Case Name: Leavitt J. Hunt, as Trustee in Bankruptcy of the Estate of Robert A. Osborn, Bankrupt, Appellant, v. Charles S. Osborn and Others, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1903
Citations: 86 A.D. 464
Docket Number: 
Parties: Leavitt J. Hunt, as Trustee in Bankruptcy of the Estate of Robert A. Osborn, Bankrupt, Appellant, v. Charles S. Osborn and Others, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 86
Pages: 464–470

Head Matter:
Leavitt J. Hunt, as Trustee in Bankruptcy of the Estate of Robert A. Osborn, Bankrupt, Appellant, v. Charles S. Osborn and Others, Respondents.
Payment under a guaranty of the indebtedness of a partner to his firm—construction of the will of the guarantor, giving a share of her estate to such partner, by him and the other parties in interest, charging such payments against his share— when conclusive as against his trustee in bankruptcy—when’ it is the proper construction.
The special partnership of John Osborn, Son & Co. was composed of Frank, ■ Charles, William and Robert A. Osborn, general partners, and Mary C. Osborn, ■ their mother, a special partner. The said Mary C. Osborn executed an instrii- . ment in writing, by which she guaranteed the payment of any indebtedness which Charles, William or Robert A. Osborn should incur to the firm, such guaranty to extend “only to the extent of their separate interest they may have in any estate at my death, in accordance with my will, which I intend to execute at the earliest moment possible.”
She subsequently executed a will by which she provided for an equal distribution of her property among hér children and the descendants of a deceased son. She directed in such will that “ each of my children and their issue shall be charged to the extent of the interest that they may respectively have in my estate at the time of my death (which was the interest less the amount advanced under the guaranty agreement) with whatever sums of money shall appear by my books to have been advanced to them subsequently to June 1st, 1890, by me, or by the firm of John Osborn,"Son & Co., at my request, together with the interest thereon, to the time of my death.”
The said Mary C. Osborn died December 28, 1891, and it was then found that Robert A. Osborn had overdrawn his account with the firm to the extent of $22,050.65, which amount was, under the terms of Mrs. Osborn’s guaranty, charged against her capital in the firm and credited to the account of Robert A. Osborn on the books of the firm. December 81, 1891, Robert A. Osborn made a sworn declaration to the effect that he owed the estate of his mother such sum of §22,050.65.
The surviving partners continued the firm business after their mother’s death, but failed in May, 1895. While the firm was still solvent, Robert A. Osborn recognized the existence of his indebtedness to the estate before mentioned and made payments on account thereof. In 1902 Robert A. Osborn, while acting ,as executor of the estate of Mary C. Osborn, made a sworn inventory of the assets, in which he included the declaration sworn to by him in 1891, to the effect that he owed the estate of his mother the sum of $22,050.65.
Held, that Robert A. Osborn and the other parties interested in the estate of Mary 0. Osborn, having, at a time when the rights of creditors were not involved, united in construing the will of Mary C. Osborn as providing that the amount of Robert A. Osborn’s indebtedness to the firm should be charged against his share of the estate, a trustee in bankruptcy of the estate of Robert A. Osborn had no standing, several years afterwards, to maintain an action to compel an accounting of the estate of the said Mary C. Osborn on the theory that it was the intention of the testatrix that, in determining the amount of Robert A. Osborn's share in the estate, the moneys paid in satisfaction of his indebtedness to the firm should be disregarded.
Semble, that the construction acted upon by the children of the testatrix was the correct one.
Appeal by the plaintiff, Leavitt J. Hunt, as trustee in bankruptcy of the estate of Robert A. Osborn, bankrupt, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Kings on the 28th day of November, 1902, upon the report of a referee, with notice of an intention to bring up for review upon such appeal an order entered in said clerk’s office on the 5th day of November, 1902, confirming the said referee’s report.
William D. Gaillard [ Charles Capron Marsh and Daniel De Wolf Wever with him on the brief], for the appellant.
William B. Davenport [A. A. Gardner with him on the brief], for the respondent Mary E. Polak.
William G. Cooke, for the respondents Howard J. M. Cardeza and others.

