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In re IRVIN. (Supreme Court, Appellate Division, First Department. November 20, 1903.) 1. ExecutOR-ACCOUNTING-LIABILITY OF SCRVIVING PARTNER-FORM OF DE
While the decedent's share in a partnership is not a proper subject of inquiry on an accounting by his executor, who is also one of the surviving partners, and therefore the court's determination thereon is of no force, yet a finding of fact confirming a statement by the surviving partners showing no assets belonging to decedent, and a conclusion of law discharging the executor, are improper, and should be modified by limiting the finding to matters actually contained in the executor's account, and by a recital in the decree that the claim as to the partnership interest was not passed upon,
Appeal from Surrogate's Court, New York County.
In the matter of the compulsory accounting of Mary M. Irvin, surviving executrix of Richard Irvin, Jr., of his proceedings as executor of Alexander P. Irvin, deceased. From a decree of the Surrogate's Court confirming the report of a referee dismissing objections and awarding costs, Mary I. Smith, contestant, appeals. Modified.
Argued before VAN BRUNT, P. J., and HATCH, PATTERSON, O'BRIEN, and INGRAHAM, JJ.
A. Coleman Smith, for appellant.
PATTERSON, J. This appeal is from a decree of the Surrogate's Court of the county of New York settling the accounts of Mary M. Irvin, surviving executrix of the last will and testament of Richard Irvin, Jr., and adjudging that the said Mary M. Irvin, as such surviving executrix, and the estate of the said Richard Irvin, Jr., “be, and the same are hereby, discharged and freed of and from all responsibility, liability, or accountability to the said Mary ļ. Smith, the contestant herein, on account of the acts and doings of the said Richard Irvin, Jr., as executor of the said Alexander P. Irvin, deceased, as to all matters embraced in the account filed herein”; and it was further adjudged that Mary M. Irvin, as surviving executrix, recover costs against Mary I. Smith.
The account was filed pursuant to the requirement of an order made by the Surrogate's Court of the county of New York, affirmed on appeal by this court. Matter of Irvin, 68 App. Div. 158, 74 N. Y. Supp. 443. The proceeding was instituted under section 2606 of the Code of Civil Procedure by Mary I. Smith, the daughter of Alexander P. Irvin, to compel the executrix of Richard Irvin, Jr., the executor of the will of Alexander P. Irvin, deceased, to render an account of the acts and proceedings of the said Richard Irvin, Jr., during his executorship, he having died without having ever rendered an account of such proceedings. The following material facts, among others, appear in the record: Alexander P. Irvin died on the 25th day of November, 1884. His will was admitted to probate in January, 1885. Letters testamentary were issued in that month to Richard Irvin, Jr., one of the persons named in the will as executor. Richard
and 118 New York State Reporter Irvin, Jr., died in March, 1896, leaving a last will and testament. He appointed Daniel Lord, since deceased, and Mary M. Irvin, the executor and executrix of his will. In August, 1900, Mary I. Smith presented her petition to the surrogate of the county of New York, praying that Mary M. Irvin, executrix, file account of the executorship of Richard Irvin, Jr., which was done, and is the account now under consideration. Objections were filed to that account by the petitioner, and such account and objections were referred by the Surrogate's Court to a referee to pass upon the same. Some of the objections were abandoned, and others were overruled by the referee, who made a report containing specific findings of fact and his conclusions of law thereupon. Upon motion the report of the referee was confirmed by the Surrogate's Court, except as to two technical matters, which do not require consideration. The appeal taken by the petitioner is from the whole of the surrogate's decree, with the exception of so much of it as relates to the technical matters. The account as rendered by the accounting party contains only a statement of receipts and disbursements made by Richard Irvin, Jr., executor, and it does not appear that as to specific items it was in any respect falsified; but the petitioner sought to surcharge the account, and to impose upon Richard Irvin, Jr., executor, a liability for an asset of the estate of Alexander P. Irvin, consisting of an uncollected interest of the testator in a copartnership firm of which he was a member, and it was insisted that, the executor not having accounted therefor, the liability to account rested upon the executrix of the executor. The question was raised by an objection to the account in the following words:
"For a further and separate objection to said account this petitioner, by her attorney, A. Coleman Smith, alleges upon information and belief that the testator, Alexander P. Irvin, was, in his lifetime, a member of the firm of Richard Irvin & Co., of which his executor, Irvin, was also a member, and as such member said testator was entitled to a share in the said firm's assets, and it does not appear by said account that he ever was a member of said firm, or that his interest in said firm of Richard Irvin & Co. has ever been liquidated.”
