Robinson v. Simmons

• Decision Date: 29 February 1888
• Citation: 146 Mass. 167,15 N.E. 558
• Parties: ROBINSON et al. v. SIMMONS et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

146 Mass. 167

15 N.E. 558

ROBINSON et al. v. SIMMONS et al.

Supreme Judicial Court of Massachusetts, Suffolk.

February 29, 1888

COUNSEL

R.M. Morse, Jr., for plaintiffs.

The plaintiffs contend that the defendants must account to them for the amount of the capital of the intestate estate used by them, and for its proportionate share of the profits. As the partnership was dissolved, there can be no pretense, as there is certainly no authority, for holding that the division of profits should be on the basis of the partnership agreement which had terminated. The duty of surviving partners is clearly stated by C. ALLEN, J., in Freeman v Freeman, 136 Mass. 260. See, also, Emerson v Senter, 118 U.S. 8, 6 S.Ct. 981. "In ascertaining the share of the deceased, the surviving partners must not only bring into account the assets of the firm which actually existed at the time of his death, but also whatever has been obtained by the employment of these assets up to the time of the closing of the account, for so long as profits are made by the employment of the capital of the deceased partner, so long must such profits be accounted for by the surviving partners." 2 Lindl.Partn. 1046; Crawshay v Collins, 15 Ves. 218; Yates v. Finn, 13 Ch.Div 839; Washburn v. Goodman, 17 Pick. 519; Townend v. Townend, 1 Giff. 201; Goodburn v. Stevens, 1 Md.Ch. 420, 5 Gill, 1; Brown's Appeal, 89 Pa.St. 139; Forrester v. Oliver, 1 Bradw. 259; Skidmore v. Collier, 8 Hun, 50; Cook v. Collingridge, Jac. 607. The defendants, having undertaken to deal with these partnership assets in violation of their fiduciary obligations, should not be allowed to play fast and loose with the property in their hands. The plaintiffs submit that the defendants cannot discharge themselves from their liability for the amount of capital which they took, except by a payment to the administrator. The knowledge of the defendant Simmons will not, under the circumstances, be imputed to the administrator. Innerarity v. Bank, 139 Mass. 332, 1 N.E. 282. The defendants are not entitled to compensation for their services in carrying on the business. To allow it would be to offer a premium on breaches of trust. The general rule is that surviving partners are not entitled to compensation. Dunlap v. Watson, 124 Mass. 305; Beatty v. Wray, 19 Pa.St. 516; Brown v. McFarland's Ex'r, 41 Pa.St. 129; Washburn v. Goodman, ubi supra; Brown's Appeal, ubi supra. It has been allowed only in exceptional cases; as in Schenkl v. Dana, 118 Mass. 236; Yates v. Finn, 13 Ch.Div. 839; Wedderburn v. Wedderburn, 2 Keen, 722, 4 Mylne & C. 41, 22 Beav. 84. But there is a clear distinction between all of these cases and the case at bar. Again, the fact that defendant Simmons is administrator, and, as such, entitled to compensation, is a sufficient reason why no compensation should be allowed him as surviving partner. Heathcote v. Hulme, 1 Jac & W. 122. The plaintiffs contend that the only issue in this case is the amount due from the defendants to the administrators; that the transactions between the defendants and Virginia A. Beals, Edith W. Beals, and Edward Henshaw, guardian and administrator, August 25, 1883, by which the former paid the latter $20,000, and between the defendants and the widow and the surviving children, by which the latter agreed that their shares should remain in the business at 7 per cent. interest, are not material to the issue; and that the questions arising thereon cannot be determined by the decree in this case.

W.K. Blodgett, Jr., for defendants Virginia A. Beals and Edith W. Beals.

