Case ID: ny-super-ct_16/html/0029-01.html
Source: Caselaw Access Project
Author: {"author": "Hoffman, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Fletcher Harper v. H. J. Raymond, Edward B. Wesley and George B. Jones.
    Where certain persons, by a writing signed by them, formed an association for publishing a daily and weekly newspaper; and therein and thereby agreed, that said newspapers and the good will thereof, and all the other goods, &c., of the association “ as they shall from time to time exist, shall be divided into, and shall always consist of 100 equal shares, to be called capital stock; ” and in what proportions such stock should belong to them in severalty; and thereby (by the 6th article thereof), also agreed, that each party should have the right to sell any of his said stock, but before doing so, should offer the same to the association and give it the refusal thereof for ten days; and that no “purchaser shall acquire any interest whatever in the profits of said papers till he shall receive a certificate or scrip for his said shares signed by all the parties hereto, and duly registered in a book to be kept for that purpose,” which scrip shall certify that the holder of it “ is entitled to participate in proportion to his shares, only in that portion of the profits which may be assigned to the party selling to such purchaser; and shall not be entitled to any voice or agency whatever in the conduct, control, management or affairs of said company or of said newspapers.”
    1. It was held, that the plaintiff, who purchased thirty shares of the stock from a prior and registered purchaser thereof, was, as between him and his vendor, the owner thereof and as such equitably entitled to any dividends of profits ascertained and declared while he was such owner, and credited on the books of the association, to such stock as its just proportion of such ascertained profits, although such stock was so purchased by the plaintiff without a previous offer of it by his vendor, to the association or to either of the associates.
    2. It was also held, that a sale and assignment, by the plaintiff, after such a dividend of profits, of the said “thirty shares of capital stock,” “and all future benefit and dividends thereof,” with full authority, as the attorney of the plaintiff and of his vendor, to sell for them “ all or any part of said stock,” did not pass to the plaintiff's vendee any right to the dividend so previously declared and credited, to the said thirty shares.
    3. It was also held, that a written notice signed by one of the associates and served (on all persons interested in the capital stock) after such a dividend of profits had been made, declaring the association dissolved; and the institution by him of a suit to obtain a judgment declaring it to be dissolved, &c., operated as a dissolution of the association, and made the plaintiff’s legal title to the profits so allotted and credited to his thirty shares perfect and absolute, and completed his right to sue the associates and recover from them such ascertained and declared profits, unembarrassed by any of the conditions and provisions contained in the sixth, of the said articles of association.
    4. But it was also held, that in such a suit, there would be deducted from such declared profits three-tenths of a debt owing by the association when the dividend was declared, and subsequently paid by it, but not then considered, because its amount was not then known, or capable of being ascertained.
    (Before Hoffman, Slosson and Pierrepont, J. J.)
    Heard, April 6;
    decided, April 17, 1858.
    This action, in which the plaintiff claims to recover of the defendants $3,000 and interest from the 1st of February, 1856, comes before the Court upon a case made under section 372 of the Code. Fletcher Harper is the plaintiff, and H. J. Raymond, Fdward B. Wesley and George B. Jones are the defendants. The facts are these:
    On the 5th of August, 1851, the defendants entered into written “ articles of association” (containing seven articles), signed and sealed by them, and which in substance, so far as their contents affect the present controversy, are as follows:
    First. The said parties hereby form an association for the purpose of establishing and publishing a daily newspaper in the city of New York, to be called “The New York Daily Times,” and a weekly newspaper from the same office, to be called “ The Weekly Times.” . . “ The name of the association shall be Raymond, Jones & Company, and the parties above named shall be the sole directors thereof, and shall have the management and direction of its affairs, according to the judgment of the majority, subject to these articles, until further articles in writing shall be made in the premises and signed by all the parties hereto.”
    Second. The business of the said association shall be conducted without incurring debt except for salaries, rent and paper.
    Third. H. J. Raymond shall be the editor, and have the entire control of the editorial department of both said newspapers; and receive a salary of $2,500 per annum, payable quarterly, and as part of the expenses of said newspaper.
    Fourth. The financial and mechanical business of said newspaper shall be managed by said George Jones and Edward B. Wesley. They shall keep full and accurate books of account of the receipts and disbursements, and of all the business of the association, and the same shall be the property of. the association.
    
