Case ID: ad_139/html/0841-01.html
Source: Caselaw Access Project
Author: {"author": "Spring, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Herman J. Westwood, Appellant, v. Harlow J. Crissey and Elton A. Cole, Respondents.
    Fourth Department,
    July 12, 1910.
    Partnership —failure of partner to furnish capital — expulsion of partner.
    Where a partnership was formed for the purpose of bidding on a government contract with the understanding that the partner who originated the scheme would not he able to supply his share of the capital needed to carry on the business, and that one of the other partners being of financial ability would aid him in so doing by indorsing his notes, he cannot be expelled from the partnership and denied some share in the profits merely because he was unable to raise money, to contribute to the capital owing to the fact that the other partner refused to carry out his agreement to indorse the notes.
    McLennan, P. J.; and Robson, J., dissented. •
    Appeal by the plaintiff, Herman J. Westwood, from a judgment of the Supreme Court in favor of the deféndants, entered in the office' of the cleric of the county of Chautauqua on the 19th day of March, 1910, upon the decision of the court, rendered after a- trial at the Erie Special Term, dismissing the complaint upon the merits.
    The .opinion of the court below is reported in Westwood v. Oole (66 Mise. Rep. 53.) . -
    
      Herman J. Westwood, Walter H. Edson, and Louis G. Monroe, for the appellant.
    
      A. C. Wade and George E. Towne, for the respondent Crissey.
   Spring, J.:

The appeal in this case brings up for review the findings of fact and conclusions of law contained in the decision of the court below and also in the requests to find made by the plaintiff. These requests to find facts are very voluminous, and every one of them was found by the c.ourt. The evidence is not contained in the record, but it seems to me upon the findings made by the court below that the judgment should be reversed.

In the early part of the year 1907 the plaintiff in a litigation in which .he was employed discovered a machine, called the Tracey hand machine, which was. designed for' filling paper, packets with seeds. The United States Government, through its Agricultural Department, had been in the habit of letting a contract to the low- . est bidder to fill these packets' or bags with seeds, and sew them up . and dispose of them as directed by Members of .Congress, the Secretary of Agriculture and various other officials of the United States Government. The contract was one of considerable importance, as about 40,000,000 bags' of these seeds were filled and distributed each year. ■

The plaintiff, with a view of entering into the-competition for bids enlisted with him a man of .property named Cole, residing in Fre- • donia. The'plaintiff, with the assent of Cole, went to Washington, made an investigation of the whole subject, and after he' returned they concluded to apply for the contract, going .into the venture ■ equally. By their agreement or understanding Cole Was to have' charge of the filling and distribution of the packets, which had to ■ ■ be done in á building furnished by the government at-Washington. The defendant Crissey wás a banker and -president of the Citizens’ .. Trust Company in the village of Fredonia, where the plaintiff resided. It became-necessary to send a certified check to the government of $1,000 to accompany the bid which was to be made'for the government contract. The plaintiff was insolvent,- as both the . defendants knew, and he applied ait the trust company to obtain this money on thé 10th day of April, 1907, and the defendant Crissey ■ asked to be admitted to the copartnership and receive-a ten per cent ■ interest therein. On the same day the defendant Cole, at the request of the plaintiff, agreed that Crissey should become b member of the copartnership on the basis already mentioned. . The court ■ has found: “That .during'the conversation between the parties . .hereto at the bank of the defendant Crissey on the morning of April 10,1907, the defendant Crissey agreed that.if he were admitted into a ten' per cent share in the partnership he would give the plaintiff ' the financial assistance tire plaintiff required to supply his. share of' ' the capital necessary for the carrying out and fulfilling the Government contract,, and woidd indorse the plaintiff’s notes therefor.”

. On the same day and in pursuance of said arrangement the parties entered into the'following agreement: •

This memorandum made April 10th, 1907, is to witness that the undersigned have this day entered into a partnership to put up. the 1907-1908 Congressional Seed Distribution contract, if they are awarded the bid; they are to supply the necessary capital and share in the net profits, and to contribute of- any losses in the following proportions among themselves, viz., Cole 45 per cent; West-wood 45 per cent, and Crissey 10 per cent; the firm name to be Cole & Westwood; details of the getting of the contract and of the work under the contract to be as talked and as arranged mutually hereafter.
“(Signed) E. A. COLE, .
• “H. J. WESTWOOD,
“I-I. J. CRISSEY.”

