Chittenden v. Witbeck
| Decision Date | 25 April 1883 |
| Citation | 50 Mich. 401,15 N.W. 526 |
| Court | Michigan Supreme Court |
| Parties | CHITTENDEN v. WITBECK. |
Upon examination of the facts in this case, held, (1) that the estate of the deceased partner has no interest in the arrangement or lease under which the surviving partner has continued to occupy certain premises from the death of his partner; (2) that it has no interest in the good-will of the business connected with the use of the premises and of the furniture; (3) that it is not entitled to a share in the profits that the surviving partner has been making in the use of the premises and the goodwill and the furniture in question, but that such partner must account to the estate for the deterioration or distribution of the furniture, and for interest on that amount; and (4) that it is not entitled to a compensation in the nature of damages suffered in the loss of profits and the expenses caused by making certain changes and improvements in the premises which inured to the benefit of the surviving partner.
A surviving partner should not exclude the executor of his deceased partner from participation in the partnership assets, so far as he has occasion to make use of them, but such surviving partner has no authority to set off any definite portion of them and retain any other definite portion to himself, except by some act to which such executor becomes a party consenting.
The estate of a deceased partner cannot claim an interest in a lease which before his death it was agreed should be made to the firm, but which was made to the surviving partner alone after the dissolution of the firm by the death of the other partner.
Partnerships are founded in and must repose upon mutual confidence and trust, and where the association is terminated by the death of one partner, his representative cannot demand as of right admission to the business as a partner, because the unlimited trust and confidence which the relation demands may not exist in respect to him.
Delay in partnership settlement between the survivor and the representative of a deceased partner cannot properly be charged against either party where their mutual negotiations are constantly progressing, and fail without manifest want of good faith on either side.
C.A. Kent, for complainant.
Henry M. Duffield, C.I. Walker, and Don M Dickinson, for defendant.
This suit involves the adjustment of partnership affairs after the decease of one of the partners. The partnership consisted of the complainant and Charles S. Witbeck. It was formed for the purpose of carrying on the hotel business in the Russell House, in the city of Detroit, which was leased by them in the year 1864. There were never any written articles of copartnership, nor was any period fixed for the duration of the firm. Each partner was equally interested in the business. The Russell House, when they leased it belonged to Dr. E.M. Clark, who died in the year 1871 leaving a will which made Ashley Pond, James E. Pittman, and James A. Brown executors and trustees of the estate. Mrs Clark, now Mrs. Lane, survived him, as did also two children, William B. and Frank H., the younger of whom, Frank H., would attain his majority March 17, 1873, at which time the trust was to terminate, and the control of the estate pass to the widow and sons. The lease of the Russell House to the partnership expired February 1, 1881. The lessees, nevertheless, continued in possession after that time as before, and paid the same rent. During the spring of 1881, negotiations were opened between the lessees on the one side, and Mr. Pond, representing the trustees, on the other, which contemplated the making of extensive changes in the hotel, and a new lease for some considerable period at a largely-increased rent. An agreement respecting the changes was arrived at, and they were of a nature to interfere very considerably with the business of the hotel, while not requiring a suspension. A proposed lease was also reduced to writing, which, in its main features, had the assent of Mr. Pond and William B. Clark, but was not submitted to Mrs. Lane or Frank H. Clark, and they were ignorant of it. It was assumed, however, that they would also assent without question. The draft was prepared with the concurrence of complainant and of Witbeck, but whether in all its provisions it had the assent of Witbeck is disputed. The executors and trustees were named as lessors, and Witbeck and Chittenden lessees, and it was to cover the period from its execution until Frank H. Clark should come of age, when as above stated the management of the estate would pass out of the hands of the trustees. The rent to be paid was $1,250 per month, and a further sum equal [50 Mich. 408] to 6 1/2 per centum on the cost of the agreed improvements when they should be completed. Certain subleases were mentioned upon which no question arises. The tenth clause of the draft was as follows:
"In case either said Charles E. Witbeck or William J. Chittenden shall die before said May 1, 1891, said leases and this agreement, and all the rights, interests, and liabilities thereunder, shall belong to and remain to the survivors of them; and the estate or personal representatives of the one deceased shall take or have no interest or liability thereunder whatsoever."
To this was appended an agreement to be signed by Mrs. Lane and the two sons, agreeing that they would extend the lease to May 1, 1891, and by Witbeck and Chittenden agreeing that they would take it for the extended period. It seems, however, to have always remained an open question between complainant and Mr. Pond whether the new lease should be for five years or for ten years, and it is not admitted by defendant that Witbeck knew of or assented to the tenth clause above recited.
That no lease was finally executed is due to the fact that by midsummer of 1881 the health of Mr. Witbeck began to fail, so that he became wholly incapacitated for business. July 21, 1881, he was taken to an insane asylum, where he remained without recovery until his death, January 22, 1882.
This sickness and death created serious embarrassment in the making of improvements, and in the contemplated future arrangements,--Mr. Chittenden hesitating to take a long lease while the future of his partner was so uncertain; but Mr. Pond and Mr. Chittenden, having entire confidence in each other, early came to an understanding that the latter would take a lease for five or ten years on the terms agreed upon, in case Mr. Witbeck, by reason of his failure to recover, was unable to unite in it, and the improvements were continued and completed on this understanding.
September 6, 1881, defendant, who was the wife of Witbeck, was duly appointed guardian of his estate and person, and, immediately on his decease, she applied for and received letters of special administration. Witbeck left a will which made his wife sole beneficiary and executor, and this will was probated and letters testamentary issued February 28, 1882.
Complainant continued to manage the Russell House for the benefit of the partnership for a year from the time when the lease had expired; that is to say, until February 1, 1882. The assets of the partnership at that time consisted of certain real estate, bonds and stocks, a special deposit of over $18,000 in one of the Detroit savings' banks, a few uncollected accounts, and the furniture and supplies of the Russell House. Some of this was probably not strictly partnership assets, but it was owned by the partners jointly, and for the purposes of this case it is not important to distinguish it.
Immediately after her appointment as guardian, defendant appears to have raised the question of the rights of Witbeck in the proposed new lease, but complainant denied that he was to have or could have any interest unless he recovered. Mr. H.M. Duffield was then acting as adviser for defendant, and Mr. E.F. Conely for complainant, and efforts in the direction of an adjustment of all matters between them were being made when Witbeck died, and were continued afterwards. The difficulties in making an adjustment concerned the proposed new lease, and the losses to the business consequent on the disturbance by the change in the building. There was never any offer on the part of the defendant to unite in the proposed new lease, or to assume in respect to the business any of the obligations and liabilities of a partner, but it was insisted on her behalf that as the arrangement for a lease was made in part for the benefit of Witbeck, and the possession was continuing under that arrangement, the estate was entitled to an interest in the extended term, and that, if this was not conceded, then the estate should recover damages for the loss to the business while the improvements, the benefits of which were to be appropriated by complainant, were going on in the house. Defendant also claimed that there was a valuable good-will belonging to the business which constituted a partnership asset and should be taken into account in any settlement. Neither of these claims was assented to by complainant. Meantime the hotel furniture remained in the Russell House, and complainant made use of it in continuation of the business, which, after February 1, 1882, he claimed to carry on for himself alone.
Brief reference will be made to subsequent negotiations. In March 1882, complainant caused an offer to be communicated to defendant that he would pay her for the interest of the estate in the partnership and joint property the sum of $50,000. This offer was declined, in part apparently because defendant preferred to take productive securities instead of money, and she in turn made an offer which, like the other, led to no adjustment. On or about April 25, 1882,...
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