Greenslete v. Ferguson

John M. Kellogg, P. J.: The defendant had carried on the grocery store in the little village of Broadalbin for about sixteen years. The title to the store building and the fixtures was in him and his wife. Greenslete had been his clerk for several years and, on the 15,th day of September, 1915, was admitted as an equal partner in the business, each contributing $500, the firm renting the store and fixtures. Greenslete died December 4, 1916, leaving the plaintiff, his widow, the only person interested in his estate. The partners made an inventory November 26, 1916, at retail prices, which showed that the firm debts exceeded its assets by $400. Plaintiff’s father-in-law, for her and with her consent and approval, and the defendant each selected an appraiser, and the appraisers on March 5, 1917 inventoried the firm assets and liabilities: The stock on hand at $2,202.35; accounts, $1,151.11; total assets, $3,353.46. Total liabilities, $3,290.12. Apparent net assets, $63.34. The accounts were all treated as cash; the stock was inventoried at cost. The stock was retailed at from eighteen to twenty per cent above cost, and if we add twenty per cent of the cost of the stock to the inventory it would represent the largest amount which by any possibility could be realized from the firm assets, if sold at retail without expense. That would make the net assets $503.81, of which one-half would be $251.90. The accounts were not all collectible. The findings of the court, upon ample evidence, establish an indebtedness from the deceased partner to the defendant, on account of the partnership businéss, of $274.08, and clearly demonstrate that, upon the view most favorable to the plaintiff, she had no interest in the partnership business. All that can be required of a surviving partner is to account for the partnership assets and the proceeds thereof. The history of the partnership, and its want of success, ehminate any discussion of good will from the case. Being unable to sell the business, the defendant used about $1,600 of his own money to buy other merchandise, making the purchases in his own name and doing the business in his own name and in his own store. He believed the business was his and carried it on as his own. He swears that the father-in-law, in the plaintiff’s behalf, turned the business [747] over to him. No administration was taken upon the estate of the deceased partner until December 10, 1917. This action was brought March 8, 1918, for an accounting of the copartnership business, and resulted in a judgment, September 8, 1919, for plaintiff of $845.01 for her interest in the copartnership business, together with costs, $230.91. The referee finds that the defendant acted without the advice of counsel and in good faith, and that he disposed of the assets to the best advantage. It is difficult to understand how the plaintiff’s interest in the property, which was worthless in March, 1917, could materialize in this very substantial judgment. After the inventory, the plaintiff, while she was living at Broadalbin for some months, traded at the store for cash, as any other customer would. The alleged profits arise from the defendant’s carrying on his own business in his own store with his own capital. The fact that he was the surviving partner did not prevent him from again engaging in the grocery business and using his store and fixtures. He did not use the firm’s credit or name, but the business was entirely his and the carrying on of the business was to the advantage of the firm in marketing the goods, which were not otherwise salable, for a reasonable price. The judgment is erroneous and a court of equity cannot allow it to stand when it is so unjust, giving the plaintiff, without reason, the fruits of defendant’s labor. (Bryant v. Gay, 88 Hun, 614; 153 N. Y. 655.) It is apparent that the plaintiff, her father-in-law and the defendant, after the inventory, understood that she had no further interest in the business and the conduct of each party makes that fact plain. Defendant swears that after the inventory he told the father-in-law “ we were worth just $63.34; that he could take the $63 and the store and I would sell the fixtures for $100 less than they cost us, and he told me I could have the store, he didn’t want to go in the grocery business.” There was no satisfactory denial of this conversation and the referee should have found that the business was turned over to defendant. If the business was continued with the consent of the widow, the defendant is entitled' to compensation for earning the profit she claims. “ Care should be taken to distinguish [748] between the cases arising over claims for compensation for winding up the affairs of a partnership which has been dissolved and those arising over claims for compensation for continuing, after the death of a partner, the business of the firm, pursuant to the articles, or with the consent of the personal representative of the deceased who receives the profits arising from the continuation of the business. Robinson v. Simmons, 146 Mass. 167, is a type of this class of cases.” (Burgess v. Badger, 82 Hun, 488, 493.) “ If, without the consent of the representatives of the deceased partner, the surviving partner, at his own risk, continues the business and makes a profit, the estate is bound to allow reasonable compensation if it elects to share in the gains thus made.” (20 R. C. L. 1000; Consaul v. Cummings, 222 U. S. 262.) “ There is no fixed rule of law as to the rights of compensation to partners who carry on the business of a partnership after the-death of one of the members. Each case must be decided on equitable principles, appropriate to the facts of the case. * * * But there are many exceptions to the’ rule [that compensation is not allowable] where the courts recognize that the rule as applied to the facts would produce an inequitable result. Nothing can move a court of equity but equity and good conscience.” (Stem v. Warren, 185 App. Div. 823, 833, 834.) “ For his services in continuing the business, the survivor will not be allowed to charge unless there is an agreement therefor, unless the court is satisfied that the services have been very beneficial to the estate- or unless the representatives of the deceased partner elect jto share in the profits.” (30 Cyc. 640.) These views are not opposed to Clausen v. Puvogel (114 App. Div. 455). There the surviving partner was also the administrator and he was limited to an administrator’s fees. The other cases referred to are not in the way when the facts of each case are fully understood. No case has its brother; good common sense and good conscience are the best guides in determining what a court of equity should do in any particular case. Equity will not compel an unjust and unreasonable result. [749] The defendant, in carrying on his grocery business from the date of the March inventory to the judgment, has made a profit of $2,194.84, and the evidence shows beyond contradiction that his services were worth $2,496, for which credit is denied. In other words, with his .money and credit and services, the business has not earned him reasonable wages. The judgment gives the plaintiff substantially one-half of his earnings, less certain indebtedness which concededly was due him. "Adopting the view most favorable to the plaintiff, she cannot appropriate the fruits of defendant’s service for eighteen months without compensation, and a reasonable compensation for his services leaves the business where it was when the inventory was taken—'insolvent. The judgment should be reversed, with costs, and the complaint dismissed, with costs. All concur, except Woodward, J., dissenting, with an opinion, in which Kiley, J., concurs.