Gutwirth v. Carewell Trading Corp.

20 Misc. 2d 64, 187 N.Y.S.2d 949, 1959 N.Y. Misc. LEXIS 3605
CourtNew York Supreme Court
DecidedMay 26, 1959
StatusPublished

This text of 20 Misc. 2d 64 (Gutwirth v. Carewell Trading Corp.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gutwirth v. Carewell Trading Corp., 20 Misc. 2d 64, 187 N.Y.S.2d 949, 1959 N.Y. Misc. LEXIS 3605 (N.Y. Super. Ct. 1959).

Opinion

Henry Epstein, J.

The instant action was commenced by the plaintiff for an accounting of the affairs of the partnership between the plaintiff and defendants pursuant to a partnership agreement dated February 3, 1942 and modified February 10, 1942 which remained in effect until May 21, 1947. A subsequent agreement was entered into on the latter date and continued until approximately July 31, 1950, at which time the said partnership was dissolved and the parties proceeded to arbitration as called for in the second partnership agreement. The sole issue submitted to this court at this time is the issue of res judicata as raised by the third separate and distinct defense.

The plaintiff Albert G-utwirth (respondent in the arbitration) is the son of defendant Charles Gutwirth and the nephew of defendant Isidore Lipschutz (petitioners in the arbitration). The defendants have been partners in the jewelry business for about 50 years. They started working together in Antwerp and continued there until about 1938 when Isidore came to this country to set up business. Shortly thereafter Albert came over and went to work for the New York firm of Isidore Lipschutz, Inc. Charles Gutwirth also came to this country around 1938 but he returned to Antwerp and later returned with his family (less Albert who was already here).

Isidore Lipschutz has a daughter, but no son. Charles Gutwirth has a daughter and two sons. Isidore and Charles wanted to take a less active interest in the business and so devote themselves to less burdensome tasks. To effectuate this inclination it was necessary to have some member of the family carry on the business in their behalf. Albert was the chosen successor because Isidore had no son and Charles ’ other son Marc was not interested in the business but rather in the higher educational pursuits.

Albert started his training in Antwerp as a young lad of 16 or 17 and he continued when he came to this country in the family firm of Isidore Lipschutz Inc. While so engaged he was paid approximately $200 per week. In 1942, it was decided that Albert be made a partner and so an agreement was entered into dated February 3, 1942 creating a new partnership wherein Albert was to have a 20% interest. His father and uncle each retained 40% interests. Albert’s capital contribution amounted to $15,000 which he had earned while working for Isidore Lipschutz, Inc. Albert claimed that for his contribution of $15,000 bis father and uncle were giving him a one-fifth interest [66]*66in a $5,000,000 inventory, consisting principally of diamonds purchased in Mexico. There were also other assets in the partnership though Albert alleged that their true value was hidden. At this time Albert was about 20 or 21 years old. From then on he actually worked little in the business. Shortly after the 1942 agreement he went to work in a war plant and was subsequently drafted into the Army. His Army tour took him to Europe and while in the service he sustained certain injuries which were alleged to have effected a change in his personality after his discharge. The nice boy who entered the Army returned as an aggressive, eccentric and insulting person, suspicious of the activities of his uncle, and who voiced his feeling that there existed an unnatural love between his father and his uncle. To Albert his uncle was a crook and his father had the philosophy of a beggar. His own sister describes him as peculiar ” after his return.

On May 21, 1947 the last partnership agreement affecting Albert was executed. Under cross-examination in the arbitration, Albert stated he felt that when he signed the agreement his grievances about the books were being corrected. The said agreement provided in part that ‘ ‘ the capital of the partnership shall be such sum as each of the parties hereto is credited with as his capital contribution as of the date hereon on the books of the partnership ” (par. 4) and in answer to an inquiry as to the import of those words, Albert answered that those words were not very important.

At the time of the signing of the 1947 agreement Albert was suspicious of his uncle but had insufficient grounds on which to base that feeling. After the agreement was signed, the breach widened and the clash of personalities became more pronounced. Efforts were made to bring about a rapprochement but to no avail. Finally the defendants, father and uncle, notified plaintiff of their desire to seek arbitration; there followed an arbitration lasting three years, which included 74 sessions and over 6,000 pages of testimony. The cost of the arbitration, excluding attorneys’ fees, was $92,555.69. The award of the arbitrators fixed respondent’s (plaintiff herein) share in the liquidation of the partnership at $218,677.47. This has been paid.

Midway through the arbitration this action was commenced. Thereafter Albert (plaintiff here) made a motion in this court to stay the arbitration and defendants moved to stay this action. Both motions were argued before Mr. Justice Schreiber and he granted defendants ’ motion except to the period prior to May 21, 1947, and in like manner Albert’s motion was denied except as to pre-1947 alleged diversions to Carewell. The first sentence [67]*67of the first paragraph and the first sentence of the last paragraph of Justce Schreiber’s opinion (May 15, 1953) furnish what was thought to be the import of his ruling. They read as folliws:

‘ ‘ The complaint in the present action against Carewell Trading Corporation is predicated upon alleged diversions of partnership funds by Charles Gutwirth and Isidore Lipschutz to the defendant corporation prior to the making of the 1947 partnership agreement as well as subsequent thereto. * * *

“ The motion is accordingly granted only to the extent of enjoining submission to arbitration of alleged diversions claimed to have occurred prior to the making of the 1947 partnership agreement ”. (Italics supplied.)

The order entered upon the above decision reads in part as follows: ‘ ‘ Ordered, that the motion is granted to the extent of enjoining the arbitrators presently acting under the arbitration clause in the May 21, 1947 agreement from making any determination in respect to diversions to Carewell Trading Corp. of moneys, property or assets of or derived from the partnership of IÁpschuts $ Gutwirth occurring prior to May 21 1947 ”. (Italics supplied.)

In the paragraph immediately preceding the first decretal paragraph of the foregoing order the following was stricken out by Justice Schreiber : ‘ and having determined and decided that the arbitration clause in the May 21, 1947 agreement is not broad enough to permit the arbitrators presently acting under such clause to make any determination in respect to any diversions occurring prior to May 21, 1947; and that the arbitrators may pass only upon matters subsequent to the making of the May 21, 1947 agreement”.

In the first decretal paragraph of the same order the following was stricken out: “and to the extent of enjoining petitioners in the arbitration proceeding any question or issue, claim or cause of action based upon or arising out of diversions claimed by plaintiffs in the above action, or by respondent in the arbitration, to have occurred prior to May 21, 1947 ”.

In the arbitration proceeding commencing at page 3245, the meaning of Justice Schreiber’s order is discussed. It is evident that great doubt existed as to the intent of the order and in fact both sides agreed that they did not understand its meaning.

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Bluebook (online)
20 Misc. 2d 64, 187 N.Y.S.2d 949, 1959 N.Y. Misc. LEXIS 3605, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gutwirth-v-carewell-trading-corp-nysupct-1959.