      Fifth. Said Jones and Wesley shall each, contribute in cash $20,000, as a cash capital to establish and continue said newspapers. “ The said newspapers and the good will thereof, and all the other goods and chattels, rights, credits and property of said association, as they shall from time to time exist, shall be divided into and shall always consist of one hundred equal shares, to be called capital stock, of which said Raymond shall receive, as an equivalent for his editorial ability twenty shares; and said Jones and Wesley, each forty shares, as an equivalent for their capital and business ability, and they shall all receive for the same, stock certificates or scrip signed by all the parties hereto.” The profits to be ascertained and divided on the first of January and July, in each year, or at such other times as may be fixed by the directors. (The 6th and 7th articles are as follows) :
    Sixth. Each of the parties hereto shall have the right to sell any portion of his shares of said stock; but before selling the same to any other person, he shall offer the same to the association, giving them the refusal thereof for ten days. But no sale of any such shares shall give to any purchaser thereof any right to interfere in the conduct, management or.affairs of said newspapers, or either of them; and no such purchaser shall acquire any interest whatever in the profits of said papers till he shall have received a certificate or scrip for his said shares, signed by all the parties hereto, and duly registered in a book to be kept for that purpose, which scrip shall always express from whom the said shares were purchased, and shall certify that the holder of said scrip takes the same with notice of and subject to the articles of association between the parties hereto, and is entitled to participate in proportion to his shares, only in that portion of the profits which may be assigned to the party so selling to such purchaser, and shall not be entitled to any voice or agency whatever in the conduct, control, management or affairs of said company or of said newspapers.”
    Seventh. These articles may • be altered at any time, by agreement in writing, to be signed by all the parties hereto, and not otherwise.
    Wesley and Jones each contributed their stipulated capital. The business of the association was commenced, and continued according to the articles of association, until some time in the year 1853, when an addition was made to said articles, as follows, viz.:
    Eighth. Fletcher Harper, Jr., having purchased from E. B. Wesley and George Jones, with the assent of all the parties -to this agreement, twenty-four shares of the stock of the Hew York Times establishment, he is hereby admitted as a director of the association, and the name and style of the firm shall be hereafter, Raymond, Harper & Co., instead of Raymond, Jones & Co., as heretofore.
    Henry J. Raymond.
    Geo. Jones.
    E. B. Wesley.
    F. Harper, Jr., prior to July 1, 1855, purchased from said Wesley and Jones, including the twenty-four shares mentioned in the 8th article, thirty shares, and the thirty shares were duly registered as his, in a stock book, kept by the association in pursuance of the 6th article.
    Fletcher Harper, Jr., acted as a director in the association from the time the 8th article was made until the 22d of Oct., 1855, and was paid for services rendered, $25 per week, as part of the expenses of the association.
    On the 2d of July, 1855, in pursuance of the 5th article, the profits of the business up to that time, were ascertained and divided; $4,500 were received by F. Harper, Jr., as the proportion to which his thirty shares entitled him.
    On the 29th of July, 1855, F. Harper, Jr., by an instrument in writing, signed and sealed by him, “sold, assigned and transferred ” to Fletcher Harper the said thirty shares. This instrument was executed without the knowledge or assent of any of the defendants, and without a previous offer of the stock to the association, or to either of the defendants. At the same time F. Harper retransferred to F. Harper, Jr., one of said thirty shares.
    Fletcher Harper, subsequently, by a written notice, dated Hov., 1855, directed to each of the defendants “ and the association owning the Times establishment,” stated that F. Harper, Jr., had executed to him a formal transfer of twenty-nine shares, which, he claimed to own absolutely, and requested a transfer made to him of the same upon the books, and the delivery to him of scrip representing the same, and offered to surrender, thereupon, the scrip that had been issued to F. Harper, Jr.
    On the 2d of Oct., 1855 (a controversy having arisen between F. Harper, Jr., and Geo. Jones, in regard to the ownership of these thirty shares of the stock of the association), a written agreement was signed by them and said Raymond and Wesley, by which F. Harper, Jr., and Jones, pending that controversy, voluntarily withdrew from all connection with the Times establishment. Its business during that time was to be managed exclusively by Raymond and Wesley, but the style of the association was to remain unchanged. Harper, Jr., was to be paid until the decision of the suit, $25 per week, and was so paid; the last payment being $75, was made by Wesley personally, on the 2d of Feb., 1856. Harper, Jr., withdrew, as that agreement provided, and never resumed his position as a director. The controversy or suit alluded to, was one brought by George Jones, against F. Harper, Jr., to compel a specific performance of an agreement to sell the thirty shares to Jones, and the complaint in that suit, was dismissed in Jan., 1856.
    On the 27th of Dec., 1855, in pursuance of the 5th article, an account of the profits of the business for the six months, preceding Jan. 1, 1856, was taken, and $3,000 of such profits were credited on the cash book, as the proportion of the thirty shares in question, thus:
    “ Stock in dispute, thirty shares, .... $3,000.” Bach of the owners of the residue of the stock was credited and paid his proportion of the profits thus ascertained and declared.
    On the 29th of January, 1856, said Wesley, by a notice, in writing, directed to all the persons being or claiming to be stockholders, and served upon them, declared that he thereby dissolved the said partnership or association.
    Said Raymond & Wesley on the same day served a written notice on all of said persons, to the effect, “that in order to prevent loss in the good will of the partnership ” they would continue to publish said newspapers “ on joint account, until the stock and good will of the partnership can be disposed of.”
    
