Sorokach v. Trusewich

• Decision Date: 13 October 1953
• Docket Number: No. A--12,A--12
• Citation: 99 A.2d 790,13 N.J. 363
• Parties: SOROKACH v. TRUSEWICH et al.
• Court: New Jersey Supreme Court

Page 363

13 N.J. 363

99 A.2d 790

SOROKACH v. TRUSEWICH et al.

No. A--12.

Supreme Court of New Jersey.

Argued Sept. 12, 1953.

Decided Oct. 13, 1953.

Leopold Frankel, Paterson, argued the cause for appellant (Frankel & Frankel, Asbury Park, attorneys).

James A. Major, Hackensack, argued the cause for respondents (Henry L. Janowski, Garfield, attorney).

The opinion of the court was delivered by

WACHENFELD, J.

The plaintiff instituted this action as executrix of her husband's estate, seeking a determination and payment of his share of the assets of a partnership of which he was a member in his lifetime. He was formerly a stockholder of the corporation fromed in 1932 bearing the name Arrow Clothing Co., Inc., having six equal shareholders. The corporation was dissolved in 1943 and a partnership was formed known as the Arrow Clothing Company, consisting of the former shareholders as equal partners, carrying on the same business as the predecessor corporation.

On December 8, 1943 two agreements were signed by the partners, one a partnership agreement, the other an insurance agreement retroactive to June 1, 1943.

The Arrow Coat & Suit Company was organized in 1948 and was subject to the same agreements. Although separate books were kept, the business was treated as one entity, both partnerships engaged in performing labor and adding accessories to materials furnished by their customers, the first making men's clothing and the latter women's clothing.

The plaintiff's husband died October 1, 1950, possessed of a one-sixth interest in both partnerships. After his death the surviving partners continued the two enterprises and the plaintiff qualified as executrix on October 19, 1950.

The agreements will again be referred to, but generally provide, amongst other things, that full, just, true and accurate accounts were to be kept; that the life of each partner was to be insured for $10,000 with the partnership as sole beneficiary; that premiums were to be charged as an expense of the business; that upon dissolution before death of any partner, the life insurance policy was to become the property of each partner; that upon the death of any partner and within 30 days thereafter, an audit of the books was to be made and inventory taken and net worth or value of the deceased partner's interest determined; that in the event of death, the enterprise was to continue and no value was to be placed on good will in determining the net worth of the partner; that the interest of the decedent partner was to be paid within 30 days; that upon payment of the sum determined as above, release was to be made by personal representatives of the partner's interest in all the assets, including good will and trade name.

As of September 30, 1950 the book value of a one-sixth interest was $12,493.71. To this figure the remaining partners added the amount of inventory and offered the plaintiff $14,000. It was refused and litigation was instituted. She was awarded $1o,112.52, the Chancery Division determining, in part, that the machinery should be valued in accordance with the amount appearing in the books of the company, which amount represented cost less depreciation. The court rejected the plaintiff's suggestion that the machinery be given its market value.

As to profits, it decided the plaintiff was not entitled to a share of them because the partnership agreement provided otherwise, the conclusion being that because of the deceased partner's illness and his consequent inability to work, he was not entitled to share in the profits of the company after the distribution of June 30, 1950.

The Appellate Division affirmed In toto in a Per curiam opinion, but a dissent was filed relating solely to the question of the valuation of the equipment, concluding the machinery should be given its fair market value and not its book value.

The appeal is taken as a matter of right under our Constitution of 1947, Article VI, Sec. V, par. 1, which provides, Inter alia, that appeals may be taken to the Supreme Court '(b) In causes where there is a dissent in the Appellate Division * * *,' and under Rule 1:2--1(b), now R.R. 1:2--1(b). The query is made whether, under these circumstances, the single question on which the Appellate Division divided is presented for review and consideration or whether the entire cause and all matters involved may be readjudicated.

Limitations in this respect are encountered where the case comes here by way of certification, as we have held it is there confined to the specific questions certified. Liberty Title & Trust Co. v. Plews, 6 N.J. 28, 77 A.2d 219 (1950). Where the appeal is one of right because of the presence of a constitutional question, the result is otherwise and this court will consider all questions presented by way of cross-appeal, even though they are not such as in and of themselves would give the right to an original appeal under Rule 1:2--1. Frank v. Frank, 7 N.J. 225, 81 A.2d 172 (1951).

Similarly, we conclude in the present case all the questions raised must be decided. The Constitution and our rules do not restrict the reconsideration to the question concerning which there is a dissent, but give the right of appeal 'in the cause' when this event occurs. The appeal under the constitutional provision is from the judgment and not from a portion of the respective opinions rendered. Accordingly, the appellant has the right to have all the issues raised considered and disposed of in the present appeal.

Considering the points raised in the inverse order of their presentation, we meet first the question of profits. As the appellant aptly states in her brief: 'The issue in this case is whether the defendants may deny the plaintiff the rights given her under the two agreements to which her husband was a party.'

With this we agree, but the appellant abandons the contracts upon which she implied she would rely and turns to the Uniform Partnership Act, R.S. 42:1--42, N.J.S.A., claiming under it the right to election of profits. A mere reading of this section of the act makes it quite apparent that the rights and privileges therein outlined never mature or come into being if the parties have 'otherwise agreed.'

The primary inquiry, therefore, is: Did the parties agree in their written contracts on the point in controversy, and if so, what was their agreement?

Paragraph 4(a) of the partnership agreement reads:

'Each partner shall be entitled during the calendar year to thirty days' sick leave with full pay, either consecutive or intermittent, and after which he shall not be entitled to participate in any profits of the partnership until he shall return to active participation in the partnership business.'

Mr. Sorokach, the deceased partner, for months prior to his death had been unable to perform services or engage in the partnership business because of illness. His sick leave under the contract was exhausted and expired on June 30, 1950. His right to profits during his lifetime was determined by his own contract. He was entitled, under his agreement, to 30 days' sick leave with full pay and no more. Thereafter he was barred from participating in any profits until he returned 'to active participation in the partnership business.' This admittedly he never did. The right which he lost during his lifetime by the terms of the contract was not revived or recreated by reason of his death. The agreement barred profits in his lifetime and his death did not restore them. Both the trial court and the Appellate Division so found and we are in accord.

The appellant, after examining the books of account, determined her late husband's interest to be in a sum considerably larger than that awarded below. The main discrepancy in the figures was occasioned by the appellant's accountant valuing the machinery at market value rather than book value as shown on the surviving partners' accounts.

At the trial level, the court determined the machinery should be valued in accordance with the amount appearing in the books of the company, which represented cost less depreciation, rejecting the market value suggestion upon the theory that the deceased partner agreed to the accounting methods of the...