Opinion:
Woodward, J. :
The plaintiff, Leavitt J. Hunt, is a trustee in bankruptcy of the estate of Robert A. Osborn, bankrupt, and seeks, in this action, an accounting on the part of the executors of the will of the late Mary 0. Osborn, and to reach certain property alleged to belong to the estate of the bankrupt. Mary 0. Osborn was á special partner in the firm of John Osborn, Son &- Co., with an investment of $100,000, which partnership expired by limitation on December 31, 1887. The active partners in the firm were her sons, Frank, Charles, William and Robert A. Osborn. Just prior to the expiration of this partnership, and on the 19th day of December, 1887, Mrs. Osborn wrote a letter to her son Frank, in response to letters from him, in which she stated that she was willing to and would give to John Osborn, Son & Co. an instrument in writing guaranteeing the payment of any indebtedness that may be incurred during the limitation of the partnership, or which might then be owing th'e firm by either Charles, William or Robert, but this was to be " only to the extent of their separate interest they may have in my estate at my death in accordance with my will, which I intend to execute at the earliest moment possible." The letter contained other matters relating to the details, and the evidence shows that an instrument in writing was subsequently executed and delivered to the firm in terms substantially as indicated in this letter, though this instrument had been lost or consumed by a fire which occurred in the office of the firm, which was under the active management of Frank Osborn. With affairs in this condition a new firm was organized, consisting.of the same persons as the previous one, and to continue from January 1, 1888, to December 31,1892. Subsequently, and on the 7th day of June, 1890, Mrs. Osborn made and published her last will and testament, in Which her Son Frank was made executor, and in the event of his death the will provided that her sons Charles, William and Robert, and her daughter, Mary E. Polak, should assume the office of executors. The testatrix, Mary C. Osborn, died Decern ber 28, 1891, and Frank Osborn entered upon the discharge of his duties as executor. It was found that after crediting Robert As. Osborn with all of the profits of the firm to which he was entitled, he had overdrawn, his account $22,050.65, and this amount, under the terms of Mrs. Osborn's guaranty, was charged against her capital in the firm and credited to the account of Robert A. Osborn upon the books of the concern. Frank Osborn died on the 13th day of March, 1892, and was immediately succeeded by Charles) William and Robert A. Osborn and Mary E. Polak as executors, who, without any intermediate accounting, took up the managesment of the estate where it had been left off by their brother; These new executors, including Robert A. Osborn, on the 15th day of June, 1892, made a sworn inventory of the assets belonging to Mary 0. Osborn, deceased, including a declaration subscribed and sworn to by said Robert A.,Osborn, that, as of the date of December 31, 1891, he owed to the said estate both the sum of $22,050.65 (paid to the firm of John Osborn, Son & Oo. for his indebtedness) and also the sum of $11,850 advanced by his mother to him. At this time the firm of J ohn Osborn, Son & Co. was solvent and it remained in existence until the expiration. of its contractual limitation in December, 1892, at which time it was succeeded by a new firm under the old name, consisting of Charles, William and Robert A. Osborn, which continued the business and failed in May, 1895; While the firm was still solvent, so far as appears from the evidence) Robert A. Osborn recognized the existence of this indebtedness and made payments upon account of the principal and interest at various dates, and the practical construction put upon'the agreement and the action of the parties in interest, while they were at liberty to deal with the matter independently of the rights of any creditors) in the absence of fraud, would seem to be conclusive upon the rights' of the plaintiff in this action who appears in behalf of creditors under a proceeding in bankruptcy long after the adjustment of the affairs of the estate, except in the distribution.of about $34,000now in the hands of the executors. . The learned referee, to whom the matter was referred for trial, has found in favor of the defendants*' and his report has been'confirmed by the court, the plaintiff appealing;
