Wahl v. Barnum

Decision Date08 October 1889
Citation22 N.E. 280,116 N.Y. 87
PartiesWAHL et al. v. BARNUM et al.
CourtNew York Court of Appeals Court of Appeals


Appeal (pursuant to section 190, subd. 2, Code Civil Proc.) from an order of the general term of the superior court of Buffalo, denying a motion for a new trial, made pursuant to section 1001, Code Civil Proc., which provides that a motion for a new trial may be made at the general term after the entry of an interlocutory judgment and before the commencement of proceedings before final judgment. For many years prior to June, 1879, Stephen O. Barnum and Theodore D. Barnum were partners and merchants at Buffalo, N. Y., under the firm name of S. O. Barnum & Son. Stephen O. Barnum owned a three-fourths, and Theodore D. Barnum a oen-fourth, interest in the firm. The respondents had for many years been employed by the firm. June 4, 1879, the firm's place of business, and a large part of its merchandise, were destroyed by fire. In that month the parties to this action orally agreed that S. O. Barnum & Son should discontinue business, and be succeeded by S. O. Barnum's Son & Co., which firm was to be composed of Theodore D. Barnum, Julius P. Wahl, John Ansteth, John S. Snaith, and Edward J. Chatfield, and have a capital of $60,000, of which Theodore D. Barnum was to contribute the unburned merchandise of the old firm valued at $40,000, and every one of the other partners $5,000 in cash; and that the firm should continue in business for three years from June 24, 1879. The time when Wahl, Ansteth, Snaith, and Chatfield should pay in their shares of capital was not agreed upon; but it was agreed that every one of the partners should pay the firm interest at the rate of 7 per cent. per annum on the amount due from him to the firm for capital, and should receive interest at the same rate of the capital furnished. It was also agreed that each partner should have one-fifth of the profits, and bear one-fifth of the losses; the five parties having equal interests. Barnum was to have the right to withdraw from the firm $2,800 in each year, and the other partners $1,200 each. It was agreed that the contract should be reduced to writing, and afterwards Theodore D. Barnum presented a written contract for the signatures of the five parties, which the plaintiffs refused to execute, on the ground that it did not express the oral contract agreed upon. Barnum turned over the unburned merchandise to the new firm, and it began business, and continued until March 23, 1882, when it was dissolved by mutual consent. In January, 1880, Ansteth paid towards his share of the capital $500; in April, 1880, $500. In April, 1880, Wahl paid towards his share of the capital $1,000, and about that time Snaith paid in $5,000, his share of the capital. No other sums were paid in as capital. In January, 1880, an inventory of the assets and business of the firm was taken, as of the 10th of that month, by which it appeared that the profits of the firm then exceeded $60,000. Shortly after the inventory was taken the Barnums asserted that, no articles of partnership having been signed, and the respondents not having paid in their share of capital, no partnership existed, and that the (the Barnums) owned the business and its profits. After considerable negotiation it was, about March 8, 1880, orally agreed between the parties to this action that every one of the respondents should be credited with $3,000 on the books of the firm, the Barnums should have the remainder of the assets, and that thereafter the business should be conducted by S. O. Barnum's Son & Co. on the terms above stated. The business was continued from this date until the dissolution. In November, 1882, this action was begun to set aside the oral compromise of March 8, 1880, for the fraud and duress of the Barnums, and for the lack of consideration, and for an accounting of the affairs of the firm from June 24, 1879, until March 23, 1882, the date of dissolution. Upon the trial the court held that the oral compromise ‘was without any good consideration, and was null and void,’ and that an accounting should be had before a referee of the business of the firm from June 24, 1879, to the date of its dissolution. An interlocutory judgment was entered in accordance with the decision, which reserved the question of costs until the final judgment. After the entry of this judgment, and before the accounting therein ordered was begun, Stephen O. Barnum and Theodore D. Barnum moved, pursuant to section 1001, Code Civil Proc., at the general term, for a new trial on their exceptions, which was denied, with costs, and thereupon they appealed from the order entered on the decision of their motion.

POTTER, J., dissenting.

Rogers, Locks & Milburn, for appellants.

Adelbert Moot, for respondents Wahl and others.

Spencer Clinton, for respondent Chatfield.

FOLLETT, C. J., ( after stating the facts as above.)