      On the 30th of January, 1856, said Wesley commenced an action against all the parties named in the said notices, to obtain a judgment declaring the said partnership or association, dissolved ; and directing its property and effects to be sold, and such a division of its proceeds made as should be ascertained to be just. . Fletcher Harper, and Fletcher Harper, Jr., were defendants in that action, and after they had been served with the summons, copy complaint, and notice of motion for the appointment of a receiver, and on the same thirtieth of January, F. Harper, by F. F. Bangs, as his attorney (who was thereto duly authorized by said Harper, and also by F. Harper, Jr.), made an offer, in writing, to said Wesley, who accepted the same, which offer and acceptance read as follows, viz.:
    “January 30th, 1856, Dear Sir: I hereby offer to sell and transfer to you the thirty shares of stock in the Times establishment standing in the name of Fletcher Harper, Jr., on the books of the establishment, and all my and his right, title and interest therein, for fifty thousand dollars cash, payable to me, at the office of F. F. Bangs, 29 William Street, to-morrow (January 31), at 11 A. it., and the transfer to be made then.
    Yours truly,
    Fletcher Harper,
    By F. F. Bangs.”
    “E. B. Wesley, Esq.,
    “ I accept the above offer.
    E. B. Wesley.”
    On the same day, E. B. Wesley, by a paper writing, signed by Mm, and directed to Fletcher Harper, offered to purchase the same stock and the same interest therein, on the same terms, as specified in the offer made by Harper, the phraseology of the two papers being the same.
    On the thirty-first, at the time and place named, the parties met, and Fletcher Harper executed and delivered to Wesley an assignment, which the latter accepted, and at the same time paid to F. Harper, the $50,000, the agreed price. -The assignment reads thus, viz.:
    “Know all men by these presents, that I, Fletcher Harper, of the city of Few York, for value received, have bargained, sold, assigned and transferred, and by these presents do bargain, sell, assign and transfer unto Edward B. Wesley, thirty shares of capital stock, standing in the name of Fletcher Harper, Jr., on the books of the Hew York Daily and Weekly Times newspaper establishment, and all future benefit and dividends thereof, and do hereby constitute and appoint the said Edward B. Wesley my true and lawful attorney irrevocable, and the true and lawful attorney irrevocable of Fletcher Harper, Jr., for me and him, and in my or his name and stead, but to said Wesley’s use, to sell, assign, transfer and set over, all or any part of the said stock, and for that purpose to make and execute all necessary acts of assignment and transfer, and one or more persons to substitute with like full power, hereby ratifying and confirming all that my said attorney or his substitute or substitutes shall lawfully do by virtue hereof, he taking same subject to any claim of George Jones. In witness whereof I have hereunto set my hand and seal the 31st day of January, 1856.
    (Signed) Fletcher Harper, [l. s.]
    Sealed and delivered in)
    the presence of j
    F. H. Bangs.”
    This sale was made as a settlement of the suit for a dissolution, as against the two Harpers. They signed a consent to its discontinuance, and on the 8th of February, 1856, it was discontinued, as against all the parties. The business of the establishment was, thenceforward, carried on under the original articles, by the parties to that suit, except the two Harpers; Raymond & Wesley alone acting as directors. The thirty shares were transferred to said Wesley, in the books.
    On the 1st of February, 1856, Fletcher Harper, Jr., by a written instrument, sealed with his seal, “granted, bargained and sold, assigned, transferred, and set over” to Fletcher Harper “all and singular the dividend and dividends declared or credited on thirty shares of stock of the Hew York Daily and Weekly Times 'establishment, standing in my (Harper, Jr.’s) name, and all sums of money due to me by the said establishment for dividends or profits and not yet claimed by or paid to me,” and to his use, benefit and behoof absolutely.
    
