Raymond v. Davis' Estate

• Decision Date: 01 May 1928
• Parties: RAYMOND v. DAVIS' ESTATE.
• Court: New York Court of Appeals Court of Appeals

248 N.Y. 67

161 N.E. 421

RAYMOND

v.DAVIS' ESTATE.

Court of Appeals of New York.

May 1, 1928.

Proceeding by Frank Raymond to establish a claim against the estate of Andrew Davis, deceased. An order of the Surrogate's Court, establishing and liquidating the claim, was modified and affirmed by the Appellate Division (220 App. Div. 480, 221 N. Y. S. 675), and the estate appeals.

Order of Appellate Division reversed, and case remitted.Appeal from Supreme Court, Appellate Division, Fourth Department.

John Griffin, of Hornell, for appellant.

Nelson J. Palmer, of Dunkirk, for respondent.

CARDOZO, C. J.

Frank Raymond and Andrew Davis formed a partnership or joint venture in 1916 to deal in lands in Chautauqua county. The thought was that there were deposits of marl and lime which would permit a profit to be made if the lands were worked or sold. Raymond was to supply the knowledge and Davis the cash, the profits to be divided a third to one and two-thirds to the other. The project went forward on that footing. There were surveys and options and contracts and conveyances. One parcel, known as the Bremer property, paid for like the rest with money supplied by Davis, was left in Raymond's name. Other parcels were conveyed to a corporation, the Bone Dry Lime Corporation, of which Davis was president, in return for cash and shares of stock. This was in March, 1918. The cash went to Davis, but it did not exceed $5,000, after allowance made for expenses incurred in consideration of the payment, if indeed it was as much. The shares, which went to Davis also, had a par value of $15,000, but their actual value was uncertain, and from whatever value they might yield, there would be need to deduct his payments for the land before the profit could be measured.

Davis died a few months later, in December, 1918, with the joint venture still subsisting. There is no evidence that an accounting had been asked for or refused. There is none of a disclaimer of a partnership relation. Raymond waited a year and a half, and then put in a proof of claim for upwards of $11,000. He framed his proof upon the theory that a third of the gross assets, and not merely a third of the profits, was to be his share of the common venture. There were three trials before a surrogate or a county judge with varying results. On the third trial a decree was made for the allowance of the claim to the extent of $5,000. The Appellate Division upon an appeal by the executrix cut the claim still lower. By the findings of that court, Raymond's share was a third interest in the profits of the venture, and not in the gross assets. Davis, according to the findings, had received $5,000 in cash and shares of stock of the value of $15,000, $20,000 in all. He had expended, however, for principal and interest, $15,231.95, in taking title to the lands. This left a net profit of $4,768.05, of which a third is $1,589.35. The recovery due to Raymond was fixed at that amount, with interest. In addition he was held to have the right to retain the Bremer property free from any claim on the part of the estate.

[1][2][3][4] The profits of the joint venture remain unknown and unknowable without a winding up of the business through a liquidation of the assets. Crater v. Bininger, 45 N. Y. 545, 548;Bank of British North America v. Delafield, 126 N. Y. 410, 415,27 N. E. 797;Wilcox v. Pratt, 125 N. Y. 688, 25 N. E. 1091;Belanger v. Dana, 52 Hun, 39, 43, 4 N. Y. S. 776. Liquidation there has never been. Davis was not chargeable with the estimated value of the shares when issued as if in taking them he had received what was equivalent to cash. There is nothing in the record to suggest an understanding that he took them on that basis. The shares were not cash, but a substitute for the land, and were to be held like any other asset as a partnership investment, subject to an equitable lien for the repayment of advances made by either partner as a contribution to the capital. Partnership Law (Consol. Laws, c. 39) §§ 40, 71; Pollock on Partnership, p. 118. Not till the advances had been repaid either through a sale of shares or otherwise could profits be determined. Chapin v. Learnard, 246 N. Y. 158, 158 N. E. 58; Id., 246 N. Y. 629, 630, 159 N. E. 679. Not till then were the shares or the proceeds to be ratably apportioned. The shares are worthless to-day, for the corporation has become insolvent. We find no basis for a holding that the executrix is to be charged with their estimated value in the heyday of gladsome expectation when the venture was still young. If the loss is to be attributed to her inaction or misconduct, the fact has not been proved.

[5] Liquidation would be incomplete, however, though the shares were accounted for as money. The Bremer property, too, is an asset of the partnership, though held in Raymond's name. Instead of treating it as such an asset, he has incumbered it with a mortgage and claims it as his own. The decision of the Appellate Division upholds him in this assertion of title and dominion. We hold a different view. True, indeed, it is that the payment made by Davis in the purchase of the Bremer parcel has been allowed to his estate as a credit to be deducted from the value of the shares of stock. The only effect of that deduction is to free the parcel from a lien for capital expenditures, and leave it to be divided between the partners according to their interests. A balance...