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Kelly v. Buck

Supreme Court of New York, Appellate Division

March 17, 1911

WILLIAM KELLY, Respondent,
v.
CARRIE G. BUCK, as Executrix, etc., of EZRA W. BUCK, Deceased, Appellant.

APPEAL by the defendant, Carrie G. Buck, as executrix, etc., from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Kings on the 18th day of July, 1910, upon the decision of the court, rendered after a trial at the Kings County Special Term, directing an accounting of partnership transactions between the plaintiff and Ezra W. Buck.

COUNSEL

Louis W. Severy [John F. Canavan with him on the brief], for the appellant.

Benjamin F. Norris [George W. Titcomb with him on the brief], for the respondent.

CARR, J.:

The plaintiff and one Ezra W. Buck were copartners in the trucking business in the city of New York. In August, 1897, while

Page 547

the partnership was pending, they entered into a written agreement, which, after reciting generally the mutual interests of the partners, provided as follows:

'WHEREAS, they desire to enter into some further agreement whereby in the event of the death of either, the business and assets of the said copartnership may become the sole property of the other, subject only to the debts of said copartnership;

' Now, therefore, in consideration of the premises and one dollar to each in hand paid by the other, the receipt whereof is hereby acknowledged by the parties hereto, it is hereby agreed that in the event of the death of either of the said parties during the continuance of said copartnership, the property and assets of same shall become the sole property of the survivor, free and clear of any and all claims of any kind whatever of the executors or administrators of the deceased party, but subject to all the debts and liabilities of said copartnership to other parties, provided the said surviving partner shall within ninety days after the death of said party pay to the executors or administrators of said deceased party the sum of five thousand dollars.'

Buck died in October, 1908, and the plaintiff, as surviving partner on December 30, 1908, paid to Buck's executrix, the defendant herein, the sum of $5,000, and became the sole owner of all 'the property and assets' of the partnership, as provided in the agreement aforesaid. In August, 1909, he brought this action in equity against the defendant as the executrix of the will of the deceased partner, Buck, to procure an accounting of the partnership transactions from its inception to the date of Buck's death. The complaint alleges the existence of the copartnership, the death of Buck, the equal interest of each partner in the firm assets and profits. It then sets forth that during the existence of the partnership Buck had wrongfully diverted to his own use large sums of money belonging to the partnership in excess of his lawful share thereof, and was, at the time of his death, largely indebted to the partnership by reason of such diversion. There was a further allegation that no partnership accounting had ever been had. The prayer for relief was for an accounting of all moneys paid and received by both partners, 'and that any and all moneys found to be due by either of the parties hereto to the said

Page 548

firm, or to each other, be paid.' The answer denied the allegations of misappropriation of firm moneys by Buck and of any indebtedness by him to the firm, and pleaded as an affirmative defense the agreement as to a purchase by the plaintiff of the partnership interest of the deceased partner and its performance by the plaintiff. On the trial at Special Term judgment was given for the plaintiff, decreeing an accounting of the partnership transactions from its inception to the death of Buck, a period of some fifteen years. The decision of the trial court contains no findings that during the existence of the partnership there was any wrongful diversion of firm moneys by Buck or that he died indebted to the firm, but does contain a finding that the plaintiff, under the copartnership agreement above quoted, paid the estate of Buck the sum of $5,000 as the consideration for his becoming the sole owner of the partnership assets. Neither in the complaint is there any allegation that the plaintiff has rescinded this executed agreement, nor is there any finding of a rescission by the plaintiff nor of any fraud by Buck's executrix, this defendant, which induced the plaintiff to enter into the performance of the executed agreement. Nor does the judgment contain any provision for its rescission. The decision and judgment of the court seem to proceed on the theory that as the partnership was dissolved by the death of Buck, the plaintiff is entitled to an accounting as an ordinary incident of the dissolution. It is true, of course, that on the dissolution of a copartnership either partner has a right to an accounting in a court of equity. ( Watts v. Adler, 130 N.Y. 646.) This right may be defeated, however, by an accord and satisfaction or by a release. (2 Lindley Part. [ 2d Am. ed.] 1134, 1136.) By the performance of the liquidation agreement, above quoted, the plaintiff became the sole owner of the partnership assets, subject to the claims of third parties, but free from all claims of Buck's estate. As Buck's estate had made no claims upon the plaintiff, the only object of an accounting would be to ascertain whether, despite the purchase by the plaintiff of Buck's interest, there existed in favor of the plaintiff any claims against Buck's estate for any indebtedness of the decedent to the partnership. If the purchase by the plaintiff of the decedent's interest in the copartnership constituted in itself, in the absence of fraud, a mutual adjustment of the mutual rights of the partners, and an

Page 549

extinguishment of the debts of the deceased copartner, then there should be no accounting, as there would be neither necessity nor propriety thereof. It appears to be settled law that the purchase by one partner of all the rights of another partner in the partnership assets extinguishes any indebtedness of the selling partner to the partnership, in the absence of fraud or an express agreement to the contrary. ( Lesure v. Norris, 11 Cush. 328; Clark v. Carr,45 Ill.App. 469; Hattenhauer v. Adamick, 70 id. 602; Hamilton v. Wells,182 Ill. 144, ...


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