The substance of this objection is that the executrix of the will of Richard Irvin, Jr., had omitted from the account an asset of the estate of Alexander P. Irvin, for which his executor was accountable. In this connection these facts appeared before the referee, namely: Alexander P. Irvin was a member of a firm transacting business in the city of New York. That firm was composed of Richard Irvin, Sr., Alexander P. Irvin, and Richard Irvin, Jr. Shortly after the death of Alexander P. Irvin the books of the copartnership were written up by the surviving partners, who stated the account of the deceased partner with the firm; and it appeared before the referee that Alexander P. Irvin was credited on the books with a balance of profits of some $80,000, but at the same time he was charged with an alleged loss on "profit and loss account” of something over $170,000. The contestant offered, in substance, to prove, from the books of account of the copartnership, that this credit charge was arbitrarily made; that the surviving partners, one of whom was Richard Irvin, Jr. (executor), had written off at merely nominal rates securities belonging to the firm; that they retained such securities, which subsequently rose greatly in value, and that the surviving partners have realized large sums of money from the sale thereof. The learned referee refused to take this evidence, placing his ruling upon the ground, not that it was an improper subject of inquiry on the accounting, but that by the copartnership articles it was left to Mr. Richard Irvin, Sr., to liquidate the affairs of the copartnership upon the death of any one of its members; and that, there being no proof of fraud in connection with the matter, the transaction could not be inquired into.
The copartnership articles were in evidence, and by the fifth paragraph thereof it is provided that, in case of the death of either of the partners other than Richard Irvin, Sr., the firm should continue, "and the interest or balance belonging to the deceased at the time of his death shall be stated by the surviving partners, and paid over to the representatives of the deceased as it shall be realized." . We do not find in this provision, nor in any of the terms of the contract of copartnership, that it was left absolutely to Richard Irvin, Sr., to determine or state what interest in the firm assets should belong to Alexander P. Irvin. That was to be determined, in the event of the death of one partner, by the surviving partners, and the interest of the deceased partner was to be paid over to his representatives as it should be realized; and the same provisions were to apply if a partner withdrew at the end of any year. By the contract it was only in case of the dissolution of the partnership in some other way that the business should remain in the hands and under the control of Richard Irvin, Sr., to settle the affairs of the concern. It is not to be questioned that, if Richard Irvin, Jr., had been the sole surviving partner, his action in arbitrarily taking over to himself, as surviving partner, the securities of the firm at prices fixed by himself, could be the subject of judicial inquiry in a properly constituted proceeding. Matter of Myers, 131 N. Y. 409, 30 N. E. 135.
Richard Irvin, Jr., became a trustee of the interest of his deceased brother in the firm. Hooley v. Gieve, 9 Daly, 104, affirmed Court of Appeals, 82 N. Y. 626. “After the dissolution by death or bankruptcy, the solvent or surviving members become trustees of the assets for the purpose of winding up its affairs and distributing its effects; and they will not be allowed to reap a profit made by the use of the partnership assets after dissolution. Murray v. Mumford, 6 . Cow. 441. As a general rule, surviving or solvent partners cannot take the assets of a firm at a valuation as of the time of the dissolution." King v. Leighton, 100 N. Y. 392, 3 N. E. 594.
The petitioner endeavored to show from the books of the copartnership the facts connected with the appropriation of securities by the surviving partners, of whom Richard Irvin, Jr., was one. The referee refused to allow that to be done, and an exception taken to his ruling was recorded. It is true that the management of copartnership affairs by a surviving partner is not the subject of an accounting in a surrogate's court (Thomson v. Thomson, i Bradf. Sur. 35), and the court could not now charge the accounting party with that which (if anything) may eventually be found to belong to the estate
and 118 New York State Reporter of Alexander P. Irvin after a copartnership accounting; but we are of opinion that, inasmuch as the referee took some proof upon the subject of the objection, the petitioner should have been permitted to show that there was an outstanding right to property of the estate of Alexander P. Irvin, which, although not strictly an asset of that estate, would become so on a proper judicial settlement of the copartnership accounts, for the referee has found as matters of fact that Alexander P. Irvin's interest in the firm was largely exceeded by the losses of the firm, and that the statement of the interest of Alexander P. Irvin in the firm, or the liquidation thereof, “is hereby ratified and confirmed"; and as a conclusion of law that Mary M. Irvin, as surviving executrix of Richard Irvin, Jr., should be discharged and freed of and from all responsibility, liability, or accountability to the said Mary I. Smith, the contestant herein, on account of the acts and doings of the said Richard Irvin, Jr., as executor of the said Alexander P. Irvin, deceased; and the report of the referee was confirmed.
