146 Mass. 167 | Mass. | 1888
George W. Simmons died intestate, on December 14, 1882, leaving a widow and seven children. He was a member of the firm of George W. Simmons and Son, in which his son, George W. Simmons, Jr., and Philip A. Spofford were his partners. Immediately upon his death the two surviving partners formed a new firm under the name of G. W. Simmons & Co., and continued the business at the same place, using the capital and stock in trade of the old firm. Owing to a disagreement between the heirs, administration was not taken out until November, 1883, when the plaintiffs and the defendant Simmons were appointed administrators. In the mean time, the defendant Simmons had paid debts of his father to a large amount out of the property in the hands of the surviving partners ; the widow and three of the children had, on September 1, 1883, made an agreement that their respective shares in the interest of the intestate “ in the firm of G. W. Simmons and Son, Oak Hall, shall remain in the business as at present conducted by ” the surviving partners, at interest at the rate of seven per cent per year, and on August 25, 1883, the defendant Simmons had paid to the other three children twenty thousand dollars, to be accounted for in settlement of the estate of the intestate on
The suit was originally brought by two of the administrators against the surviving partners, but by amendment all the children of the intestate, and the representatives of the widow and of a deceased child, were made parties defendant. The only controversy is between the three married daughters and the surviving partners, the ultimate object of the suit being to recover the share to which they are respectively entitled of the profits of the business since the death of the intestate.
There is nothing in the case to show any want of fairness or good faith in the conduct of the surviving partners, but the master has found that the interest of the intestate was of such a character that the only way to realize its fair or substantial value was to deal with it as the defendants did, and “ that the manner in which the defendants dealt with the full stock was necessary in order to obtain its full value.” The master found that upon the death of the intestate the capital standing to his credit was $66,480.10, that to the credit of the surviving partners $14,787.38, making the whole capital $81,267.48. This is an outline of the principal facts in the case, and upon them the master reserved for the decision of the court the rule for the measure of the liability of the surviving partners.
If the accounts could have been settled at the death of the intestate, his representatives would have been entitled to receive the above named amount of capital standing to his credit. As we have seen, this was impracticable, and the surviving partners continued the business, using the capital of the intestate with the consent of those who represented five sevenths of his interest, and under the objections of the three dissenting heirs who represented two sevenths.
As a general rule, where a surviving partner continues to use the capital of a deceased partner in the business, the representatives of the latter, in the absence of any agreement to the contrary, have the election to demand either interest on the
The plaintiffs contend that in this case tlie rule should be that the profits accruing after the death of the intestate should be divided according to the amount of capital which each partner or person interested had in the business, and that no compensation or allowance should be made to the surviving partners for their services and skill in conducting the business. We do not think that this rule is supported by the authorities, or is just as applied to this case. It finds some support in Crawshay v. Collins, 15 Ves. 218; S. C. 1 Jac. & W. 267, and 2 Russ. 325. This case, which was before Lord Eldon at intervals for eighteen years, was a suit by an assignee of a bankrupt against the continuing partners of the firm of which he was a member; the assignee was held to be entitled to three eighths of the profits accruing after the bankruptcy, that being the proportion of the bankrupt’s capital and profits in the business, but a just allowance was made for the services of the continuing partners. The case has been much commented on in later cases, and it has never been regarded as establishing an inflexible rule applicable to all cases. Indeed, in this case Lord Eldon says, “ The rule which is to be applied must be deduced, in almost every case, from the particular circumstances of that very case”; and he fully recognized the justice of making allowance for the skill and services of the surviving partners. The later English authorities regard this as the effect of Lord Eldon’s decisions in the various stages of Crawshay v. Collins. Brown v. Be Tastet, Jacob, 284. Cook v. Collingridge, Jacob, 607. Wedderburn v. Wedderburn, 2 Keen, 722; S. C. 4 Myl. & Cr. 41, and 22 Beav. 84. Willett v.Blanford, 1 Hare, 253. Yates v. Finn, 13 Ch. D. 839.
In most of these cases the rule applied was, that the profits should be divided according to the capital, after making allowance for profits earned by the personal activity, attention to business, skill, and services of the surviving partners, though in Wedderburn v. Wedderburn the representatives of the deceased partner were held to be entitled to interest at the rate of five per cent on their capital, instead of a share of the profits.
