Falconer v. Kirby

45 A. 469, 90 Md. 594, 1900 Md. LEXIS 106

• Court: Court of Appeals of Maryland
• Decided: January 29, 1900
• Status: Published

Opinions

McSherry, C. J.,

delivered the opinion of the Court.

The controlling question presented on this appeal involves, and for solution depends on, an ascertainment of what the late James Hodges meant by the seventh clause of his will. We are required, therefore, to interpret that clause and to give to it the effect which he has indicated upon the face of the whole instrument, as, viewed in the light of all the circumstances that surrounded him, he intended. it to have. The clause is in these words : “It is my will, and I hereby direct, that all sums of money or indebtedness which may be due to me by my sons-in-law, or any or either of them, and the amount of all promissory notes drawn by any or either of them, and endorsed by me (if paid by my executors out of my estate) shall be deducted from the shares of their respective wives in the distribution and settlement of my estate.”

On the one hand it is insisted that Mr. Alexander Falconer, a son-in-law of the testator, is indebted in a considerable amount to Mr. Hodges’ estate; on the other, it is contended that he is not indebted in the sum claimed, or, if indebted at all, that the indebtedness is not, with the exception of a small portion, of the kind or character contemplated by the will, and is not, as a consequence, such an indebtedness as Mr. Hodges intended should be charged against the share of his daughter, Mrs. Falconer. The inquiry presents, therefore, alternative aspects. If there is no indebtedness, there is, of course, nothing to be charged against Mrs. Falconer’s share. If there is an indebtedness, it comes to the question whether 'there is such an indebtedness as Mr. Hodges intended to charge against that share. The first is a .mixed question of fact and law, and as an examination of it to determine whether an indebtedness does exist or not, necessarily includes an investigation into the character of that indebtedness, and therefore involves a consideration of the other question as to whether the indebtedness, if it does exist, is such an indebtedness as Mr. Hodges intended by his will to charge up against his daughter; it will be more convenient to pass by the first and to proceed at once to the second inquiry. -

Assuming an indebtedness of some amount to exist— and this may b¿ done without touching the ultimate question as to whether the' indebtedness .thus assumed is one that under the will can be charged against Mrs. Falconer’s share—how did the indebtedness arise ? We must put ourselves, as nearly as we can, in the testator’s arm-chair; see the circumstances that he saw; appreciate his surroundings as he appreciated them, and then give to the language he has used in his will the meaning which these circumstances and these surroundings indicate he intended that language to have. Littig v. Hance, 81 Md. 425. Let us look for a moment at the situation. For a number of years Mr. Hodges had been engaged in a large and lucrative mercantile business. Nearly his whole fortune was invested in it, and only an insignificant part was not. He had four children—one son and three daughters. The daughters were married and the son was employed in the father’s business. Mr. Falconer, a son-in-law, was also employed in the same business. Because of declining health, absence from home and inability to attend as formerly to so large a commercial enterprise, Mr. Hodges took Mr. Falconer into the business as a partner. Falconer, according to one of the witnesses, was what Mr. Hodges called a “ salaried partner.” He was to receive three thousand dollars a year and ten per cent of the profits if the latter sum was in excess' of three thousand dollars ; but in any evént he was entitled to three thousand dollars per annum. He contributed nothing to the capital. From year to year these profits were ascertained by including in the statements of assets a large number of unpaid accounts due by customers to Mr. Hodges, and these unpaid accounts were carried in the statements as suspended accounts. When these suspended accounts, or any of them, were found to be uncollectible they were charged off. Both before and after Mr. Hodges’ death and following a period of great financial depression, large proportions of these suspended accounts were so charged off, whereby the books were made to show considerable losses in the business. In addition to this Mr. Falconer overdrew the amounts which, according to his own contention, he was entitled to receive. The aggregate of these overdrafts was three thousand, four hundred and nine dollars and sixteen cents. Ten per cent of the losses on these suspended accounts were charged to Mr. Falconer, and this indebtedness, thus made up and amounting, with the overdrafts, to fourteen thousand five hundred and eighty-nine dollars and thirteen cents, is the indebtedness which Mr. Kirby, one of the executors of Mr. Hodges’ will, contends should, under the terms of that will, be charged against the share of Mrs. Falconer. In opposition to this contention it is maintained that neither the language of the will nor the intention of the testator as gathered from that language, when it is read in. the light of all the surroundings, includes any of this alleged indebtedness other than the overdrafts. So the contest comes down to these losses in the business. If there is anything clear on the face of the will, and clear beyond controversy, it is that Mr. Hodges intended to treat his children with absolute and exact equality in the distribution of his estate. Some of them he had helped before he made his will and to compensate for this he bequeathed to the one not thus provided for, ten thousand dollars, in order, as he said, ‘ ‘ to more nearly equalize her share of my estate.” After making a life-provision for his sister and for a niece, he gave the whole residue and re mainder of his estate to his four children “ in equal portions, share and share alike.” To further preserve that equality the seventh clause, transcribed above, was inserted. Under it what the sons-in-law owed him—what they had received from him—and what he might be required to pay for them on notes given by them and endorsed by him, was to be deducted from the shares of the respective wives of those sons-in-law. This method preserved the predominant scheme of equality ; and the sums which Mr. Falconer drew in excess of his salary, and which he and his family received the benefit of, are therefore chargeable against his wife’s share of the residuum. But in what possible way can the losses in the business—the shrinkage of assets— which diminished the volume of the estate, be said to be an indebtedness of Falconer within the meaning of that term as used in the will ? If these losses constitute an indebtedness to the amount claimed, they would equally constitute an indebtedness without reference to the amount of them, because the amount is purely accidental and has-nothing to do with determining the character of the indebtedness. If, then, without reference to the amount, the alleged indebtedness created in the manner indicated, was the kind of indebtedness which, as it is insisted, Mr. Hodges designed to charge against the share of his daughter, it was altogether possible that Mrs. Falconer might, instead of receiving one-fourth of the residuum, actually receive nothing; because had Mr. Falconer’s ten per cent of the losses of the business equalled one-fourth of the estate left for distribution, Mrs. Falconer would not have been entitled to a dollar. She would not have been entitled to a dollar, not because her husband had received from Mr. Hodges the equivalent of the share which otherwise would have been distributed to her, but because the value of the estate, without fault of his and without benefit to him or to her, had, by the vicissitudes of business and the hazards of trade, shrunk below what it was believed to be worth when Mr. Hodges, to benefit himself and not to im poverish Mr. Falconer, took the latter into the business. It is inconceivable that a father, who so unmistakably manifested his purpose to deal with exact equality amongst his children, and who, to free himself in a measure from the cares of business, had made one of his sons-in-law a salaried partner, deliberately intended, under the guise of that transaction, to place that son-in-law in a position where, if disaster befell the business, he would not only be crushed financially, but where his wife might be stripped of the last dollar of her share in that father’s estate; To that length the argument must go if sound at all; and short of that limit it cannot logically stop. If it cannot logically stop short of that limit, Mr. Hodges must be treated as having contemplated the possibility of such a result, because s uch a result was obviously possible ; and if he must be treated as having contemplated the possibility of such a result, he must be held to have intended to create a condition which might involve co-existent, contemporaneous inconsistencies, namely, that Mrs. Falconer was to have a one-fourth interest in his estate and that she was to have absolutely no part of it, at one and the same time. Manifestly, if this be an indebtedness which the testator meant to include in the seventh clause, it would have been none the less an indebtedness within that same clause had it happened to swell to the full limit of Mrs. Falconer’s share. And had that event occurred, we would have been obliged to hold, on the construction contended for by Mr. Kirby, that Mrs. Falconer, who was confessedly in no way responsible for these losses, would be bound to make them up out of her share of the estate to the full limit of that share, though the fact as to whether there would be any estate for division at all, depended, when the will spoke, altogether upon the contingency that the total losses and shrinkages and debts were less than the value of the assets which remained. A construction which would give to three of Mr. Hodges’ children the whole of his estate and would throw upon the fourth, as her share, the losses resulting from the business, in which nearly all the assets of the estate were invested, would be a construction utterly subversive of the equality so conspicuously apparent on the face of the will as the predominant intent of the testator. If this be so, it is no less, in principle, a violation of that equality to cast upon one share losses which affect the value of the whole, even though the sum of those losses be less than the share so charged with them.

