Ledyard v. Bull — 28 N.Y. St. Rep. 551

Majority

p. 551

Frances L. Ledyard, as Administratrix, App’lt, v. William L. Bull et al., as Executors, Resp’ts.^[1]

(Court of Appeals,

Filed January 14, 1890.)

Headnote

1. Interest—What does not constitute a statement of account so as TO CHARGE A PARTY WITH.

Asa W. and his son Henry were connected in business. In 1861, Ass

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addressed a letter to his son, stating the condition of the business, and that he, Asa, was entitled to $75,000, as his share in profits, for his services during fifteen years, and for the remainder of his life, “ as you have agreed,” directing his son, that-if the assets should prove to be less than figured, that a proj ortion of the loss should be deducted, etc. He also directed his son, after paying his debts, to divide the balance among his heirs. In 1876, Asa being dead, the son read portions of the letter to the heirs, and made a statement showing a balance of $5,941, which he paid to them in settlement. Held, that, under all the circumstances, Henry was not liable to account for interest upon the $75,000.

3. Executobs and administbatobs—Debt due administeatob.

While an administrator cannot retain from money in his hands the-amount of a debt due him from his intestate until it has been legally established and allowed, yet he may do so if all the persons interested in the estate assent thereto.

3. Same.

In the absence of creditors, an administrator is a mere trustee for the next of kin, charged with the sole duty to collect, convert and distribute the estate among the beneficiaries, according to their respective interests; but where the whole trust estate has been legally and justly distributed there is no trust duty to be performed, and no need of a trustee.

(Huger, Oh. J., and Peckham, J.,- dissent.)

Appeal from judgment of supreme court, general term, first department, reversing judgment for defendant entered upon the report of a referee.

Asa Worthington, plaintiff’s intestate, died November 25,1875, leaving four daughters and a son, his only children and next of kin. The plaintiff, one of the daughters, was appointed administratrix December 19, 1884. Henry E. Worthington, the son, died December 17, 1880, leaving a will, in which the defendants-were named as executors. The cause of action slated in the complaint is that Asa Worthington and his son, Henry R. Worthington, were associated in business as copartners, under the name of Henry E. Worthington & Go.; that on December 31, 1860, Asa Worthington being about to retire, an account of the assets and liabilities were taken and a balance struck, on which there was found '■l due and owing” to Asa Worthington from the partnership assets $75,000, which sum Henry E. Worthington agreed to-pay, and Asa Worthington agreed to accept as his share of the capital and profits in business up to the date of the alleged settlement. The complaint further states that on December 31, 1860, there appeared upon the books of H. E. Worthington & Co., to the credit of Asa Worthington, the sum of $41,539.38, transferred from the account of one Anthony Worthington, against which Asa Worthington had drawn $89,119.17, leaving a balance on the books to the credit of Asa Worthington, on December 31, 1860, of $2,420.20, which sum Henry E. Worthington also agreed to pay; that the sums were not then paid to Asa Worthington, but were by him loaned to Henry E. Worthington, who used the same in his business. The complaint further states for a separate cause of action that at various times between 1862 and 1876 Henry R. Worthington received from various sources to the use of Asa Worthington $4,806.04, which sum Henry E. Worthington retained and used in his business.

The defendants in their answer denied all the material allega

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tians of the complaint and set up as a defense to each cause of action the statute of limitations.

The action was referred and brought to trial before the referee and upon the trial it appeared that prior to 1860, Asa Worthington and his son had some connection in business and had had for many years; that on the 24th day of June, 1861, the father wrote a letter addressed to his son in which he first said:

“ Being about to give up my agency in your affairs and retire from active business, and having at the close of the year I860' carefully adjusted the accounts in ledger E., I desire in order to a right understanding of them by those who come after me to make-file following explanations:

“ These accounts principally relate to the business you are now engaged in. They commenced in my private or individual books and have so continued to the present time. They, therefore, appear (so far as you are concerned), as kept by an agent who is to-account to you for all receipts on your account after deducting all expenditures and advances made or paid by him, and this is the manner in which they have been yearly stated to you and your former partner, Wm. H. Baker; I will state these accounts in two-ways :

“First. As they will appear if rendered by myself as an agent for you; and, secondly, as they will stand if the books in which they are kept, be (as they now will be), considered as your own.”

