| Mich. | Apr 25, 1883
This suit involves the adjustment of partnership affairs after the decease of one of the partners.
The partnership consisted of the complainant and Charles S. Witbeck. It was formed for the purpose of carrying on
“ In case either said Charles E. Witbeck or William J. Chittenden shall die before said May 1st, 1891, said leases and this agreement and all the rights, interests and liabilities thereunder, shall belong to and remain to the survivors of them; and the estate or personal representatives of the one deceased shall take or have no interest or liability thereunder whatsoever.”
To this was appended an agreement to be signed by Mrs. Lane and the two sons, agreeing that they would extend the lease to May 1st, 1891, and by Witbeck and Chittenden agreeing that they would take it for the extended period. It seems, however, to have always remained an open question between complainant and Mr. Pond whether the new lease should be for five years or for ten years, and it is not admitted by defendant that Witbeck knew of or assented to the tenth clause above recited.
That no lease was finally executed is due to the fact that by midsummer of 1881 the health of Mr. Witbeck began to fail, so that he became wholly incapacitated for business. July 21st 1881, he was taken to an insane asylum where he remained without recovery until his death, January 22nd, 1882.
This sickness and death created serious embarrassment in the making of improvements, and in the contemplated future arrangements, — Mr. Chittenden hesitating to take a long lease while the future of his partner was so uncertain; but Mr. Pond and Mr. Chittenden, having entire confidence in each other, early came to an understanding that the latter would take a lease for five or ten years on the terms agreed upon, in case Mi'. Witbeck, by reason of his failure to recover, was unable to unite in it, and the improvements were continued and completed on this understanding.
September 6, 1881, defendant, who was the wife of Wit-beck, was duly appointed guardian of his estate and person, and, immediately on his decease, she applied for and
Complainant continued to manage the Bussell House for the benefit of the partnership for a year from the time when the lease had expired, that is to say, until February 1st, 1882. The assets of the partnership at that time consisted of certain real estate, bonds and stocks, a special deposit of over $18,000 in one of the Detroit savings’ banks, a few uncollected accounts, and the furniture and supplies of the Bussell House. Some of this was probably not strictly partnership assets, but it was owned by the partners jointly and for the purposes of this case it is not important to distinguish it.
Immediately after her appointment as guardian, defendant appears to have raised the question of the rights of Witbeck in the proposed new lease, but complainant denied that he was to have or could have any interest unless he recovered. Mr. H. M. Duffield was then acting as adviser for defendant, and Mr. E. F. Conely for complainant, and efforts in the direction of an adjustment of all matters between them were being made when Witbeck died, and were continued afterward. The difficulties in making an adjustment concerned the proposed new lease, and the losses to the business consequent on the disturbance by the change in the building. There was never any offer on the part of the defendant to unite in the proposed new lease, or to assume in respect to the business any of the obligations and liabilities of a partner, but it was insisted on her behalf that as the arrangement for a lease was made in part for the benefit of Witbeck, and the possession was continuing under that arrangement, the estate was entitled to an interest in the extended term, and that if this was not conceded, then the estate should recover damages for the loss to the business while the improvements, the benefits of which were to be appropriated by complainant, were going on in the house. Defendant also claimed that there was a valuable good-will
Brief reference will be made to subsequent negotiations. In March, 1882, complainant caused an offer to be communicated to defendant that he would pay her for the interest of the estate in the partnership and joint property the sum of $50,000. This offer was declined, in part apparently because defendant preferred to take productive securities instead of money, and she in turn made an offer which, like the other, led to no adjustment. On or about April 25, 1882, complainant made to defendant two propositions for a settlement, the first of which was to give her the sum of $51,000, half in property, and half in money, and the second contemplated a division of the partnership property. It was a part of this last proposition that the furniture should be appraised by disinterested appraisers, and that complainant should take it and pay for the interest of the estate therein the sum of $2500 above the appraisal. Mr. Duffield on behalf of defendant replied, rejecting these propositions and making others on her part. To the communication making them was added the following: “ Provided that nothing' in those propositions is to he construed as in any way a waiver of the right to put a stop at any time to the continued use of the firm property by Mr. Chittenden for his private advantage, or her right to compel him to account for one-half of the profits arising from such past or future use, or in lieu thereof, interest on the value thereof as she may elect.” “ I am further instructed to inform you that Mrs. 'Witbeck is advised that there has sufficient time elapsed for Mr. Chittenden to have closed the partnership affairs, and have consummated a settlement thereof, as was and is his duty as surviving partner, and that unless the same is done without fur
The result of these various propositions was that a portion of the assets of the partnership was passed over to the defendant, and the following receipt given by her:
“ Received of William J. Chittenden, as surviving partner of the late firm of Witbeck & Chittenden, the following-described property, as a part of the assets of said firm, coming to the undersigned as executrix of the last will and testament of her husband, Charles S. Witbeck, who was one of said firm.
