Case Name: Julius P. Wahl et al., Respondents, v. Stephen O. Barnum et al., Appellants, Edgar J. Chatfield, Respondent
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1889-10-08
Citations: 116 N.Y. 87
Docket Number: 
Parties: Julius P. Wahl et al., Respondents, v. Stephen O. Barnum et al., Appellants, Edgar J. Chatfield, Respondent.
Judges: 
Reporter: New York Reports
Volume: 116
Pages: 87–106

Head Matter:
Julius P. Wahl et al., Respondents, v. Stephen O. Barnum et al., Appellants, Edgar J. Chatfield, Respondent.
An order of General Term denying a motion for a new trial, made as-authorized by the Code of Civil Procedure (§ 1001), in a case where an interlocutory judgment has been entered on decision of the court or report of a referee, rendered upon trial of an issue of fact, is reviewable here.
On such a motion, however, the General Term may not review" questions of fact, but simply those of law; and only questions of law presented by the exceptions may be considered in this court.
In the absence of fraud or duress, a settlement of a disputed claim preferred in good faith by a promisee against a promisor is a legal consideration for the promise; and the fact that the promisor had a legal defense to the claim settled is no defense to an action on the new promise.
Byan v. Ward (48 N. "Y. 204) distinguished.
In the absence of duress, fraud or mistake, an account stated by partners between themselves will not be opened and investigated in an action for an accounting.
A contract forming a partnership to be continued beyond one year is, within the provision of the statute of frauds, declaring every agreement which by its terms is not to be performed in one year from the making thereof to be void unless in writing; and a partnership so formed is a partnership at will. (Potter, J., dissenting.)
(Argued June 6, 1889;
decided October 8, 1889.)
Smith v. Tarlton (2 Barb. Oh. 336); National Bank v. Van Derwerker (74 NV Y. 234, 239) distinguished and limited.
An oral contract, invalid by the statute of frauds, because by its terms it is not to be performed within one year from the making thereof, is not validated by part performance.
Where findings of fact of a court or referee are so inconsistent that they cannot be reconciled, those which are more favorable to the appellant will control on appeal.
An oral agreement was entered into between the firm of S. O, B. & Son, composed of the defendants S. 0. B. and T. D. B., that said firm should discontinue business and be succeeded by another composed of T. D. B., defendant 0. and the plaintiffs, the copartnership to continue for three years from June 24,1879, the copartner's to share equally in the profits and losses. The new firm began business, and in January, 1880, an inventory was taken which showed that the profits of the business exceeded $60,000. Shortly after the inventory, the members of the' old firm asserted that they owned the business and its profits as no partnership existed, the agreement not having been reduced to writing, and as the new members had not paid in their share of capital. It was thereupon agreed that plaintiffs and C. should each be credited with $3,000, the B.s to have the remainder of the assets, and that thereafter the business should be continued on the terms of the copartnership agreement, the partnership to date from January 10, 1880. It was continued until dissolved in March, 1882. In an action to set aside the compromise agreement for lack of consideration and for an accounting, etc., held (Potter, J., dissenting), that either party had a right to terminate the copartnership at will; that the new agreement was supported by a valid consideration, and in the absence of any evidence of fraud or bad faith on the part of the B.’s was valid and binding.
Appeal (pursuant to section 190, subdivision 2, Code of Civil Procedure) from an order of the General Term of the Superior Court of Buffalo, made July 12, 1886, which denied a motion for a new trial (made pursuant to section 1001), and affirmed an interlocutory judgment in favor of plaintiffs, entered upon a decision of the court on trial without a jury.