- A trustee -in bankruptcy, except in some special statutory matters not involved here, takes'mo greater estate than that of the bankrupt 3 hie has no rights which the bankrupt himself would not have in the present case were he solvent and in control of his own affairs. It is not alleged.or suggested that there was anything fraudulent, in the transaction, but the .theory of the. plaintiff is that Mary 0. Osborn, in making a will and in providing for an equal distribution of her property among her children and the .descendants of a deceased, son, elected to disregard the advances made to Robert A. Osborn under. the provisions of the guaranty agreement, and that she intended to make an equal division of what remained after, the payment of such obligations out of her estate, instead of deducting the amount o.ut of the portion to be paid to Robert A. Osborn as was done by the original executor, and as was subsequently ratified and approved by the said Robert A. Osborn at a time when he was not only free to act in the premises as he saw fit, but at a time when it was his duty to know the contents of the will and all of the facts relating to the estate. Robert A. Osborn was one of the executors of the will of his mother; it was his duty to know the contents of her will and the assets of her estate, and the law presumes that he .has discharged this duty. Having the opportunity of knowing the '.contents of the will, and presumptively knowing it; having a direct interest .in .having the will construed so as to relieve him of the payment of over $22,000, Robert A. Osborn, at a time when his firm Was entirely solvent, and in the discharge of his duty as an executor, swears that he owes the estate of his mother this sum of money, and his trustee, in a voluntary bankruptcy proceeding, years afterward, and without any suggestion that any one has acted fraudulently in the matter, comes into a court of equity and claims the right to question the construction of the will and the understanding between the parties, and to take from the remaining residuary legatees the money now in the hands of the executors, and which, under the original interpretation of the will, belongs to them, and to turn the same over to the creditors of Robert A. Osborn.. We are .persuaded that neither equity nor the law. requires that , this be done, and .that the learned referee and the court below have properly disposed of this case. Assuming that the will of the late Mary. O. Osborn contemplated that her estate .should be charged with- the overdraft of Robert A. Osborn, and that he should be forgiven this amount and. be permitted to share equally with his. brothers and sisters, can there be any doubt that he had a right in 1892 to acknowledge such an indebtedness to his mother's estate and to accept an equal distribution of the same after making this allowance ? There is no suggestion that he oWed any one a single dollar at that time; and if he had given the estate this amount of cash before the distribution, no one would have suggested that his subsequent creditors had any equitable right to reclaim any portion of the money. It is difficult to understand how they could have greater rights under the facts disclosed, for it is certain that a court of equity would not permit Robert A. Osborn to maintain this action to recover money or property which he had voluntarily paid or surrendered, where he had a full opportunity, and where it was his duty, to know the facts.
But the will, read in connection with the guaranty agreement, and in the light of the relationship of the parties, does not warrant the interpretation put upon it by the plaintiff. The agreement contemplated that the firm of John Osborn, Son & Co., of which Frank Osborn was the active manager, might advance money to the other brothers for their own purposes, and that this need not be limited to their profits, but might encroach upon their interests in their mother's estate as fixed in her will, which she was about té make. In the will which she did make she provided that " each of my children and their issue shall be charged to the extent of the interest that they may respectively have in my estate at the time of my death (which was the interest less the amount advanced under the guaranty agreement) with whatever sums of money shall appear by my books to have been advanced to them subsequently to June 1st, 1890, by me, or by the firm of John Osborn, Son & Co., at my request, together with the interest thereon, to the time of my death." While the language might have been clearer, we are of opinion that the intention was not to adjust the estate as of the date of the will, but to fit it in with the contract of guaranty for the sums which the firm might have advanced up to the time of her death, and to provide for an equal distribution of the entire estate among her children and their descendants. This was the construction which all of the heirs accepted and acted upon for several years; it is the natural and logical construction from all of the facts and circumstances surrounding the parties, and the whole matter having-been.'adjusted and acquiesced in by Robert A. Osborn while aétirig as an executor under the • will of his mother,' and'when there'were no rights of creditors involved, we are clearly of'opinion that: a trustee in bankruptcy of the estate of Robert A. Osborn- has no-standing in a court, of equity to overturn the adjustment and compel the other residuary legatees to contribute to the Creditors of their brother.
'-'-The judgment appealed from should be" affirmed, with. costs.
Goodrich, P. J,, .Hirschberg and Hooker, JJ., concurred.
j Judgment affirmed, with costs: