In re Marcuse & Co.

• Decision Date: 12 January 1922
• Docket Number: 2855.
• Citation: 281 F. 928
• Parties: In re MARCUSE & CO. [1] v. GILES et al. VETTE et al.
• Court: U.S. Court of Appeals — Seventh Circuit

281 F. 928

In re MARCUSE & CO. ^[1]

VETTE et al. v. GILES et al.

No. 2855.

United States Court of Appeals, Seventh Circuit.

January 12, 1922

Rehearing Denied April 4, 1922.

Evans Circuit Judge, dissenting. [Copyrighted Material Omitted]

Petitioners seek review and revision of an order of the District Court of July 1, 1920, finding in effect that petitioners and Hecht Finn, Marcuse and Morris were general partners of the firm of Marcuse & Co., against which original and supplemental petitions in bankruptcy had theretofore been filed, alleging all to be general partners, and referring the petition to a referee to ascertain the solvency of all of them as 'composing the firm of Marcuse & Co.' After filing of the petition to review and revise, Hecht and Finn, though not petitioners, joined in the petition and asked review and revision of the order. They will, with the others, be considered and referred to as petitioners; Hecht, since deceased, appearing by his executor.

The record discloses that under date of April 2, 1917, all the alleged partners, except the Studebakers (one Hoffman signing in his own name, but in fact as representing the Studebaker interest), executed an agreement which provided for carrying on at Chicago a brokerage business of buying and selling on commission stocks, bonds, grains, etc., for a period of five years from such date, under firm name of Marcuse & Co.; that such firm be a limited partnership under the statute of Illinois, Marcuse and Morris the general partners, and the others special partners, the contributions of the latter to be, Hecht $25,000, Hoffman $50,000, Vette $30,000, Zuncker $25,000, Finn $31,500, and Regensteiner $28,500, total $190,000; that the business be conducted and managed by Marcuse and Morris, they to receive named salaries, and that on the contributions of Marcuse, Morris, and of the special partners should be paid interest at 6 per cent. per annum; that thereafter 25 per cent. of the net profits be paid to Marcuse, to be applied by him on certain certificates which he would issue, representing debts due from Von Frantzius & Co. (then in bankruptcy), all of such limited partners, except Vette and Zuncker, being large creditors of the Von Frantzius concern, and that after such certificates are paid, the said 25 per cent. should be paid to all the parties to the agreement, except Morris; that 10 per cent. of the net profits of the business was payable to Morris, and the balance of profits was to be divided periodically between the parties in proportion to their contributions to the whole capital; that the special partners be limited in their liability to the amounts respectively contributed to the capital, and that they should have no liability for debts of the partnership beyond such contributions; that Marcuse and Morris should be in charge of and carry on the business, and that the special partners shall have right to examine the books and have them audited, and in certain contingencies to have the business liquidated. After execution of the agreements they were left with one of the lawyers, pending carrying out of certain conditions, mainly the dismissal of the Von Frantzius bankruptcy proceedings, with which concern Marcuse had been in some way connected.