For many years prior to June, 1879, the defendants Stephen O. Barnum and Theodore D. Barnum were partners and merchants at Buffalo, E. Y., under the firm name of S. O. Barnum & Son. Stephen O. Barnum owned a three-fourths .and Theodore D. Barnum a one-fourth interest in the firm. The respondents had for many years been employed by the firm. On June 4, 1879, the firm’s place of business, and a large part of its merchandise, were destroyed by fire. In that month the parties to this action orally agreed that S. 0. Barnum & Son should discontinue business and be succeeded by S. 0. Barnum’s Son & Co., which firm was to be composed of Theodore D. Barnum, Julius P. Wahl, John Ansteth, John S. Snaith, the plaintiffs, and defendant Edward J. Chat-field, and have a capital of $60,000, of which Theodore D. Barnum was to contribute the unburned merchandise of the •old firm, valued at $40,000, and every one of the other partners $5,000 in cash; and that the firm should continue in business for three years from June 24,1879. The time when Wahl, Ansteth, Snaith and Chatfield should pay in their share's of capital was not agreed upon, but it was agreed that every one of the partners should pay the firm interest at the rate of seven per cent per annum on the amount due from him to the firm for capital, and should receive interest .at the same rate on the capital furnished. It was also agreed that each partner should have one-fifth of the profits and bear one-fifth of the losses, the five partners having equal interests. Barnum was to have the right to withdraw from the firm $2,800 in each year, and the other partners $1,200 each. It was agreed that the contract should be reduced to writing, and .afterwards Theodore D. Barnum presented a written contract for the signatures of the five parties, which the plaintiffs refused to execute on the ground that it did not express the •oral contract as agreed upon. Barnum turned over the unburned merchandise to the new firm and it began business and continued until March 23, 1882, when it was dissolved by mutual ■consent. In January, 1880, Ansteth paid toward his share of the capital $500; in April, 1880, $500. In April, 1880, Wahl paid towards his share of the capital $1,000, and about that time Snaith paid in $5,000, his share of the capital. Ho ■other sums were paid in as capital.
In January, 1880, an inventory of the assets and business, of the firm was taken, as of the tenth of that month, by which it appeared that the profits of the firm then exceeded $60,000. Shortly after the inventory was taken the Barnums asserted that no articles of partnership having been signed, and the respondents not having paid in their share of capital, no partnership existed, and that they, the Barnums, owned the business and its profits. After considerable negotiation, it was, about March 8, 1880, orally agreed between the parties, to this action that the plaintiffs and Cliatfield should be credited with $3,000 on the books of the firm, the Barnums should have the remainder of the assets, and that thereafter the business should be conducted by S. O. Barnum’s Son & Co., on the terms above stated, the copartnership to date from January 10, 1880, The business was continued from this, date until the dissolution.
In November, 1882, this action was begun to set aside the oral compromise of March 8, 1880, for the fraud and duress of the Barnums and for the lack of consideration, and for an accounting of the affairs of the firm from June 24, 1879, until March 23, 1882, the date of dissolution. Upon the trial the court held that the oral compromise “ was without any good consideration and was null and void,” and that an accounting should be had before a referee of the business of the firm from June 24, 1879, to the date of its dissolution. An interlocutory judgment was entered in accordance with the decision, which reserved the question of costs until the final judgment. After the entry of this judgment, and before the accounting therein ordered was begun, Stephen O. Barnum and Theodore D. Barnum moved, pursuant to section 1001, Code of Civil Procedure,. at the General Term, for a new trial on their exceptions, which was denied, with costs, and thereupon they appealed from the order entered on the decision of their motion.
Further facts appear in the opinion.
John G-. Milhurn for appellants.
