Maynard v. Richards

46 N.E. 1138, 166 Ill. 466

• Court: Illinois Supreme Court
• Decided: May 11, 1897
• Status: Published

Opinion

Mr. Chief Justice Magruder

delivered the opinion of the court:

First—It is contended by Richards, that so much of the judgment for $95,594.17, as represented the loss of the profits from October 22, 1887, the time of the death of Maynard, up to January 2, 1894, when the ten years, for which the contract with the railway company was to run, expired, did not belong to the firm of Richards, Maynard & Co., but belonged to Richards himself individually; and that, therefore, he was not bound to account for the same with Maynard’s estate. It is claimed, that, when Maynard died on October 22, 1887, the partnership between Richards and Maynard was thereby dissolved; and that the only portion of the judgment, recovered against the railroad company, belonging to the estate of Maynard, is one-half of the proportionate part thereof which represents profits that would have accrued between June 16,1886, when there was a total breach of the contract by the railroad company, and October 22, 1887, the date of the death of Maynard. As there were 2751 days between June 16,1886, and January 2, 1894, the date of the termination of the contract with the railway company, and as there were 491 days between June 16, 1886, and October 22, 1887, it is contended, that the amount, to which Maynard’s estate is entitled, is one-half of the proportion which 491 days bears to 2751. This proporis 17.85 per cent. In other words, the first question in the case is, whether the whole amount of the judgment, recovered in the action at law against the railroad company, is a partnership or firm asset, or whether so much thereof as represents the loss of profits between the death of Maynard and January 2, 1894, "is the individual property of Richards.

It is true, that the death of Maynard terminated the partnership between him and Richards; but a community of interests still continued to exist between Richards, as surviving partner, and the representatives of Maynard, the deceased partner, notwithstanding the dissolution. The partnership continued to have a limited existence for the purpose of settling and winding up the affairs of the partnership. (Nelson v. Hayner, 66 Ill. 487.) The railway company abandoned the contract and was guilty of a total breach thereof on June 16, 1886, during the life of Maynard. At that time a right of action accrued to the firm to recover the damages or future profits, which were afterwards recovered in the action at law begun on May 17, 1888. It was during the existence of the firm that the right of action accrued. It was during the existence of the firm, to-wit: in August, 1886, that the chancery proceeding, which turned out to be ineffective, was instituted to recover the damages or future profits resulting from the total breach. Richards and Maynard, as partners, treated the repudiation of the contract by the railroad company as putting an end to it for all purposes of performance, and sued for the profits they would have realized if they had not been prevented from performing. The contract was thereby continued in force for that •purpose. (Lake Shore and Michigan Southern Railroad Co. v. Richards, 152 Ill. 59.) Such accrued right of action in favor of both partners could not be divested from the firm and vested in appellant individually, either in whole or in part. The construction and use of the transfer house by Maynard, and the assignment of the contract with the railroad company to the firm by Richards, were contributed to the firm for the express purpose of performing the contract, which was not to be completed for a period of ten years. If the railroad company had not refused to perform, the estate of Maynard would have been under obligations to allow Richards, as surviving partner, to continue the use of the transfer house and the machinery, in order to carry out the contract. So, also, the contract between the railroad company and Richards was assigned by him to the firm, and this assignment was ratified by the railroad company. The contract was thereafter a partnership asset, and the obligation to perform it was upon both the partners equally, and upon the legal representatives of each of them in case of death. If two parties enter into a partnership for the purpose of performing a contract whose performance requires ten years, and each contributes certain property to the firm for the purpose of performing it, and such property is absolutely necessary to such performance, the right to its use should not be taken away from the surviving partner because the other partner happens to die. Maynard would certainly have had a right to his share of these damages if they had been collected in his lifetime, and his estate has not lost them by his death. It is the duty of the surviving partner to settle all the obligations of the firm and to collect all the debts due to the firm. This must be done in the name of the surviving partner at the expense of the firm. (Clay v. Freeman, 118 U. S. 97). Where the object of the partnership is to carry out a contract which was unfinished when one of the partners dies, the court will not necessarily order the property sold, nor the share of the deceased partner in it ascertained by valuation, but will leave the surviving partner to complete the contract, and will postpone the account until it is completed. (McClean v. Kennard, 9 L. R. Ch. Pl. 336; Rust v. Chisholm, 57 Md. 376; Ayers v. Railway Co. 52 Iowa, 478; King v. Creighton, 100 N. Y. 386; Doris v. Dowell, 77 Ala. 262). Choses in action, debts and other rights of action of a firm, belong to the surviving partners, and they possess the sole and exclusive right to reduce them to possession, but when they are recovered, the survivors are regarded as the trustees thereof for the benefit of the partnership, and the representatives of the deceased partner possess in equity the same right of sharing and participating in them, which the deceased partner would have possessed if he had been living. (Story on Partnership, sec. 346). In addition to what has already been said, the action, which was brought for the recovery of these future profits or damages from the railroad company, was brought by Richards, as surviving partner of the firm of Richards, Maynard & Co. In the declaration in that suit, which is filed as an exhibit to the bill in this case, the amount due from the railroad company is spoken of as due to the firm, and the recovery sought is of the damages suffered by the firm, and of the profits lost by the firm. Counsel refer to certain authorities, which hold that a surviving partner may, in an action brought by him, include in his declaration a count for a debt due to himself in his own right. But here, the declaration contains no count in which Richards claims the loss of profits for the period between the death of Maynard and the expiration of the ten years, as belonging to him in his own right; nor does the declaration contain a count for damages due to him, as surviving partner, for the period between the total breach of the contract and the death of Maynard. For the reasons thus stated, we are of the opinion, that the amount of the judgment, recovered in the action against the railroad company for damages or future profits, was a partnership asset, and, therefore, should be divided between Richards and the estate of his deceased partner, Maynard.

