Summary
In Dwinelle v. Edey (102 N.Y. 423) the action was between the original parties to a sealed agreement of copartnership, brought for the purpose of securing contribution of losses in accordance with its terms.
Summary of this case from Oldfield v. Vassar CollegeOpinion
Argued April 2, 1886
Decided June 1, 1886
Aaron J. Vanderpoel and John M. Bowers for appellant. Herbert G. Hull for respondent.
We are content with the determination of the General Term that the written agreement of the parties created a copartnership from its date, and that such relation was not postponed or intended to be postponed until a period when the business profits had fully reimbursed the plaintiff for his advances. While all such profits were at first applicable to the debt, the latter was a debt of the firm, due to one of its members; the advance was to the copartnership and for its business purposes; and the contract which limits its duration to three years plainly indicates the moment of its beginning by the words "three years from this date."
The further question in the case, as to the statute of limitations, and what lapse of time is a bar to the action, depends upon a correct interpretation of the provisions of the Code, and upon the substantial character of the action. The contract of copartnership was under seal. It fixed and settled the respective interests of the parties in the capital stock, and contained an express covenant that "all losses happening to said firm, whether from bad debts, depreciation of goods, or any other cause or accident, and all expenses of the business shall be borne by the said parties in equal proportions." This language is criticised as not amounting to a covenant to pay losses to the partner who has been compelled to overpay his share. But that is an interpretation quite too technical and narrow. Each party covenanted with the other to bear his specified proportion of the losses, and that he does not do when he omits to pay his just share to the partner who has been compelled to overpay. The covenant amounts to an express agreement to reimburse to the paying partner the excess above his share, for, when the creditors have been paid by one, a proportion of the losses can only be "borne" by the other through a payment to the partner who has advanced the whole. In the emergency which happened, the covenant amounted to an express agreement to reimburse the partner paying in excess of his share. Upon this covenant the complaint founded the cause of action pleaded. After averring the partnership agreement it alleges its expiration by the terms of its own limitation; that all the property and assets of the firm had been applied to, and exhausted in, the payment of debts; that all of these except the sums due to the plaintiff had been paid by him with the aid of the partnership property; that the business had resulted in large losses; and that the defendant had "failed to pay one-half of the losses and expenses incurred in said business as he agreed to do in and by said copartnership agreement." The relief demanded is an accounting and the payment of the sum to be so ascertained which the complaint alleges is in excess of $27,000. So that on the face of the pleadings there was stated as the substantial cause of action a covenant under seal, its breach, and damages resulting beyond a certain amount, to ascertain which an accounting was needed. The pleader vested the plaintiff's right upon the covenant and its breach, claiming the resultant damages as an absolute right, and seeking the aid of equity only that the amount might be more conveniently ascertained.
We concur in the opinion of the General Term that this was a cause of action founded upon a sealed instrument, within the meaning of the limitations prescribed for the commencement of actions. (Code, § 90; Code of Civ. Pro., § 381.) The argument to the contrary rests mainly upon the theory that the action is an equitable one for contribution, and founded not upon the sealed agreement, but upon the doctrines of equity operating upon a given relation, and reaching a just result out of regard for justice, and irrespective of any contract of the parties to that effect. The fact of the partnership is said to be alone material, and it is not of the least consequence whether that fact be evidenced by a sealed contract, an unsealed writing, or a verbal consent. The argument is very strong, if the action may be correctly treated as one for contribution. But that action fitly reaches an emergency not here existing. It takes care of a case in which the parties have not fully taken care of themselves. From the partnership relation it evolves certain unexpressed and uncovenanted duties as mutually intended by the fact of the relation, and is at least needless where the parties themselves have stipulated as to all such duties in detail, and bound themselves by express covenants for their performance. When that occurs, and the action may rest upon an express covenant purposely made, and is brought explicitly upon it, there seems to be no sound reason for turning it into an action for contribution merely. That is not needed to sustain a recovery, and in face of the sealed covenant, and the plain choice of the plaintiff to stand upon it, we think it ought not to be treated as an action for contribution such as the appellant claims. The cases cited to that effect were those in which, without the aid of doctrines peculiar to equity, there was no cause of action. The subject was very fully discussed in Peters v. Delaplaine ( 49 N.Y. 362), which was an action for specific performance. In such an action equity acts or withholds its aid upon grounds peculiar to itself. A covenant to convey does not give an absolute right to a conveyance, and an action seeking that relief depends upon other circumstances than the covenant, and lies in the equitable discretion of the court. In the present case, however, the covenant and its breach gives the absolute right to a recovery of the resultant damages, and it is only in the mode of ascertaining them that equitable aid is found useful. The substance of the action is to recover damages for a breach of covenant, and is founded upon the sealed instrument. The illustration suggested by the learned trial judge of the nature of the action between joint obligors in a bond where one has paid the whole debt may serve still further to elucidate our conception of the true rule. He says very correctly that the liability inter sese does not depend upon any covenant or contract between themselves. Their sole expressed contract is to pay the obligee. But suppose that in the bond there was inserted an express covenant running, not to the obligee, but to each other, to bear respectively one-half of the debt. In such a case their mutual liability would depend upon no equitable doctrine, but be fixed by an expressed covenant, which would by itself sustain and support the right of action. The covenant here is of that character. It is not one running to the creditors, as is the covenant of the ordinary bond, but one running to each other, and establishing their rights and duties as between themselves. The General Term, therefore, was correct in saying that the limitation of twenty years was applicable to the action.
The order should be affirmed, and judgment absolute rendered for the plaintiff upon the stipulation.
All concur, except RAPALLO and ANDREWS, JJ., dissenting.
Order affirmed and judgment accordingly.