      In April, 1856, Fletcher Harper, by a written notice directed to said Raymond & Wesley, required the amount of the dividend made for the six months "preceding the 1st of January, 1856, and credited to this stock, to be paid to him as the assignee and owner thereof.
    Since January 1st, 1856, the defendants paid $9,500 of debts of the association which accrued prior to that date, $4,100 being for part of the rent of the building occupied by the association from May 1st, 1854, to January 1st, 1856. Ho reservation, at the time of declaring the dividend, was made for this rent, as the amount to be paid had not then been liquidated with the landlord. The defendants paid it out of the general funds of the association, and neither of the Harpers paid any part of it directly or indirectly. Subsequent dividends have been declared of subsequently accruing profits.
    The case made was verified on the 10th of February, 1858, and it states that the questions to be submitted to the Court, upon it, are as follows, viz.:
    First. Are any other persons necessary parties to the settlement of this controversy?
    If yes, judgment as of nonsuit is to be rendered.
    If no,
    Second. Is the defendant Wesley entitled to the dividend in controversy by virtue of the agreement with and assignment from Fletcher Harper to him, hereinbefore described.
    Third. If not, would the Court, on appropriate pleadings based on the foregoing facts, reform the assignment, so that it would pass the dividend in dispute to him.
    If either of these questions is answered in the affirmative, then judgment is to be given for the defendants on the merits.
    If both are answered in the negative, '
    Fourth. Is the plaintiff entitled to judgment against Henry J. Raymond, Edward B. Wesley, George Jones, or either and which of them, for the sum of three thousand dollars, and interest thereon from February 1st, 1856, or for any definite sum ascertainable from the foregoing facts ?
    If yes, judgment is to be given accordingly.
    If no, judgment is to be given for the defendants accordingly.
    
      
      F. N. Bangs, for plaintiff, argued (among others) the following points:
    I. On December 27th, 1855, the time when the amount in question was ascertained and apportioned, no other person than the plaintiff or Fletcher Harper, Jr., was entitled either to receive it from the partnership or to have credit for it in the partnership accounts.
    . II. The sale to the defendant Wesley, made by the plaintiff on January 31st, 1856, was not such as to justify the defendants or the association in withholding previously ascertained profits, from the party entitled to them at the time they' were ascertained, in deference to any title acquired by Wesley, who acquired no title.
    TIT. Fletcher Harper, Jr., if entitled to the profits ascertained on December 27th, 1855, at all, was entitled to their immediate and separate use; that is, he was not bound to leave them mingled with the funds or property of the association.
    TV. There being a right in Fletcher Harper, Jr., to an immediate division of his ascertained portion of the profits, which right continued in him until it was assigned to the plaintiff, he, and afterwards the plaintiff, became entitled to an action in some form against those who withheld the enjoyment of the right.
    V. If the legal rights and relations of the parties were as above contended, then either the plaintiff or his assignor might have maintained an action, as upon a contract for the payment of money, to recover the dividend.
    XI. If the plaintiff is properly chargeable with any portion of this payment of $4,100, the Court has the means of finally adjusting all matters of account between the parties, by its judgment in this proceeding.
    The plaintiff, if chargeable at all, is chargeable with only three-tenths of that sum, viz., $1,230; and a judgment for the difference between $1,230 and the amount of the dividend in question, would close and finally adjust the affairs of the partnership.
    
