105 N.Y.S. 872 | N.Y. App. Div. | 1907
These are cross-appeals from a final decree, of the Surrogate’s Court of Suffolk • county in the accounting of the executors of Adolph F. Braidich. So' far as the appeal of the executors is concerned, -we shall consider it upon their amended notice thereof. Objections to .the account were filed by Mrs. Olga Blasig, of-Trieste, Austria, -only, heir and next of kin and the residuary legatee. Many of the objections .were sustained, with a consequent surcharging of the account; some of them were rejected. The appeals have been argued with great learning and ability by leading counsel ■ with exhaustive and elaborate briefs.
The principal question arises from a dealing with the interest of Mr. Braidich, the -decedent, in his firm of Thurston & Braidich. The will directed the executors to wind up the interest of thq testator in the firm within one year from his death. The testator died on March 4-, 1902, the will was probated on April 15, 1902, and on that day Mr. Silkman alone qualified. By this transaction of May 1, 1902,. there was transferred tq Mr. Shaw,, then the sole. surv-ivingpartner in said firm, the entire interest of Mr. Braidich in the firm for $277,949.08, .Mr. Young had an interest in the firm and has now become a partner of Mr. Shaw. The final payment thereof is stated - as of October .28, 1902. On May 27, 1903, letters were issued to Mr. Shaw and Mr. Young, who then qualified and who now account. . The learned surrogate made a conclusion of law “ that the sale purported to be made ” by the executor Silkman “ to the said surviving partner and executor” Shaw was made in viola-' tion of - the trust duties owed the said estate by the said Shaw and Young “ and was and is void as against the estate of the decedent and as against the said Olga Blasig.” It is contended that the surrogate erred in holding- the transaction void.. Of course there is distinction between void and voidable, which, though nice,, -may often' tie important'. But void is used in the sense of voidable. (Anderson’s Law. Dict.). In Somes v. Brewer (2 Pick. 191) the court say: “ Between' the grantor and grantee in such cases the technical difference between void and voidable is wholly immaterial. Whatever may be a/ooided may in good sense, to this.purpose, be calléd void, and this, use of the term void is not uncommon in the language of statutes and of courts.” (See Mailhoit v. Insurance Co., 87
It is also contended that this transaction was not a sale but a liquidation. The execptors term'it thus in their account. And -the eminent "counsel for the executors writes in his brief: “ The executors in this proceeding do not question the ordinary rule that>a person acting in a fiduciary capacity cannot deal with a trust estate-for his Own benefit, but they sáy that, admitting the general rule to.be as stated, it does not .apply to this case. ' The rule has no application to the case, for the reason that it was a liquidation and not a sale. Sha.w and Young dealt as individuals, riot as executors or as trustees. They paid a large part of the valúe without, waiting, for it to be ascertained.” I do riot -take this view. “ Liquidation ” in its
It is also contended that when the executor Silkman dealt with Shaw and Young and agreed upon the price which should be paid for the property, he had the legal right to do so. If we view the transaction as if Mr. Shaw and Mr. Young were but surviving parners and were only to be regarded as such on this accounting, there is most respectable authority for this 'proposition. (Case v. Abeel, supra; Holladay v. Land & River Imp. Co., 57 Fed. Rep. 774; Schouler Exrs. § 345; Lindl. Part. [Ewell’s 2d Am. ed.] *593; Pars. Part. [4th ed.] 437, note.) In Holladay v. Land & River Imp. Co. (supra), Fullee, as circuit justice, said for the court: “ But the executor of a deceased partner, if not a member of the. firm,
But it is true that the theory of the decree depends upon the question whether the evidence justifies the conclusion that there were any profits from the transaction. (Case v. Abeel, and authorities supra.) The position of the executors is, as I have said, if the sale is voidable the measure of Mrs. Blasig’s recovery is based upon the profit which was gained in the transaction. So, invoking Case v. Abeel (supra), they contend that “ the evidence conclusively shows that Shaw paid full value for Mr. Braidich’s interest in the firm business; and, as to the value of the merchandise, the surrogate so held.” Again they say: “ Tested by this standard, it appears that the learned surrogate has not found that the property in fact was worth more than the valuation placed upon it and for which payment was made. He did not surcharge the account with a penny upon the value of the merchandise, and we are now limiting our observations to that part of it.” I am at a loss to understand this assertion in the face of finding XI: “ That the actual value of the interest of the decedent in the firm of Thurston & Braidich, exclusive of the value of the good will and firm name, exceeded on 1st of
