Case Name: Bernard Klotz vs. Charles Macready et al., Executors
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1887-05
Citations: 39 La. Ann. 638
Docket Number: No. 9607
Parties: Bernard Klotz vs. Charles Macready et al., Executors.
Judges: 
Reporter: Louisiana Annual Reports
Volume: 39
Pages: 638–649

Head Matter:
No. 9607.
Bernard Klotz vs. Charles Macready et al., Executors.
. A surviving partner, bound by tlie articles to liquidate tbe concern within six months after the dissolution of tbe partnership by death, and who has no rights, after tbe expiration of that term, to prolong tbe liquidation, is liable for the value of all tbe assets at tbe termination of tlie delay, when they cannot bo returned in integrum.
-Such partner cannot shield himself from responsibility by showing that those assets have been sold by judicial authority, when it is shown that the property apparently adjudicated to outsiders, and which never left bis possession, has been transferí ed to him for ihe same prices, on the same day, or shortly after, conformably to a previous understanding.
1 Where part of such assets is not thus transferred, in consequence of a deception, tbe partner will nevertheless be responsible, when it appears that bidders were deterred from bidding for bis benefit.
‘The succession of the deceased partner is entitled to recover, after deducting the liabilities from the assets, the share to which the deceased is, by tbe articles of partnership, authorized to claim in tbe residue, with legal interest from the expiration of the delay allowed for the liquidation of the concern.
APPEAL from the Civil District Court for the Parish of Orleans. Tissot, J.
T. J. Seinmes & Legendre, T. Gilmore & Sons and J. Ad. Bonier for the Executors, Appellants:
Land purchased by a commercial partnership belongs to tiie individual niembors as joint owners, and not to the partnership. 30 Ann. 800; 35 Ann. 839.
The partner who makes advances beyond capital agreed on is entitled to .interest. ]29 Mass 518; 2 Lindley Part.,.see. 787; 2 Lansing, 300.
Partner has no right to withdraw his capital during the partnership. O. C. 2858; 129 Mass 518; 2 Lindley Part., soo. 611.
The partner who. after the dissolution of the firm, uses partnership assets in new business is liable for profits or interest, at the option of the plaintiff 2 Lindloy Part., secs. 977-9 25 G-ratt. 536; 1 Giflard, 86; 4 Myl. & Craig, 41; 9 Hare, 141; 8 Ch, App. 323 (n).
Co-partner in the new business nota necessary party unless a judgment is sought against him for knowingly participating in the broach of trust. 1 Giflard, 86; 2 Lindley Part., see. 979; 58 H.H. 449. !
W. S. Benedict and A, J. Murphy for Plaintiff and Appellee.

Opinion:
The opinion of the Court was delivered by
Bermudez, C. J.
This is an action for the settlement of a partnership once existing between Margaret Haughcry and Bernard Klotz for the bakery business. It was originally formed to last ten years, but it expired at the death of the former partner, which occurred on February 9, 1882.
While on the one hand the surviving j>artner tenders $3360 86 as the share accruing to his deceased partner, the executors of the latter insist that the real sum due is $40,997 02, for which there ought to be .judgment with interest.
After hearing a large number of witnesses and considering a mass'of written evidence, the district court found that the residue consisted of real estate and an oven, and a sum of $22,030 59, which it directed should accrue equally to the parties, or $11,015 29 to each partner, besides half of the property. From this judgment defendants appeal.
Answering the appeal, plaintiff prays that the judgment appealed from he amended so as to conform with his accounts.
It appears that by the articles of partnership the survivor was, in case of dissolution thereof by death, to he allowed six months to wind up the affairs of the concern; that at the expiration' of that delay, however, Klotz had himself appointed liquidator, inventorying the property in his hands and disposing of the same, under the provoked •direction of the court which had appointed him.
On appeal from the different decrees rendered in the course of the proceedings, this Court held that Klotz had no right to enter upon another term of liquidation, in the face of the opposition of the executors; that his appointment, as well as all the orders procured by Mm to sell out tlie property of the partnership, were unwarranted and' ought to be (and they actually were) annulled, and the application was rejected. 35 Ann, 596.
