Goodburn v. Stevens

The Chancellor, (Johnson :) It is, therefore, settled by the Court of Appeals, that the accounts are to be taken to the day of the death of Samuel Hayes, and that the right of his administratrix to recover as a creditor, depends upon the state of the accounts at that time. — 436 — The Auditor reports that the deceased was a creditor of the firm at that time, and this does not appear to be now disputed; the controversy with reference to this part of the claim of the complainant, applying to its amount, and not to its existence. In the statement of the Auditor, designated as G. No. 19, the principal of this claim is stated to be $6,644 56, and in account G. No. 24, which is an account between the administrator and the surviving partners, interest is allowed her on this sum from the 1st of May, 1826 to the 1st of September, 1848. Both sides are dissatisfied with this mode of stating the account, the complainants insisting that interest should run from the 1st of May, 1825 to the day of the death, and the defendants insisting that as the bill prays for profits, the Auditor should not have allowed interest, but should have stated an account of profit and loss from 1825 to 1841, when a decree was passed for a sale of the property, and have allowed the administratrix a proper proportion of those profits. The rule upon the subject of the right of the representatives of a deceased partner at their election, to demand an account of the surviving partners, (if they continue the trade,) of the profits, or to charge them with interest as stated in Story on Part., section 343, was adopted by the Courtof Appeals, when this case was in that court, and must, therefore, be looked upon as the true one. It is there said, “that if the surviving partners continue the trade orlbusiness, it is at their own risk, and they will be liable at the option of the deceased partner, to account for the profits made thereby, or to be charged with interest upon the deceased. partner’s share of the surplus, besides bearing all the losses.” The correctness of this rule has not been, and of course cannot be denied, sanctioned as it is by the high authority of the Court of Appeals; but it is said, that no election has been made in this case, the complainant, the administratrix of the deceased partner, having only called for an account of the profits with a view of determining whether she will claim a share of those profits or interest on the amount due her intestate. Such, however, is not my understanding of the bill. It al — 437 — leges that the surviving partners have carried on the business under the name and style of the old firm; and after making expensive improvements from the profits of the concern, they have divided among themselves large annual sums, and it prays that these surviving partners “may be required to fay to the complainant as administratrix, the share of her intestate of the personal property of said concern, as well as his share or portion of the profits which have accrued thereon since his death.” My opinion, therefore, would have been, independently of the opinion of the Court of Appeals, that the complainant had made her election to claim a share of the profits; and I should not have been prepared to say, that having so elected, she would have been at liberty afterwards to claim interest. But the Court of Appeals, as I think, have settled this question also. They say, “it was the undoubted privilege of the appellant,” (the complainant,) “on the case made by the bill, to demand the profits produced by the employment of her husband’s share of the property, from his death to the institution of the suit.” And having thus elected to claim profits and not interest, and the general rule being that the party is not at liberty to claim profits for one period and interest for another, I think the complainants must be restricted to a claim for profits, until the 31st of August, 1841, when the business was brought to a close, by the decree for a sale of the property. An account of profits must, therefore, be taken down to that period, and upon the sum thus found due the complainant, together with the amount due her intestate at his death, interest .must be allowed from the date of the decree to the mean day of sale, under said decree. Besides this claim against the partnership growing out of its indebtedness to the deceased partner, the complainant, the widow of Samuel Hayes, claims a reasonable and just allowance in lieu of her dower interest, in the real estate owned by her husband, and which constituted a part of the partnership property. This real estate, as has been decided by the appellate court, though regarded in a court of equity as personal estate for all partnership purposes, yet in the absence of an ex — 438 — press or implied agreement, indicating an intention to convert it into personal estate, will, when the claims against the partnership have been satisfied, and the partnership accounts adjusted, be treated in a court of equity as at law, as real estate, ánd be chargeable with the dower of the widow. In this case, the Court of Appeals have, in express terms, decided, that the widow of Samuel Hayes, is entitled to a proper allowance out of the proceeds of the sales of the partnership lands, as an equivalent for her dower, if the partnership was solvent at the period of its dissolution. And the question is, what this proportion shall be, and whether, in addition to the equivalent for dower, she is not entitled to rents and profits, from the period of the death of her husband until the sale of the property. The court of Appeals have said nothing, in regard to any claim of the widow for arrears of dower, or interest on those arrears ; nor have they decided whether she has a lien for her dower, on the proceeds of sale. All that has been decided, is, that when the claims against the partnership have been satisfied, the accounts adjusted, and the object of the trust fulfilled, the widow is to be entitled to an allowance out of the proceeds of the sales, as an equivalent for her dower in her husband’s interest in the real estate. The real estate sold for $33,771 27, and the Auditor reports, that on the 17th of September, 1845, that being the date of the last sale, the proportion of the widow, as an equivalent for the interest of her husband therein, was 1-8, she being about forty-seven years of age, amounting to $1,731 91. It is insisted on the part of the complainants, that this mode of stating the account is erroneous ; first, because the proportion should have been determined by her age at-the time of the death of her husband, in 1825; and, secondly, because no allowance is made her, for arrears of dówer from that time. My opinion is, that the death of the husband, in 1825, is the epoch to be taken, in fixing the allowance to be made to the widow in lieu of her dower, and that she must be paid the equivalent for the value of her interest at that time, according — 439 — to the rule of this court. The accounts arg.fq.