Opinion
January Term, 1901.
John T. Cook, for the appellant.
James J. Farren, for the respondent.
The partnership heretofore existing between the parties was dissolved, as of the 31st day of December, 1896, by an agreement executed by them on February 3, 1897.
The controversy in this case arises out of that part of the agreement which provides that "all of the outstanding accounts and obligations due to said firm up to and including the 31st day of December, 1896, when realized, shall be divided between the parties hereto in proportion to the interests each had in such copartnership, viz.: two-thirds to said party of the first part (the defendant) and one-third to said party of the second part (the plaintiff), and either of the parties hereto may collect and discharge any of such outstanding obligations, each accounting to the other for the amount so collected and received."
The contention of the plaintiff is that the agreement was a settlement between the parties of all their partnership affairs, and that by the foregoing clause the defendant was bound to pay to the plaintiff one-third of the accounts due the firm on December 31, 1896, collected by defendant, without regard to the partnership debts owing at that time or the state of the account between the partners.
I think that the referee erred in adopting that construction of the agreement.
The sale by the plaintiff to the defendant was not of his interest in the partnership, which might raise a presumption of a complete settlement, but was a sale of specific property only, and the contract should be construed to be a settlement of the partnership affairs so far only as it purports so to be in express terms or by reasonable implication. It will be observed that the agreement makes no provision for the payment of the partnership debts owing December 31, 1896, although it expressly provides that the defendant shall assume and discharge all obligations of the firm thereafter contracted and save the plaintiff harmless therefrom. It is hardly conceivable, in view of this express agreement, that so important a one as the assumption by the defendant of all prior obligations of the firm should have been omitted if such had been the intention of the parties.
Notwithstanding the dissolution of the partnership, the parties remained bound for the obligations of the firm to third persons, and the uncollected accounts due the firm December 31, 1896, were liable for those debts. The plaintiff sold to the defendant his interest in the good will and in the office furniture, fixtures and other property, except the uncollected accounts due the firm December 31, 1896; and his interest in the moneys collected from said accounts in the absence of any agreement otherwise, was subject to the payment out of the same of the firm's debts and the adjustment of the accounts between the partners. There is nothing in the agreement from which it can reasonably be inferred that the plaintiff was to be relieved from this liability.
I think the proper construction of the clause in question is that the defendant was bound to pay the plaintiff one-third of the accounts due the firm December 31, 1896, collected by the defendant, subject to the payment of the debts of the firm due December 31, 1896, and to the statement of the account between the parties.
I am of opinion that the referee erred in refusing to make deductions of the debts owing by the firm December 31, 1896, which were paid from the amount collected by the defendant from the accounts then due the firm, and in refusing to take into consideration the statement of the account between the parties, and for this reason the judgment should be reversed and a new trial granted, with costs to abide the event.
All concurred; MERWIN, J., in result.
Judgment reversed on the law and facts and new trial granted, with costs to appellant to abide event.