King v. Leighton

JIaedin, J.: I think the evidence sufficient to uphold the finding of fact made by the referee, that the defendant falsely stated that the profits did not exceed about $19,000, and that the plaintiff relied thereon, whereas in truth the profits exceeded $49,000. It may be conceded that the plaintiff might, at the time he accounted with the defendant on the basis of $19,000 profits, have ascertained the actual situation of the accounts. Yet the defendant ought to have made time statements if he made any, and if he assumed to know what the profits actually were. The plaintiff was justified in reposing upon such statements, and the plaintiff ought not to be defeated by an imputation of negligence. (Mead v. Bunn, 32 N. Y., 275; Clark v. Rankin, 46 Barb., 578.) Assuming that the settlement of February 28,1873, was not con422 elusive upon the plaintiff, and that he was entitled to have and receive-the actual profits, which had been earned at the time of the dissolution of the copartnership by his bankruptcy in July, 1872, we come to the question as to wliat rights the plaintiff has in the contracts that were on hand at the time of the dissolution, and which contracts were subsequently carried out by the defendant. The referee has allowed the plaintiff to recover one-third of the-profits, made by the defendant after the dissolution, upon contracts-then in existence, and has stated the profits to be some $02,650, and as the plaintiff by the original agreement was to have one-third of the profits, the defendant has been charged $21,000 and. upwards. In that respect we think the referee has fallen into an error. The bankruptcy of the plaintiff in July, 1872, worked a dissolution of the copartnership. The defendant immediately treated the dissolution as accomplished, and agreed upon terms with the-plaintiff for the use of the shops and power. The fact is found by the referee in a former action between the parties. The defendant by that arrangement was to pay rent for what had thereto been the capital contributed to the copartnership by the plaintiff. lie paid rent for the shop and machinery and power up to November 7, 1873, which was as long as he had the use of the same. The plaintiff claimed the rent and received the last of it as late as November 18, 1873. Tims we see the plaintiff had, himself, voluntarily withdrawn his original contribution to the capital of thecopartnership. Thus he treated it as dissolved. His acts in regard to such withdrawal, and Iris countenancing the-payment of profits to his assignee on account, and his own negotiations for an adjustment, indicate an intention rrpon his part to-treat the copartnership as dissolved, and the unfinished business as transferred to the defendant, subject to a fair ascertainment of the actual profits and value of the assets of the firm at the time of its-dissolution. (Collender v. Phelan, 9 Weekly Dig., 571; opinion of Rapallo, J.; S. C., 79 N. Y., 366.) Having withdrawn his capital and his own personal services, and become insolvent, so that his financial standing was impaired and his-credit gone, and having charged rent and received it, upon 'what. [423] was his share of the capital stock, I think it would be inequitable to allow him to take the same share in the profits of the business, carried on by the defendant after the dissolution, as he was entitled to prior thereto. (Lindley on Partn., 830, etc.; Willett v. Blanford, 1 Hare 253; Simpson v. Chapman, 4 De G., Mac. & G., 154; Wedderburn v. Wedderburn, 22 Beav., 84.) The dissolution, the withdrawal of capital, evinced such an intent to withdraw from the firm as to relieve the plaintiff from liability to pay subsequently contracted debts, as to the defendant, and as to creditors and dealers having notice thereof. And as to the defendant from liability to pay subsequently accruing losses. Under such circumstances the plaintiff ought not to receive the one-third of the profits which the defendant produced by his services and capital subsequent to the dissolution. It may be that the defendant should upon a fair adjustment, between the parties, of the affairs at the time of the dissolution, and prior to the withdrawal of his capital, receive an allowance for the uncompleted contracts, if they then had 'an appreciable value. But that question has not been discussed, so we have not the aid of the research of counsel and do not pass upon it, as it is not necessary to do so at this time. If we were to discuss it and reach a conclusion favorable to the plaintiff, we should still be obliged to send the case back for ascertainment of the value of such contracts at' the time of the dissolution. Judgment reversed ' and a new trial ordered before another referee, with costs to abide the event. Talcott, P. J., and Smith, J., concurred. Ordered accordingly.