It is insisted that the surrogate erred in computing the Braidich interest at fifty per cent. The partnership articles provided for it. But the argument is that as the articles were parol, there was a parol modification thereof. It is true that, as the appellants point ®nt, one of the counsel stated there was “ an oral, variation of it,” but he added “that point your Honor will have to pass upon” so that there is no concession upon the record. It appears that at the end of certain years there were variances. Mr. Roelker, the bookkeeper, testifies that when the profits of the year 1900 were to be divided Mr. Braidich handed back the showing, saying “ Here is the division of the profits — so much for me, so much for Mr. Shaw, so much for Mr. Young, so much for Mr. Rosevear and so much for Mr. Roelker.” The paper was given to Mr. Shaw and by him returned to Mr. Roelker. The surrogate admitted secondary evidence of the contents of it. By its direction the net profits were divided, in round numbers, $15,000 to Mr. Braidich, $15,000 to Mr. Shaw, $6,000 to Mr. Young, $4,000 to Mr. Rosevear, $3Í to Mr. Roelker. In 1901 the profits were likewise divided—that is, in each year Braidich and
The "court found that the profits of Thurston & Braidich from-May 1 to October 28,' 1902, were $36,245.70, and ehargedthe' executors with the percentage of Braidich upon' that amount. Inasmuch as the practical result of the decree is to hold the executors for the profits of the sale, I think that the basis of the computation must be the amount of the merchandise actually taken over by the saje of May 1,. 1902,. together with the amount • thereof remaining unsold. The statement furnished by Mr, Lombard and read in evidence by the executors shows that the estimated gross profits were $37,016.91, which, less $19,211.71, percentage of expenses to'sales,' left a net profit' of $17,805.20. This deductive sum represented galanes, wages? rent, insurance, interest, traveling, fire insurance,
The surrogate found that the value of the good will and firm name of Thurston & Braidich in October, .1902, was $93,987.60, and .that on May 1, 1902, the value of the interest of said estate, in the good will was still greater by the share of said estate in profits. He surcharged the executors’ accounts with $46,993.80 therefor. The contention of the executors is that good will did not exist. In People ex rel. Johnson Co. v. Roberts (159 N. Y. 79, 83) the court, per "Vans, J., cite many instances of the definition of good will, and the learned judge, after citation, says-: “ Good will embraces at least two elements, the advantage of continuing an established business in its old place and of continuing it under the old style or name. . While it is not necessarily altogether local, it is usually to a great extent, and must of necessity be an incident to a place, an established business or a name known to the trade.” The firm of Thurston & Braidich began business in 1883 at 130 and 132 William street, New York city. Mr. Thurston died in 1890. The business was continued by Mr. Braidich until 1891, when he took in Mr. Shaw as his partner. The business was moved in' 1901 to the next door, 128 William street, but to a store in all respects similar to the old place.- The business was the import and retail of vanilla ■beans, gums and merchandise. The firm’s customers were estimated by Mr. Shaw at from 1,100 to 2,000. But a small part of the sales were made in New York city, and less than two per cent of the customers visited the store. The great part of the sales were upon mail orders or upon orders obtained by salesmen. The salesmen used cards bearing the name of Thurston & Braidich, and
But I do not think that the valuation of the good will made by the decree should stand. The learned surrogate wrote in his opinion that in the case at bar two years’purchase on the amount of profits was as little as should be allowed, and that he was by no means clear that the allowance should not be more liberal. He took the average/annual profits -for three years suc’eeeding the death of Mr. Braidich, and calculated fifty percent of the annual profits for two years. I think that while the process- may be approved, the basis should be the annual profits before the death of the testator. For naturally it is the condition of the .business at the time of the. dissolution or death which should be the criterion. Neither the capital nor the efforts of the retired (or deceased) partner normally contribute to the profits of the after years, and certainly they cannot afford as safe or as fair a basis as that which I have indicated. Mr. Sedgwick in his book on Damages (§ 254)- says: “ A basis for such an estimate is the proof of past profits.” In Broughton v. Broughton (44 L. J. [N. S.] Ch. Div. 526) the business was insolvent at the death of the partner, and the surviving partner, being executor, carried it on for eight years and then sold it for £1,700. Upon a bill filed on administration, the executor, was charged for a moiety thereof. Jessel,. M. B., held that