The record shows that, notwithstanding the appeal which, it is-claimed, operated suspensively, Klotz had the property offered for sale by an anctioneer, and that it was adjudicated to certain parties,, at prices far below its valuation in the inventory. The real estate, though adjudicated, however was not taken by the bidders, ail'd remains in kind. The property otherwise bid off, in all instances, save one, appears to have been transferred by the adjudica tees, on the same-day, or some short time after, for the same prices to Klotz, or the partnership, which he had formed with Joyce, a former clerk of his-
The account which Klotz presented, pending the suit, is open to many attacks which were actually made upon it.
It implies the validity of all the proceedings had by him as liquidator; but as his appointment was annulled, and as there are no third persons concerned, those proceedings must be considered as though they never existed; the more so, as all'the property said to have been sold, except in one instance, is now, from Klotz's own standpoint, in his possession as owner.
The parties, at least, two of them, to whom the property was so adjudicated, and who afterwards passed it to Klotz at the same prices,, appear as sureties on the latter's bond as liquidator. They must have known that he was acting in a fiduciary capacity, at least as agent, and that as agent, he could not buy the property of his principal, directly or indirectly.
It is claimed that they acted in good faith ; but it seems strange that they undertook to buy objects for which they had no use, which they did not care about, which never came to their possession, and which they subsequently passed to KIolz at the prices of adjudication. This is the more singular when it is considered that it appears that bidders were deterred at the sale, in some cases, on the representation, expressly or impliedly made, that Klotz was buying or intended to buy.
It is remarkable-that the property thus bid off, at prices frightfully below the appraisement thereof, appears, after the transfer by the adjudicates, to have been acquired by Klotz's new firm at prices surprisingly superior.
The decrees appealed from and reversed, under which those transactions took place, may well be assimilated to a judgment appealed from and reversed, under which, in the meanwhile, the judgment creditor acquires property of his judgment debtor and detains possession ot' tlie same. In such cases, the rule, well founded on reason, equity and law, is that the defendant is entitled to restitution of the thing itself in integrum, for none is injured, save the wrong-doer himself.
Prom this standpoint, which is the correct one, the assets comprising the active mass of the partnership must be viewed as in the possession of Klotz, and must be dealt with as though no proceeding whatever had taken place, after the expiration of six months, within which he was to have wound up and done what the articles required of him, viz: "Make and render a true, just and .final account for all things relating to the business and a true adjustment and division of the stocks and profits thereof."
Although, in legal contemplation, the property is or ought to be there in integrum, it does not, however, follow that, by surrendering it to-day, as it is, Klotz can relieve himself from the consequences of his illegal acts and persistent dereliction of duty.
That property .is surely not, at present, in the condition, in point of worth, in which it was at the expiration of the delay allowed for winding up. it has been used by Klotz for the purposes of the new firm. Unavoidably, it has considerably deteriorated, after a use exr ceeding four years. Being more or less worn out, it cannot be tendered at all, as property in integrum.
This condition of things is brought about by Klotz himself. It is the legitimate result of his failure to perform his obligations, in time,. as tlie surviving partner. He would' have no one to blame but himself, if any injury has been sustained; but the evidence shows that,, by using that property, in the business of his new firm, he has realized piofits, comparatively quite large.
The value of the property at the end of the six months, less debts- and charges of the old partnership, must serve as the basis of his accountability', and the residue, actual and constructive, must be equally apportioned between the partners.
Among the property offered for sale by the auctioneer, were iwc flue boilers, which had cost $1000 two years before. These were adjudicated for $275, but were afterward sold to a boiler maker for-$800, without being moved.
It appears that they were being bid on by a by-stander, who stopped bidding, because told, by the party to whom they were subsequently adjudicated, that he was purchasing for Klotz. It also appears that there had been, previous to the sale, au understanding between the latter and this adjudicatee, to that end, and that after the sale Klotz, who had expected a return of the boilers, complained that the adjudicatee had not treated him right.