He then states the accounts in the two -ways and shows that whether he should be regarded as agent or as interested in the business to the extent of one-third he ought to have for his services, $75,000. This result he reached by stating an account of all the assets and business which he and his son had carried on. Some of the assets were not converted and accounts to a large amount were outstanding and to be collected. He says: “You have agreed to allow me for my services or agency up to 31st of December, 1860, and thence forward while I am able or willing' to assist you the sum of $75,000, being for services, etc., since the year 1845, say fifteen years. This sum I have carried to my credit in the ledger and to the debit of H. B. W. & Co., or your profit and loss account. * * * This deducted leaves a balance of $75,000, the amount you have agreed to allow me for services rendered. This sum of $75,000 is all I have asked or felt entitled to demand, and you have freely and unhesitatingly allowed it. It is now, however, involved in the assets of your business and I do not consider that it is at present due and payable to me.

“ Our fortunes and business have been linked together up to the-present time without any agreement or understanding between us of our relative interests. You have been involved by my imprudence in a large outlay of cash funds, resulting in your being compelled to take real estate, heavily incumbered for your security.

“ These incumbrances must be removed and much time consumed before you can realize from it. It would evidently be unjust for me or my heirs to demand payment of my claim before

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you have had reasonable time to realize from the assets out of which it arises. To your ingenuity and perseverance is mainly due this claim I hold against you and should your assets (now more doubtful than before the existence of our country’s difficulties) prove to be of less value or yield less than was contemplated when the accounts were adjusted (31 Dec. I860,) it is but right that a due proportion of such loss or depreciation be deducted from my claim. Altho’ our minds have never met until now upon the subject of my compensation, yet I have always supposed that (one-third) of the net profits of the concern would be a fair share for me, and this I shall always be content with (or its equivalent) -on a final winding up of the business. I preferred to base my compensation on the principle of a salary rather than this interest in order to avoid the trouble of an adjustment at the termination of my connection with you. You have readily yielded to my desire in this respect, and now I think this settlement had best be adhered to. If the assets you hold should prove worthless, for instance, I should have no claim upon you, and so in proportion to their depreciation I must bear a proportionate rate of the loss, charging me with the same until my share of the net profits, or my compensation rather, be no more than one-third of your net profits. And this adjustment in case of my absence I must and do confidently, cheerfully leave with you. * * * The one-third of this (if this be my interest) is .$ 15,187.03 so that the sum of $75,000, now passed to my credit, appears to be near enough to the right one under present appearances, but time will determine whether these estimates are correct and I must be debited or credited with the difference as the case may be.

“ I do not desire to split hairs with you or to have you go into nice calculations. It will be easy enough by referring to these statements to determine about the just amount due me at any time the account is settled.

“ When I am taken, which must now soon happen, it is my wish and desire and I here so will and decree that whatever is left to me of worldly goods, shall, after paying my just and legal debts, be divided equally between my five children or to their heirs. * * * And I sincerely hope, and it is this belief that cheers me when I contemplate my approaching end, that my children will always continue to feel one common interest in each other’s welfare, and that no hard feelings will be entertained or reflections cast to chill my grave that I have not done equal justice to all and loved all with equal affection.

“ I am not aware at this time of owing anyone any considerable amount except Maria, so long my faithful housekeeper and your youthful protector and guide. Towards her you know my feelings and obligations. I owe for her unexampled and faithful services for a long series of years. She keeps the account although I have somewhere a copy of it, but it matters not, whatever she claims she is justly entitled to, and I desire it may be paid to the utmost farthing, whatever happens, and while she lives let her want for nothing that money, care or kindness can

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yield. You know her and have experienced her care and kindness. I need say no more. This last request is addressed to all my dear children.”

