holding that an agreement supported by mutual promises to perform did not constitute a willSummary of this case from Detroit Institute of Arts Founders Soc. v. Rose
If, after the expiration of the term of a written partnership agreement, the business is carried on in the same way, with no indication of change in control, methods or circumstances, the ordinary legal situation is that the partnership has become one at will but subject to the terms and conditions of the original agreement as far as they are applicable. A man and his son entered into a partnership agreement to run for two years. One of its terms was that in the event of the death of either the partnership should continue for the term of the agreement and the share of the deceased partner should pass to his widow. When the two years were up they orally agreed to continue business "just the same" and in fact did so. One of the partners died. Held: 1. That the widow was entitled to avail herself of the clause that the share of a deceased partner should pass to his widow. 2. That the agreement created in the wife of each partner a present interest which was vested in right and it was not invalid as an attempted testamentary disposition.
Argued June 15, 1944
Decided July 26, 1944.
ACTION for a declaratory judgment determining whether a certain instrument transferred to the named defendant the interest of the plaintiff's intestate in a partnership business, and other questions, brought to the Superior Court in New Haven County and reserved by the court, Munger, J., for the advice of this court.
William J. McKenna, for the plaintiff.
William L. Beers, with whom was George E. Beers, for the defendant Leonard Marenna.
Michele Marenna and Leonard Marenna, one of his sons, were partners in business for many years. In 1938 they entered into a written partnership agreement to run two years. When the two years were up, they orally agreed to continue business "just the same" and in fact did so. Michele died February 6, 1943. The written agreement referred to contained the following clause: "7. In the event of the death of either of the parties hereto, said partnership shall continue for the term of this agreement and the share of said deceased partner shall pass to his widow, subject to the same terms and conditions as herein contained." On February 11, 1943, Michele's widow, Pasqualina, conveyed the one-half interest in the partnership Michele had owned to Leonard for a very substantial consideration. Michele's administratrix, Adeline Faggelle, a daughter, brings this suit for a declaratory judgment to determine the legal relations of the parties and the validity of this sale under the stipulated facts. Pasqualina was defaulted for nonappearance but Leonard, the only remaining defendant, appeared.
It is not unusual for partners to continue in business together after the expiration of the term of their written partnership agreement. Sangston v. Hack, 52 Md. 173, 189. If the business is thereafter carried on in the same way with no indication of change in control, methods or circumstances, the ordinary legal situation is that the partnership has become one at will but subject to the terms and conditions of the original agreement as far as they are applicable. Ibid.; Normand v. Normand, 90 N. H. 548, 551, 11 A.2d 816; Bradley v. Chamberlin, 16 Vt. 613, 615; Mifflin v. Smith, 17 S. R. (Pa.) 165, 168; Daub's Estate, 313 Pa. 35, 37, 169 A. 379; Metcalfe v. Bradshaw, 145 Ill. 124, 136, 33 N.E. 1116; Corr v. Hoffman, 256 N.Y. 254, 258, 274, 176 N.E. 383; and see Chipman v. National Savings Bank, 128 Conn. 493, 498, 23 A.2d 922. On the death of Michele, Pasqualina was entitled to avail herself of that portion of clause 7 which provided that, in the event of the death of either partner, "the share of said deceased partner shall pass to his widow." She had the right to sell Michele's share in the partnership to Leonard. See Normand v. Normand, supra.
The plaintiff claims that, even if that is so, the quoted clause providing that the share of the deceased partner shall pass to his widow is ineffective as an attempted testamentary disposition not made in accordance with the Statute of Wills. In a similar situation it was said: "The partnership articles involved in the present controversy were neither intended as a deed or a will. They constitute an executory agreement, which determines the rights of the parties inter se, and provides what disposition shall be made of the partnership property on the happening of a certain event." McKinnon v. McKinnon, 56 F. 409, 412, 5 C.C.A. 530. A will is ordinarily without valuable consideration and lacks the element of present-existing contractual rights. Here the consideration for the agreement was the mutual promises to perform, a valuable consideration. The agreement created in the wife of each partner a present interest which was vested in right, though it might be defeated should her husband be living at the termination of the partnership and though enjoyment of it would be postponed in any event until his death. Ibid.; Hale v. Wilmarth, 274 Mass. 186, 189, 174 N.E. 232, 73 A.L.R. 980, and note, p. 1000; and see Bristol v. Warner, 19 Conn. 7, 18; Eisenlohr's Estate, 258 Pa. 438, 441, 102 A. 117; Autenreith v. Commissioner, 115 F.2d 856, 858. In Bowen v. Morgillo, 127 Conn. 161, 14 A.2d 724, several different transfers were involved. One was held to be a transfer of a present interest and error was found in the conclusion of the trial court that it was testamentary in character and void. The conclusion of the trial court that the other transfers were testamentary in character because no present gifts were intended was sustained. This accords with the rule laid down in this case under the stipulated facts.