Leaving out of view the question whether the order of sale was or not suspended by the appeal, it is manifest that from the incipiency throughout, Klotz was impelled by selfish considerations, the object of which was to enrich himself per Jas et nefas, at the expense of the estate of his deceased partner, and that had it not been for the deception practiced .on him, and of which he bitterly complained, the boilers, like the rest of the property, would have gone back to him.
Had such been the case, he most assuredly could be held for their value, but the difficulty is removed by the consideration that had he not combined as he did, the boilers • would have realized their value.
We, therefore, deem that ho should be responsible for the boilers, as he is for the other property.
The parties have taken much trouble and pains to show what amount accrues to the succession of Margaret Haughery. We have patiently followed them in their respective theories and computations, and considered their conclusions; but cannot justify the result to which either side has arrived, particularly that presented by the surviving partner, who has operated upon foundations of no solidity, and which have entirely given way, with the structure elected upon them.
He has been unable to convince us that a most prosperous partnership which, from June 30,1879, to August í), 1882, realized as profits $63,066 61, and the assets of which aggregated at that last date (which is that of the expiration of the six months to wind up), $58,857 28, nets actually $3360 86 only, as the share of the succession therein — a share for which he himself, about that time, had offered to the executors, $32,000, but which the latter declined, as inadequate.
The theory of the executors and their computations of the rights of the parties appear, to a certain extent, moie consonant with the law governing in such eases and with the accounts and facts disclosed by the record.
They admit the conclusions of the lower court, in a measure; but they complain that the judge has entirely omitted to debit Klotz with the large amounts which ho has drawn and with which he ought to have been charged.
We find that this complaint is well founded.
After deducting' from the assets, which include Klotz's debit, as well as the value of the real estate and oven, and a mortgage note of $10,- 000 paid, and the other liabilities of the partnership, the executors conclude, rightfully we think, that the rights of Margaret Haughery's succession ought to amount to $31,341 65; but they err when they assume that the succession is also entitled to one-half of the profits realized by the new partnership, viz: $9655 37 — the total of these two amounts being the $40,997 02 mentioned in the beginning of this -opinion.
We feel no hesitation in adopting the correctness of the former conclusion as to the $31,341 65, as that sum is less than that which Klotz had offered to the executors as the value, put by himself, on the share of the succession in the partnership, but which the executors, under a commendable sense of duty, did not, deem themselves authorized to accept.
This amount, liad it been seasonably paid, would have realized fruits in some form in the hands of those whom the testatrix had designated .as the worthy objects of her charity; hut it was not paid. It was retained by Klotz, utilized by him and is represented as having assisted in enabling him to realize for his new firm profits nearing $20,000.
If it were true that the succession is entitled to half of that sum, under the law, it would he because the succession was a partner in the concern. .Such being the ease, would it not likewise he true that, if instead of realizing profits the concern had become involved, the succession would have had to bear half of the. debts and liabilities, and thus possibly put into insolvency V
IT To recognize this theory as a proposition authorized by law would be to promulgate quite a dangerous doctrine, for which no precedent has been shown in this State. The reason for repudiating this theory is that successions cannot be considered as beings, susceptible of forming a partnership. The object of the law regulating the settlement of successions is to liquidate them promptly and prudently, so that when this is accomplished the residue passes at once to the heirs, whoever they be, testamentary or legal. When this is done the succession, as such, exists no more.
Although the executors cannot share the profits of the now firm, it does not follow, however, that the amount which they ought to have received at the expiration of the six months allowed to wind up and which has served to enrich that firm, shall remain barren and impoverish the recipients of the bounty of the testatrix. They are entitled to legal interest from, the 9 th day of August, 1882.
It is, therefore, ordered and decreed that the judgment of the lower court be amended so as to entitle the succession of Margaret Haughery to recover from Bernard Kioto thirty-one thousand three hundred and forty-one dollars' ($31,341 65), instead of eleven thousand and fifteen dollars and twenty-nine cents ($11,015 29), with legal interest from the 9th day of August, 1882, till paid, and costs of suit in both courts,, besides the undivided half of the real estate and oven mentioned in this petition, and that thus amended said judgment be affirmed.