      Benjamin V. Abbott, for defendants, argued (among others) the following points:
    
      I. Fletcher Harper, Jr., is a necessary party defendant to the determination of this controversy. (Smith v. Lusher, 5 Cow., 688; Bailey v. Inglee, 2 Paige, 278; Beaumont v. Meredith, 3 Yes. & B., 181.)
    II. The claim of the plaintiff is founded on an attempt to evade the articles of copartnership, which the law should not sanction.
    III. The defendant Wesley is entitled to the dividend in controversy by virtue of the agreement and assignment of the 30th and 31st of January, 1856.
    1. The agreement and assignment were entered into by both the Harpers, in settlement of the suit brought by Wesley for a dissolution of the partnership; and the result of that settlement was a discontinuance of the action by Wesley, on consent given by the Harpers. This settlement must be held to conclude the Messrs. Harper, as to every claim which was fully involved and presented for settlement in that suit. The complaint in that suit set forth the claim of E. Harper to hold twenty-nine shares of the stock by assignment from E. Harper, Jr., and the grounds of objection to this claim, and prayed that 'the rights of the plaintiff and defendants respectively might be declared, and, if necessary, that any of the parties might interplead, and that a division of the proceeds after payment of debts might be made between the parties entitled, in the proportion of their respective rights. The title of the Messrs. Harper to the dividend now claimed was therefore fully involved in that suit, and was therefore extinguished by the compromise and settlement of it.
    2. The chose in action called “ thirty shares of stock ” in the assignment, was, in law, simply the interest of E. Harper, Jr., in the partnership effects. That whole interest, whether capital or profits, passed by the assignment. The words “ future benefit and dividends ” include all profits not theretofore distributed.
    3. The letters of agreement (of the 30th of January, 1856) evince an intent to transfer to Wesley the entire interest of both Harpers in the concern. The assignment should be so construed, or so reformed if need be, as to effectuate that intent.
    Y. The plaintiff, as assignee of a partner’s interest, can claim no higher rights than those of his assignor. He is equally bound to abide a settlement of partnership accounts. (Nicoll v. 
      Mumford, 4 Johns. Ch., 522; Rodriguez v. Heffernan, 5 Ib., 417; Marquand v. The New York Manufacturing Company, 17 Johns., 525.)
    The utmost that the latter could claim would be to have an accounting on a proper bill filed, and to have a payment of the balance of capital and profits remaining after payment of the debts; e.g., the $4,100 rent. He could not sue for the $3,000, nor for any specific sum.
    An action at law is not maintainable by one partner against his copartner for a claim like the present connected with the partnership affairs, except on a final balance and an express promise to pay. (1 Parsons on Contracts, 139; Bovill v. Hammond, 6 Barn. & C., 149; Robson v. Curtis, 1 Stark., 78; Casey v. Brush, 2 Cai., 293; Niven v. Spickerman, 12 Johns., 402; Westerlo v. Evertson, 1 Wend., 532; Pattison v. Blanchard, 6 Barb., 537; and see Murray v. Bogert, 14 Johns., 318.)
    Either partner has a right to insist that the debts be paid before the shares are withdrawn. (Kirby v. Schoonmaker, 3 Barb. Ch., 46;. Smith v. Jackson, 2 Edw., 28; Robb v. Stevens, 1 Clark, 191.)
   By the Court.

Hoffman, J.

—The parties to the original association, in the 6th article, contemplate and allow a sale of a share or shares, but stipulate and direct that such sale shall not constitute the purchaser a partner. They intend also that such a sale shall not work a dissolution of the association. They contemplate a subsequent allotment of profits to the vendor in such sale.. The purchaser being registered, and getting his certificate, could demand and receive the profits declared as belonging to his vendor, by getting a power of attorney or other authority for that purpose from him. In fact, it seems that such vendor was to be still regarded as a partner for management. At least, he is not excluded. Upon a dissolution, the purchaser would succeed fully to all his vendor's rights and interests.