It further appeared that about March 10, 1876, Henry R. "Worthington called his sisters to his office and there presented and read to them portions of the letter written to him by his father and either stated or professed to read from the letter that interest on the account had been “ waived.” At the same time he presented an account endorsed “ statement of account of Asa Worthington, from books of H. R. Worthington, 1860 to 1875, inclusive.” On the credit side of the account was an item of $75,000, under date of December 31, 1860, and fourteen other items in different years, all the credits aggregating $121,345.42. On the debtor side there was a charge under date of January 1, 1860, of $34,721.84, and charges in each year for money had by Asa Worthington, from and including the year 1860, to his death, aggregating $62,127.80, and the account thus far showed a balance of credit to Asa Worthington of $24,495.78. The account also contained certain charges against his estate after his death, in 1875 and 1876, amounting to $1,089.50, and after deducting that sum from the first balance there remained a credit balance of $23,406.28. From this sum he then deducted $11,000 for rent of the house occupied by his father for eleven years, and the further sum of $6,465.13 due to Maria Fraser, the housekeeper, spoken of in the letter, and there was thus left due from Henry R. Worthington to his father’s estate the sum of $5,941.15. He subsequently paid the amount due Maria Fraser and without administration upon his father’s estate, paid to his sisters their respective shares in the final balance.

The referee refused to allow the plaintiff any interest upon the credit items in the account and found that Henry R. Worthington had accounted for and paid the balance due from him to his father’s estate to those entitled to the same, and he dismissed the complaint. The decision of the referee having been affirmed at the general term the plaintiff has brought this appeal.

Isaac H Miller, for app’lt; W. A. Jenner, for resp’ts.

After the death of his father, Henry R. Worthington undertook with the assent of his sisters, the only other next of kin, to administer upon his estate. He stated an account and distributed the balance, and each of his sisters took and had her share. Although all this was done without letters of administration upon his father’s estate, so far as it went, it was binding upon the next of kin. They were the persons beneficially interested in the estate, and they could not take their respective shares in the estate and then through administration claim and obtain a new distribution and thus duplicate their shares. 3 Redfield on Wills, 89, 3rd ed.; Josey v. Rogers, 13 Ga., 478 ; Byrd v. Byrd, 44 id., 258; Babbitt v. Bowen, 32 Vt., 437 ; Wodworth v. Abel, 52 Pa., 370 ; Weaver v. Roth, 105 id., 408 ; Fretwell v McLemore, 52 Ala., 124 ; Ricks v. Hilliard, 45 Miss., 359 . In the absence of creditors,

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an administrator is a mere trustee for the next of kin, charged with the sole duty to collect, convert and distribute the estate among the beneficiaries according to their respective interests. But where the whole trust estate has already been legally and justly distributed, and the purposes of the law thus accomplished, there is no trust duty to be performed and no need of a trustee.

There is no dispute that Henry R Worthington discharged a valid debt of his father’s by the payment he made to or on account of Maria Fraser, his father’s housekeeper,- and the propriety of that payment is in no way challenged. Nor is there any dispute that he made proper distribution among the next of kin of the final balance due from him of about $6,000. At the time of the settlement with his sisters he claimed $11,000 due him from his father for rent, and they assented to it. While an administrator cannot retain from money in his hands the amount of a debt due him from his intestate until it has been legally established and allowed, yet he may do it if all the persons interested in the estate assent thereto. In that event he need „not make formal proof of his claim, but the assent takes the place and answers the purposes of proof. Here the sole parties interested in the estate undertook to settle up and divide the estate without administration, and this claim was made, assented to and deducted, and the balance distributed. The children of the intestate must have known whether he occupied a house of his son under such circumstances as to make a claim for rent just and proper; and for ten years after the settlement, and for four years after the death of the son, it does not appear that any one raised any question about the propriety of the claim or its allowance It was, however, open to the plaintiff upon the trial of this action to show that there was some fraud or mistake as to this claim. But she gave no evidence whatever impeaching it, and the settlement and distribution th^n made must, therefore, stand and bar this action unless interest upon some one or more of the credit items of the account was due from the son to the estate of his father. The main contention at the trial and since has been over the interest, and unless the plaintiff is entitled to recover some interest the judgment below is right and must be affirmed.

