Rutan v. Coolidge

• Decision Date: 28 June 1922
• Citation: 241 Mass. 584,136 N.E. 257
• Parties: RUTAN v. COOLIDGE.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

241 Mass. 584

136 N.E. 257

RUTAN

v.COOLIDGE.

Supreme Judicial Court of Massachusetts, Suffolk.

June 28, 1922.

Case Reserved from Supreme Judicial Court; Suffolk County.

Suit by Sarah E. Rutan, executrix of Charles H. Rutan, against Charles A. Coolidge, for a partnership accounting. Reserved by a single justice on exceptions to the master's original and supplementary reports, and on defendant's motion to confirm the report. Exceptions overruled, and bill dismissed.

Defendant and plaintiff's testator were in partnership, but defendant terminated the partnership shortly before the testator's death. Defendant and the executrix were unable to agree on the method of accounting for so-called unfinished business and good will. Defendant formed new partnerships, one of which new firms was that of Coolidge & Shattuck. The payment by this firm to the firm in liquidation, mentioned in the opinion, represented the amount spent by the firm in liquidation on work thereafter credited to the new firm, after deducting similar expenditures by the new firm on work, the receipts of which were credited to the firm in liquidation.Sherman L. Whipple and Ralph E. Tibbetts, both of Boston, for plaintiff.

Gaston, Snow, Saltonstall & Hunt, of Boston (Thomas Hunt, of Boston, for counsel), for defendant.

CARROLL, J.

This bill in equity for a partnership accounting is brought by the executrix of the will of Charles H. Rutan against Charles A. Coolidge, sole surviving and liquidating partner of Shepley, Rutan & Coolidge, architects. Mr. Shepley died in 1903, and the business of the firm after his death was carried on by Rutan & Coolidge, each member having 50 per cent. of the profits. The firm was dissolved on December 1, 1914. Mr. Rutan died on December 17 of that year. The firm had offices in Boston and Chicago. The designing and all the artistic and creative work were done by the defendant. Mr. Rutan had charge of making calculations of construction, writing the specifications, superintending construction and office details, in Boston; he had little to do with the Chicago office. He did no designing and had personal relations with only a few of the clients. At the time of the dissolution the majority of the firm's clients looked chiefly to Mr. Coolidge, and a substantial number of important clients had stipulated for his personal services. In August, 1912, Mr. Rutan became incapacitated and after that time took no part in the business, but continued to receive his full share of the profits.

There was on hand in the office of Shepley, Rutan & Coolidge, at the time of the dissolution, jobs in all stages, from work actually in operation to work only vaguely contemplated, where only tentativeplans had been discussed with the architects. The principal question in the case is the method to be adopted in stating the account of the so called unfinished business and good will.

The plaintiff contended that each job constituted a contract between the owner and architect, which, although subject to termination by the owner, was an asset of the partnership, which it was the right and duty of the liquidating partner to complete and account for. The master found that there were no such contracts, and ruled that, in absence of special contracts, the only assets of the partnership on December 1, 1914, resulting from uncompleted jobs, at whatever stage, consisted of two items: (1) The fair value of services rendered to date and not paid for; and (2) the contingent value of the job, as one of the many items to be taken into account in determining the value of the good will of the partnership. In determining the assets of the firm, he included the personal property and equipment, cash in hand, receivables due from clients, as well as accounts assumed and completed by the defendant as liquidating partner. In determining the value of that portion of the good will which consisted of the possibility of future business concerning which the firm had not been consulted, the master took into account the personal nature of the relation of architect and client, and the reputation and prominence of the individual members of the firm, and found that as against the defendant's right to compete, this general good will of the firm of Shepley, Rutan & Coolidge was of no substantial value. The evidence is not reported.

That portion of the good will which consisted of the possibility of retaining or securing the right to continue the work in various stages where the firm had already been consulted, was found to be of some substantial value. The plans and sketches belonging to the firm were of little worth apart from the work to which they related. Their value to such work was contingent upon the possessor having the right to carry it on; and in estimating this portion of the good will, the contingent value of these sketches and plans in connection with current work was included. Subsequent to December 1, negotiations between the parties were in progress, and finally the assets of the firm, including the good will, ‘except its cash on hand and on deposit, bills receivable, books of account and rights in contracts unfinished December 1, [241 Mass. 596]1914, and in connection with work already at hand at that time, such contracts and work to be completed by Mr. Coolidge, the surviving partner, for the account and risk of the firm,’ were sold at auction to Mr. Coolidge for $13,400. The master found that the consideration was adequate for the assets sold, including the good will.

The defendant assumed responsibility as liquidating partner, to complete and account for all work on which between contractor and owner, contracts had been made on December 1, 1914; and in stating the account the defendant was held accountable for the profits on this work. He was allowed his expenses in completing these undertakings, and also compensation for his personal services as architect. Payments were made by the defendant for the work done as liquidating partner to the plaintiff on account of her husband's share, amounting to $78,856.94, and it was found that there was still due the sum of $18,375.56, which was paid in full with interest after the filing of the master's original report, as shown in the supplementary report. The plaintiff filed exceptions to the master's report, but no objections were filed by the defendant and the case is before us on the reservation of a single justice.

In Hutchinson v. Nay, 187 Mass. 262, 266, 72 N. E. 974,68 L. R. A. 186, 105 Am. St. Rep. 390, it was decided that, if the sale of the good will of a partnership was ordered by the court, such a sale is to be ‘conducted on the footing that the surviving partner was at liberty to enter on a competing business and to solicit trade from the customers of the old firm.’ The master followed this rule and found that that portion of the good will of Shepley, Rutan & Coolidge which consisted of the possibility of future business concerning which the firm had not been consulted, was of no value.

In professional partnerships the good will, in so far as it relates to the possibility of future business, may be found to be of only nominal value. A professional partnership depends on the...