“ This receipt is given simply as an acknowledgment of having received the property herein described, and not as a receipt in full; leaving the remainder of the assets of said firm to be adjusted hereafter, as the rights of said parties may appear, and the acceptance of said articles to in nowise alter or change the legal or equitable relations of the parties as to the settlement of the remaining affairs and assets of the partnership.
“Ten (101 Detroit opera-house bonds of $1000 each; eighty-four (84) shares Detroit Gas Company stock; one (1) share Detroit base-ball stock; certificate of deposit Wayne County Savings Bank, $9120.89; William J. Chittenden’s check for $251.44, being my one-half of net income of real estate,’ as per Mr. Chittenden’s account accompanying said check; also secretary’s certificate for transfer to me of four (4) shares, stock of Board of Trade Joint-stock Building Company.
April 29, 1882. Harriet E. Witbeok, Executrix.”
This seems to have been practically a settlement of their controversies except in so far as they concerned the hotel furniture and the claims to an interest in the lease, and to damages because of injury to the business by the making of changes in the house. Agreement upon those claims proving impracticable, the complainant filed this bill for a final settlement of the partnership affairs. The bill recites briefly the controversies and claims of the parties, and prays “ that your orator may be allowed to purchase said furniture at an appraised price, or if not, that it be divided one-half to your orator and 'one-half to defendant, or that if a sale is had it be made under the direction of the court, and that both parties be allowed to bid at such sale, and that such sale be
The defendant answered, and the case went to a hearing on pleadings and proofs. The decree ordered a reference ,to E. C. Hinsdale as special master, to take and state an account of the partnership dealings: “And it appearing to the court from the pleadings and proofs in this cause that the complainant has retained a large portion of the assets of 'the firm .of "Witbeck & Chittenden, wherein the said complainant and the defendant’s testator were sole partners, and has used them in the continuance and carrying on the hotel business of the Russell House, without the consent, permission or authority of said defendant and for his own private gain, and has made large profits therefrom,” it was ordered that he account for the same; “ also that said master take evidence of the value of the services of said Chittenden in managing said hotel business, and from such evidence determine the same; also that he take evidence as to the value of the respective properties of said defendant and complainant which have been used in said hotel business, and from such evidence determine such values; also that he take evidence as to the net profits of said hotel business, from said January 31st, 1882, and that after deducting the value of complainant’s services therefrom, he divide the remainder between complainant and defendant in proportion to the value of their respective interests in the property used in said business.”
The decree denied defendant’s claim to any interest in the good-will of the business of Witbeck & Chittenden; to the agreement for a new lease of the hotel, and her alternative claim to damages for injury to the business pending the repairs and rebuilding. It appointed John H. Kaple receiver of the partnership assets, with power to sell at public or private sale in his discretion on four days’ notice to the
Both parties appealed from the decree.
The claims of the respective parties, in so far as they concern their substantial rights, have been referred to in the course of the preceding statement of the case, but they will now áemand more specific mention. Of these the claim of defendant that the complainant was derelict in duty in not proceeding with promptitude to a settlement of the partnership affairs is hardly made with such particularity of statement and specification as to give us a very clear impression of the precise act or acts, the neglect of which is supposed to constitute the breach of duty complained of. That complainant had a right as surviving partner to settle up the partnership affairs is asserted, and this seems to be disputed by no one. This, in the case of many partnerships, would involve numerous collections and the settlement of complicated dealings with third persons; but in this case there seems to have been almost nothing of that sort to be done, for the partnership owed little, and had but little due to it, and this record does not indicate that, with the exception of the controversy respecting the Russell House lease, any dealings with third persons were the subjeet of dispute or the source of difficulty, or that the parties to this suit had any such dealings in view when negotiating respecting a settlement of the partnership affairs. The settlement, then, of the partnership affairs was limited almost exclusively to an adjustment of matters between the surviving partner and the estate of the others ; and we must find the culpable delay of complainant here if anywhere. From the recital of facts above made it will appear that mutual efforts were made by the parties to bring about a complete adjustment, and while these were progressing without result, we cannot say that one party was in fault rather than the other, for the failure in the negotiations, unless on looking into the propositions and counter-propositions we find good faith clearly manifest on the one side, and a want of it on