The compromise of March, 1880, was untainted by fraud, and, as an adjustment of conflicting claims, is sustained by a sufficient consideration.. (Dunham v. Griswold, 100 N. Y. 224; Feeter v. Weber, 78 id. 334; Wehrum v. Kuhn, 61 id. 623; Crans v. Hunter, 28 id. 389; White v. Hoyt, 73 id. 505, 514, 515; Hemmingway v. Staurell, 106 U. S. 399; Union Bank v. Geary, 5 Peters, 99; Pollock’s Principles of Contracts, 166; Wharton on Contracts, § 533; Miles v. Estate Company, L. R., 32 Ch. Div. 266; Callister v. Bishchoffsheim, L. R., 5 Q. B. 449 ; Moore v. Townsend, 102 N. Y. 381; Bullock v. Bemis, 20 N. Y. S. R. 836 ; Oberlander v. Speiss, 45 N. Y. 175, 179; Armstrong v. Dubois, 90 id. 95.) Provisional agreements which are to be reduced to writing are not completed contracts until they are so reduced and signed. (Whart. on Contracts, § 5; Pollock on Contracts [4th ed.] 41, 42; Brown v. R. R. Co., 44 N. Y. 79 ; Ridgway v. Wharton, 6 H. L. Cases, 238, 264, 268, 305, 306.) The facts in connection with the various transactions under review were all equally known to the parties; the plaintiffs, in making the compromise in question, acted under the advice of counsel, and were advised as to their rights, and it should be sustained. (Miles v. E. Co., L. R., 32 Ch. Div. 266.) Whatever may have been the relations of the parties prior to the 8th day of March, 1880, and whether before then they were partners or not the agreement made on that day was valid as a reconstruction of their relations, and, as such, is founded upon a sufficient consideration. (Lattimore v. Harsen, 14 Johns. 330; Stewart v. Keteltas, 36 N. Y. 388; Monroe v. Perkins, 9 Peck, 298; Cooke v. Murphy, 70 Ill. 96; Holmes v. Doane, 9 Cush. 135; Morse v. Locomotive Works, 14 Mich. 266; Coyner v. Lynde, 10 Ind. 282; Lawrence v. Davy, 28 Vt. 264; Bishop v. Busse, 69 Ill. 403.) The contract of partnership, as found by the trial court, was void under the statute of frauds, as it was not to be performed within a year, and, therefore, the agreement, at the time the compromise was made to continue the partnership, in accordance with the terms of the proposed articles of copartnership, was a sufficient consideration in and of itself to sustain the compro mise, it having been performed. (2 R. S. 136, § 2, subd. 1; Oddy v. James, 48 N. Y. 685 ; P. Co. v. Sickels, 5 Wall. 580; Morris v. Peckham, 51 Conn. 128; Williams v. Jones, 5 B. & C. 108; Whipple v. Parker, 29 Mich. 369; Bates on Partnership, §§ 208, 209 ; Griffin v. Rossiter, L. R., 11 Q. B. 123 ; Lindley on Partnership [5th Eng. ed.] 571; McElvoy v. Lewis, 76 N. Y. 373; Shinner v. Dayton, 19 Johns. 513, 538; Slemmer's Appeal, 58 Pa. St. 163; Solomon v. Kirkwood, 55 Mich. 256.) The compromise is unimpeachable on .any ground of duress or undue influence. (Dunham v. Griswold, 100 N. Y. 224; Ins. Co. v. Meeker, 85 id. 614; Bean v. Whipple, 15 N. Y. S. R. 998; Scudder v. Burrows, 8 id. 605; Silliman v. U. S., 101 U. S. 464; French v. Shoemaker, 14 Wall. 314; Gould v. Gayuga Bank, 86 N. Y. 75; Scheffer v. Dietz, 83 id. 300; Upton v. Trebilcock, 91 U. S. 54; Whart. on Contracts, § 284.)
Adalbert Moot for plaintiffs, respondents.
The only legitimate charge against the plaintiffs, individually, would have been $5,000 each, and interest thereon from'June 23, 1879, at the legal rate, or, at most, at the rate which the firm had been compelled to pay for money to take its place, and there is no dispute but that this was seven per cent. Charging this to plaintiffs, they would still have been entitled, over and above the charge, to about $7,000. (Cheeseman v. Sturges, 6 Bosw. 520; 9 id. 246.) Mutual promises make an accord, but not a satisfaction, and the party may still recover his original demand. (Mitchell v. Hawley, 4 Denio, 416 ; Markle v. Hatfield, 20 Johns. 459; Dewey v. Derby, Id. 462.) Part payment, if so accepted, does not discharge whole debt. (Markle v. Hatfield, 20 Johns. 459; Deidkrick v. Leman, 9 id. 333; Ryan v. Ward, 48 N. Y. 204; Bunge v. Koop, Id. 225.) The minds of the parties must meet on every ■essential proposition or there is no contract, and they stand on their previous contract, express or implied by law. (Hough v. Brown, 19 N. Y. 111; Baptist Church v. B. F. Ins. Co., 28 id. 153 . Booth v. Bierce, 38 id. 463 ; Cutts v. Guild, 57 id. 229, 234.) A mere entry in the copartnership books of the firm, made by reason of false statements of one partner, which does injustice to the other, is not a bar to an honest accounting by that other partner, which shall go behind this false entry and correct it. (3 Pomeroy’s Eq. Jur. 473, § 1421.) There has been no account stated here, and no settlement. (Stryker v. Cassidy, 76 N. Y. 50; Evenson v. Syracuse, 100 id. 579, 584.) The facts proved do not constitute a good accord and satisfaction. (1 Smith’s L. C. 439; Platte. Walrath, Lalor’s Supplement, 59; Keeler v. Salisbury, 33 N. Y. 653 ; Bunge v. Koop, 48 id. 225 ; Ryan v. Ward, Id. 204; Markle v. Hatfield, 20 Johns. 