Court Opinion

ID: 5220047
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:31:48.243731+00
Date Added: 2024-06-11T08:27:30.137408
License: Public Domain

McLaughlin, J. (dissenting):
Plaintiff appeals from an order denying a motion for a discovery and inspection of certain- books of- account and documents in the possession of the defendant. The parties were formerly partners doing business under the name of Ward & Glow, and the action is brought to set aside and cancel certain instruments purporting to dissolve the firm and transferring-its property to the defendant Ward. The complaint also asks for an accounting of the partnership assets and a judgment against the defendant for an amount found due to the plaintiff.
The record shows that the firm of Ward & Grow carried on a large and profitable advertising business from sometime in 1892 to October 24, 1907, at which date the plaintiff executed' and. delivered to the defendant what were in form an assignment of all his interest in the firm’s properly, a consent that the- defendant continue the business under the firm name, and a declaration that the firm was, on that day, dissolved. A few days later he executed more formal documents to the same effect, viz., a general release on October twenty-ninth; an agreement “of further assurance” on November- eighth; and other confirmatory papers on November tenth, twenty-sixth and twenty-seventh.
The right to maintain the action is based-upon allegations of • fact to the effect that the transaction was not intended to be an assignment of plaintiff’s interest in the assets, or to work a dis- ' solution of the firm; all that was sought to be accomplished was to prevent, at th'e instance of plaintiff’s creditors, a receiver being appointed—the plaintiff’s claim being that the defend*599ant promised to continue the business for the benefit of both partners and to use the plaintiff’s share of the profits of the business in paying his individual debts. The defendant, on the-other hand, claims that the firm was actually dissolved, the assignment o'f the plaintiff’s interest in the assets was absolute, and was for a valuable consideration. It will he observed, however, that he does not indicate, otherwise than by a statement of counsel in his brief, what the consideration was. The assignment dated October 24, 1907, states that the consideration was “the sum of One hundred & fifty thousand dollars more or less — consisting of my [the plaintiff’s] overdrafts on the firm of Ward & Grow;” that what was meant by “overdrafts” was the amount drawn by the plaintiff out of the profits of the business in excess of what the defendant drew. In another instrument signed on October 24, 1907—-being a consent that the defendant continue the business in the firm name—the consideration for the assignment is given as the plaintiff’s indebtedness to the firm “in the sum of Two hundred thousand dollars and upwards for overdrafts and otherwise.” These are the only places in the record where any consideration is specified and the plaintiff seeks an examination óf the firm’s books kept prior to October 24, 1907, to prove that in fact there was no consideration, inasmuch as the plaintiff’s share of the profits exceeded by a large amount what he drew out, and that he was not at that time indebted to the firm in any sum whatever. He desires to show this fact, not as a ground of rescinding or setting aside the assignment, but as a fact tending to show that the parties did not intend the transaction to be an assignment.
I do not see how it can be seriously denied, if the property assigned had the large value claimed for it by the plaintiff, and if there were, in fact, no consideration for the assignment itself, that these facts would be material as bearing upon the plaintiff’s claim, that is, that an absolute assignment was not intended. The record shows enough at least to indicate the plaintiff’s good faith in seeking the evidence which he does. He alleges that the net profits of the firm for the period from January 1, 1903, to January 1, 1907, were $736,000 in the advertising branch of the business alone, and that all he drew *600out from, the time the firm was organized until the assignment was made, was $165,000. It is true the defendant alleges that the profits in the main branch of the business were to some extent counterbalanced by losses in other branches, and attention is called to an instance in which there was a loss of $360,000, and he also alleges that the plaintiff drew out $315,000 from his share of the profits instead of $165,000, as set forth by him. ' But only two months before the alleged assignment the parties entered into an agreement which recited the value of the plaintiff’s interest in the partnership assets at $1,000,000. The books which the plaintiff seeks to inspect relate entirely to the business which the firm transacted while he was a member of it. As a general proposition a member of a firm, even though dissolution has taken place, should be permitted to inspect, at all reasonable times, the books of the firm while he was such member. A liberal rule, under such circumstances, as pointed out in Howlett v. Hall (55 App. Div. 614), should be applied. In that case this court said: “ The right of a partner to a disclosure of partnership books rests upon entirely different principles than the rights of third persons to have a disclosure, it being usual almost as matter of course to grant such examination and inspection to a partner. * * * And it is only where it can be seen that the application is made in bad faith that he will be- refused the privilege. The fact that the partnership is dissolved does not change the rule, the courts recognizing the right of a former partner to have access to the books at all reasonable times.” (Kelly v. Eckford, 5 Paige, 548; Stebbins v. Harmon, 17 Hun, 445; Bearns v. Burras, 86 id. 258.) It sufficiently appears that this application is made in good faith and if granted cannot possibly injure the defendant. All of the authorities which hold that in an action for an accounting, the plaintiff will not, until after an accounting is decreed, be granted an inspection of books containing a record of the transaction to be accounted for, have no application. The plaintiff here is seeking to show his right to an accounting, which obviously must be established before an accounting can be decreed. That there was, in fact, no consideration for the assignment—if it be a fact — must be largely ascertained by an inspection, of the books.
*601I think' the order appealed from shoúld he reversed, with ten dollars costs and disbursements, and the motion granted, with ten dollars costs.'
Order affirmed, with ten dollars costs and disbursements.