But it seems to have been assumed on the part of defendant that complainant, as surviving partner, under his authority to settle the affairs of the partnership, might divide and ought to have divided the assets; and complaint was made that he did not proceed to do so irrespective of defendant’s assent to the division, and while in fact she was expressly withholding her assent. We are aware of no rule of law or of equity that could have required of complainant such a division. Fair dealing undoubtedly demanded of him that he should not exclude defendant from participation in the partnership assets, so far as she had occasion to make use of them; but he had no authority to set off any definite portion of them to her and retain any other definite portion to himself, except by some act to which she became a party consenting. The division of property which was at length actually made was precisely such a division as ought to have been made; namely, a division by mutual consent. And though shortly after Mr. Witbeck’s death there was complaint that defendant had not supplied the widow with money as he should have done,we find the neglect to have been neither very serious nor long-continued, and we are not satisfied of any want of good faith. We therefore come to an examination of the legal
The position of the complainant in this controversy is perhaps sufficiently indicated in the recital of facts. With this is to be contrasted the claims of the defendant; and as these are very clearly and concisely stated in the brief of one of the counsel, we copy from that. The claims are — 1st. Thar the estate has an interest in the arrangement or lease under which Chittenden has continued to occupy the premises from the death of Witbeck ; that that arrangement was made with the firm and for the firm; and that the estate is entitled to its benefit; 2d. That it has an interest in the good-will of that business connected with the use of the premises and of the furniture ; 3d. That it is entitled to a share in the profits that Chittenden has been making in the use of the Bussell House and the good-will and the furniture in question; 4th. That at all events the estate is entitled to compensation for the damages suffered in the loss of profits and the expense during such improvements, the complainant having realized all the benefits of such improvements.
These claims will be considered in their order.
I. It is perfectly true that the arrangement for a new lease of the Bussell House was made by Mr. Pond and Mr. Clark with the firm and for the benefit of the firm; but when it is said as a. deduction from these facts, that the estate is entitled to its benefit, it becomes necessary to inquire how and by what rules of law this follows, and to get over, if we can, certain difficulties that are very palpable and that obtrude themselves upon our notice on the most cursory examination. The estate is no part of the firm, and never was; and unless it appears that the “ arrangement or lease ” constituted an asset of the firm at the time it ceased to exist, it would seem that this claim must fall to the ground.
What is the arrangement or lease ? If it has any existence as a property it must be an interest in land, not resting
That the oral arrangement was made between Mr. Pond and complainant, and that the latter now has possession and is enjoying the advantages and rights of a lessee in the confident expectation of having a written lease and a legal estate when the present litigation is ended, is no doubt due to the fact that the partnership had previously been lessee, and was expected to continue to be lessee when the improvements were made. There is some plausibility, therefore, in the argument that complainant has taken advantage of the previous relation of the firm to the premises to procure a lease for his own exclusive benefit; and the application of such cases as Featherstonhaugh v. Fenwick 17 Ves. 298, and Mitchell v. Reed 61 N.Y. 123" court="NY" date_filed="1874-09-05" href="https://app.midpage.ai/document/mitchell-v--reed-3594425?utm_source=webapp" opinion_id="3594425">61 N. Y. 123; s. o. 84 N.Y. 556" court="NY" date_filed="1881-03-22" href="https://app.midpage.ai/document/mitchell-v--read-3624440?utm_source=webapp" opinion_id="3624440">84 N. Y. 556, is insisted upon with considerable force. If these and similar cases are applicable to the facts now under investigation, we should not hesitate to apply them; for the general principle
TMs pivotal fact is entirely wanting here. There is no evidence whatever that complainant, while Witbeck was alive and capable of being consulted, ever failed to disclose the negotiations to him, or ever contemplated depriving him of joint participation in the lease if the partnership could be or should be continued. The opposite of all this is fully shown: the negotiations were open and frank, and we have every reason for believing that complainant not only contemplated but desired the continuance of the partnership and the renewal of the lease for its benefit. But complainant anticipated the possibility of the partnership unfortunately coming to an end by the death or permanent disability of Mr. Witbeck; and all his negotiations which were not disclosed, if any such there were, had regard to this contingency. But was there any wrong in this ? If the parties had contemplated a dissolution by the voluntary withdrawal of Mr. Witbeck from the firm, it is plain that there could have been no wrong in such a separate arrangement by complainant as took place here; and how it can "be or why it should be different when the contemplated event that was to cause dissolution was death, is certainly not very manifest. What the separate negotiations contemplated was not that the partnership should be deprived of the advantages of a new lease, but that complainant should have a new lease in the event that the partnership, without the fault of either party, should come to an end, and for that reason no longer be able to take it.
It is necessary to bear in mind in this ease that no new lease was actually made by complainant during the existence
But without enlarging further.on this branch of the case we give full assent to the conclusion of' the Superior Court that defendant has no interest in the present occupancy of the Bussell House, or in the proposed new lease.