Second—The next question which arises is as to the right of Richards, as surviving partner, to have compensation for his services in obtaining for the partnership estate the fund of §95,594.17 by the prosecution of the action at law against the Lake Shore and Michigan Southern Railway Company. It is well settled, that one partner cannot charge the firm, or his co-partners, for his services in attending to the partnership business, unless there is a special agreement among the partners entitling him to do so. In the absence of such an agreement, the law "will not imply one “from the greater industry or greater ability of any one partner.” (Brownell v. Steere, 128 Ill. 209; Parsons on Partnership, sec. 155). The reason of the rule is, that each partner is under obligations to devote his skill and efforts to the promotion of the common benefit of the firm. (Lewis v. Moffett, 11 Ill. 392). The same rule applies as to services of a surviving partner as between himself and the representatives of the deceased partner. The text books and the authorities all hold, that, after the dissolution of the firm by the death of one of the partners, the surviving partner is entitled to no extra compensation for services rendered by him in winding up the affairs of the partnership, in the absence of any agreement allowing such compensation in the articles of co-partnership. (17 Am. & Eng. Ency. of Law, 1183; 2 Bates on Partnership, secs. 771, 772; Collyer on Partnership, sec. 199; Parsons on Partnership, secs. 346, 155, note c).

But the rule, that a surviving partner is entitled to no extra compensation, applies to his services in winding up the partnership. The winding up or settling of the partnership affairs after the death of one of the partners may be said to consist, as a general thing, in selling the property, receiving moneys due the firm, paying the firm debts and the advances of the partners, returning the capital contributed by each partner, and dividing the profits. Where, however, the surviving partner renders services in excess of the mere winding up of the partnership affairs, he will, under certain circumstances, be entitled to compensation for such excess. (17 Am. & Eng. Ency. of Law, 1154, 1183; 2 Lindley on Partnership, 1046; Collyer on Partnership, sec. 328; Parsons on Partnership, sec. 346). It is said, in Bates on the Law of Partnership, at section 773: “The rule applies merely to the simple and immediate winding up by collecting the assets, paying the debts and accounting for the surplus, as is necessarily involved in the creation of the partnership and implied in the contract; but for time, skill and labor expended beyond this, and inuring to the general benefit, the reason of the rule fails.” The most usual cases, where the surviving partner is allowed compensation, are cases where he successfully continues the business of the firm, or successfully completes an enterprise in which the firm has been engaged, so that a substantial benefit is received from his efforts. The amount of compensation will vary according to the state of the accounts, the nature of the business, the difficulty and results of the undertaking, and its necessity or desirability. (2 Bates on Partnership, sec. 773; 17 Am. & Eng. Ency. of Law, 1183). If he performs such extra services with the consent of the representatives of the deceased partner, such consent is sometimes an important factor in determining the question whether he is entitled to compensation. His claim to compensation will, in connection with the circumstances already mentioned, be looked upon with favor, if the representatives of the deceased partner elect to share in the profits realized from his services as surviving partner. While it is true, that compensation will ordinarily be denied to a surviving partner in the absence of an agreement therefor, yet an agreement will sometimes be implied where the services are extraordinary and unusual, and such as could not reasonably have been contemplated. (2 Bates on Partnership, sec. 777; Robinson v. Simons, 146 Mass. 167; Schenkl v. Dana, 118 id. 236; Newell v. Humphrey, 37 Vt. 265; Cameron v. Francisco, 26 Ohio St. 190; Hite v. Hite, 1 B. Mon. 177; VanDuzen v. McMillan, 37 Ga. 299; Bradley v. Chamberlin, 16 Vt. 615; Griggs v. Clark, 23 Cal. 427; O'Reilly v. Brady, 28 Ala. 530; Sears v. Munson, 23 Iowa, 380; Levi v. Karrick, 13 id. 344).