the defendant .was only liable to be charged with the value of the moiety of the good will at the death of the decedent, (See, too, Gibblett v. Read, 9 Mod. 459.) In Mellersh v. Keen (supra), where the dissolution was of December 31, 1858, the court adopted the calculation of the clerk baped upon the three years ending on that date. “ The value of good will,” says Bich, J., for this court in Von Au v. Magenheimer (115 App. Div. 87), “ may be fairly arrived at by multiplying the average net profits by a number of years, such number being suitable and proper, having reference to the nature and character of the particular business under consideration, and the determination of such proper number of years should be submitted to and determined by .the jury as a question of fact, dependent upon the evidence before them in each action,” Under the authority of Kirkman v. Kirkman (26 App. Div. 395) this court may be regarded as competent to pass upon the value of the good will upon the data before it.' (See, too, Mellersh
I understand that it is conceded that the item of $1,639.63 was properly surcharged. I think that it was error to surcharge the account with the difference between five pet cent (exacted) and six per cent upon the legacies advanced. In Bedfield’s Law and Practice of Surrogates’ Courts (5th ed. p. 632) it is said:" “But an executor who withdraws productive funds in order to pay legacies before they become due, is chargeable with the loss thus occasioned to the residuary estate; that is, the interest which might have been earned.” In M'Loskey v. Reid (4 Bradf. 340), after discussion, the surrogate summed up the reason for the rule thus: “ The executors must then, in my judgment, place the residuary legatees in the same plight and condition as if the general legacies had not been paid until they became due.” ' It appears that the funds used were lying in trust companies at three per cent or four per cent. It seems to me that the burden was on the contestant to establish that the executor, with reasonable diligence, could have received six per cent on such funds, which, at .the lapse of the year, he might be required to devote to the said purposes before the sxxrcharge can be sustained. (Shuttleworth v. Winter, 55 N. Y. 624.)
I have sought to desci'ibe conduct, not to characterize it. I may assume that Mr. Silkman thought that technically he could sell this interest to Mr. Shaw or to Mi’. Shaw and Mr. Young, because they had not then qualified as executors. I cannot think, however, but that it was understood that Mr. Shaw and Mr, Young would
If Mr. Shaw thought he was an ordinary purchaser, and if he regarded Mr. Martin as the seller, it was commercial and natural that Mr. Shaw would put the prices as low as he thought the seller, would accept. I can readily suppose that Mr. Shaw thought that not having qualified as executor, he had an opportunity to purchase at arm’s length,^and that he went about to improve it. But despite all these things, when these executors return their acts as discharges of their trust Mrs. Blasig may hold them to account if the result was unfair to her estate. (3 Williams Exrs. [R. & T. ed.], 238; Adair v. Shaw, 1 Sch. & Lef. 272; Walsham v. Stainton, 1 De G., J. & S. 689.) Gray, J., writing for the court in Matter of Niles (113 N. Y. 547) says: “ This matter of the administration of assets is one which is peculiarly within the cognizance of equity, anda Surrogate’s Court, in adjusting the accounts of executors and administrators, is governed by principles of equity as well as of .law, (Upson v. Badeau, 3 Bradf. 15.) In -the exercise of the statutory powers conferred upon him to direct and control the conduct and settle the accounts of ad minis trators. and executors, the surrogate is not fettered; nor is he prevented by any rule of law from doing exact justice to the parties.' He is supposed to administer justice in each case within his jurisdiction, according as the equities of the case demand; within the confines only of statutory provisions.” Speaking of the obligation upon an administratrix, the learned judge says: '‘Upon her, equally with her associate in the office 'of administration, rested the duty to ■ be vigilant to guard the estate from waste, loss and impairment. Having sought
The surrogate decreed that executor’s commissions should be allowed to Mr. Silkman “ upon the amount of $357,999.92, being the amount received and paid out by him,” but not including the amount by which said account filed by said executors is surcharged. A majority of this court is of opinion that it would not be warranted to disturb this part of the decree.
The decree must be modified in accordance with this opinion, and as modified it must be affirmed, without costs.
Hirschberg, P. J., Woodward and Miller, JJ., concurred.
Decree of the Surrogate’s Court of Suffolk county modified in accordance with the opinion of Jenks, J., and as modified affirmed, without costs. Settle order before J enks, J.
Heirs of Ludlow v. Cooper's Devisees,— [Rep,
Davoue v. Vanning (2 Johns. Ch. 252).— [Rep.