One of the contributions of Marcuse toward the firm's capital was a seat on the New York Stock Exchange estimated to be then worth $68,000. When in New York, shortly after the agreement was signed, Marcuse learned that under the practice of the New York Stock Exchange firms doing business there were not permitted to have more than two special partners who must not be engaged in any other business. Marcuse at once notified his attorney at Chicago and after further negotiation between the parties concerned or their representatives, another agreement was signed June 30, 1917 (but dated April 2, 1917), wherein the general partners were stated to be Marcuse and Morris, and the special partners Hecht and Finn. The stated objects of the partnership, the name, and the details respecting rights, duties and immunities of the parties and the character and amount of capital contributions were in all essential features the same as under the first contract except that Hecht and Finn, the special partners, each agreed to contribute $95,000, and the term was five years from July 1, 1917. At the same time there was executed by Hecht and Finn an instrument under date of June 30, 1917, known as the 'Hecht-Finn Trust,' in which Hecht and Finn were named as trustees, wherein, after reciting the last-named partnership agreement as being attached as an exhibit, and that Hecht and Finn held in trust all interest in the assets and income coming to them under said partnership agreement, it is provided that the trustees shall direct that any distribution to be made to them by the partnership under the terms of the partnership agreement be paid over by the partnership to the Chicago Title & Trust Company on account of the 'Hecht-Finn Trust,' to be by the Chicago Title & Trust Company distributed among the holders of trust certificates under the Hecht-Finn Trust. It was provided that these trust certificates should be issued by the Chicago Title & Trust Company to evidence 380 shares, each of $500, and that the interest represented should be subject to the terms and conditions of the Hecht-Finn Trust; that the certificates were transferable only upon the books of the Chicago Title & Trust Company, and that the original certificate holders and holdings should be, Hecht 50, Finn 63, Hoffman 100, Regensteiner 57, Vette 60, and Zuncker 50, a total of 380, or $190,000. It was agreed that the profits earned by the partnership should be drawn out at least twice a year, and the Hecht-Finn share be paid by the partnership to the Chicago Title & Trust Company, and by it ratably distributed among the registered holders of the certificates. It was provided that in certain contingencies the certificate holders might name an auditor to audit the accounts of the firm, and that, in the case of the death of Hecht and Finn, certificate holders might choose another to be the special partner in the concern.

The trust instrument was by indorsement thereon assented to by the Chicago Title & Trust Company and by Marcuse and Morris, who agreed to do all the things therein provided to be done by the partnership. On June 30 the parties met and delivered their respective checks for the amount of their several contributions (representing in each case the amount of the Hecht-Finn Trust certificate holding); the checks of the certificate holders being made to Hecht and Finn who indorsed them to the firm. The check of the Studebaker interest was one of the Studebaker Bros. Trust to Hoffman, who indorsed it to Hecht and Finn as trustees; they in turn indorsing it to Marcuse & Co. Some days later the trust certificates, dated June 30, were issued in the amounts and to the persons as stated; the Studebaker certificate being issued to Hoffman, who at once indorsed it over to Mr. Gardner, secretary of the Chicago Title & Trust Company, for the Studebaker Bros. Trust. A certificate of limited partnership, drawn in accordance with the then limited partnership law of Illinois, was duly executed. It was dated April 2, signed by Marcuse, Morris, Hecht, and Finn, recited contribution of $95,000 each by Hecht and Finn, and that the partnership was to commence July 1, 1917, and terminate June 30, 1922. Acknowledgment and oath were dated June 30. The first partnership contracts were never delivered, and it was testified that some time in July they were canceled by tearing off the signatures thereon.

June 30, 1917, was Saturday, and, the banks and county offices closing at noon, the transaction could not be completed that day. The following Monday, July 2, the certificate of limited partnership was filed in the office of the county clerk of Cook county, and the checks were all deposited to the credit of the firm, excepting that of Hecht. As to this Hecht had requested Marcuse to withhold temporarily deposit of it, and it was not deposited until about the end of July. It appears that Hecht's bank account was during all that month prior to the deposit of his check, much smaller than the amount of this check. His banker testified that, had the check been deposited at any time, it would have been paid, regardless of his balance. The supposed limited partnership of Marcuse & Co. began to transact business July 2, 1917 (although for some time theretofore Marcuse and Morris had been carrying on the brokerage business under the same name at the same location), and continued in business until the filing of the petition in bankruptcy in March, 1920.

The 'Studebaker Bros. Trust' was made in 1916 between petitioners George M. and Clement Studebaker 'grantors,' the Chicago Title & Trust Company, 'trustee,' and Scott Brown, 'manager.' It recites that the grantors had delivered to the trustee certain moneys and properties of value as stated in the schedules, and contemplated the delivery of other money and property owned by the grantors, and that the grantors are desirous of creating such money and property into a trust fund to be employed and operated for the use of the grantors; that the corpus of the trust fund shall be ultimately divided between the grantors in proportion to their contributions thereto. It sells, assigns, and transfers to the trustee all such moneys and properties, to be held by the trustee under the enumerated terms of the trust. Brown was to be manager, in charge of the office, and to keep books of account, and with the grantors constituted the first board of directors. The directors had power to direct the policy of the trust, and the investment of the trust funds, and Brown was...