459; Dewey v. Derby, Id. 462 ; Mitchell v. Hawley, 4 Denio, 416; Diedrich v. Leman, 9 Johns. 333.) The right to claim that plaintiffs were to put in $5,000 each at once, and should sign copartnership articles, was clearly waived by going on with the business of the firm, as was done, and it was too late for the Barnums to make such a claim as the .basis of compromise in February, 1880, for that reason. (Azel v. Betts, 2 E. D. Smith, 188; A. B. N. Co. v. Edson, 56 Barb. 84; Story on Partnership, §§ 86, 203, 348, 348a; Sombey v. Bimtin, 118 Mass. 279.) To determine whether or not a particular payment is voluntary, regard must be had to the situation of the parties, and to the effect of the decision in the particular case. (18 Cent. L. J. 190; Scholey v. Mumford, 60 N. Y. 498.) A compromise induced by lies, acted, actual, or expression of part of the truth, where called upon to speak, will not stand, but a party may retain what he may receive under it and sue for the balance justly his due. (Gould v. Bank, 99 N. Y. 333; M. E. Ry. Co. v. M., 14 Abb. N. C. 226; Almon v. Hamilton, 100 N. Y. 526; Boyd v. Foote, 5 Bosw. 110; Herrick v. Ames, 8 id. 115 ; A. B. N. Co. v. Edson, 56 Barb. 84; Stryker v. Cassidy, 76 N. Y. 50; Story on Partnership [7th ed.] § 206; Talcott v. Harris, 93 N. Y. 567.) Since the claim clearly lacked bona fides in part or in toto, in fact or in law, which was put forth by the Barnums, the so-called compromise falls through. (Feeter v. Weber, 78 N. Y. 334; Story on Partnership, § 203; Stewart v. Ahrenfeldt, 4 Denio, 189; Ormsby v. Howe, 54 Vt. 182.) Since the Barnums parted with nothing not legally the plaintiffs, as a consideration for the so-called agreement, and in making the credit in ■ question plaintiffs only received part of what they were legally entitled to, that entry is no bar to a further credit by this court upon this accounting of the whole sum to which plaintiffs are entitled, and is no bar to the accounting commencing with the commencement of the copartnership. (Long v. Fowl, 42 Mo. 545; Mitchell v. Hawly, 4 Denio, 416 ; Bunge v. Koop, 48 N. Y. 225; Farnham v. O'Brion, 23 Me. 482; Haynes v. Thorn, 28 N. H. 38; Alfrey v. R. R. Co., 4 Allen 55; Lang v. Johnson, 24 N. H. 302; Wilbur v. Crane, 13 Pick. 284; Sullivan v. Collins, 18 Iowa, 228; Kidder v. Blake, 45 N. H. 530; Mulholland v. Bartlett, 74 Ill. 58; Foster v. Metts, 55 Miss. 77; Vanderbilt v. Schreyer, 91 N. Y. 392; Cabot v. Haskins, 3 Pick. 92 ; Farnham v. Comrs., 20 Week. Dig. 502; Davison v. Ford, 23 W. Va. 617.) There is enough in this case to show that this pretended compromise was executed under duress of property by the plaintiffs. (29 Alb. L. Jour. 436 ; Knotts v. Preble, 50 Ill. 226; Headly v. Hackley, 50 Mich. 43 ; Schooley v. Mumford, 60 N. Y. 498 ; 64 id. 521; 72 id. 578 ; Harmon v. Bingham, 12 id. 99 ; Stenton v. Jerome, 54 id. 480; Baldwin v. Steamship Co., 74 id. 125 ; Carew v. Rutherford, 106 Mass. 12; Shortwell v. Horton, 28 Ves. 373.) The purchase of the goods on three years’ time shows that the partnership was to continue three years. (Dixon on Partnership, 24-27.) As there was no final settlement, it was necessary to direct an accounting from the beginning as to all the .stocks and assets. (King v. Leighton, 100 N. Y. 387-389.) Where there is any mistake or omission, or fraud, or undue advantage, by which an accounting is, in truth, vitiated, and the balance incorrectly fixed, a court of equity will not suffer it to be conclusive upon the parties. (Story’s Eq. Juris. § 523; Farnham v. Brooks, 9 Pick. 212; Banow v. Rhinlander, 1 Johns. Ch. 550 ; Wheaton v. May, 5 Ves. 26; Bakers. Spencer, 47 N. Y. 562; 4 Cranch, 306; King v. Leighton, 100 N. Y. 387.) As there was no settlement of the copartnership affairs between the copartners, and it does not appear how much money was in the bank when the copartnership was dissolved, or how much the Barnums have collected on firm’s accounts since dissolution, it is clear that the plaintiffs were entitled to the interlocutory decree. (Story on Partnership [7th ed.] §§ 206, 349.)