While a decree of the Surrogate's Court in an accounting proceeding is conclusive evidence only as to the four matters recited in section 2742 of the Code of Civil Procedure, yet we have here findings of fact made upon the objection we have considered, and a conclusion of law following it, which would apparently discharge the estate of the executor from liability for the copartnership interest of his testator, and a confirmation of the report of the referee by the decree. In order to preserve the rights of the petitioner, and prevent any future misunderstanding or controversy as to the effect of the decree, we are of the opinion that it should be modified by limiting the adjudication upon the account to the items as that account is stated by the referee, and declaring it not to be a final accounting; that the decree should specifically recite that the court does not take cognizance of the claim to a copartnership interest, and refuses to pass upon the same; and that the discharge of the executrix from liability does not relate to that claim, if any exists. It is not necessary to send this matter back to the Surrogate's Court for further consideration. While we think the referee, under the circumstances, should have admitted the proof offered, for the reason above suggested, no practical benefit would be gained by continuing this particular proceeding. The modification of the decree will leave it open to those entitled so to do, to bring suit in the proper tribunal for an accounting of the copartnership affairs, and a discharge of the executrix of . the executor in a final accounting will be withheld for the present.
The decree should be modified in accordance with the views above expressed, and, as modified, affirmed, without costs to either party of this appeal, and the question of the allowance of costs generally should be reserved until the final accounting. All concur.
MARTIN V. NEW TRINIDAD LAKE ASPHALT CO. (Supreme Court, Appellate Division, First Department. November 20, 1903.) 1. DISCOVERY-EXAMINATION OF DEFENDANT'S BOOKS.
A plaintiff is not entitled to an order for an inspection and discovery of defendant's books of account, to discover the amount due him under
a contract, to enable him to frame his complaint. Appeal from Special Term.
Action by William D. Martin against the New Trinidad Lake Asphalt Company. From an order denying a motion to vacate order for discovery and inspection of defendant's books and accounts and modifying such order for discovery, defendant appeals. Reversed.
Argued before VAN BRUNT, P. J., and McLAUGHLIN, PATTERSON, O'BRIEN, and LAUGHLIN, JJ.
Abram J. Rose, for appellant.
PATTERSON, J. This appeal is from an order denying a motion to vacate an order for an inspection and discovery of books. The order sought to be vacated requires the defendant to give to the plaintiff a discovery and inspection and permission to take copies of statements and accounts described in a petition, and provides that the discovery and inspection be made by requiring the defendant to deliver to the plaintiff, on or before a date fixed, sworn copies of statements and accounts; and, if such statements are not furnished, then to deposit the books of account of the defendant, and of statements rendered to the defendant by another company, at the office of the plaintiff's attorneys, or in the office of the clerk of this court. That order was granted on a petition of the plaintiff, in which he states that this action is brought to recover damages for the breach of a contract in writing for the payment of royalties by the defendant for the use by the defendant and its licensees of processes covered by letters patent of the United States and of the Island of Trinidad, under which contract the defendant agreed to furnish statements of the amounts of dried and refined asphalt produced, used, or sold by the defendant, and upon which, under the terms of the contract, the plaintiff was entitled to royalty.
The only ground upon which the plaintiff sought to have an inspection and discovery is to enable him to ascertain the amount of royalties to which he would be entitled, and he alleged that that was necessary in order to enable him to frame his complaint, and for no other reason. That the plaintiff may be entitled, at the proper time, to an inspection and discovery to enable him to obtain evidence necessary to prove the amount he may be entitled to recover upon a trial may be true, but it is not necessary that he should have such inspection and discovery at this time simply for the purpose of enabling him to state in his complaint what damages he demands. Taylor v. American Ribbon Co., 38 App. Div. 144, 56 N. Y. Supp.
11. See Discovery, vol. 16, Cent. Dig. $ 111,