Case ID: ad_40/html/0348-01.html
Source: Caselaw Access Project
Author: {"author": "\n      O’Brien, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Emma Hayes, Respondent, v. Leonard R. Kerr, Individually and as Executor and Trustee, etc., of Lawrence R. Kerr, Deceased, and as Administrator, etc., of Mary Kerr, Deceased; Mary R. Kerr, Lawrence R. Kerr and Myra Kerr, Appellants, Impleaded with Walter Ashe and Others, Respondents.
    
      Mquitable action to set aside a transfer of property and, for an accounting — it is not to be treated as an action for conversion — measure of accountability for the use of real property.
    
    In an action in equity brought by one of the next of kin and an heir at law of a decedent to set aside certain conveyances, and for an accounting, and the appointment of a receiver, a person in whose possession the' property in question is, a defendant in such action, cannot be charged with the value of the property as though he had converted it; the proper relief in such a case should, provide for the return of the property, together with such profits as may have; been realized from its use while it was withheld or employed by the wrongdoer.. It is only in cases where the property taken is destroyed, or the title to it is in, some way parted with by the wrongdoer to some third person, and the proceeds are converted, or in some other way the identity of the property is lost, or its possession cannot be regained, that the value of the property on the theory of conversion will be allowed.
    Where there is no evidence of bad faith, or want of judgment, or of care, or of ' diligence in the, way in which the defendant has managed or has rented the property, a hotel consisting of several buildings; and having, the furniture ¡as a. necessary equipment •— and it appears that it was rented in the way in which, it would bring the highest price, namely, as a whole, for hotel purposes —-the amount received for such renting being all that the defendant, or any one, so- . far as is shown, could have obtained for the property, the defendant should, not be charged, with an estimated rental value, regardless of what he has. received from the property, but should be considered, and be held, accountable as a trustee for himself and those who, by the interlocutory decree in the , action, fixing the rights of the parties, have been held to be entitled to ah. interest in the property.
    Appeal by the defendants, Leonard R. Kerr and others, from a final judgment of the Supreme. Court in favor of the plaintiff- and certain of the defendants, entered in the office of the cleric of the; county of Hew York on the 29th day of October, Í898, upon the report of a referee appointed pursuant to an interlocutory judgment heretofore entered in the action.
    
      Sol. Kohn, for the appellants.
    
      Peter B. Olney and Edw. C. Boardman, for the respondents.
   O’Brien, J.:

This suit in equity, brought by the plaintiff as next of kin and heir at law of Mary Kerr, deceased, to set aside certain conveyances and transfers of property, including a hotel and its furnishings, for an accounting and for the appointment of a receiver, resulted after a trial in an interlocutory judgment granting the relief asked for in the complaint. On appeal to this court the judgment was modified in some respects unnecessary here to discuss, and the questions of an accounting were sent to a referee. In the opinion of this court •on that appeal (19 App. Div. 91) all the facts are fully set forth and need not be repeated. This appeal presents questions relating to the proceedings had before the referee.

The interlocutory judgment, as modified, provided that the defendants Leonard R. Kerr and Lawrence R. Kerr account before the referee for all the “ property covered by the transfers which are avoided by the said interlocutory judgment, * * * and for all of the proceeds, rents, issues and profits thereof received by them, or either of them, including all of the rents, issues and profits as may have, been received by them, or either of them, under the agreement made by and between Leonard R. Kerr and the said Mary Kerr, deceased, dated the 11th day of January, 1889, and known as Defendants’ Exhibit 3.” Exhibit 3 is as follows : ■

“ Hew York, January 11th, 1889.
“ I agree to run the Hotel with my son Leonard R. Kerr on equal terms, Leonard to have the entire management of the Hotel.
her
“ MARY X KERR.”
mark.

The learned referee in his decision and also in his report states: "In this case, when the parties first appeared before the referee, it was agreed that the three questions of fact on which the referee was to find and report as to the amount due, were : First. What was the value of the personal estate at the time of its conversion by the defendant ? Secondly. What was the rental value of the premises, real estate, the deed in regard to which had been set aside by the court ? Third. When did the agreement of the 11th of January, 1891, commence by its terms to run^ and what the amount of the profits under it were.”