^e taken to that period; and the equivalent to her, must be- measured by the value of her husband’s interest in the fea}),¡estate of the partnership at that time, after the claims of thf; creditors are satisfied. But, the complainants insist, that nof'dhly has the Auditor erred, in fixing on the 17th of September, 1845, as the period for determining the money equivalent to be paid the widow, in lieu of her dower; but that he has also erred in not making her an allowance for arrears of dower from her husband’s death to the day of sale, with interest on the yearly arrears as they accrued. That she was entitled to a money allowance in commutation of dower, has been settled by the Court of Appeals. Is she also entitled to arrears of dower, and interest on those arrears ? The complainants say that she is, and that the annual allowance ought to be computed on one-third of the interest on $13,855 29, the estimated proportion of the product of the real estate belonging to the heirs of her husband. I do not find it anywhere decided, that a widow can recover interest on arrears of dower; and in Park on Bower, 332, Lord Loughborough, is said to have stated, that there were no cases warranting such a proposition. But without deciding, or intending to express any opinion on the right to recover interest on the arrears of dower, when the title of the widow to recover the arrears themselves is clear, the question here is, whether under the peculiar'circumstances of this case, and upon this bill, such title can be maintained. The bill does not claim arrears of dower. The prayer is, that, “the complainant,” (the widow,) “may have a reasonable and just allowance made for her dower in her said husband’s interest in said lands and premises.” There was no demand upon the defendants, to account for the rents and profits of the lands, the claim and the account of profits, having reference exclusively to profits made by the surviving partners, from the employment of the partnership property, and the proportion thereof, to which the complainant, as administratrix of her husband, was entitled. And it would — 440 — seem to be quite obvious, that if the defendants were made to account for profits to the representative of their deceased partner, for the use of this real estate as a part of the partnership property; and are also compelled to pay the complainant, as widow, a proportion of those profits as arrears of dower, they will, to that extent, be paying twice for the use of the same property. Her deceased husband, who owned nearly one half of all the real estate employed in the business of the partners,would receive — or rather she, as his representative, would receive nearly one moiety of the profits, of which, as there were no children of the marriage, she, as widow, would be entitled to one half; and then, upon the ground taken by the complainants, she would as dowress, receive one-third of the supposed annual value of the interest of her husband in the same lands. It appears to me, there can be no equity in this, and it cannot be allowed. There are, moreover, circumstances attending this property, which would seem to take it out of the general rule applicable to oi'dinary cases of bills for dower, and rents and profits. The general rule is well settled, that the courts will decree dower, and rents and profits, to the widow from the death of her husband. Wells and Wife vs. Beall, 2 Gill and Johns., 468. But this property, being partnership property, and as such subject to the partnership engagements ; and as upon the death of the deceased partner it descended to his heirs at.law, clothed with an implied or constructive trust, until the purposes of the partnership were accomplished; the right of the widow to dower was postponed until those purposes should be accomplished by paying all claims against the partnership, and adjusting the accounts. Such was the decision of the Court of Appeals, when this case was before it in 1847. The right, therefore, of the widow was not a fixed and absolute right, but one depending upon the contingency, that there would be a surplus after paying the debts of the partnership ; and consequently it cannot, I think, be maintained, that the principles applicable to cases in which the title of the widow is clear,, and consummate by the death of the husband, will apply to this case. The property was subject to a trust para — 441 — mount to the title of the widow ; and until thát trust was fulfilled, her right was in suspense; and hence she cannot-have rents and profits from his death. Dower could not have been assigned to her at that time, nor can she have rents and profits, the incidents to the dower. It is true, as has been urged, that it was the business of the surviving partners to pay the debts, and wind up the concern; but if they failed to do so, the complainant had it in her power to stimulate them by a bill in this court: and a bill was accordingly filed by her for that purpose. But an examination of the proceedings will show that the long delay which has taken place, and the slow progress of the cause, is chargeable, perhaps, in a greater degree to the complainants than the defendants. My opinion therefore is, that the complainant can only have an equivalent in money, payable out of the proceeds of sales, according to her age, and the state of her health at the period of the death of her husband, with interest thereon from the mean day of sale; but that she is not entitled to arrears of dower, or interest in lieu thereof, from his death until that day. And I am also of opinion, that the widow is entitled to receive this sum in preference of the creditors of the new partnership, becoming such since the death of her husband. With regard to the bonds and mortgage to William Seal, I think the principal sums should be paid out of the personal estate of the mortgagor, in the hands of his administratrix, and if that is not adequate for their payment, then the balance should be paid out of the proceeds of that portion of the real estate contained in the mortgage. The complainants claim in their bill, that the defendants shall be compelled to pay this claim from that portion of the concern which was originally bought of Seal, which was a clear recognition of its validity; but the rule being, that as between the heir and the executor, the personal estate shall exonerate the real — being the primary fund for the payment of the mortgage — the heir in equity shall have the preference, and may insist upon such application of the personal estate. 