Veatch v. Black, 42766
Decision Date | 09 June 1952 |
Docket Number | No. 2,No. 42766,42766,2 |
Citation | 250 S.W.2d 501,363 Mo. 190 |
Parties | VEATCH v. BLACK |
Court | Missouri Supreme Court |
R. B. Caldwell, Robert S. Eastin, M. D. Blackwell, Caldwell, Downing, Noble & Garrity, Kansas City, for N. T. Veatch, respondent and appellant.
Albert Thomson, Harold T. Van Dyke, Johnson, Davis, Thomson, Van Dyke & Fairchild, Kansas City, for respondent-appellant Faye B. Black.
BOHLING, Commissioner.
These are cross-appeals from a declaratory judgment construing certain provisions of the written agreement of partnership of Black and Veatch, Consulting Engineers, of Kansas City, Missouri, applicable upon the death of one of the partners. E. (Ernest) B. Black, a partner, died on July 4, 1949. N. T. Veatch, also known at N. T. Veatch, Jr., the other partner, instituted the action against Faye B. Black (the widow of E. B. Black), Administratrix of the Estate of Ernest B. Black, Deceased. A main controversy is occasioned by the income tax law. The declaratory judgment of the trial court on the issues presented was, briefly stated, to the effect (1) that the agreement provided for a liquidation and not a sale of the retiring partner's interest and an accounting which divided the earnings received on partnership contracts completed after Mr. Black's death equally between Mr. Black's estate and Mr. Veatch as a distribution of income (after general taxes but before income taxes) conformed to the agreement; (2) that charging bonuses paid to certain partnership key employees for services in completing the partnership contracts as an overhead expense of the partnership was proper; and (3) that certain contracts treated as new business of the surviving partner were under the agreement the completion of partnership or old contracts and should be so treated. The amount involved vests jurisdiction here. On plaintiff's appeal the rulings with respect to '(3),' supra, are questioned; whereas, on defendant's appeal the rulings with respect to '(1)' and '(2),' supra, are questioned.
Plaintiff was first associated with Mr. Black as an employee in 1909. In 1915 they became partners under the name of Black and Veatch. In 1923 this partnership was dissolved, Mr. Black having encountered financial difficulties. Mr. Veatch continued the business as 'Black and Veatch' with Mr. Black as an employee. Under a written agreement, dated January 1, 1937, the partnership of Black and Veatch was reestablished and continued until the death of Mr. Black. The partners were men of high reputation in their profession. Black and Veatch performed professional engineering services, designing and supervising the construction of water supply, power and sewage systems, roads and pavements, airfields, et cetera. At Mr. Black's death the partnership had uncompleted contracts involving exceptionally large sums with corresponding fees (stated to be nonrecurring) to the firm.
Said partnership agreement of January 1, 1937, first reviewed the history of the Black and Veatch firm and stated the parties desired to renew the partnership. Then followed the 'Now, Therefore,' clause, reciting that 'for One ($1.00) Dollar and other valuable considerations * * * N. T. Veatch, Jr., hereby sells and conveys to E. B. Black an undivided half interest in and to said business and property,' describing the same (office furniture, fixtures, office and engineering equipment, instruments and supplies, accounts and bills receivable, pending contracts, other assets and choses in action), and that E. B. Black assumed one-half of all liabilities and obligations of the firm. The agreement then set forth provisions for the conduct of the partnership and restrictions on the partners for the protection of the partnership, for an accounting on January 1 of each year, oftener if necessary, and, in the event of the withdrawal or demise of either partner, 'a complete audit of the business' by certified public accountants (paragraph II). It provided that neither partner was to 'draw more money' from the partnership in any month than that 'due him for salary,' determined by mutual agreement, and expenses incurred on behalf of the partnership (paragraph III); that income from all professional services of the partners belonged to the co-partnership (paragraph IV); and that life insurance be carried on the lives of the partners and be distributed in a stated manner upon the death of a partner (paragraph VI).
The paragraphs of the agreement important to the instant issues are VIII and IX, but other provisions bear thereon.
Paragraph VII of the agreement required a retiring partner to give the other an exclusive six months' option 'to purchase the interest of the other partner on the basis and according to the terms hereinafter provided for in case of the death of one of the partners.'
Other pertinent provisions of the agreement read:
'VIII. 1. If either party shall die or be adjudicated bankrupt, or insolvent, or take proceedings for liquidation by arrangement or composition with his creditors, the partnership shall thereupon determine as to him, and he or his executors, administrators or assigns, as the case may be, shall have no interest in common with the surviving or other partner or partners in the property of the partnership, but shall be considered in equity as a vendor to the surviving partner, of the share in the partnership of the deceased or bankrupt or liquidating or compounding partner as and from the date of his death, or bankruptcy, or insolvency, or of his having compounded as aforesaid, for the price and on the terms to be arrived at under the provisions hereinafter contained.
'2. The method to be used in arriving at the amount due the retiring partner, or his administrators, executors or assigns, shall be based upon the value of that partner's interest as shown by the books of the partnership as of the effective date of the dissolution, with the following exceptions:
'(b) Partnership insurance shall be taken into consideration as heretofore set forth.
'(c) All moneys received from charged off accounts, plan deposits forfeited, and other undisclosed assets, shall, when received, be divided equally between the parties.
'(d) Unsecured liabilities and losses on book accounts ascertained after the effective date to be deducted.
' .
'(c) If at any time the retiring partner shall, by the method above outlined, receive more than his interest as finally determined, his executors, administrators or assigns agree to repay such sum.
'(f)...
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