Summary
In Clausen v. Puvogel (114 App. Div. 455) a surviving partner, who was also an administrator of his partner's estate, had in good faith and without objection by his coadministrator continued the business and earned a profit.
Summary of this case from Germann v. JonesOpinion
July 12, 1906.
Hamilton R. Squier, for the appellant.
Jerome Eisner, for the respondent.
The principal contention of the appellant is that he should have been allowed the salary. It is urged that he continued the business in good faith; that he did not deny that he was continuing it for the benefit of the estate of the deceased partner, as well as for himself, and that as he made a substantial profit in which the estate of his deceased partner shares equally, it is but equitable that he should be allowed compensation for his services. Upon the facts presented, there is no room for questioning the appellant's good faith in continuing the business and it would seem equitable and right that he should be compensated for his services which resulted in a profit and enables the plaintiff and others interested in the estate of her father to receive a substantial distributive share. The court, however, is without authority to compel the plaintiff to do equity in this particular case without disregarding a wholesome rule which it is essential to preserve inviolate.
It has long been the established rule that a surviving partner should not be allowed any compensation for his services in liquidating the business. ( King v. Leighton, 100 N.Y. 394; Slater v. Slater, 78 App. Div. 449, 459; Burgess v. Badger, 82 Hun, 488; Skidmore v. Collier, 8 id. 50; Coursen v. Hamlin, 2 Duer, 520.) It is the duty of an administrator, and, in the absence of a direction for the continuance of the business of the decedent in his will, of an executor, to dispose of the business and convert it into cash with all reasonable dispatch, having due regard for the interests of the next of kin or beneficiaries and creditors ( Riddle v. Whitehill, 135 U.S. 621; Gilmore v. Ham, 142 N.Y. 1, 8); and a continuance of the business beyond a reasonable time for this purpose is unauthorized. An administrator or executor is ordinarily confined to the fees or commissions prescribed by statute; and if the business of the decedent be continued under authority contained in the will, the services rendered by the executor in continuing it are deemed part of the duties of his office and he cannot receive therefor any compensation other than the commissions allowed by law. ( Matter of Hayden, 54 Hun, 197; 7 N.Y. Supp. 313; affd., 125 N.Y. 776, on opinion at General Term.) In Matter of Hayden ( supra) it was held that a son employed by his father at a salary of $5,000 per annum, appointed executor of his father's will and authorized thereby to continue the business in his discretion, electing to continue it under an arrangement with his coexecutors that he should receive the same salary as during the lifetime of his father, was not entitled to an allowance for the salary on an accounting, it appearing that there were infants in interest for whom lawful consent thereto had not been given. If, however, the appellant had continued the business at the request of all parties in interest and they were competent to consent, then doubtless he would have been entitled to receive the salary which he appears to have justly earned. ( Matter of Braunsdorf, 13 Misc. Rep. 666; 2 App. Div. 73; Lent v. Howard, 89 N.Y. 169. See, also, Burgess v. Badger, 82 Hun, 488, and Robinson v. Simmons, 146 Mass. 167.) It follows, therefore, that the appellant's account was properly surcharged with the amount of the salary withdrawn by him.
I am of opinion, however, that his account should not have been surcharged with interest on the moneys which he drew out as salary. The plaintiff in the circumstances disclosed had her election to have an accounting to the estate as of the date of the death of her father and to demand that the surviving partner account for and pay over the share of the assets of the estate to which she would be entitled, together with interest thereon, or, instead of asserting this claim for interest, to claim the profits of the business, which, according to her theory, was wrongfully conducted by the appellant with the firm assets. Having made such election, she is only entitled to an accounting for the principal and for the profits which take the place of interest. In such case the appellant is not obliged to account in detail for the business as conducted by him, and he may in the first instance merely account for the profits, but the contestant is then at liberty to show that the profits are greater than the amount admitted. ( Matter of Peck, 79 App. Div. 296; affd., 177 N.Y. 538.) It is manifest that the accounting for profits is confined to an inquiry as to the actual profits and not to the profits that might have been realized had the business been conducted differently. ( Matter of Peck, supra.) It is evident, therefore, that on the accounting the propriety of disbursements other than to the appellant himself cannot be investigated. If in addition to being charged with the amount with which he has credited himself as salary he is also to be charged with interest thereon, then the court is revising the profits and adding thereto without proof that the amount added on account of interest was earned. Since he was not entitled to the moneys withdrawn for salary, he should be charged therewith as if the moneys were still in his hands, and they are thus considered in arriving at the profits. In the ordinary case of a copartnership accounting partners are not liable for interest upon moneys withdrawn, because, until there is an accounting and the balance is ascertained, it cannot be said whether the partner was owing the firm or the firm was owing him. ( Johnson v. Hartshorne, 52 N.Y. 177.) Although the rule is not applicable here, yet the effect of limiting the plaintiff to requiring an accounting for the profits is the same. The money withdrawn earned no profits in the business and, therefore, no profits by way of interest or otherwise can be charged.
The compound interest on the note was paid voluntarily; there was no mistake of fact. If a mistake at all, it was merely a mistake of law. The appellant, instead of paying cash for the estate's share of the property, as he should have done, gave a note therefor and thereby deprived the estate of the use of the money. There is no insuperable obstacle to recovering back money paid under a mistake of law or fact or even negligently, provided the position of the party receiving it has not changed so that he will be prejudiced. ( Mayer v. Mayor, 63 N.Y. 455; Martin v. Home Bank , 160 id. 190.) In this case, however, it appears that the appellant continued the business without authority and that he refused to account. In Johnson v. Hartshorne ( supra) the court said: "Compound interest may be charged in cases of bad faith, refusal to account, and private use of money, and the question of its propriety was a question of fact for the referee, whose decision is conclusive. There were facts found from which the referee might conclude to make this charge. (2 Kent Com. 231, note; Collyer on Part. § 336, note 3.)" The money having been paid voluntarily, therefore, we are of opinion that the referee was justified in refusing to permit the plaintiff to be credited therewith.
The remaining claim is that the appellant should have received credit for the checks. His books of account were inaccurate, and it was difficult to ascertain the true state of the accounts. While the propriety of a disbursement, if made in the business, could not, as already shown, be considered, the burden was upon the appellant to show that the disbursements evidenced by these checks were made in the business. That he has failed to do and his account was, therefore, properly surcharged therewith.
It follows, therefore, that the judgment should be modified by deducting the amount charged for interest on the amounts withdrawn for salary and interest thereon, and as so modified affirmed, without costs.
O'BRIEN, P.J., PATTERSON, McLAUGHLIN and CLARKE, JJ., concurred.
Judgment modified as directed in opinion, and as modified affirmed, without costs. Settle order on notice.