In re Petition of Williams, 1678

• Decision Date: 11 April 1924
• Docket Number: 1695.,1678
• Citation: 297 F. 696
• Parties: Petition of WILLIAMS. v. WOLFF et al. WILLIAMS In re BURGESS, LANG & CO.
• Court: U.S. Court of Appeals — First Circuit

297 F. 696

Petition of WILLIAMS.

WILLIAMS v. WOLFF et al.

In re BURGESS, LANG & CO. ^[1]

Nos. 1678, 1695.

United States Court of Appeals, First Circuit.

April 11, 1924

Mark M Horblit, of Boston, Mass. (Everett S. White and White &amp White, all of Taunton, Mass., and Horblit & Wasserman, of Boston, Mass., on the brief), for petitioner and appellant.

Hugh W Ogden, of Boston, Mass. (Philip J. Sondheim and Hollis R Bailey, both of Boston, Mass., on the brief), for respondents and appellees.

Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.

BINGHAM Circuit Judge.

March 18, 1922, Wolff, Hamilton, and Stetson, creditors, filed a petition in bankruptcy against William H. Burgess, Howard W. Lang, Henry F. Palmer, Francis H. Coleman, and John G. Williams, individually and as copartners trading under the firm name of Burgess, Lang & Co., and March 21, 1922, receivers were appointed. Williams, within the time required by law, appeared and filed an answer denying that he was a partner, that he had committed the acts of bankruptcy set forth in the petition, that he was insolvent, that the petitioning creditors had provable claims against him, and requested a jury trial on the issues raised. May 15, 1922, the respondents in the bankruptcy petition, other than Williams, filed a petition stating that they were copartners under the name of Burgess, Lang & Co. and as such proposed an offer of composition. The offer of composition was referred to a referee in bankruptcy, who reported that a majority in number and value of those who had filed their claims assented to the offer, but that a number of the creditors desired leave to examine the matter further. October 5, 1922, and while the petition for a composition was still pending, the petitioning creditors filed a further petition requesting that the receivers be required to reduce to possession the assets of Williams, and that he be declared a general partner of the firm of Burgess, Lang & Co. At the hearing on this petition counsel for Williams called the court's attention to the fact that he had filed an answer and claimed a trial by jury, and that he insisted on such trial. The court, being of the opinion that it might be of assistance in the consideration of the offer of composition before adjudication to have a report upon the question whether Williams was a partner, ordered the issue of partnership sent to a master. At the hearing before the master counsel for the petitioning creditors submitted their evidence. Counsel for Williams offered none. Later the master filed a report stating the facts bearing upon the question of Williams' membership in the firm, upon which report the District Court entered an order adjudging Williams a partner, from which Williams appealed and also filed a petition to revise in matter of law.

As the order under consideration was not a final decree or one adjudging the respondents bankrupts, no appeal lies therefrom to this court. The matter, however, is properly before us on a petition to revise.

The essential facts bearing upon the question of partnership reported by the master and upon which the order or decree was entered are as follows:

April 2, 1919, a written agreement was entered into between Burgess, Lang, Palmer, and Williams (to which Coleman later became a party), in which the three former were designated general partners, and Williams a silent or special partner. The agreement was prepared by the attorney for the parties other than Williams. By the second and fourth paragraphs the partnership was to continue until noon of the 2d of April, 1929, unless one of the partners gave notice in writing to the remaining partners at least 6 months before April 2, 1924, for its termination on that date.

By paragraph 3 Williams was to have the right to retire from the partnership on April 2 in any year on and after 1921, provided he gave notice in writing, at least a year in advance, of such intention; that, if he so retired, he should have the right to withdraw one-third of the capital furnished by him on the date of retiring, and one-third of such capital on April 2 in each of the two following years, but that the remaining partners had the right, on such dates, to pay him a larger portion or the whole of his capital, and should, in any event, pay him interest on his capital, and his share of the profits was to be reduced to correspond to his reduced capital.