Practically the whole estate of Mr. Hodges consisted of his stock in trade and bills receivable. Whether he regarded Mr. Falconer as a partner who was bound to contribute to the losses in the proportion that he was entitled to share’ in the profits, is immaterial; because the inquiry before us is, not as to whether on an accounting between the partners there is a liability on Mr. Falconer’s part to make up a percentage of the losses, but whether, assuming that there is, that liability is an indebtedness which the testator’s will, as correctly interpreted, directs to be charged against Mrs. Falconer’s share of her father’s estate.

These losses were losses in the business—they diminished the assets of the concern—they resulted in making the amount for division that much less ; but they neither benefited Mr. Falconer or his wife, nor gave to her an advantage over any of the other children. It is not necessary to include them under the term indebtedness used in the seventh clause, in order to give that clause efficacy. There were items of indebtedness due by the sons-in-law to which the clause does apply, and applies without subverting the cardinal idea of equality and without working out the injustice which the contention of Mr. Kirby involves. These items are all of the same kind. They represent sums actually due by the sons-in-law to Mr. Hodges. Some of them were notes representing borrowed money. The overdrafts of Mr. Falconer were of the same nature. Both stood for advances made, substantially, for the benefit of the daughters. Upon these the will can operate, and was obviously intended to operate; but to extend its effect and to bring in under it losses in a large and fluctuating business, would be to make the wife of the salaried partner a guarantor against any loss of her husband’s in that business up to the full amount of her interest under the residuary clause of her father’s will. We are unwilling to give such a construction to the clause in controversy when there is another and a reasonable one, which gratifies the letter and the spirit of the clause and which is much more in harmony with the testator’s scheme of equality and much more in accord with his sense of justice.

(Decided January 25th, 1900).

, Our conclusion, then, is that the decree, in so far as it charged Mrs. Falconer’s share with the overdrafts of her husband amounting to $3,409.16, is correct; but in so far as it charged her share with the losses amounting to $ 1 x, 179.97, it is erroneous. The decree of the lower Court will therefore be affirmed in part and reversed in part, and the cause will be remanded that a new decree may be passed conforming to this opinion ; the costs above and below to be paid out of the estate.

Decree affirmed in part and reversed in part and cause remanded, the costs above and below to be paid out of the estate.