Court Opinion

ID: 6234473
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:29:18.41685+00
Date Added: 2024-06-11T08:57:59.960993
License: Public Domain

The opinion of the court was delivered, by
A&new, J.
— By the article of copartnership of January 2d 1860, between James Marshall and Robert P. Clarke, Marshall contributed to the capital of the company certain real estate at an estimated valuation, inventoried and carried into the stock account. Thenceforth this property became in equity partnership property, the legal title remaining in Marshall. But on dissolution Marshall reserved the right not to be bound by the estimated value, and to withdraw the property. Evidently the right to withdraw was the contract provision for correcting the estimated valuation. But when the foundry buildings were destroyed by an accident, and rebuilt by mutual consent with partnership funds, how did the case stand ? The part destroyed was gone and incapable of withdrawal. The loss necessarily fell upon the partnership, for the property was then partnership property and a part of the capital; Marshall had been credited with its value in the stock account. When dissolution came he could not withdraw the burnt part which was destroyed and gone, while the buildings which filled its place were the product of the investment of partnership funds with Marshall’s consent, and were of a different value. This portion was no longer the same put in by Marshall, and its withdrawal could not correct the estimated value, for the rebuilt portion had no inventoried valuation. Even the money invested did not represent the enhanced value at the time of dissolution. The lots had no designated value apart from the destroyed buildings, the contract provided for no such contingency, and afforded no means of making a relative valuation of the lots and new buildings. If, therefore, on dissolution Marshall took the foundry property he would withdraw what he did not put in, without a contract mode of determining the relative values of the lots and the new buildings. The design of the reservation clause was to enable Marshall to correct the original valuation. But such a withdrawal could not correct the value of *149what he put in. Its condition was altered. The destruction of a part left the undestroyed part without a relative or designated value, while the destroyed part being gone was incapable of valuation. Nor did the whole as renewed represent the same value as the whole when it was brought in, for it does not appear that the money expended was the equivalent in value of the part destroyed. No intent to make an exact equivalent appears. As the foundry stood at the dissolution it was wholly a different thing in value and in condition from that which it was when contributed by Marshall. How then could he claim it as a right to withdraw the property and take it to himself? He could not withdraw it at the same value at which he contributed it, for the rebuilding necessarily involved a revaluation, for which no provision was made by the parties. Having a credit already in his stock account for the value of the property, the property with its accretions necessarily belonged to the firm, and must be accounted for as partnership assets. The situation of the parties had been altered by the fire and by the mutual consent to rebuild with partnership funds. Clark had given his personal attention and services to the business during the suspension by the fire and rebuilding, and was also entitled to his share of the benefit of the investment of the partnership funds in the new building, and was entitled to the accretion in value by lapse of time and the rise of property. If Marshall did not intend these advantages to accrue to the partnership it was his duty to have refused to rebuild with partnership funds, and to have claimed his right to withdraw, if indeed it were even practicable to withdraw the unburned portion of the foundry property. But when he permitted the incorporation of the partnership funds with the unburned part, he consented to the existence of a new thing, which in fairness and justice he could not withdraw to the prejudice of Clark, who is entitled as well as himself to the enhancement in value of that which was produced by the partnership. The partnership can be settled only by treating the foundry as partnership property, ascertaining its value at the time of dissolution, and stating the account accordingly. The foundry would comprehend only the ground necessarily connected with it, and used as a part of it. Detached lots, not the subject of the removal by the partnership and not necessary for the use of the rebuilt part, would not be considered a part of the foundry, and might be withdrawn.
Decree of the court below reversed, and the record remitted with a direction to refer the account to the same or another master for a restatement according to the principles contained in the foregoing opinion, and the costs of the appeal to abide the final order of the court.