The order of the general term denying the motion for a new trial, made under section 1001, Code Civil Proc., is reviewable by this court, (Walker v. Spencer, 86 N. Y. 162;Raynor v. Raynor, 94 N. Y. 248;) but the general term could not, on such motion, review questions of fact, and only the questions of law presented by the exceptions can be considered in this court, (Id. 248, 252.)

In the absence of fraud or duress, a settlement of a disputed claim, preferred in good faith by a promisee against a promisor, is a legal consideration for a promise; and the fact that the promisor had a legal defense to the claim settled is no defense to an action on the new promise. Russell v. Cook, 3 Hill, 504;Stewart v. Ahrenfeldt, 4 Denio, 189;Crans v. Hunter, 28 N. Y. 389;White v. Hoyt, 73 N. Y. 505, 515;Feeter v. Weber, 78 N. Y. 334;Dunham v. Griswold, 100 N. Y. 224, 3 N. E. Rep. 76; Callisher v. Bischoffsheim, L. R. 5 Q. B. 449; Ockford v. Barelli, 25 Law T. (N. S.) 504, 20 Wkly. Rep. 116; Miles v. Estate Co., 32 Ch. Div. 266. The cases, of which Ryan v. Ward, 48 N. Y. 204, is a type, holding that a payment by a debtor of a less sum than the amount which he admits to be justily due and owing by him does not extinguish the debt, though the creditor agrees to receive the less sum in satisfaction, are not in conflict with the rule above stated. There is a great difference between claims unliquidated and disputed, and those which are liquidated and undisputed; a compromise which is sufficient to bar an action on a claim within the first class often being quite insufficient to bar an action on a claim within the second class. The law regards with favor, and seeks to uphold, settlements of pending or threatened litigations, but not with favor an attempt to discharge an admitted debt by payment of a part of it. There is no doubt about the rule above stated being firmly established in the law of this state; but the important question is whether the settlement of March 8, 1880, is within the rule. The transaction was not an executed settlement of one or more disputed claims, by which the claimant surrendered or released his demands in consideration of the payment of a sum agreed on, or upon the promise of future payment of the sum agreed on. In the absence of duress, fraud, or mistake, an account stated by partners between themselves will not be opened and investigated in an action for an accounting. Story, Partn. § 206; Lindl. Partn. (5th Eng. Ed.) 512; Pilling v. Pilling, 3 De Gex, J. & S. 162; Coventry v. Barclay, Id. 320. But the controversy settled March 8, 1880, did not relate to the accounts between all or any of the parties to this action, as partners. The question debated and settled was, had Theodore D. Barnum and the respondents been partners since June 24, 1879, and each entitled to a fifth of the profits? They finally agreed, in consideration of being credited with $3,000 each, and of the future partnership, that no partnership had previously existed. This contract is supported by a valid consideration. The partnership which the court found then existed, and which, by agreement, was to continue for more than a year, rested only on an oral contract, and either partner had a right to determine it at will. A contract forming a partnership to be continued beyond one year is within the section of the statute of frauds which provides that every agreement which, by its terms, is not to be performed in one year from the making thereof, is void unless it is in writing; and a partnership so formed is a partnership at will. Morris v. Peckham, 51 Conn. 128; Williams v. Jones, 5 Barn. & C. 108; Jones v. McMichael, 12 Rich. Law, 176; Essex v. Essex, 20 Beav. 442; Burdon v. Barkus, 3 Giff. 412, affirmed, 4 De Gex, F. & J. 42, 47, 50; Reed, St. Frauds, § 191.

We have not been referred to any case in this state wherein this proposition has arisen and has been decided. In Smith v. Tarlton, 2 Barb. Ch. 336, the parties, by an oral contract, entered into and agreed to continue in partnership for three years. Before the expiration of the time limited two of the partners filed a bill against the third partner, alleging that the partnership property had been sold, and the partnership dissolved by mutual consent, and that the defendant had misapplied the funds of the firm. An accounting and an injunction pendente lite was prayed for. An injunction was granted on the bill, which the defendant moved, on the bill, to vacate, but the motion was denied, the chancellor saying: ‘This was not, as the counsel supposes, an agreement which was not to be performed within one year, so as to require it to be in writing, under the statute of frauds; but it was the formation of an immediate partnership between the parties, which partnership was to continue three years, unless sooner dissolved by the consent of such parties. In this state no written articles are necessary to constitute a copartnership which is to take effect immediately, although a written agreement might be necessary to bind the parties to enter into a future...

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