Court Opinion

ID: 5220104
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:31:54.832955+00
Date Added: 2024-06-11T08:27:30.289576
License: Public Domain

Smith, P. J.:
This action is brought by the administrators of Belfrage McGibbon against Edward B. Tarbox for an accounting. In 1873 McGibbon and Tarbox entered into partnership in the hardware business.' On September 1, 1881, McGibbon died. At that time an " inventory was taken of the stock, which disclosed the interest of McGibbon at his death to be $1,275.85, and the interest of Tarbox to be $6,332.72. At his death McGibbon left a widow and three children. The widow was the sister of the. defendant and lived in' his family. After some family consultation, and by the advice of an attorney, the defendant continued the business in the same firm name *839for the benefit of himself and his sister and her family until, the 1st of March, 1906, at which time the youngest child became of age. At that time an inventory disclosed assets 'of the value of $9,303.48. During that time Mrs. McGibbon had drawn for her family the sum of $13,182.69, and the defendant had withdrawn $15,022.64. The referee has charged the defendant with' the final inventory of $9,303.48; has credited him with store rent to the amount of $1,137.50, and has allowed him the further sum of $4,544.50 for his personal services during that time.- He has treated the amount of moneys drawn by the defendant in excess of the amount drawn by the McGibbon family as withdrawals of excess capital. But this amount withdrawn still left $216.92 as excess capital, with which he has credited the defendant, which leaves a balance of $3,404.56, which he' calls the net assets of the firm for division in this action. From this sum he has directed that the plaintiffs’ and defendant’s costs should be taxed and adjusted and paid. It seems that $250 has been paid to Clara McGibbon. By his 5th conclusion of law he directs: “That to the balance then remaining shall be added the sum of $250 paid to Clara McGibbon by the defendant, and the aggregate divided in two equal portions, one-half of which, less the said sum of $250 shall be paid to the plaintiff in this action, and the other one-half, plus the $250 paid to the' defendant in this action.” The plaintiffs’ costs were taxed at $628.77 and the defendant’s costs at $100, leaving in the hands of the defendant for division the sum of $2,709.83. Add to this $250 paid to Clara. McGibbon. ■ The result divided by two makes the sum of $1,479.92. From this deducting the sum of $250 there remains the sum of $1,229.92, which the defendant was directed to pay to the plaintiffs in addition to their costs of the action.
In. Robinson v. Simmons (146 Mass. 167) the head note, in part, reads: “ The representatives of a deceased partner, whose Capital is used by the surviving partner in the business, may generally, if there is no agreement,, elect to demand either interest on such capital or the profits earned by its use. A surviving partner who in good faith continues to use in the business his deceased partner’s capital with the consent of a majority of his *840heirs, is entitled to compensation for his skill and services out of the profits earned by it; and the latter’s-representatives will take "only such profits as then remain.” At page 176 the opinion reads: “ The plaintiffs contend that in this cáse the rule should be that the profits accruing after the death of the intestate should be divided according to the amount of capital which each partner or person interested had in the business, and that no compensation or allowance should be made to the surviving partners for their services and skill in conducting the business. We do,not think that this rule is supported by the authorities, or is just as applied to this case.” In the same opinion it is stated:; “There is, however, no inflexible rule governing all cases, but each case depends upon its own circumstances and equities.”
Under this rule the plaintiffs have the option either to demand back the sum invested with interest less the amounts that had. been received, or to charge the defendant with their proportion of the profits in lieu of interest. Inasmuch as the profits have exceeded what the interest would amount to under the legal rate plaintiffs have elected to demand the profits instead of simple interest. Under that election) however, plaintiffs áre entitled only to their share of the net profits after a fair and equitable allowance to the defendant for his disbursements and services. The referee, therefore, properly allowed him, for the rent of his building and for his services. The amount of moneys withdrawn by the defendant in excess of those withdrawn by the estate has been treated by the referee as a withdrawal of so much excess of capital which the defendant had in the business at the death of McGibbon. During all this tune, however, the defendant was contributing his services and the use of his property to the value of over $5,000, as found by the referee. It is fair, therefore, that this withdrawal of $1,839.95 in excess of the withdrawal of moneys-by the estate should be deemed applicable to reimbursement to him to that extent for services rendered and for the use of his property, and should not be deemed-a withdrawal of .excess capital.
The defendant then at all times had in the business $2,056,87 of capital in excess of the capital invested by the estate.. For *841this excess of capital the referee should fairly have allowed the defendant some compensation. If interest be allowed upon such excess for the period of twenty-one" and one-half years it will amount to $2,653; 31. This would seem to be warranted under the Robinson Case (supra). ' One of my colleagues insists that interest cannot be allowed to a partner on excess capital except by specific agreement. Within the Robinson Case (supra), as well as within the authorities cited in support of this proposition, if interest be not allowed proportional profits may be allowed, which in this case would be greater than simple interest. The plaintiffs cannot complain then if the rule more favorable to them be applied to the case and they be charged with simple interest upon the excess capital which the defendant had in the partnership. Deducting from the services and rent of the store allowed' by the referee the excess amount withdrawn by the defendant there remains still due to the defendant for his services and for rent the sum of $3,842.05. The excess capital of $2,056.87, together with the interest thereon, $2,653.31, amounts to $4,710.18. This, with the amount remaining -unpaid for his services and rent, makes the sum of $8,553.23 to be paid to the defendant from the assets before the plaintiffs have any interest therein. This leaves for distribution, after the debts of the concern are paid, $751.25. In this way .the defendant loses $250 which he advanced to Clara McGribbon unless he is able to collect the same from her. The $751.25 should be used first to pay the defendant’s costs as taxed and thereafter to apply upon the plaintiffs’ disbursements and costs as taxed.
As this result rests upon facts already found by the referee the judgment should be modified in accordance with this opinion, and as so modified affirmed, without costs to either party.
All concurred, except Betts, J., dissenting in opinion.