Spencer Clinton for respondent, Edward J. Cliatfield.
The claim that the compromise of March 8, 1880, was sustained by a valid consideration is not borne out by the facts or the law. (Ryan v. Ward, 48 N. Y. 204; Miller v. Coates, 66 id. 609.) The statute of frauds does not affect the question, as the contract was executed at the time of the alleged compromise, and the right of the parties were, at that time, fixed by the partnership agreement. (Baxter v. West, 1 D. & S. 173; Williams v. Williams, 2 Ch. 294 ; Burdon v. Barkus, 4 De G., F. & J. 47.)

Opinion:
Follett, Ch. J.
The order of the General Term denying the motion for a new trial made under section 1001, Code of Civil Procedure, is reviewable by this court. (Walker v. Spencer, 86 N. Y. 162; Raynor v. Raynor, 94 id. 248.) But the General Term could not, on such a motion, review questions of fact, and only the questions of law presented by the exceptions can be considered in this court. (Raynor v. Raynor, 94 N. Y. 248, 252.)
In the absence of fraud or duress, a settlement of a dispxxted claim preferred in good faith by a promisee against a promisor, is a legal consideration for a promise; axid the fact that the promisor had a legal defense to the claim settled is no defense to an action on the new promise. (Russell v. Cook, 3 Hill 504; Stewart v. Ahrenfeldt, 4 Denio 189 ; Crans v. Hunter, 28 N. Y. 389; White v. Hoyt, 73 id. 505, 514, 515 ; Feeter v. Weber, 78 id. 334; Dunham v. Griswold, 100 id. 224; Callisher v. Bischoffsheim, L. R., 5 Q. B. 449; Ockford v. Barelli, 25 Law Times 504, 20 Week. Rep. 116; Miles v. New Zealand etc., Co., 32 Ch. Div. 266.)
The eases of which Ryan v. Ward (48 N. Y. 204) is a type, holding that a payment by a debtor of a less sum than the amount which he admits to be justly due and owing by him does not extinguish the debt, though the creditor agrees to receive the less sum in satisfaction, are not in conflict with the rule above stated. There is a great difference between claims unliquidated and disputed, and those which are liquidated and undisputed. A compromise which is sufficient to bar an action on a claim within the first class often being quite insufficient to bar an action on a claim within the second class.
The law regards with favor and seeks to uphold settlements of pending or threatened litigations, but not with favor an attempt to discharge an admitted debt by payment of a part of it. There is no doubt about the rule above stated being firmly established in the law of this state; but the important question is, whether the settlement of March 8,1880, is within the rule. The transaction was not an executed settlement of one or more disputed claims by which the claimant surrendered or released his demands in consideration of the payment of a sum agreed on or upon the promise of future payment of the sum agreed on. In the absence of duress, fraud or mistake, an account stated by partners between themselves will not be opened and investigated in an action for an accounting (Story on Part., § 206 ; Lind. on Part. [5th Eng. ed.] 512; Pilling v. Pilling, 3 De G., J. & Sm. 162; Coventry v. Barclay, id. 320.) But the controversy settled March 8, 1880, did not relate to the accounts between all or any of the parties to this action, as partners; the question debated and settled was, had Theodore D. Barnum and the respondents been partners since June 24, 1819, and each entitled to a fifth of the profits ? They finally agreed, in consideration of being credited with $3,000 each and of the future partnership, that no partnership had previously existed.