Applying the principles thus announced to the facts of the present case, we are of the opinion that Richards, as surviving partner, is entitled to extra compensation for his services in the prosecution of the suit at law heretofore mentioned. A suit in chancery had already been begun for the recovery of future profits for the total breach of the contract by the railroad company in the lifetime of Maynard. This chancery suit had ended adversely to the firm in May, 1888. If at this point Richards had ceased the prosecution of any further litigation for a recovery of future profits, it could not have been said at that time, with the light then had upon the chances of recovery, that he was recreant in his obligations to the estate of his deceased partner. But on May 17, 1888, seven months after the death of Maynard, he commenced an action at law against the railroad company for unliquidated damages or future profits under circumstances which, to say the least, seemed to make success a doubtful matter. This suit he prosecuted for six years, and finally succeeded in recovering nearly $100,000.00 for himself and the estate of his deceased partner. His action in this regard was a continuation in another form of a litigation, which the firm had been engaged in at the time of Maynard’s death, and was the completion of an effort at recovery which had been begun by the firm in the lifetime of Maynard. He spent a great deal of his time in securing evidence and attending upon numerous hearings and trials, in obtaining the attendance of witnesses, in procuring documentary evidence, in employing and consulting with attorneys, in looking up authorities, in doing clerical work, in reviewing abstracts of record, in making suggestions to his counsel. All this labor necessitated the practical abandonment of all other business. He engaged in the prosecution of the suit with the consent of the executrix of Maynard because she furnished money for costs; and the accounts in evidence show, that the sum of $1278.50 was paid to her on account of disbursements made by her in and about the suit. As soon as the judgment was obtained and the money recovered, the executrix of Maynard’s estate elected to share in the amount of the recovery. It cannot be denied, that the services of Richards in this case were so extraordinary and unusual as to give rise to the presumption of an implied contract. The long and successful prosecution of the suit may be regarded as service in excess of the mere winding up of the partnership affairs.

The case of Zell’s Appeal, 126 Pa. St. 329, is somewhat similar in its facts to the case at bar. There, a surviving partner, many years after the death of the other partner, succeeded in compromising a land claim and realized therefrom some $50,000.00; the claim was not merely doubtful, but had no real foundation in law or equity; and the court there said: “More than thirteen years after his death, Zell seems to have discovered this claim, * "x" * and he prosecuted it for four years, with the energjr and under the circumstances already related, to ultimate success. And now that the others come in and claim a share in the success, * * * we think in equity they should make him a fair compensation for his services.”

What the amount of the compensation of Richards should be is a question of fact. There is evidence in the record sustaining the finding of the Appellate Court upon this subject. We are not disposed to disturb their judgment, so far as concerns the amount of the compensation.

Third—The circuit court charged Richards with interest upon certain balances in his hands and not at once paid over. The Appellate Court disallowed these charges for interest. We think that there was no error in this action of the Appellate Court. The record shows, that Richards did at one time pay over to the executrix upon order of the probate court $11,300.00, and at another time $1278.50. The questions involved as to the equitable distribution of the fund recovered were fairly debatable, and were litigated in good faith so far as we are able to discover. We have held, that delay of payment, in order to justify a recovery of interest in such cases as the present one, must be both unreasonable and vexatious. (Devine v. Edwards, 101 Ill. 138). We cannot see, that there was any unreasonable and vexatious delay here on the part of Richards.

