that the executors are to share in the control of the business. It is to be conducted by the son ‘and the estate’ of the father ‘equally as provided in the will.’ The result is spoken of as ‘a partnership.’ In the will he charges his executors ‘in the conduct of the business to be guided entirely by the provisions of the partnership agreement,’ and he says one of them, his son, shall defer entirely to the wishes of the other, his wife, ‘it being my intention that her desires and judgment shall control as to the interest of my estate in the business.’

At any rate, whatever legal results follow, it is clear that the agreement of the parties was, not that the son, as sole survivor, should carry on the business for the benefit of himself and the estate, but that he and two persons named should do so. When by executing the second will Mr. Haff made this impossible the whole provision fell. If so the partnership terminated by the father's death. Upon the son were imposed only the ordinary duties of a surviving partner. As to this later will the son had no knowledge.

Passing this for the present, however, it appears that disputes continued. So in June, 1918, the father served on the son notice that he elected to terminate the partnership in 60 days. Negotiations followed. On August 30 the notice was withdrawn by mutual consent. The parties signed a new agreement, annexing and referring to the original contract, stating that there should be an audit of the firm's affairs and that when this was done they will make a new partnership contract for the future conduct of the business, which shall provide that upon the death of Haff, Sr., the uncontrolled management of the business should be in the hands of Haff, Jr. This, however, because of the death of Haff, Sr., was never done. The whole matter therefore seems immaterial. The withdrawal of the notice of dissolution left the original contract in force until or unless it was superseded by the new contract which was contemplated.

The elder Haff died, as has been said, on February 22, 1919. Even assuming that the provisions of the will of 1913 were still in force, the business was to be continued and controlled by Haff, Jr., individually and by him as executor and Mrs. Haff, the son's...