In re the Special Proceeding of Keller

Miller, J.: Adolph Keller died on the 18th of May, 1904, leaving a last will and testament in and by which he appointed the respondent and his widow and brother-in-law, the petitioners and appellants, executors and trustees of- his will. His estate consisted of his interest in the • firm of L. H. Keller & Co., composed of himself and the respondent. The copartnership was formed March 14, 1895. On the'14th day of April, 1904, new articles were executed. They provided that, upon the death of either member, an inventory should be taken by the survivor within three months; that the property, save cash, book accounts, bills payable, promissory notes, stock in certain corporations and jeVels and supplies carried under a stated account, should be valued at sixty per cent of the cost price; that the said jewels and supplies should be valued at eighty-five per cent of the cost price; that the stock of the Keller Jewelry Manufacturing Company, which was owned by the copartnership, save cash in hand and in bank, should be valued at seventy-five per cent of the cost; that the capital stock of certain corporations owned by the firm should be valued at seventy-five per cent of the [456] par value, and that the good will of the firm should be valued at $4,000, but that no value whatever should be allowed for the good will óf the Keller Jewelry Manufacturing Company that the interest of the deceased partner, thus ascertained, should be paid to his representatives in the following manner, viz.: Two. and one-half per cent thereof annually for the period of four years, and thereafter semiannually at the same rate, until the entire amount should be paid, interest to be allowed at the rate of four per cent. The testator’s will, made on the same day, ratified and confirmed said articles of copartnership. The capital account of- the testator was carried on ..the Copartnership books at the time of his death at $78,267.48. The inventory furnished the executors by the respondent, within three months after the testator’s death, showed the value of that interest to-be $38,554.85. The petitioners and appellants have brought a suit against the respondent, as surviving partner, for an accounting. They attack the inventory and assert that the respondent procured the testator to execute the said copartnership articles when the latter was feeble in body and mind. It does not distinctly appear whether fraud and undue influence are specifically averred. It is quite significant that the main purpose of the new articles •of copartnership apparently was to provide for dissolution upon the death of one of the partners. The plaintiffs in that action sought an inspection of the books and papers of the copartner'ship, and an order granting an inspection was recently affirmed by us against the opposition of this respondent. (Keller v. Keller. 138 App. Div. 910.) The learned justice at Special Term thought that in view of the gravity of the" charges made against the respondent the matter ought to.be referred to a referee. While undoubtedly the Special Term had the power to order a reference, we think that power was improvidently exercised. The questions referred to the referee are involved -and will be adjudicated in the action for an accounting. A reference in this proceeding will have little effect but to subject the parties to useless expense. It plainly appears that there is a substantial controversy between the parties and that, as a result thereof, the respondent occupies two inconsistent positions, one as trustee and the other as surviving partner, and that his private interests as surviving partner conflict [457] with his duties as trustee. He ought to be the first to apply for relief from the embarrassment of- such a situation. The Supreme Court has power in an action brought or on a petition presented to remove a trustee “ who for any * * * cause shall be deemed to be an unsuitable person to execute the trust.” (Real Property Law [Consol, Laws, chap. 50; Laws, of 1909,- chap. 52], § 112.) When a trustee acquires .or asserts interests in hostility to his trust he becomes an unsuitable person to execute the trust. (Pylev v. Pyle, 137 App. Div. 568.) Ho such situation as here exists was involved in Matter of Thieriot (117 App. Div. 686). Of course, the respondent, as surviving partner, is entitled to liquidate the copartnership. The petitioners merely ask that he be relieved of the embarrassment of continuing as trustee of his deceased partner in view of the fact that a substantial controversy has arisen in which his private interests conflict with his trust duties. We do not undertake in any way to pass upon the merits of the controversy, but only decide that it is of' such a nature as justifies-the court in relieving the respondent of the burden of continuing as trustee. The order should be reversed, with ten dollars costs 'and disbursements and the petition granted. Ingraham, P. J., Laughlin, Clarke and Scott, JJ., concurred. , Order reversed, with ten dollars costs and disbursements, and petition granted. Settle order on notice.