Fourth—The circuit court allowed William A. Gardner §7500.00 as compensation for his services as attorney'of Richards, as surviving partner of the firm. Two questions of fact were involved in this branch of the controversy: First, whether Gardner was actually employed by Richards, as surviving partner, or whether he was merely employed by Mrs. Maynard to look after her individual interests; and second, if he was employed by Richards, as surviving partner, what amount of compensation should be allowed to him for his services. The lower courts found, that Gardner was employed by Richards, as surviving partner, to perform legal services for the benefit of the firm, and we think that the evidence sustains that finding. The testimony as to the value of his services fixes such value at amounts ranging all the way from §3500.00 to §15,000.00. We are not disposed to interfere with the conclusion of the chancellor below, which has been affirmed by the Appellate Court, that his services were worth §7500.00.

Fifth—It is claimed, that the circuit court, sitting as a court of equity, did not have jurisdiction to pass upon Gardner’s claim for fees, and that the determination of such claim should have been submitted to a jury. We are unable to agree with this contention. When Richards filed his account in the probate court, he set out therein the claim of Gardner against himself, as surviving partner, for fees. In that court it was agreed between Gardner and Richards, that the matter should be submitted to the probate court, and the probate court accordingly heard and determined it, making an allowance to Gardner. The probate court passed upon Gardner’s fees as an item in the account submitted by Richards to that court. The statute provides, that, upon the application of the executor or administrator of a deceased partner, the county court may, whenever it may appear necessary, order such surviving partner to render an account to the county court, and, in case of neglect or refusal may, after citation, compel the rendition of such account by attachment. (1 Starr & Curtis’ Stat. 229). Upon appeal to the circuit court from the orders of the probate court in reference to the account submitted by Richards, the matter of the account was placed upon the chancery docket. By consent of Richards, and upon his motion, these appeals were consolidated with the chancery cause which he began in the circuit court by the filing of a bill; and the consolidated causes were heard together. Gardner was a party defendant to the bill in chancery. The whole of the account of Richards, including the item as to Gardner’s fees, was thus brought within the equitable jurisdiction of the circuit court. A jury trial was not therefore a matter of right. It is within the discretion of the chancellor to require the issues of fact arising in equity cases to be tried by a jury at any time before decree; and his action in the matter will not be reviewed. (Russell v. Paine, 45 Ill. 350; Guild v. Hull, 127 id. 523; South Park Comrs. v. Phillips, 27 Ill. App. 380). The provision of the constitution of 1870, prescribing the right to trial by jury, does not extend to cases in equity, but is confined to cases at law. (Flaherty v. McCormick, 113 Ill. 538; Heacock v. Hosmer, 109 id. 245). The remedy, given by statute to compel a surviving partner to account in the county court with the administrator of the deceased partner, is to be governed by the same equitable rules and principles as a proceeding in equity. (Mack v. Woodruff, 87 Ill. 570). The constitutional provision- as to jury trials was not intended to introduce the jury trial into special summary jurisdictions unknown to the common law, and which did not provide for that mode of trial. (Ward v. Farwell, 97 Ill. 593). The citation to an administrator to account is not a suit at law, but the exercise of a summary power conferred by statute, and is like a bill in chancery for discovery, to sift the conscience. (In re Steele, 65 Ill. 322). Where there was an appeal from the order of the county court approving the settlement of an estate, we said: “The probate court should on the trial proceed as though a bill in chancery had been filed, hear the testimony and investigate the accounts without the intervention of a jury.” (Heward v. Slagle, 52 Ill. 336). The statutory proceeding in reference to an accounting by a guardian in the probate court is in substance a chancery proceeding. (Cheney v. Roodhouse, 135 Ill. 257). Inasmuch, therefore, as the statutory proceeding, requiring a surviving partner to account, is, like the proceeding requiring administrators and guardians to account, in the nature of a chancery suit; and inasmuch as, in this case, the appeals from the order of the probate court were consolidated with the chancery suit, and tried as such, it cannot be said, that the court below committed any error in not submitting the question of the amount of Gardner’s compensation to a jury.

Sixth—We are of the opinion, that the judgment of the Appellate Court was correct in dividing the costs equally between Richards and the executrix.

After a careful examination of the whole record, we are unable to find any error in the judgment of the Appellate Court. That judgment is accordingly affirmed.

Judgment affirmed.