The appellants insist that there was no such agreement upon questions to be disposed of, and the respondent virtually admits that the record does not show it: The extent to which the respondent: goes is in saying that the referee correctly states the substance of what occurred at the opening of the case, but the-defendants were not held to their admissions during the trial. We are required, therefore, to consider the questions presented for determination, there being no binding stipulation -or agreement limiting the scope of the inquiry, and to decide from the entire record'arid testimony whether "the conclusions reached by the referee were right.

Considering the principal questions passed upon by the referee, we may, following the same order he adopted, take up in the' first place the éxtent to which the defendant Leonard R. Kerr is chargeable with the personal property in .the hotel under the terms of the-decree. ■

The plaintiff, and those situated alike with her in interest, refused to accept the furniture, and insisted upon the right to elect to take •its value upon the theory that the defendant had been guilty of . converting the same, and was chargeable on that theory. There are many legal objections to the plaintiff’s right so to elect at this time, growing out of the form of her action, which was one in equity for an accounting, and from the language of the interlocutory judgment entered, and from the terms of the decision'of the court-on the former, appeal affirming that judgment which, in effect, ordered that the defendant Leonard R. Kerr should account as. trustee ” for the property. • Though it was held that the bill of •sale which he had received from his mother of the furniture in ¡the hotel should be set aside, he was not, by our decision, deprived of the title or interest which he had in that property as a joint owner to the extent of one-half, nor of the additional amount or interest: to which he was entitled in common with the other next of kin in the one-half belonging to his mother. Having possession of the-personal property, and having rented it in connection with the hotel, he should account as trustee for all the profits or rents received. In other words, the theory of the plaintiff’s action and of the decree, was not to charge the defendants with having converted the property;, but rather to establish and restore title and to assert that as to a. portion of the personal property the title thereto was in the plaintiff and the others next of kin. Such persons, having established their right to a portion of the personal property which was in the possession of the defendant and which he had rented in connection with the hotel property, were entitled as against him to have their interest fixed and to require him to account as trustee for what he had received from the property from the time he took possession down to the time it was decreed that he was no longer the exclusive owner thereof.

The plaintiff, having originally elected to treat this as a suit in equity to establish title and to obtain an accounting, could not, subsequently, elect to treat it as an action for conversion. Where a suit in equity is brought to establish title and to secure an accounting, the one in whose possession the property still is cannot be charged with the value as though he had converted it. The relief to be accorded is that given in this action for the return of the property together with such profits as may have been realized from its use while it was withheld or employed by the wrongdoer, and it is only in cases where the property taken is destroyed, or the title to it in some way parted with by the wrongdoer to some third person, and the proceeds converted, or in some other way the identity of the property is lost or its possession cannot be regained, that the value of the property on the theory of conversion will be allowed.

The instances in which the joint owner of personal property in possession can be charged with the value of the property upon the theory of conversion are pointed out in the case relied on by' the respondent. (Osborn v. Schenck, 83 N. Y. 201.) As said by the learned judge writing the opinion in that case: “When and for what cause one of two or more tenants in common of personal property may maintain trover against those retaining its possession is sufficiently clear on principle, but not always'of easy application.to confused and varying facts. The right of each to the use and possession of the property is precisely the same, and neither can have or exercise a superior authority over the other. It follows necessarily that the mere fact of such possession and use by one, even though it prevents the use and possession of the other, can furnish no ground of action, since it is rightful and rests upon a lawful authority. But it also follows that if that possession develops into a destruction of the property or of the interest of the co-tenant, or into such a hostile appropriation of it as excludes the possibility of beneficial enjoyment by him, or ends in a sale of the whole property which ignores and denies any other right, then a conversion is established and trover may be maintained against the wrongdoer. The earlier cases on the subject hesitated to decide that a mere sale of the whole of the common property by one of the owners was sufficient proof of a conversion, * * * and the loss and destruction of the property, so that it had passed out' of the reach of the injured party, was to some extent coupled with the fact of a sale as furnishing the ground of an action. But in White v. Osborn (21 Wend. 75), the rule freed itself from any such incumbrance, and it -was decided that the sale of the whole property which ignored- and denied the right of the co-tenant, furnished sufficient proof of a -conversion. That case has been steadily followed and the doctrine is now fully established.”

