Court Opinion

ID: 3621578
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:03:12.965459+00
Date Added: 2024-06-11T07:43:58.809960
License: Public Domain

I dissent upon the ground that the question sought to be arbitrated does not come within, nor is it covered by, the dissolution agreement. If I am correct in this then the rights of the respective parties should be settled, not by arbitration, but by an action. (Piercy v. Young, L.R. [14 Ch. Div.] 200.)
Some time prior to March 1, 1923, the parties to this proceeding were engaged in business as bankers and brokers, under the firm name of Kelley, Drayton  Co. Such firm had entered into negotiations with others for the purpose of financing certain sugar properties in the Republic of Cuba, known as the "Tacajo" properties. Considerable money was spent looking to such development, but the efforts turned out to be a failure and were finally abandoned by the partnership about the end of May, 1923. This fact is alleged in the petition and nowhere denied. The partnership continued until the 3d of October, 1923, when a dissolution agreement was entered into. By this agreement and certain supplemental agreements the time of the actual dissolution of the partnership and the final winding up of its affairs was fixed at the close of business on December 31, 1923. The agreement contained, among others, the following clauses:
"The parties hereto mutually agree that until the time of dissolution any of the parties hereto, individually, shall be entitled to entertain and carry on negotiations for new business on their individual account and in their own names respectively, but not for the account of the partnership; and they further agree that in case said time of dissolution shall not become effective within twenty days after the date of this Agreement [October 23, 1923] none of the parties hereto, individually, or jointly as individuals, shall be prohibited or precluded thereafter from entering into contracts for business, but not for the account of the partnership. * * *
"In the event of any difference or dispute of any nature *Page 81 
whatsoever in any way relating to the partnership or liquidation of the partnership as between any of the partners or as between the Liquidating Partners and any of the partners or as between the Liquidating Partners themselves, the parties thereto shall mutually endeavor to adjust the same with the aid of their respective counsel and in the event of their failure so to do after consulting such counsel, then the same shall be referred to" an arbitrator named "whose determination in writing thereon shall be final and conclusive upon the parties to the same and upon the parties to this Agreement. * * *
"The right of each of the parties to this Agreement to compete for future business from and after the time of dissolution against the other parties hereto respectively shall not be impaired by the provisions of this Agreement * * *."
Subsequent to October 23, 1923, the respondents formed a new firm for the purpose of joining with others in financing and developing certain other properties belonging to the Tacajo owners, and sometime subsequent to January 1, 1924, such firm and its associates — sufficient funds having been provided — commenced, under an agreement with the owners, to develop such property. The development proved a success. Quite large profits were realized and the appellants claim that the profits going to the respondents, growing out of such development, belong to the old firm of Kelley, Drayton  Co. This the respondents deny and urge that under the terms of the dissolution agreement before quoted, such profits belong to them individually.
The appellants insist they are entitled to have this dispute determined by an arbitrator, under the terms of the dissolution agreement. The Special Term reached the conclusion that the dispute was not covered by the dissolution agreement, and such conclusion was unanimously affirmed by the Appellate Division. *Page 82 
The profits made by the respondents in developing the Tacajo property under the agreement entered into after December 31, 1923, it would seem, under the dissolution agreement, belong to them individually and not to the old firm of Kelley, Drayton 
Co. Those profits were not made by any effort of such firm. The dissolution agreement expressly provided that "none of the parties hereto individually or jointly as individuals shall be prohibited or precluded * * * from entering into contracts for business, but not for the account of the partnership." The profits here sought to be reached were made under a new agreement entered into after December 31, 1923. The firm of Kelley, Drayton Co. was not a party to this agreement and it is difficult to see how it can be said such profits belong to it. If so, it must be upon the theory that the respondents were in some way acting as agent or trustees for the old firm and had authority to bind it. This the dissolution agreement would seem to negative. It certainly cannot be said, as matter of law, that the profits claimed by the respondents belong to the old firm of Kelley, Drayton  Co. Therefore, one of the first questions the arbitrator would have to decide would be his own jurisdiction. There is nothing in the dissolution agreement which indicates an intent to submit such a question to him. (Willesford v.Watson, L.R. [8 Ch. App. Cas.] 473.)
I am of the opinion the order appealed from is right and should be affirmed.
HISCOCK, Ch. J., CARDOZO, POUND and LEHMAN, JJ., concur with ANDREWS, J; McLAUGHLIN, J., reads dissenting opinion in which CRANE, J., concurs.
Orders reversed, etc. *Page 83