2 Powell, 777, 780. — 442 — This being so, I can see no reason why the heirs at law of Samuel Hayes may not insist, that his personal estate, as between his personai representatives and themselves, shall be applied in exoneration of the real. And as both the personal and the real estate are now in this court, brought here by the act of the administratrix, it seems to me, this court may now see, that the proper application is made. If this mortgage debt should be paid by the heirs, they would have a clear right to reimbursement out of the personal estate, and the latter being in this court, no good reason suggests itself, why the proper application should not be made at once, to prevent circuity, and save expense and delay. It is not that this court usurps the powers of the Orphans Court, but upon a principle of equity, which regards the personal estate as the primary, and natural fund for the payment of debts ; and the court will — having both funds under its control — apply them in the order in which, as between the heir and executor, they are liable. 1 Story’s Eq., sec. 571. I think, therefore, this mortgage debt, or the principle thereof, must be paid out of the personal estate, if it is sufficient for the purpose. . I have said, that the principal sums due upon the mortgage to William Seal, should be paid out of the personal estate of Hayes, the mortgagor; but I do not think the interest should be, which accrued between the death of Hayes, and the sales of the property in 1845. During that period the defendants were in possession of the mortgaged property, and acknowledged that they received some profits; though, in their answer they say they received very little; — the profits being applied, as they represent, to keeping in repair, and enlarging the establishment. It appears to me, however, that they ought to have kept down the interest upon the debt, and that the payments which they made on account of interest, and which are stated in the Auditor’s statement G. No. 6, must be assumed to have been made out of the profits. There is another reason why the interest upon the bonds and mortgage to Seal should not be thrown upon the personal estate in the hands of the administratrix of Hayes. — 443 — The evidence shows that the property of the partnership was worth quite as much at the death of Hayes in 1825, as when the sales were made, although expensive improvements were made out of the profits after his death, and the accumulation of interest, therefore, upon those bonds, would be a clear loss to the estate of Hayes, if the burden must be borne by his personal estate. The surviving partner might, and ought, upon his death, to have sold the property and divided the proceeds among the parties entitled, according to their respective interests, and in that event, the estate of Hayes would have had to pay only the amount due at that time. But, by keeping it, and carrying on the business, they suffered a large amount of interest to accrue, which if not paid by them, must be paid by the estate of Hayes, without any corresponding advantage in the appreciation of the property. This, it seems to me, ought not to be allowed. According to all the authorities, the surviving partners have no right to expose the estate of the deceased partner to the vicissitudes of the business, without the consent of the persons interested in his estate. The interest, therefore, upon these bonds to Seal, from the death of Hayes until the property was sold, must be paid' out of the profits, or out of the defendant’s proportion of the proceeds of the real estate bought of him. With regard to the bond to Rachel Bryant, (from Samuel Hayes, which was paid by certain of the defendants, and assigned to them,) it is, I think, barred by limitations, and cannot be set up as against the complainants. Several sums are allowed the trustee in statement G. No. 14, which, I think, are not properly chargeable against the proceeds of the sales. His own personal expenses, and the travelling expenses of other persons, and for clover seed, and other matters connected with the cultivation of the land, cannot be allowed. Nor can he be allowed for sums paid R. M. Hayes, nor for postages ; but I see no objection to an allowance for counsel fees, which are admitted to be reasonable. The complainants’ 8th exception, (to the deduction from her claim, of that proportion of the costs incurred in the cause, and — 444 — the trustees’ expenses and allowances, which the interest of her late husband bore to the whole partnership estate,) appears to me to be well taken. The administratrix of Hayes is to be regarded as a creditor, and entitled to be paid as any other creditor would be, in preference to the parties who held the estate subject to her claim. It has already been said, that the bonds to Seal, secured by the mortgage, are, as to the principal sums, to be paid out of the personal estate of Hayes in the hands of his administratrix, if it be sufficient; and that the interest thereon from the death of Hayes until the property was sold, must be paid by the defendants, either from the rents and profits, or out of their proportion of the proceeds of the real estate. The interest from the period of the sales must be paid by the administratrix out of the proceeds of the personal estate. And I have also said, that this court will retain the money, and make the proper application of it in this court, upon the grounds already stated. But it is not to be understood, that the court will, in this proceeding, discharge the functions of the Orphans’ Court, and settle the administration accounts; and, therefore, when the accounts are stated, ascertaining the sum due the complainant, as administratrix of her husband, after deducting therefrom the amount payable on the mortgage debt, the residue will be paid over to her, to be accounted for in the Orphans’ Court of the proper county. It may also be said, that I approve of the mode in which the Auditor has stated the trustees’ commissions on the several sales, (the trustees having calculated the commissions separately on each sale, when made at different epochs, and not treated the sales as made at one time ;) and that in charging interest on Seal’s bonds, he should charge up to the mean day of sale. Many of the exceptions going to the details of the accounts, it is not necessary to decide, as the present questions which will be considered by the Orphans’ Court, when the accounts of the administratrix are stated there. [No appeal was taken from this order.]