It was the duty of the surviving partners, upon the death of George W. Simmons, to wind up the business. They were trustees for that purpose. Continuance of the business was a breach of trust. Upon the facts, we assume that the court will compel the defendants, Simmons and Spofford, so long as they continue the business without liquidation, to account to the administrators for the whole capital of the intestate estate thus wrongfully used by those defendants, and for its proportionate share of the profits. And we assume, further, that the defendants Simmons and Spofford will not be allowed compensation for their services in thus wrongfully continuing a trust business for the purpose of appropriating it to their own use. Burden v. Burden, 1 Ves. & B. 170; Crawshay v. Collins, 15 Ves. 218; Yates v. Fin. 13 Ch.Div. 839. It is important, in considering this question, to bear in mind the distinction between the above cases--which are on all fours with the case at bar--and those cases in which the surviving partners had, by agreement or otherwise, a right to continue the partnership business; as in Brown v. De Tastet, 1 Jac. 284; Cook v. Collingridge, Id. 607; Wedderburn v. Wedderburn, 2 Keen, 722; Willett v. Blanford, 1 Hare, 253; Simpson v. Chapman, 4 De Gex, M. & G. 154; Vyse v. Foster, 8 Ch.App. 309; Schenk v. Dana, 118 Mass. 236; Freeman v. Freeman, 136 Mass. 260, 142 Mass. 98, 7 N.E. 710. The court, under the circumstances, will certainly not allow one trustee, who had us completely at his mercy, to deduct, by a forced manipulation of the accounts, our withdrawals, or any portion of them, from the profit-sharing fund which he held in trust for us, when the ordinary rule of merchants, where the parties are treating on terms of equality, would never go to that extent. We had a right to suppose, as we did, that any advancement made by him to us under those circumstances, in the absence of any statement by him, was a simple deduction from whatever profits upon our share in the business had then accrued, or should thereafter, within a reasonable time, accrue, or should prove to have accrued upon a subsequent final accounting. We submit that we were, at least, in as favorable a position as the ordinary partner, who, with equal knowledge, draws such sums as his co-partners may consent to, to be deducted from his share of the profits at the next settlement of accounts. We submit that if the accounting be between us and the surviving partners, the amount withdrawn by us, August 27, 1885, is to be deducted, not from our capital in the business, but from the profits which may be finally found to be due to us. The state of facts, as between us and the defendant Simmons, was this: He was our administrator. Two debts were presented to him for payment,--each proper to be paid; each subject only to ordinary interest,--one for a small amount; the other for a larger amount,--the payment of which might reasonably be delayed (as in fact it was) for eight months. He had in his possession, at that time, two funds belonging to us,--one, certain bonds, which were producing only simple interest, and which might have been sold or pledged at slight sacrifice; the other a trust fund, producing to us an income of more than 90 per cent. on our investment, and so mingled with his own property that any diminution of our portion was a corresponding increase of his. It would be monstrous to allow him, under such circumstances, to sacrifice our interest in the profit-producing fund, of which he was our trustee to protect; especially in view of the fact that his own good judgment, before it had been misled by considerations of self-interest, had decided to make use of the bonds for the payment of both these debts. We submit, therefore, that on this bill in equity no reduction whatever should be made in respect of these sums. The defendant Simmons must be conclusively presumed to have paid them in a reasonable and proper way, and is to be credited for them in the probate court in the ordinary settlement of his accounts. At the most, if deducted here, they can only be deducted from our profits; not from our share in the fund. We submit that after September 1, 1883, the profits which would have accrued upon the share of the four withdrawing defendants, must be divided between the remaining partners, or part owners, or parties interested, and that that division must be made according to the proportions which the profit-sharing rights of those remaining partners bore to each other, from the death of Mr. Simmons to September 1, 1883. The defendants submit, finally, that they are entitled, either directly or through administrators, to a decree that the business of George W. Simmons & Son, shall be sold as a "going concern;" that an account of all the profits shall be taken to the time of the sale; that in reckoning the profits no compensation shall be allowed to the defendants Simmons and Spofford; that no deduction shall be made for any sums paid by the defendant Simmons in settlement of liabilities of George W. Simmons, deceased; that the profits be divided in proportion to the shares in the capital, as reported by the master, at the date of the death of Mr. Simmons; that from and after September 1, 1883, the shares of the defendants F.A. Simmons, T.H. Simmons, S.M. Simmons, and C. Simmons, be treated as loans at 7 per cent. interest; and that from and after that date the profits which would have accrued to those defendants be divided among the remaining defendants, according to the proportions which the profit-sharing rights of those remaining defendants bore to each other, from the death of Mr. Simmons to said September 1st; that from the profits finally found due to the defendants Virginia A. Beals, Edith W. Beals, and Edward Henshaw, in his own right, or as guardian or administrator, there be deducted the sum of $20,000.

W.G. Russell and J.O. Teele, for defendants.

Any act done by Simmons in the course of administration in August or September, 1883, was rendered valid by his appointment as administrator in November, 1883. Alvord v. Marsh, 12 Allen, 603. See Hatch v. Proctor, 102 Mass. 351. It is the duty of the administrator to get in the assets of...