The court further finds : “ That thereupon it was mutually agreed between the parties that the defendant Cole should have the exclusive and active charge at Washington of the work of fulfilling the Government contract if it was-awarded to the parties; that the defendant Crissey should obtain the ten thousand dollar ($10,000.00) bond required by the Department of Agriculture to accompany the contract, which bond was to be conditioned that the same should be null and void if the said Cole & Westwood should faithfully perform all the requirements of the said contract; and that the said plaintiff should perform any legal services incident to the business of the partnership.”

It is apparent, therefore, from these findings that Crissey, with the knowledge of the defendant Cole, was received into the copartnership and entered into the agreement with the explicit understanding that the plaintiff would not be able to supply his part of the-money needed to carry on the business in- case they obtained the contract with the government, and that Crissey, who was a man of means and abundantly able to furnish the necessary money, was expected to do so.

In providing the $1,000 necessary for the purpose of sending the certified check to the government each copartner contributed his aliquot share. The plaintiff’s share of $450 was obtained at the Citi-. zens’ Trust Company and upon the indorsement of Crissey made in pursuance of the agreement to supply the funds already referred to. The United States Agricultural Department early in April advised ' Cole & Westwood that theiv bid for the seed contract was-the low-, est one1 received, and requested a.personal interview at the department before awarding any contract. Accordingly the plaintiff with Mr. Cole.went to Washington, made the necessary arrangements, looked up some additional machinery that was necessary and finally their bid was accepted and. the contract,' bearing date the 1st day of May, 190-7, was entered into between the parties to this action individually and the government, and the. necessary bond, executed by .the parties with sureties, which, .was' soon thereafter presented to the government and accepted by it. The.' plaintiff thereupon obtained one of the Tracey hand machines which was the pattern for the bag; filling machines used in the consummation of the.contract, and. the parties immediately commenced operations to enable them. to_fill the packets-and distribute them as-provided in said agreement.

In the early part of June it .became apparent that it was necessary to raise money for the purpose of carrying out this agreement, and the court finds :. “ That on June lltli, 19.07, -the plaintiff orally-requested the defendant Grissey to indorse Ms note for the plaintiff’s share of such' part of the capital of the partnership as was then needed, but the defendant Grissey- refused to do so.”

': On the thirtéenth of June the plaintiff wrote to Mr.- Grissey that it was advisable to raise $500 and place in the bank for the use of the company and in closed Ms promissory note for $225, his portion thereof, and requested Grissey to indorse the same, which he refused -to do. Two days later Oble and- Grissey wrote-a letter, to'the plain-, tiff that it was necessary to pay in the sum of $3,000 at once and that his share must' be paid oh or before the. eighteenth of that month. The letter concluded as- .follows: “ Please take further notice that in the event of yoiir failure tb contribute your proportionate share of .the said sum of Three thousand ($3,000.00) dollars within the -time above designated, that we shall consider the copartnership created and existing of Oble & Westwood dissolved, and that we shall -take steps to acquire the capital necessary for -the performance of' said contract with the government from.other sources and elsewhere^ and shall proceed in the performance of. said contract without any reference tffyou or any interest that you shall claim to have thereunder, because, of your failure to perform as hereby required and as the necessities demand, and shall refuse at any time hereafter to pay you any portion of any moneys or profits whatever resulting from and which we shall receive from or on account of said contract between said copartnership and the United States Government.”

The plaintiff replied "to this letter very elaborately under date of June 18, 1907, and denied emphatically the right of the defendants to dissolve the partnership or to expel him therefrom.

