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Kehnast v. Kehnast

Court of Chancery of Delaware, New Castle County

January 3, 1952

KEHNAST
v.
KEHNAST et al.

[32 Del.Ch. 299] Vincent A. Theisen, Wilmington, for plaintiff.

Anthony F. Emory, Wilmington, for defendant.

H. Albert Young and David B. Coxe, Jr., Wilmington, for interveners Edmund Kehnast and Rose Kehnast.

John T. McEvilly, Wilmington, for interveners Emma Kehnast and Joseph Kehnast.

SEITZ, Chancellor.

This is an action by plaintiff, one alleged partner, seeking an accounting from defendant, his alleged co-partner. Subsequently other parties were permitted to intervene to assert that they were either co-owners of the 'family enterprise', additional partners, or creditors.

The questions presented for decision are three in number: (1) What was the legal nature of the business conducted under the name of the West End Coal Co., (2) Who were the parties legally embraced within that legal relationship, and (3) What subject matter was included within the business as legally defined?

The first two questions can be discussed and answered together. To arrive at these answers it is important to consider the history of the business known as West End Coal Co.

Sometime in 1939 the plaintiff began to participate in [32 Del.Ch. 300] the operation of a retail coal and oil delivery business. Operations were conducted on a plot of land owned by his father and mother--two of the interveners here. The parents' home also served as the business office. However no rental was ever charged for the office or land although plaintiff testified he agreed to furnish coal, gas, electricity and food for his parents. These conditions continued throughout the years and up until this action was commenced except that I doubt whether plaintiff kept his promise in full.

Plaintiff, who is defendant's brother, handled the records, such as they were, almost exclusively. The same was true of the money. He also did some of the driving. While there is some dispute as to the extent of his services, there is no doubt that

Page 358

The defendant devoted much of his time during this same period to the coal and oil delivery aspects of the business. However, the defendant also spent a substantial amount of his time, particularly after 1946, selling and installing oil burners. Plaintiff contends that this part of defendant's work was part of the partnership business known as West End Coal Co. Defendant says that the oil burners installation business was his own private business and not a part of the West End Coal Co. This issue is part of the third question to be resolved.

The coal and oil delivery business grew in volume despite the very unbusinesslike manner in which it was conducted. For instance, sales were in excess of $100,000 per year, yet no bank account was kept. Plaintiff literally operated largely out of his pocket. At various times the interveners, being the parents of plaintiff and defendant, as well as another brother and a sister-in-law, performed various miscellaneous services over the years for the business. They worked on the trucks, took trips for the coal and oil, answered [32 Del.Ch. 301] the phone, etc. However, it is clear that these acts were spontaneous and irregular and the evidence fails to disclose that the interveners performed these services with any expectation of compensation. Nor did they receive any compensation. Truly the business was a family affair in a sense, but that was not because the business was being operated for the benefit, legally speaking, of all of the family. Those who benefitted directly from the business as owners were the plaintiff and the defendant and I am inclined to believe that the plaintiff benefitted more than the defendant because he controlled the purse strings. While plaintiff may have done some of the dastardly things with which he is charged by defendant and interveners, and I believe he did, nevertheless, the facts here recited are admittedly true and show to my satisfaction that plaintiff and defendant alone operated the business as partners. They filed partnership tax returns and took out a partnership license for the coal and oil delivery service. Defendant's attempts to deny the partnership relationship is unimpressive at best. The same is true of defendant's testimony that he worked for years and never received any of the profits. Although, I do believe that plaintiff took the bulk of such profits.

I conclude that plaintiff and defendant were partners in their operation of the West End Coal Co.

Are any of the interveners entitled to claim an interest as co-owners or co-partners of the West End Coal Co.? I think not. As stated, they performed miscellaneous services over many years but they never sought nor received compensation therefor and their services were rendered at highly irregular intervals. True the mother and father provided the premises and office for the business but there is no evidence that this was anything more than the benevolence of parents for their children. The apparent lack of gratitude on plaintiff's part and the reciprocated resentment have added coals to the emotional fire which has almost consumed the truth in this case.

[32 Del.Ch. 302] The contention that it was a family enterprise is to a degree true, but, legally, I believe the family aspects of the matter do not alter the dominant facts which point to a partnership of plaintiff and defendant, viz., control of the business and profits by plaintiff and defendant alone.

I conclude therefore that the business of the West End Coal Co. at the date of the dispute between plaintiff and defendant, and at all times here pertinent, was a partnership of which plaintiff and defendant were the sole partners. This partnership I imply from the facts and not from any oral agreement. See Beecham v. Dodd, 3 Har. 485; and compare 46 Del.Laws Chapt. 229 §§ 15, 16.

We now consider what business and property were included within the West End Coal Co. partnership. Specifically, I must determine (1) whether certain trucks belong to the partnership, (2) whether certain

Page 359

money was lent to the partnership, and (3) whether the oil burner installation business was part of the partnership business.

The intervener Edmund Kehnast contends that three trucks were purchased in his name as owner and were lent for use in the business. Plaintiff contends that the trucks belonged to the partnership. Plaintiff explains that the titles were taken or transferred into the name of Edmund Kehnast because plaintiff was having serious domestic troubles. This is hardly an appealing explanation but that fact does not require the rejection of the testimony.

One truck in dispute was purchased in 1946 for $2500. The receipt for the money was given in the name of Edmund Kehnast and title taken in his name. Edmund claims that he and his wife Rose used cash savings kept in their room to pay for this truck. Plaintiff says the truck was paid for with partnership money given to Edmund.

While title to the truck and the receipt for the payment were in Edmund's name, it is not denied that the truck was used in the partnership business and that no compensation [32 Del.Ch. 303] was paid Edmund for its use. This condition existed for several years. The testimony of the plaintiff and Edmund are in direct conflict and in order to resolve the conflict, one must pass upon their veracity. Plaintiff's contention that the truck was purchased for the business and placed in Edmund's name because of plaintiff's marital difficulty has some plausibility. An even more plausible reason comes from the trouble plaintiff caused by refusing, on occasion, to permit 'his' trucks to move. However, I place principal reliance for my conclusion that Edmund is not the owner of the truck on the improbability of such a fact in view of the surrounding circumstances. Thus Edmund said he accumulated this substantial sum of cash and kept it in his room. He allegedly saved this sum despite the fact that he had a rather small annual income and had substantial financial commitments. The legacy to Rose does not explain this situation. Also, only a few months before the truck was purchased, Edmund and Rose purchased an automobile and financed it 'on time'. The explanation for financing their car rather than paying cash from their savings is unconvincing.

The cumulative effect of the evidence leads me to conclude that the truck purchased from the Ayers Coal Co. was actually the property of the partnership.

Edmund next contends that he paid $100 cash and gave a $500 check for another truck and that still later he paid $220 for a body for it. Once again it appears that this truck was used in the business and that Edmund received no compensation for its use. Plaintiff says partnership money was used to purchase this truck. It appeared that Edmund as a mechanic was familiar with trucks and undoubtedly helped in deciding whether a certain truck should be purchased. However, I believe he was only a 'front' man. The circumstances ...


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