II. The second claim is that defendant has an interest in the good-will of the business connected with the use of the Bussell House and the furniture. By good-will we suppose must be intended the favor which the management of the Bussell House bas won from the public, and the probability that the old customers will continue to give it their patronage for the future. Cruttwell v. Lye 11 Ves. 335; Snow-
III. The third claim is that defendant, as the representative of the Witbeck estate, is entitled to a share in the profits that complainant has been making in the use of the Bussell House and the good-will and the furniture. This claim was sustained by the decree at the same time that the. right to participate in the use and the good-will was rejected. The right, then, to share in the profits was left to rest solely on the interest of the estate in the furniture. Surely this is too narrow a basis to support the right. If the furniture were of greater importance to the business than anything else, and complainant’ had wrongfully made use of defendant’s share of it and reaped profits therefrom, he might justly be called upon to share the profits with defendant. But in this case the house was of more importance to the business than the furniture; and so also, probably, were the services of the complainant. The furniture might at any time have been removed and its place supplied without serious interruption to the business.
¥e find, then, that on February 1, 1882, when the estate ceased to have any interest in the business, the furniture was in use in the house, and negotiations were going on between the parties, looking to an adjustment of the controversies which unhappily had arisen. In strictness complainant had no right to make use of the furniture for a single day in his private business, and it was perhaps his duty to remove it from the house immediately and to proceed to inventory and divide or sell it. But did defendant desire this to be done? There is abundance of evidence in this record that she did not. On her behalf protests were interposed to the continued use of it in complainant’s exclusive interest, but this was a part of the general purpose to insist upon participation in the profits of the business. It is manifest that complainant could not cease to use the furniture without removing it unless at the same time he ceased to carry on the hotel; and a demand that he should do so and still leave the furniture where it was, was equivalent to a demand that he should suspend business. But this was the demand that was made; and inasmuch as another case is to be decided with this, in the record of which the fact appears, we may properly notice here that when, after the decree was entered, the complainant notified the defendant that he should remove the furniture from the hotel, he was immediately restrained by injunction from doing so. It is quite correct, therefore, to say that if complainant had yielded to the demands made upon him — that he should cease to use the furniture but not remove it — the house must have been closed. Iiis use of it under such circumstances bears upon its face no evidence of such intentional
What complainant should account for is the deterioration or destruction of the furniture while it has been used by him, and for interest on the amount. Nothing further could justly be required. With the legal questions settled, it would seem that the parties ought to be able to adjust all controversies concerning the furniture by voluntary arrangement ; and twenty days will be allowed for the endeavor. If this fails, the receiver may proceed to sell, in the mass or in parcels, as his judgment shall dictate, with liberty to both parties to compete as purchasers.
IY. The fourth claim of defendant is that the estate is entitled to compensation in the nature of damages because of the loss of profits and the increased expense consequent upon the improvements in the building; the circumstances being such that the complainant will take the benefit of the improvements. This claim is obviously to be discussed on an assumption that the oral understanding between Mr. Pond and the complainant is to be carried into effect; for otherwise it could have no basis whatever. We shall therefore make that assumption for the purpose of determining whether the claim can then have any foundation. It is to be observed at the outset that no charge of wrong-doing in respect to the.improvements is made against the complainant ; but it is abundantly shown, and not disputed, that whatever was done was with Mr. Witbeck’s full concurrence. The truth, apparently, is this: That the time had arrived when the good of the hotel as a piece of property and a place of business required that the building should be
In giving this consent, no doubt each of the lessees expected — or at least hoped — that he would live to become a party to the anticipated new lease, and that the partnership would continue its business in the same place for another considerable period. Each submitted to the consequent loss in that hope, and sacrificed to future expectations an immediate advantage. Death, as to one of the parties, has disappointed the expectations after the price for the expected benefits has been paid. And it remains to be seen whether the other can justly be called upon to make good the loss to the estate of his late associate.
It is to be observed, in the first place, that the losses are not all on one side. Complainant has lost his associate in business, and all the benefit of his advice, assistance, estate and credit in the business. "We have no right to assume that this is an. unimportant loss; the negotiations of complainant with Mr. Pond show very clearly that he considered it a great embarrassment in respect to his future business, and hesitated to take alone the ten-years’ term the partnership had asked for. But passing this consideration, it is to be observed further that the claim now under discussion is based upon a supposed moral obligation on the part of complainant to account for an additional benefit which he obtains from the estate consequent on the death of his partner. But that he will receive any such increased benefit is altogether a matter of assumption. And the same error is made in respect to this part of the case which has been pointed out in considering the claim to compensation for the good-will.
It is no doubt true that the occupation of the Russell House
The result of our review of the case is that the decree of the Superior Court must be modified as indicated in respect