In the case at bar, as we have said, there is nothing to impeach the good faith or fairness of the surviving partners. The defendant Simmons, who is the principal surviving partner, upon the death of his father, was placed in a very difficult and embarrassing position. A large amount of property belonging to his father was invested in the business. Owing to a quarrel among the heirs, no administrators were appointed for nearly a year. There was no one with any power to close up the business, either by a sale of the interest of the intestate, or otherwise ; a majority of the heirs in number and amount desired him to continue the business. It is difficult to see how he could have done better than he did; he appears to have acted with due regard to the interests of all concerned, and no rule of a punitive character could justly be applied in the case. We think the rule of division of profits we have stated above will work out substantial justice to all parties, for that period of time when the surviving partners employed the whole or the principal part of the capital of the intestate as the basis of their business, that is, up to August 27, 1888.
In applying the rule, some questions arise as to the amount of
After the death of the intestate the surviving partners were desirous of paying as soon as could be the amount of the capital which he left in the business. As we have seen, delay occurred in appointing administrators, and on August 27, 1883, the defendants paid to the three dissenting heirs the sum of twenty thousand dollars, which, in the words of the receipt signed by them, was “to be accounted for in settlement of the estate of George W. Simmons, deceased, as received on account of our respective shares in his interest in the firm of George W. Simmons and Son, and which to that extent shall be discharge of the liability of the surviving partners to us as heirs of said deceased, directly or through administrators.” There can be no doubt
It also appears that, on September 1,1888, the surviving partners made an arrangement with the widow and three of the children, by which they agreed that their respective shares in the interest of the deceased in the firm of Gr. W. Simmons and Son should remain in the business of the new firm at an interest of seven per cent per annum. The effect of this was to change the amount of their shares so far as they were concerned, from capital to a debt of the new firm, and to transfer the same amount of the capital to the credit of the surviving partners. The widow and three children who signed it, and the defendant Simmons, were entitled to five sevenths of the estate of the intestate, and the result of this arrangement therefore was that the surviving partners became the owners of the whole of the capital, except the small balance due to the dissenting heirs.
As we have before intimated, the principles we have discussed should be applied in ascertaining how much was due to the dissenting children on August 27, 1883. But, as we have seen, at that time a material change occurred in the circumstances and the relations of the parties which justifies and requires the application of a different rule for the future.
The surviving partners then, evidently as parts of the same scheme or purpose of relieving themselves of the responsibility of the care of the property of the intestate which was forced
It also appears that the business of the new firm was prosperous, and its profits very large; the surviving partners were anxious to pay what they justly owed the heirs, and it is not an unfair inference that the payment of this amount by the firm would not in any measure cripple its resources or injure its business. It is difficult to believe that the retention or withdrawal of this comparatively small amount would in any considerable degree affect the volume of business, or the amount of the profits. Under these circumstances, it would be inequitable to apply the rule of the division of the future profits according to the nominal capital. It would be unjust to the surviving partners, as it would compel them to work for the benefit of a compulsory partner against their wishes, and to bear the most of the burden of a protracted litigation, for which the dissenting heirs are at least equally to blame. It would give the latter more than they are fairly entitled to as the earnings or income-of the debt which is due them, and swell unjustly the amount-they receive from their father’s estate.
We are therefore of opinion, that, unless the parties can agree, the case should be recommitted to the master to ascertain the balance due to the three dissenting heirs after the payment of August 27, 1888, upon the principles we have stated, and that thereafter the surviving partners should pay interest upon such
. A question remains as to the payment by the defendant Simmons of the Ballardvale mortgage above referred to. This payment was not made until after August, 1888, and cannot therefore be applied in reduction of the capital of the intestate before that day in determining the amount due to the dissenting heirs on that day. But it was made by virtue of an agreement with all the heirs. The dissenting heirs were responsible for two sevenths of it, and we think that, when paid, two sevenths of the amount should be charged to them in diminution of the amount then found to be due them.
The plaintiffs contend that this suit is to be treated as simply a suit between the administrators and the surviving partners, and that the latter should be decreed to pay to the former the whole amount of the accrued profits, without any regard to their payments to and agreements with the heirs, leaving the sum so paid to be distributed in the Probate Court. We do not think this is necessary or just. All the persons interested are parties to this suit. None have any controversy with the surviving partners, except the three dissenting heirs, and the object of the suit is to determine the amount to which they are entitled. This being determined, and paid, either directly or through the administrators, the object of the suit is accomplished, and the rights of all parties are protected. The amount, if paid to the administrators, would be for the sole benefit of these three heirs; no one else would have any claim upon it, and it is to be assumed that the Probate Court would order its distribution and payment to them. There would be no conflict between the two courts, and no mandatory order to the Probate Court. The decree would operate personally upon all the parties, and by its force would enable the dissenting children to receive the amount they are entitled to.
There is no necessity of going through the form of ordering the surviving partners to pay a large sum to the administrators which must be immediately repaid to them.
Case recommitted.