Case Name: Wilmot H. Smith, Appellant, v. G. Waldo Smith and Others, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1906-12-07
Citations: 116 A.D. 165
Docket Number: 
Parties: Wilmot H. Smith, Appellant, v. G. Waldo Smith and Others, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 116
Pages: 165–170

Head Matter:
Wilmot H. Smith, Appellant, v. G. Waldo Smith and Others, Respondents.
First Department,
December 7, 1906.
Partnership — action for accounting — figuring prospective profits — damage when partner not restored to former business as agreed.
The plaintiff, having been a commission agent for the defendant, was taken into partnership by the latter under articles terminable on notice. The plaintiff was entitled to a percentage of the profits and the defendants agreed that on terminating the plaintiff’s membership they would establish him in as good a commission business as that he gave up on entering the firm.
The partnership was dissolved as to all partners on notice to take effect at the expiration of teu months, as provided in the agreement.
In an action for an accounting,
Held, that in figuring the prospective profits in which the plaintiff was entitled to a share from the date of the actual dissolution to the date set for dissolution in the notice, it was proper to compute the prospective earnings on the average of the preceding three years, and that the average should not be based upon the earnings in prior years in which the firm had made exceptidnal profits;
That, in determining the plaintiff’s damage in not being established in a commission business as good as that he had given up, ttiefact that his former business depended on defendants continuing their partnership should be taken into consideration, and that an allowance of his former profits for one year was liberal;
That the plaintiff was not entitled to a gross sum which would produce an income equal to his former profits during his probable term of life. ■
Appeal by the plaintiff, Wilmot H. Smith, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 6th day of December, 1905, upon the report of a referee.
F. K. Pendleton and John B. Gleason, for the appellant.
Morris J. Hirsch, for the respondents.

Opinion:
Patterson, J.:
The plaintiff appeals from a judgment entered in his favor upon the report of a referee. The cause of action arose, out of the stipulations of an agreement entered into between the defendants, who were copartners, and' himself, which is set out in full as an exhibit .to the complaint. By the terms of the agreement it was provided that the plaintiff and one Howard L. Sills, in consideration of their relinquishing their commission business and tea and coffee business, and devoting their time to the interests of the business of the defendants, should become partners in the profits of the defendants' business in the manner following: The plaintiff and Howard L. Sills were each to receive a monthly payment of $250; commencing J lily, 1897, and in addition each to receive one-sixth of each year's net profits, as shown by the balance sheets at- the end of each fiscal year, such year to begin May first and end April thirtieth. Details of the method of áscertaining the profits are then provided for and the agreement proceeds to recite as -follows: ".While it is the purpose of the parties of the first part (that is, the defendants) that this agreement shall continue during the life of all the parties; yet they (the defendants) reserve the right to cancel it at any time upon ten months' notice having been given in writing,, both of said parties . (defendants) concurring or by the survivor of them." The. defendants also agreed that if at any time the plaintiff or Howard L. Sills, or either of them, desired to cancel the arrangement, or if the .defendants should cancel it, after due notice, that they (the defendants) would give to the plaintiff and Howard L. Sills, or either of them, commission trade as good in all. respects as the commission trade they surrendered. Hpon entering the service of the defendants Wilmot H. Smith and Howard L. Sills did surrender a com- mission business. Relations between all the parties to the agreement existed and were continued until the 28th of February, 1902. On the 13th day of January, 1.902, defendants gave notice to the plaintiff that the agreement would expire ten months from that date, namely, on the 13th day of November, 1902. That notice was given because of the dissolution of the defendants' firm. The plaintiff was not continued in the employment of the new firm, his services not being required. The plaintiff had received $250 a month and one-sixth of the profits. He received no profits from February 28, 1902, to November 13, 1902. At the 'dissolution of the firm an inventory was taken, showing the profits of the business from the 1st of May, 19Ó1, and notice was given to the plaintiff that such an inventory would be taken, but he paid no attention to it. Nothing by way of substitution for the commission business the plaintiff had surrendered when he entered the defendants' .employ was furnished him. In this action the plaintiff prayed that the court would direct an accounting of the profits made by the defendants' firm from the 1st of May, 1901, to the 1st of March, 1902, so that one-sixth of the net profits made during that period might be determined and ascertained; second, that he might be awarded the damages suffered by loss to him of one-sixth of the net profits which the firm might have made during the period between the 1st day of March, 1902, and the 13th day of November, 1902; third, that the value of the commission trade surrendered by the plaintiff at the time he accepted employment with the defendants might be determined and ascertained to the- end that he might be allowed in the judgment to be entered in this action full indemnity for the dam' age which has been caused him by reason of the breach of the condition'contained in the contract to restore him a commission trade as good as that which he surrendered. The learned referee in deciding the case allowed-to the plaintiff the sum of $85, being one-sixth of the amount of an error in the inventory, $948.75 for a share of prospective profits from February 28, 1902, to the 13th of November, 1902, and $3,500 as damages for the failure of the defendants to give the plaintiff a commission trade in accordance with the stipulation of the agreement-above recited.
