Miller v. Salabes

• Decision Date: 05 April 1961
• Docket Number: No. 217,217
• Citation: Miller v. Salabes, 225 Md. 53, 169 A.2d 671 (Md. 1961)
• Parties: Mose MILLER and Lewis E. Hess, v. Katherine Spear SALABES.
• Court: Maryland Court of Appeals

Page 53

225 Md. 53

169 A.2d 671

Mose MILLER and Lewis E. Hess, v.Katherine Spear SALABES.

No. 217.

Court of Appeals of Maryland.

April 5, 1961.

George Gump, Baltimore (Joseph Bernstein, Robert F. Hochwarth, Frank, Bernstein, Gutberlet & Conaway, Baltimore, on the brief), for appellants.

Samuel J. Fisher and Allan H. Fisher, Jr., Baltimore, for appellee.

Before BRUNE, C. J., and PRESCOTT, HORNEY, MARBURY and SYBERT, JJ.

PRESCOTT, Judge.

From a decree of the Circuit Court of Baltimore City holding that the appellee, Katherine S. Salabes, is the sole proprietress of the Consolidated Loan Company(sometimes hereinafter referred to as the Company), and that the appellant, Lewis E. Hess, is not a partner in the Company, the appellant appeals.

The principal issue to be determined is single in nature and narrow of scope.It is simply whether or not Lewis E. Hess is a partner in the Company.

The applicable law is clear and well established.The existence of a partnership will not be presumed, but must be proved.68 C.J.S.Partnership§ 51, with the burden of proving such existence resting upon the party having the affirmative of that issue.McBriety v. Phillips, 180 Md. 569, 26 A.2d 400;Beard v. Beard, 185 Md. 178, 44 A.2d 469.Between the parties, the existence of a partnership, vel non, is a matter of the parties' intention proved by their expressed agreement, or inferred from their acts and conduct.¹And this intention is to be determined as it is disclosed by all of the transactions between the parties.Townsend v. L. J. Appel Sons, Inc., 164 Md. 255, 257, 164 A. 679;Vlamis v. De Weese, 216 Md. 384, 140 A.2d 665;Smith v. Smith, 189 Md. 1, 53 A.2d 15.The receipt by a person of a share of the profits of a partnership business (with certain exceptions noted in Code[1957], Article 73A, § 7) is prima facie evidence that he is a partner in the business.Ibid.;Cohen v. Orlove, 190 Md. 237, 57 A.2d 810.The probative force of the sharing of profits is not conclusive on the question of the existence of a partnership, but may be rebutted by a showing of fact to the contrary.68 C.J.S.Partnership§ 17c.The death of one of the partners dissolves the partnership, Code(1957), Article 73A, § 31, but the partnership is not terminated until the winding up of the partnership affairs is completed.Illian v. Northwestern National Ins. Co., 215 Md. 507, 513, 138 A.2d 884.And a conveyance by a partner of his interest in the partnership does not of itself dissolve the partnership, nor, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management of the partnership business.Code(1957), Article 73A, § 27(1).

We turn now to an application of the facts in the instant case to the principles of law as we have stated them above, with our principal inquiry directed to a determination of the intention of the parties as disclosed by their actions, conduct and agreements.

Prior to his death in 1928, one Sody Salabes and his son, Meyer S. Salabes, had conducted a business known as 'Lewyt and Salabes,' or The Consolidated Loan Company.By his last will and testament, Sody bequeathed his interest in the business to his three children, Meyer S., Marie Hess, and Sarah Strouse.He directed that the business be continued and provided that after the death of his wife, each of his daughters should receive 25% of the 'net profits' therefrom, and his son, Meyer, 50%.The will further provided that Meyer should have exclusive control of the conduct of the business, but if either of the daughters desired to withdraw her 'capital,'she should give six months' notice before doing so.

Sometime during 1928, after the death of their father, the three children entered into a written agreement whereby they explicitly agreed to operate the business as a partnership.They agreed to conduct the same in accordance with the will of Sody Salabes, that the business was not to be sold to outsiders and that the profits would be divided into thirds.

This agreement further provided:

'7.Should any of the three parties hereto depart this life, then the personal representatives of the one so dying shall have the right to permit the capital to remain in the business of the firm at the option of the representatives of the deceased partner, receiving the profits provided for in the will of Sody Salabes.If, however, the one dying shall be Meyer S. Salabes, then the profits after his death shall be divided into three equal parts, instead of as provided in the will of said Sody Salabes, and the survivors, in the event of his death, shall have the exclusive control of said business and direct the policy and the management thereof; and in the event that the representatives of the one so dying shall desire to withdraw the capital account, then the survivors shall have right to pay said capital account within a period of five years, * * *.'

