Kolker v. Greenberg

Henderson, J., delivered the opinion of the Court. Milton Kolker filed a suit in equity against Samuel Green- ³³⁴ berg, his relative and partner, to compel Greenberg to account to the partnership for the cash proceeds received by him from the sale of stock in Inter-American Specialty Corporation. After a full hearing on the merits, the Chancellor dismissed the bill. Despite the fact that the shares of stock in the corporation were issued in the individual names of the two partners, and the purchase price charged to their individual drawing accounts, the appellant contends that the stock belonged to the partnership originally and that there was no subsequent agreement for a division of the proceeds.

The partnership agreement provided that the partners, engaged in the business of manufacturing buckles, heel plates and kindred products, should share equally in the profits. Kolker and Greenberg each contributed about $10,000 to the capital account, but from time to time Kolker advanced some $26,000 in addition. It was agreed that this advance should bear interest, and that 75% of the profits should “be allocated” to the liquidation of Kolker’s advance, although the advance was never actually repaid. The remaining 25% was divided equally and withdrawn.

Greenberg received a salary of $150 a week and devoted full time to the business. Kolker received a salary of $50 per week, although he was employed full time in another business. The partnership was a success, earned profits each year, and is solvent as to creditors. At the time of the signing of the partnership agreement it was contemplated that the partners should enter into a foreign venture through a separate corporation to be formed, in which a third party should contribute 50% and the partners 25% each.

Greenberg was to receive a salary for supervising the business of the new corporation. The stock was not only issued in individual names, but there was an agreement that the corporation would buy the stock of any deceased stockholder, from his heirs or personal representatives. The issued shares were placed by each partner in his own safe deposit box. The corporation was a financial success, but its stock was subsequently sold to a foreign purchaser at an advance in price over the amounts originally paid.

When this deal went through, payment was made to the partners individually. Kolker received some $17,000, and ³³⁵ Greenberg some $25,000, the difference being due to past and future salary claims on Greenberg’s part. Greenberg paid Kolker a sum he owed him individually, paid off other individual indebtedness to others, with Kolker’s knowledge, and retained the balance. Kolker accepted the payment for his shares, and deposited the money in his own account.

The capital gains from the sale of the stock were accounted for individually, and not as partnership assets. But some time later, when differences between the partners arose, Kolker insisted that the proceeds from the sale of stock issued to Greenberg should have been paid to the partnership and used to liquidate the sum originally advanced to the partnership by him. The law of the case is well settled. Whether property held in the name of one partner is to be treated as a partnership asset depends upon the intention of the parties.

See Price v. McFee, 196 Md. 443, 448 . Cf. Fleischmann v.