■ The suggestion is made that as the manner, of using the personal property was in renting it, one of the elements is present which would justify charging the defendant for its value, because the plaintiff and those united with her in interest were excluded from the possibility of beneficial enjoyment.” There was, however, ho such-deprivation, for in renting it to a third person the property was put to the-only use to which it was suited, and the plaintiff to the extent of her interest has the same beneficial enjoyment as the defendant of the property. Its use is represented by the rents received, in which, as the result of the accounting ordered, all the next of kin will share. As there was no parting with title by the defendant nor any destruction of the property, the elements upon which to base an election charging the defendant with having converted the property are entirely lacking.

Hpon the first question, therefore, we think that the learned referee erred in the theory on which he proceeded to charge the defendant on the accounting; and this conclusion is necessarily fatal to an affirmance of the .judgment.

That the method adopted by the referee results in injustice is made more evident when we consider, in connection with the rule he applied as to the personal property, that which he applied in reference to the rental value of the real estate, for it appears that although the decrees required the defendant to account for the rents And profits reeewed from the property, he was charged with an -estimated rental value, regardless of what he received. The statement in the decrees as to what the defendant should account for and the fact that he was chargeable, not as one who had no relation whatever to the property, but as a trustee for himself and the others whom the decree held to be entitled to some interest in the real ■estate, shows that the theory on which the referee proceeded with reference to the rental of the property was also erroneous. It is not •claimed that there was any bad faith or want of judgment or care ■or diligence in the way in which the defendant managed or rented • -•the property; and it appears that the hotel, consisting of several buildings and having' the furniture as necessary equipment, was .rented in the way in which it would bring the highest price, namely, as a whole for hotel purposes. And the amount received for such renting was all that the defendant or any one, so far as •-■shown, could have obtained for the property.

Instead, however, of being required to account for the rent received, the defendant was charged with a greater sum, notwithstanding the fact that he stated that the price at which the hotel was rented was enhanced by the circumstance .that the furniture was included in the leases made. And although the defendant is charged with the full value of the furniture, as though he had converted it, he is not allowed anything for its use in connection with .the rental of the real estate. We say not allowed, because the ■•amount charged against him as the value of the rental of the real •estate was concededly more than was received from the rent of the .real estate together with the furniture. Here, again, the referee proceeded on the theory of conversion, as if the defendant had con■verted the real estate or its rental use and was liable for an estimated value, instead of being chargeable as. a trustee. For so proceeding, "we find no warrant either in the interlocutory judgment or in our •decree confirming the same.

It may be pointed out, furthermore, that there was no justification or reason for the referee to take evidence as to the value of the ■fee property, since that determination was not referred to him, and "there was no- advantage to be derived from his finding on that subject. Such testimony would be necessary only in the event that the defendant had converted the property and was to he charged, therefore, for its value. We do not understand, however, that even the respondent goes to that length, and the exception taken by the defendant to this finding was right, although it may be said that-the finding was harmless because there was nothing in the report or in the final judgment which required the defendant to pay over money on the basis of the referee’s valuation.

As. the referee has fallen into error upon the two principal questions involved in the construction to be given to the interlocutory ■ judgment as affirmed, it is unnecessary to extend the discussion to other matters for the reason that another accounting wifi be. required.

The judgment should accordingly be reversed, and a new accounting ordered before another referee, with costs to the appellant to abide the event. ...

Van Brunt, P. J.„ Patterson, Ingraham and McLaughlin,. JJ.,. concurred.

Judgment reversed and new accounting ordered before another referee, with costs to appellant to abide event.