Heath v. Waters

• Decision Date: 09 April 1879
• Citation: 40 Mich. 457
• Parties: Merica E. Heath, adm'x of Elijah W. Waters v. Daniel H. Waters and William B. Remington
• Court: Michigan Supreme Court

40 Mich. 457

Merica E. Heath, adm'x of Elijah W. Waters v. Daniel H. Waters and William B. Remington

Supreme Court of Michigan

April 9, 1879

Submitted January 22, 1879; January 23, 1879. [Syllabus Material]

Appeal from Kent. Submitted January 22 and 23. Decided April 9.

The decree affirmed.

James A. Rogers and Stephen H. Ballard for complainant. It is illegal for a surviving partner to procure compensation from decedent's estate for carrying on the business during decedent's sickness, Beatty v. Wray, 19 Pa. 516; Franklin v. Robinson, 1 Johns. Ch., 165; Bradford v. Kemberly, 3 Johns. Ch., 434; a surviving partner is a trustee who must wind up the business and account to decedent's estate (Ramsdell v. Millerd, Har Ch., 373; Stoughton v. Lynch, 2 Johns. Ch., 210; Beacon v. Rickets, 4 Johns. Ch., 304; Story's Eq. Jur., §§ 1207, 1211; Story on Partnership § 343), and cannot buy from its representative at private sale, its share of firm assets, Huguenin v. Baseley, 14 Ves. 273; Farnam v. Brooks, 9 Pick. 212; Butler v. Haskell, 4 Dessau. 680; Wormley v. Wormley, 8 Wheat. 421; Dunscomb v. Dunscomb, 1 Johns. Ch., 510; Story's Eq. Jur., §§ 190, 196, 287.

Eben Smith and J.C. Fitz Gerald for defendants. The representative of a deceased partner may sell the latter's interest to the survivor and settle with him, and in the absence of fraud or mistake, the settlement would be conclusive on the parties and all claiming under them, Sage v. Woodin, 66 N.Y. 578; Chambers v. Howell, 11 Beav. 6; Parsons on Partnership, 443, n. s: 511; and the burden of proof is on the representative to show fraud if it is sought to set it aside on that ground, Perrett v. Yarsdorfer, 37 Mich. 596; Robert v. Morrin, 27 Mich. 306; fraud is not to be inferred from the mere relations of the parties, Chambers v. Howell, 11 Beav. 14; one who seeks to set aside an agreement for fraud must prove the fraud as alleged, Creasey v. St. George etc., 34 Mich. 51; Ford v. Loomis, 33 Mich. 121; Rudd v. Rudd, id., 101; Harwood v. Underwood, 28 Mich. 427; Buck v. McCaughtry, 5 T.B. Monr., 216; Carneal v. Banks, 10 Wheat. 181; Kerr on Fraud, 365, 382; one cannot retain what he has received and yet treat his agreement as void, Dunks v. Fuller, 32 Mich. 242, and if he seeks to rescind for fraud, he must not delay, Wright v. Peet, 36 Mich. 213; Whiting v. Hill, 23 Mich. 399; De Armand v. Phillips, Walk. Ch., 186; Grymes v. Sanders, 93 U.S. 55; mere inadequacy of consideration does not show fraud unless extremely gross, and relief cannot be obtained on that ground if the bill does not charge fraud in this particular, Eyre v. Potter, 15 How. 42; a surviving partner must account to the decedent's representative only when he continues business with capital belonging to the decedent's estate, Story's Eq. Jur., § 676 b; Parsons on Partnership (3d ed.), 481; Wedderburn v. Wedderburn, 22 Beav. 99; Taylor v. Hutchison, 25 Gratt. 536; Crawshay v. Collins, 15 Ves. 218: 2 Russ. 325; Brown v. De Tastet, 1 Jacob. 284; Collyer on Partnership, 534; Waring v. Crane, 1 Parsons Selected Eq. Cases, 522. One should not be compelled to go to trial before one who has prejudged the case, Schermerhorn v. Van Alen, 13 How. Pr., 82; Moses v. Julian, 45 N.H. 52; Yale v. Gwinits, 4 How. Pr., 253. A surviving partner who carries on the business and has to account for profits to the decedent's estate is entitled to compensation for his services, Schenkl v. Dana, 118 Mass. 236; Griggs v. Clark, 23 Cal. 427; Newell v. Humphrey, 37 Vt. 265.

Campbell, C.J. The other Justices concurred.

OPINION

Campbell, C.J.

