Court Opinion

ID: 5257074
Source: CourtListenerOpinion
Date Created: 2022-01-06 18:31:10.880698+00
Date Added: 2024-06-11T08:28:01.769150
License: Public Domain

Woodward, J. (dissenting):
The complaint alleges that in the month of September, 1915, the defendant and one William H. Greenslete entered into a copartnership for the purpose of engaging in the grocery business in the village of Broadalbin, 1ST. y., under the firm name and style of Ferguson & Greenslete; that the agreement provided that each should contribute $500 as capital, and that the defendant should contribute the use of store fixtures, while Greenslete was to furnish a horse and delivery wagon for the use of the business, and that the profits should be equally divided between them; that the copartnership thus instituted continued until the death of William H. Greenslete on the 4th day of December, 1916; that at the time of his death and the termination of the copartnership there were certain assets, the amount of which is unknown to the plaintiff, as well as liabilities which are also unknown; that the plaintiff was duly made administratrix of the estate of William H. Greenslete; that from the time of the death of the said Greenslete the defendant has continued individually in the possession of said store and said business, and has continued to manage and carry on said business, and to dispose of said stock in trade, and to collect the debts and things *750in action, and to pay debts and liabilities of said firm out of the avails thereof; and he has collected large sums, the amount of which the plaintiff does not know and cannot ascertain; that said business so carried on and managed, and its good will, have increased in value and the net profits of the same have been large, although their amount is unknown to plaintiff and cannot be ascertained; that the plaintiff has requested of said defendant a statement and account of said copartnership transactions which defendant has refused to give, and that no final settlement of the accounts of said partnership has ever been made, and that upon a final accounting a balance will be found to be ’due from the defendant to the plaintiff. It is then alleged that the plaintiff has no adequate remedy at law, and asks for an accounting and the usual relief.
The answer admits the partnership, but asserts that at the time of the death of Greenslete the debts exceeded the assets of the firm; admits that the defendant has continued the business and that no final account has been made, but alleges that the plaintiff has received statements and full information of •the condition of the assets, accounts, etc., of such copartnership as far as it has been possible to ascertain or know the same. The answer then sets up some alleged failures on the part of Greenslete to fulfill all the terms of the partnership agreement, and then “ for another further and separate answer and defense to the complaint herein, alleges that he as the sole surviving partner of the said William H. Greenslete, deceased, has as he is informed and believes true, the sole right and power to wind up the affairs of said partnership business and convert the remaining assets thereof into money, collect the outstanding accounts and pay the debts owing and thereafter make distribution of any remaining proceeds if such there be, to the plaintiff who is the wife and legal representative o.f her intestate and this defendant; that he has since the death of the plaintiff’s intestate, proceeded with reasonable diligence so to do but has been unable to accomplish it in that he has been unable to collect all of the outstanding claims and book accounts and also convert all of the merchandise assets into money and pay debts owing by such copartnership; that some of said debts are still owing and he believes *751can be and will be within a reasonable time, collected and that the merchandise assets will also within a reasonable time be sold at a reasonable price and converted into money without sacrifice which will doubtless result in case he is forced to sell the same at public auction,” etc.
Upon the trial of the action the defendant appears to have taken the position that it appeared from a certain inventory of March 5, 1917, about three months after the death of Greenslete, that the firm was insolvent, and that the defendant thereupon took over the business and conducted it in his own name, mingling new goods with those then in stock for the purpose of closing out the goods without sacrifice. In other words, the position of the defendant is that the inventory having disclosed that the firm was insolvent he was at liberty to terminate the relationship of a surviving partner, and to purchase goods in his own name and to sell them in connection with the old stock, and thus to close up the business. This is likewise the attitude upon this appeal, the learned referee having given judgment in favor of the plaintiff.
This position is wholly untenable. The defendant, upon the death of his copartner, became the legal owner of the partnership assets, charged with the duty of closing up the affairs of the concern and paying over to the estate of the deceased partner a just portion of the excess, if any, remaining after the partnership obligations were discharged. In other words, a copartnership imposes upon each partner the duties and obligations of a fiduciary as between themselves while living, and upon the death of either of them the survivor continues to occupy that fiduciary relationship to the estate of the deceased partner; he is bound to exercise the útmost good faith, and cannot deal with the assets for his own benefit. “It is a well-settled and salutary rule,” say the court in Dutton v. Willner (52 N. Y. 312, 318), “ that ‘ a person who ■undertakes to act for another in any matter shall not, in the same matter, act for himself.’ It is only by a rigid adherence to this simple rule that all temptation can be removed from one acting in a fiduciary capacity to abuse his trust, or seek his own advantage in the position which it affords him. One consequence of a violation of the rule is that the agent must, at the option of his principal, account to him *752for any profit he may have made by the transaction. It matters not how fair the conduct of the agent may have been in the particular case, nor that the principal would have been no better off if the agent had strictly executed his power, nor that the principal was not in fact injured by the intervention of the agent for his own benefit. If the agent deals with the subject-matter of his agency, or, by departing from the instructions of his principal, obtains a better result than could have been obtained by following them, the principal can claim the advantage thus obtained, even though the agent may have contributed his own funds or responsibility in producing the result. The rule which places it beyond the power of the agent to profit by such transactions is founded upon considerations of policy, and is intended not merely to afford a remedy for discovered frauds, but to reach those which may be concealed; and also to prevent them, by removing from agents and trustees all inducement to attempt dealing for their own benefit in matters which they have undertaken for others, or to which their agency or trust relates. [Citing authorities.] All profits and every advantage beyond lawful compensation made by an agent in the business, or by dealing or speculating with the effects of his principal, though in violation of his duty of agent, and though the loss, if one had occurred, would have fallen on the agent, are for the benefit of the principal.” (Ridgely v. Keene, 134 App. Div. 647, 649; Bain v. Brown, 56 N. Y. 285, 288, 289.) “ The rales applies where there is a confidential relation between parties, creating or tending to produce a conflict of duty and interest by a trustee or agent, in dealings or transactions relative to the subject-matter of his trust or agency.” (Lingke v. Wilkinson, 57 N. Y. 445, 450, 451; Taylor v. Klein, 47 App. Div. 343, 346; affd., 170 N. Y. 571.) “ When agents, and others acting in a fiduciary capacity, understand that these rules will be rigidly enforced, even without proof of actual fraud, the honest will keep clear of all dealings falling within their prohibition, and those dishonestly inclined will conclude that it is useless to exercise their wits in contrivances to evade it.” (Bain v. Brown, supra.)
In the case now before us the defendant, occupying a fiduciary relation, has concededly mingled the assets of the *753copartnership with goods purchased on his own account and sold from the same store, and within the influence of the firm good will, that prevailed before the death of the partner. He has made a profit out of the transaction, though his alleged inventory of the 5th of March, 1917, indicated an insolvent concern. He has, by his own admissions, failed to discharge the obligations of a surviving partner, and we-see no reason why the law should not take its course as applied by the referee in this case.
The judgment appealed from should be affirmed.
Kiley, J., concurs.
Judgment reversed on the law and facts, with costs, and the complaint dismissed, with costs. This court disapproves of findings of fact numbered 8 and 9.