Marie Hess, one of Sody's daughters, died, testate, in 1944.In her will, she referred to the agreement with her brother and sister executed in 1928, and the provision therein giving her personal representatives the right to permit her interest in the partnership to remain in the business.She directed her executors to permit her entire interest to remain in the business and stated that 'all income, profits and dividends to which the said partnership interest may be entitled in said partnership shall be paid' unto her beneficiaries.

After the death of her husband in 1948 and in accordance with her will, Marie Hess's share of the profits of the business was divided as follows: 50% to her son, Lewis Hess, one of the appellants, for life; 25% to her daughter-in-law, Alice Hess, for life; and 25% to her grandson, Robert Hess, for life, with remainder in each case to various trust estates.

Marie Hess also directed that during the lifetime of Meyer S. Salabes, neither her executors, trustees nor legatees should have any voice in the management or administration of the partnership, or the right to interfere in the partnership business.

Meyer S. Salabes died on December 23, 1953.In his will, he bequeathed his share in the business to the appellee, Katherine S. Salabes.

Shortly after the death of Meyer, a written agreement was executed on February 16, 1954, which was superseded by another written agreement, dated April 5, 1955.More will be said concerning these agreements later.

On January 26, 1957, Lewis E. Hess assigned to Mose Miller all of his right, title and interest 'in and to the partnership known as Consolidated Loan Company, and in and to the capital account of the Estate of Marie S. Hess in said partnership.'It was stipulated that if Miller and Hess had testified in the case, they would have stated that this assignment was made to secure an indebtedness owed to Miller by Hess, and that all sums payable from the partnership to Hess from the date of the assignment have been paid to Miller.

On June 22, 1959, Sarah Strouse assigned and transferred her entire interest in the Company to Katherine S. Salabes.(These assignments, of themselves, did not dissolve the partnership, if there were one.Code [1957], Article 73A, § 27 , supra.)

On March 14, 1960, Katherine S. Salabes filed her bill of complaint praying a declaratory decree that she'is now the sole remaining partner in, or the sole proprietress of, Consolidated Loan Company, subject to the one-third interest therein of Marie S. Hess, now held by H. Lee Allers, Jr., successor substituted trustee under the will of Marie S. Hess' and 'subject to the life interests therein of Lewis E. Hess, Alice R. Hess and Robert Hess, pursuant to the provisions of said will.'

The lower court held that Lewis E., Alice R., and Robert Hess were not partners in the business known as the Consolidated Loan Company, and that Katharine S. Salabes was the sole proprietress of the Company, subject to the rights of Lewis E., Alice R., and Robert Hess to receive their respective portions of the profits of the business as provided in the will of Marie Hess and in the agreement of April 6, 1955, subject further to the rights of the trustee under the will of Marie Hess upon the deaths of said Lewis E., Alice R., and Robert Hess, or upon a distribution of the capital investment of Marie Hess in said business.

In deciding the case below, the learned chancellor, apparently, considered the agreements of 1954 and 1955 of little importance in determining whether Lewis E. Hess was a partner in the Company at the time of the trial, and seems to have felt that the terms of the will of Marie Hess controlled his status in relation to the Company.We deem the agreements to have been, and to be now, of prime and poignant significance.

We shall analyse the situation of the parties just prior to the agreement of February 16, 1954; and for purposes of this decision, we shall assume that at no time up to that point had Lewis been a partner in the Company.Compare68 C.J.S.Partnership§ 297, p. 803.The partnership, as it had previously existed, had been dissolved, less than two months before, by the death of Meyer S. Salabes on December 23, 1953, although it had not been terminated.Code(1957), Article 73A, §§ 30, 31.At that time, the estate of Meyer owned a 'capital account' interest in the Company of $86,514.13; Sarah Strouse a 'capital account' interest of $82,052.18; the trust estate of Marie S. Hess a 'capital account' of $73,092.67 (subject to the rights of Lewis E., Alice R and Robert Hess to receive 'all income, profits and dividends, in named proportions, for life'); and Lewis E., Alice R., and Robert Hess had certain 'credit' interests therein, aggregating some $10,000.At this point anyone of the beneficial owners could have demanded (subject to an interpretation of the will of Marie Hess, wherein she directed her executors to allow her interest to remain in the business and permitted...