.During all this time the plaintiff had been vigilant and effective in organizing the work with a view to cariying out the contract. He was more familiar than his copartners in the general scope of the labor involved in the fulfillment of the contract; knew of the methods to be adopted, the machinery and' appliances required,' and was in very frequent consultation with Cole pertaining to the business, especially, up until about the middle of July. The defendant Crissey was not active at this time in the practical part of the business of the company. It had been agreed at the outset that Cole was to have charge of the work in Washington, and lie consequently was acquainting himself with the details of it for the purpose of making the venture a success, and his knowledge of the business was chiefly gained from the plaintiff. When the actual performance of the contract .was commenced Cole went to Washington, assumed the active charge of the business under a salary and continued there until the contract was completed*

During the month of September Cole and Crissey made further requests upon the plaintiff to contribute his part, and again threatened to dissolve the corporation or expel him from it in case this was not done, and as late as October 8, 1907, the defendant Crissey wrote to the plaintiff to contribute to the funds of the copartnership, and concluded his letter with the statement, that we shall consider the copartnership created and existing of Cole & West-wood dissolved, and that we shall take steps to acquire the capital necessary for the performance, of said contract with the Govern, inent from other sources and elsewhere, and shall proceed in the performance of said contract without any reference to you or any interest you shall claim to have thereunder because of your failure to perform as hereby required and as the necessities demand, and shall refuse at any time thereafter to pay you any portion of any moneys or profits whatever resulting from and which we shall receive from or on account of said contract between said .copartnership and the United States Government.”

Considerable property, had been purchased by the defendants on behalf of the firm and they had.insured this in their own .names, and in November,' 1907, it was destroyed by fire-ánd $9,200 in insurance " money was paid to them, which was reinvested -in the business, Including this $9,200, the defendants contributed over $18,000 in . carrying out the contract, and the profits of the enterprise, including the insurance money, ''were 'nearly $11,000, which was divided equally between the two defendants according to an agreement among themselves.

During all the time after the defendant Crissey had absolutely refused to comply with his'promise to indorse the notes of the plain- " tiff so that he might furnish his part of the money demanded' in the prosecution of the firm’s business,, the plaintiff unavailingly made vigorous efforts to obtain the money required to meet the calls made . upon him. The court has found as a fact that.he acted in good faith. During tlie period that the contract was being carried on,.he was-ready to perform any work which he was called upon to do. He paid out for expenses $110.35 and is credited therefor upon the books of ; the company.- ■ 1

It may be that a member of a firm -who absolutely refuses to contribute his part of the necessary capital to carry on the firm business excludes himself from the firm and from any right to participate in ■ , its profits, if any there be. I think that rule does not apply to this case. ' .

The plaintiff was not repudiating the copartnership agreement. He expected that. Crissey.would aid him in obtaining the money-.required for.his proportion. Cole w.as-present when that agreement, was made. He'knew that the plaintiff was unable to furnish the money which he would be called upon to pay,, and the agreement ' was entered into with all parties- understanding the precise situation. It was not until the defendant Crissey had agreed to be-the paymaster for the plaintiff that the copartnership agreement was entered into. : . The plaintiff always recognized the binding force of that agreement and never attempted to escape payment of the obligationsit imposed. His failure was due not to repudiation of the agreement, but to his - inability to procure the money after repeated efforts to do so. If Crissey had complied with the agreement which he made with the plaintiff and which was entered into with the knowledge and assent of Cole, all would have been well. The one who formed the plan , and was responsible for the contract with the government’ was pushed aside by the defendants in order that Crissey might reap •the benefits accruing from the performance of that contract.

I think the defendants, in view of these circumstances, could not at the very outset of the agreement, when it became necessary to raise money, expel the plaintiff from any rights in the.copartnership contract. Apparently, they themselves did not think that the letter of .June thirteenth was sufficient to obtain his expulsion, for this was followed up by repeated interviews and other letters as late as October' eighth, each containing the same suggestion that they would “consider” him outside of the firm in ease he did .not contribute.

It may be that the plaintiff is not entitled to the full forty-five per cent, which was. his proportionate share b;y the terms of the agreement. He was the originator .of .the project. He ascertained the method by which seeds'were distributed 'by the government. He discovered the kind of machine that was necéssary to be used. He obtained the machine. It was used as a model,' and in the inception of the plan he is entitled to the credit of it. The. action is in equity, and I think his rights should be ascertained, and that he is entitled to be paid- his fair and just .proportion of the profits that were made.

The judgment should be reversed.

‘ All concurred, except McLennan, P. J., and Robson, J., who dissented upon the opinion of Marcus, J:, delivered at Special ' Term. (66 Misc. Rep. 53.) ...

Judgment reversed and new trial ordered, with costs to appellant to abide event.