In appealing from this judgment the plaintiff asserts in the first place, that he was entitled to a full accounting of the profits made by the defendants' firm from May, 1901, to March, 1902, but it is evident that the referee has, in effect, taken such an account. There was no occasion for an interlocutory judgment. By the order the referee was' required to hear and determine the action and in ascertaining the profits made during the period mentioned he Considered and passed upon various items aggregating sotne $39,000 which the plaintiff asserts were erroneously claimed by the defendants as credits in the statement of their business on the 28th of February, 1902. In his opinion, the referee has very carefully and in detail stated his reasons for overruling the plaintiff's con-, tention with reference to those items, and each of them, and nothing,' therefore, need be Said further concerning them.
•The referee allowed the plaintiff as his share of profits that the defendants might or would have realized if they had contitiued in business . up to the 13th day of November, 1902, the sum of $948.75. The plaintiff insists that in making that allowance the referee proceeded upon an improper basis, which-was, that had the defendants continued in business until the expiration of the ten months that business Would have at least equaled in volume the business of the preceding two- or three years and- yielded an average percentage of profit. The ampunt fixed by the referee represented the plaintiff's proportion of that fair average. The plaintiff contends further that the referee should have gone back to preceding years in which, by reason of adventitious circumstances, the defendants did a very large business and reaped great profits. We see no ground for differing with the referee in his view of this subject, and -as he well says,-there is no reason for passing over the three years immediately preceding 1902, to get back to a year of extraordinary business, such as 1898, in order to arrive at some conclusion of what business might or probably would have been done by the firm. As the referee very properly .says, " To pass over these intervening years with their moderate returns, and adopt the extraordinary returns of 1898, as the basis for computing the plaintiff's damages," would not be* warranted by the evidence in the case. Upon reading /the record, we agree with the referee that it does not show any reason for believing that the profits of the business for 1902, would have exceeded by any substantial increase those of the two preceding years.
The appellant strenuously insists that the referee erred in riot allowing him more than $3,500 damages for the breach of the stipulation of the .agreement which provided that, the defendants should furnish a." commission trade as good in all respects as the commie sion trade they have surrendered." Very divergent views have been presented as to the effect to be given to that stipulation, and as to what rule of damage, other than nominal damages, should apply in an action for a breach of it. We certainly know from the evidence what the plaintiff surrendered when he entered upon the performance of his part of the agreement with the defendants. At that time he had an interest of §3,500 'net a year from a commission business which he had got together as a commission salesman for the defendants. He had 150 or more customers to whom he sold goods on _ which he received a commission; those customers being brought to the defendants by him. He employed three men to assist him and his business was so organized that it did not require much of his time or attention. After the making of the agreement with the defendants lie ceased to look after his particular customers and devoted his time to the manufacturing department of the defendants and to looking after their business generally. The salesmen employed by him became the employees of the defendants. The reasonable view of the undertaking of the defendants with relation to their stipulation now under consideration seenis to be that they undertook, in case they terminated the plaintiff's relation with them under the agreement, to put him in possession of as good a commission trade as he had surrendered, namely, one from which lie might, not necessarily would, realize the sum of $3,500 a year. But there was no stipulation or undertaking that upon doing so they should guarantee or become responsible for the continuance of such a trade for an indefinite period of time or even for a year. The commission trade was connected with the business of the defendants ; they did not agree to remain in business for any specific time; they could not restore to him the customers he had secured for himself and they could not compel any one to purchase from him. The trade commission business surrendered by the plaintiff was one subject to termination by the defendants going out of business at any time. All the defendants were- bound to do was to furnish as good a trade commission business as that surrendered. That to be furnished under the stipulation was to be no better than the one surrendered, and as that might have been put an end to by the defendants retiring from business, so would the new arrangement be subject to the same contingency. Clearly, there was no obligation on - the part of the defendants to give to the plaintiff a business that would continue for any fixed time. The learned-referee has allowed as damages-for the breach of this stipulation the sum of $3,500-which, acting upon the rule that the measure of damage is the value of the contract, he has determined to be its value for one year. We. think this is a very liberal allowance, but it is unnecessary to comment further upon it as the defendants have not appealed from the judgment.
It is. also unnecessary to consider the contention-of the plaintiff that he should' have been allowed as damages a gross sum which as capital would produce an income of $3,500 a year to him for a period of his expectation of life, according to the Northampton tables. In no possible aspect of the case is such a theory admissible.
The judgment appealed from should be affirmed, with costs.
Ingraham, McLaughlin, Houghton and Scott, J J.; concurred.,
Judgment affirmed with costs.