This controversy, which is chiefly to obtain a settlement of partnership affairs, contains two main branches: First, a cause of action against Daniel H. Waters for such accounting; and second, a claim against Remington for the use of certain property which had been previously used by the same partnership. These for the purposes of the decision will be kept separate as far as may be.

The complainant's case is in brief this: Her former husband, Elijah W. Waters, was for some time before his death in partnership with his brother, Daniel H. Waters, and the business involved in this cause was chiefly the manufacture and sale of wooden ware of various kinds. Most of this was made on premises used with water-power derived from a canal in Grand Rapids, and there was a saw-mill auxiliary to the other machinery. A majority of the work was called box and rim work, made of thin wood bent into circular forms, for boxes, measures and similar ware. The land and buildings belonged to the several partners in common, but the power was rented of a company owning and managing the canal. The record contains a history of earlier dealings which are not important, except perhaps to throw light on some collateral inquiries not directly involved in the merits.

The partnership in question was controlled by written articles not executed until April 19, 1866, which gave each partner an equal right and interest with his co-partner, and which showed each to have then contributed $ 10,901.33. By these articles it was covenanted that the surviving partner, upon the death of either, should upon payment as therein provided, become sole owner of all the joint property, real, personal and in action.

On June 7, 1867, a full settlement was made to that date. No further settlement was made during the life of Elijah. After his death certain dealings were had which will be referred to in their place.

During the latter part of 1867, Elijah was confined to his house and unable to take any active part in the business. He died January 11, 1868, leaving a will made November 4th, 1867, whereby he bequeathed and devised to complainant, his wife, all his property, whether partnership or not, that was held jointly with Daniel, to hold for life in trust to the amount of ten thousand dollars, so as to provide $ 5,000 to be invested for each of her two children, and the remainder for her own benefit. But she was not to break in on the capital beyond the $ 10,000. The personal assets not held jointly with his brother were to go absolutely to the wife.

On the 16th of March, 1868, complainant was made executrix. About that time and shortly after an inventory was made of the estate in the probate court in which the interest in the partnership effects was set down at $ 10,940.31. This is but a few dollars more than was originally put in. This inventory was made at what the appraisers called the actual cash value. Upon some items they discounted paper down so as to make it equivalent to a ten per cent. investment to its maturity in the future. An important controversy arises as to the correctness of the property valuations, as will appear hereafter. A partnership inventory made up $ 28,980.62, less $ 5,100 debts.

At about the same time Daniel Waters represented to complainant that he was justly entitled to payment for his services in managing the business during his brother's illness, and she turned over to him a partnership claim against one T. T. Davis, the precise value of which is a little uncertain, being spoken of as $ 3,500 and as $ 3,100. It was reckoned below at $ 3,100. It is claimed that this was a doubtful demand. It seems, however, to have been made available. It was not included in the inventory.

Daniel Waters did not exercise his right of taking the property under the partnership articles, but continued doing business apparently in the usual way until September, 1868, when he procured a transfer from complainant of all the partnership interests in personal assets on the assumed basis of the March inventory for $ 2,790.31, a majority of which he paid by time notes drawn without interest, which, however, he took up in the ensuing December. At the time of purchasing out the personalty he took a lease of the building and machinery for $ 600 a year. Two quarters' rent was paid.

In December, 1868, complainant married one Frederick G. Heath, and was soon thereafter appointed administratrix, with the will annexed, of the estate of Elijah W. Waters.

Immediately after purchasing from the administratrix Daniel Waters joined with him in business, Alonzo Clements, his foreman, and Oliver S. Waters, his brother, and they continued to carry on the same business until December, 1869, when a change was made. Daniel Waters then sold out his interest in the building and fixtures that had been used to defendant Remington, who went into possession of the whole for similar purposes. Daniel Waters and his partners organized a corporation known as the Michigan Barrel Works, where work of the same general character has been carried on ever since.

Remington subsequently, and while this suit was pending, made an arrangement whereby he was allowed to keep possession in consideration of paying complainant what the premises were worth.

As the final decree held him responsible for nothing more than this rent, the only question, so far as he is concerned, is whether he has been overcharged. The objection that he should not have been charged at all in equity is not, we think, well taken. He was alleged by the bill and shown by the proofs to have had the use of property belonging to the firm of E. and D. Waters, and in the view we have taken of the other branch of the case might have been liable to some sort of responsibility enforceable in equity. The agreement to substitute payment of reasonable rent did not render the case defective, and we see no very good ground for declining to allow the amount to be fixed in this case, especially as the testimony was introduced at much length on both sides at great expense and entirely without any reasonable attempt to oppose the jurisdiction.

We think the amount not excessive. While the accounting charges...