By paragraph 5 it was agreed that Burgess had contributed to the partnership $70,000, Lang $95,000, Palmer $50,000, and Williams $100,000; that Burgess and Lang were each to be further credited with the sum of $50,000 as the value of their ownership of the good will of the business of Burgess, Lang & Co. (a partnership name under which they had theretofore done business); that each partner should have a right to increase his interest in the firm by paying to it on the 2d day of April in any year during the life of the partnership the sum of $5,000, or any multiple thereof, and to receive interest thereon and a proportionate share of the net earnings.

By paragraph 6 it was agreed that Burgess, Lang and Palmer should have 'the entire management and control of the business, and that each should have and exercise all the rights of control and management usually belonging to members of a partnership'; that they alone should have the right and power to act for the partnership, to sign checks, notes, execute contracts and other written instruments, and the use of the firm name of Burgess, Lang & Co.; that the decision of any two of these three should be binding in all matters relating to the business; that Williams should have no authority to sign checks or notes or execute contracts or other written instruments, or to use the firm name, or otherwise to act for the partnership.

By paragraph 7 Burgess, Lang, and Palmer were to devote their entire time to the business and use their best skill and power in its conduct.

By paragraph 8 provision was made for keeping full and correct books of account of the business, to which any of the four parties named should have access at any time.

By paragraph 9 it was provided that neither Burgess, Lang, nor Palmer should indorse notes, or become surety on any bond for any person, or become bail or surety for any person, without the consent of the other parties.

By paragraph 10 it was provided that Williams should be a silent and special partner, and not held out as a general partner; that the title and the entire legal and equitable ownership of all bonds, stocks, contracts, leases, office furniture, good will, and all other assets of every kind of said partnership, should be and remain solely in Burgess, Lang, and Palmer.

By paragraph 11 provision was made for the drawing of money from the funds of the partnership by the parties. Williams was to receive interest quarterly at the rate of 10 per cent. a year on the sum contributed by him; Burgess, Lang, and Palmer were each to receive 6 per cent. interest quarterly on the sum which each contributed; Burgess and Lang were each to receive monthly a salary at the rate of $12,000 a year, and Palmer at the rate of $7,500 a year, and, after payment of the above sums, the balance of the net earnings was to be divided and withdrawn at the end of each year as follows: Burgess, 120/415; Lang, 145/415; Palmer, 50/415; and Williams, 100/415.

By paragraph 12, upon dissolution, the assets were to be distributed as follows: Williams was first to be paid the sum contributed by him; then Burgess, Lang, and Palmer were entitled to receive proportionately the sums contributed by them. Any surplus was to be divided in the proportions above provided for the division of the net earnings.

By paragraph 13, in case of the death of any of the members, the survivors were to have the right to continue the use of the firm name of Burgess, Lang & Co. until the winding up of the business as hereinafter provided.

By paragraph 14, if a partner died before April 2, 1922, the surviving partners had the right to continue the partnership until April 2, 1924 (when it would terminate, even if no notice was given under paragraph 4), and the sum contributed by the deceased was to be left in the firm; one-third of said sum, however, was to be paid to his estate within a year after death, the other third within two years, and the final third within three years. The estate of the deceased was to be entitled to receive interest and the proportion of the earnings as above set forth on any portion of the sum remaining in the partnership and contributed by such partner. In case a partner died on or after April 2, 1922, the surviving partners had the right to continue the partnership for two years after his death, and retain the sum contributed by him or pay his estate from time to time any portion or the whole. The deceased's estate was entitled to receive interest and a share in the earnings as above set forth on such portion as remained in the partnership. In case the partnership was continued after April 2, 1924, there were similar provisions for continuing and terminating the partnership if a partner died after April 2, 1924.

By paragraph 14, in case Burgess or Lang died, the survivor, and at his death the representative of the survivor, was entitled to the entire credit of $100,000 for the good will, and to receive the share of the net earnings allotted to such good will, and was to become the owner of the good will, with the sole right to use the partnership name.

By the 16th paragraph, at...