The case is, in this particular, very similar to that of Tatam v. Williams (3 Hare’s Rep., 347). The leading principle of the arrangement in each case, is the prevention of the intrusion of a new partner without the concurrence of all, and the guarding against the dissolution being produced by the transfer of any party’s share. Neither his caprice nor his misfortunes were to produce this result. As between Fletcher Harper, Jr., and Fletcher Harper, the instrument of the 29th of July, 1855, transferred the whole stock, and every right, interest or benefit which the ownership of the stock on that day conferred upon Fletcher Harper, Jr. The right to the future dividend passed from the latter, and vested in Fletcher Harper, he being the owner when the dividend was declared. This right followed the title to the corpus, as between these parties.

As between Fletcher Harper and the association, the purchase not having been tendered to the latter, nor assented to by them, Harper did not become a partner. He could not be intruded upon the association as such. He could not insist upon the future profits being declared to him, credited to him, or paid to Mm as purchaser. Fletcher Harper, Jr., was not, however, dispossessed of a nominal ownership, nor was a dissolution worked by the assignment. The profits would he declared as payable to him on the thirty shares, and a power of attorney would enable this plaintiff, Fletcher Harper, to obtain them.

But the dissolution of the association or partnership on the 29th of January, 1856, abrogated the 6th article of the agreement, superseding, of course, all the motives and reasons for framing or continuing it. Raymond and Wesley became agents and trustees to conduct the establishment until an advantageous disposition could be made, and thus a great loss be averted.

The consequence of this was, that the right of Fletcher Harper was no longer embarrassed or qualified by the influence of the articles. It was entire and absolute, and I cannot doubt that on the thirtieth of January, he was entitled to the dividend in question.

Then on the tMrtieth of January, Fletcher Harper, through his authorized attorney Bangs, enters into the contract with Wesley, contained in the instruments of that date, and carries such contract into effect by executing and delivering the assignment of January the 81st.

After a careful consideration of these instruments, I have concluded that the right to this dividend did not pass to Wesley under them.

They may indeed be considered together: but if the last in date, the formal assignment, is unequivocal, it must control the question. If the preceding papers did clearly import a different meaning, and would produce a different result, they would be superseded by the last and decisive instrument as the true indication of the parties’ ultimate intent. But if the first papers, being the heads of the agreement, may, when fairly interpreted, be made consistent with the final instrument, there can then no longer be room for doubt.

Now the instrument of the 31st of January, 1856, is a transfer of' the stock, the corpus, and all future benefit and dividends thereof. Whatever then should thereafter spring from the stock in any form of benefit or dividend, was to pass. It is a strong exclusion of any profit or dividend, which then existed, and had been separated and distinguished from the stock itself.

I admit that if the instruments of the 30th January afforded the sole ground of decision, the better construction would be, that the previous dividend of December 31st passed under them. A transfer of the stock, and all right and interest therein, would, I think, be sufficient for this purpose.

Yet it seems to me impossible to deny that these instruments are consistent, in their language, with an intent to exclude such previous dividend; and that intent is disclosed and contained in the actual assignment of the 31st of January.

I consider the assignment of the 1st of February, 1856, from Fletcher Harper, Jr., to the plaintiff as totally ineffectual and inoperative. If it could have any operation—that is, if Fletcher Harper, Jr., had a right to this dividend which it professes to transfer, then beyond doubt that right would have gone to Wesley, under the papers of January 30th.—F. Harper, Jr., agreed to sell every right and interest he possessed in all the stock. There was no scintilla of interest in him except connected with this dividend, and if that was in him it passed to Wesley, or the language was nugatory. But the view I have taken shows that there was nothing in him. All had gone to the plaintiff under the transfer of July, 1855.

Another question is raised under the 5th point of the defendants, connected with the 11th jDoint of the plaintiff. It relates to the point whether the case does not enable the Court to decide fully and finally every matter connected with, the partnership between these parties. Of this we are entirely satisfied. The partnership as far as concerns the plaintiff is wholly dissolved; and except as to this isolated sum and the question of reduction for the rent there is nothing which shows the least ground of claim which can require an account.

The result is, that the plaintiff is entitled to the three thousand dollars after deducting his three-tenths of the rent or $1,280. We understand the parties not to differ as to this amount, or at any rate that they would adjust this deduction among themselves. Judgment accordingly. 
      
       This case is also reported in 7 Abb. Pr. R., 142.