This contract is supported by a valid consideration. The partnership which the court found then existed, and which, by agreement, was to continue for more than a year, rested only on an oral contract, and either partner had a right to terminate it at will.
A contract forming a partnership to be continued beyond one year, is within the section of' the statute of frauds which provides that every agreement which by its terms is not to be performed in one year from the making thereof, is void unless it is in writing, and a partnership so formed is a partnership at will. (Morris v. Peckham, 51 Conn. 128; Williams v. Jones, 5 B. & C. 108; Jones v. McMichael, 12 Rich. Law, 176; Essex v. Essex, 20 Beav. 442; Burdon v. Barkus, 3 Giff. 412; 4 De G., F. & J. 42, 47 and 50; Reed's Stat. Fr. § 191; Lind, on Part. [5th Eng. ed.] 80, 81.)
We have not been referred to any case in this state wherein this proposition has arisen and has been decided. In Smith v. Tarlton (2 Barb. Ch. 336), the parties, by an oral contract, entered into and agreed to continue in partnership for three years. Before the expiration of the time limited two of the partners filed a bill against the third partner, alleging that the partnership property had been sold and the partnership dissolved by mutual consent, and that the defendant had misapplied the funds of the firm. An accounting and an injunction pendente lite was prayed for. An injunction was granted on the bill which the defendant moved, on the bill, to vacate, but the motion was denied, the chancellor saying:
" This was not, as the counsel supposes, an agreement which was not to be performed within one year, so as to require it to be in writing, under the statute of frauds. But it was the formation of an immediate partnership between the parties, which partnership was to continue three years, unless sooner dissolved by the consent of such parties. In this state no written articles are necessary to constitute a copartnership which is to take effect immediately, although a written agreement might be necessary to bind the parties to enter into a. future copartnership to commence after the expiration of a. year."
In National Bank v. Van Derwerker (74 N. Y. 234, 239), it was said : " But as to partnerships, although to endure for a longer period than a year, it has been held that they are not within the statute of frauds." (Smith v. Tarlton, 2 Barb. Ch. 336.)"
In the first case the complainants alleged that the partnership property had been sold and the firm dissolved ly mutual consent, which was not denied. The question whether a partnership to continue more than one year, formed by an oral contract, was determinable by the will of either party, was not in the case. The second case did not arise between partners, but was an action brought against the shareholders in a joint-stock association, which existed under an oral contract, to recover the amount due upon executions against the association, which had been returned unsatisfied. It was held that the fact that the association existed under an oral contract was not a defense in favor of the shareholders and against a creditor of the association. The remark quoted was made while discussing the liability of the shareholders and cannot be regarded as a determination of the question.
An oral contract, invalid by the statute of frauds, because by its terms it is not to be performed within one year from the making thereof, is not validated by part performance. (Billington v. Cahill, 51 Hun, 132.) To hold that part performance is performance would be a nullification of the statute The agreement of March 8, 1880, cannot, under the facts found, be avoided for fraud or duress. It is not found that the position of Stephen 0. and Theodore D. Barnum, that no legal partnership existed, was taken in bad faith. There is no finding that the Barnums made false representations or concealed any facts ; on the other hand, it appears that all of the facts now known were then known to the respondents. Duress per minas might be implied from the seventeenth and eighteenth findings of fact contained in the decision signed, but for the finding, made on the request of the appellants, that the plaintiffs consulted counsel in the matter (the settle ment of March 8, 1880), and were not ignorant of their rights, if any, nor under duress." When findings of facts are so inconsistent that they cannot he reconciled, those which are the most favorable to the appellant are controlling on the appellate courts. (Redfield v. Redfield, 110 N. Y. 671; Bennett v. Bates, 94 id. 354; Bonnell v. Griswold, 89 id. 122 ; Schwinger v. Raymond, 83 id. 192.)
The facts found by the trial court are insufficient to support its decision that the oral compromise of March 8, 1880, l£ was without any good consideration, and was null and void."
The order and' judgment should be reversed and a new trial granted, with costs to abide the event.