The referee held that the statute of limitations did not furnish any defense, and therefore we need not give that defense any consideration nor determine whether or not the referee’s decision in reference thereto was right.

If Henry R. Worthington was legally bound to pay interest we do not think that the settlement made in March, 1876, bars the plaintiff from its recovery. If he owed the interest, he has never paid it, and the next of kin never released him from its payment, and his estate, assuming that the claim is not barred by the lapse of time, is still bound to joay it.

We then come to the important question, was Henry R, Worthington legally liable to pay interest on any of the items on the credit side of the account found in his books and rendered by him to his sisters?

As to the interest, we have no material evidence outside of the

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letter addressed by the father to his son, and the account rendered from his books by the son. The evidence as to the precise relations between them is very meagre, and we have no evidence whatever of their dealings, relations or transactions with each other from 1860 to the death of the father in 1875, a period of fifteen years, except what is furnished by the account, and all that shows is the credit items upon one side of the account and debit items upon the other side for moneys had by the father.

We must assume that the son received the letter written by his father at about its date. He produced it after his father's death and acted upon it. The credit of the $75,000 was entered in the books of his business, and he must have been cognizant of the entries in those books. Those entries are intelligible only by a reference to the letter. He made no claim that it had then recently come into his possession, or that he had not assented to the statement therein made. The declarations therein contained are at least binding upon the plaintiff as the representative of the writer.

We will confine our attention to the $75,000, because if that item did not draw interest it would be easy to show that none of the others did. That was a sum agreed upon for the value of the father’s services for many years, or for his share of the profits of the business carried on by him and his son.

Interest is payable for the loan or retention of money by express contract or as damages for non-payment of money due. Here there was no contract to pay interest, and hence no interest could be claimed upon the $75,000 unless that amount became due and payable and the son was in some way in default for not paying. The general rule is that in the absence of an agreement to pay interest it is implied by law as damages for not discharging a debt when it ought to be paid. The important practical inquiry, therefore, in each case in which interest is in question is, what is the date at which this legal duty to pay as an absolute present duty arose ? In the case of a running" account it is not sufficient that the account is capable of accurate statement or of liquidation from the facts which it contains, or that its payment may be presently enforced. Interest is refused upon such accounts more upon the ground that there is a running credit than because the demand is uncertain and actually unliquidated. 1 Sutherland on Damages, 582, 596, 615. Money payable on demand does not draw interest until after demand. And so money deposited with the depository does not draw interest until after demand. These general rules of law might be more fully stated; but they are sufficient for the present purpose.

How what are the facts to which these rules of law must be here applied? The father did not take from his son any obligation for the payment of the $75,000, and there is no hint in the letter that he expected any interest thereon. He simply entered it as a credit in the books of his son’s business. There he left it for nearly fifteen years without exacting any interest and without giving himself credit or asking that he should have credit in the account for interest. Other credits were riven him in the

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same account, and he was annually charged therein with moneys had by him. If there had been any understanding that he was to-have interest, would there not have been some mention of a matter of such importance, or would not the interest have been credited against the moneys had ? If there had been between father and son a simple adjustment of the claims of the father at the sum of $75,000 and nothing more, that ¿mount would have been presently due and would have drawn interest But here the father entered this sum as an item of account, giving his son credit therefor in his books, thus leaving it fairly to be inferred that it was not presently to be paid and that the son was to have some forbearance at least. But this is not all. The sum of $75,000 was not definitely fixed as the sum absolutely to be paid by the son. It was merely tentative. It was based upon statements which might or might not prove accurate.

In the letter, he said: “The sum of $75,000 now passed to my credit appears to be near enough, but time will determine whether these estimates are correct, and I must be debited or credited with the difference, as the case may be. * * * It will be easy enough by referring to these statements to determine about the just amount due me at any time the account is settled.” It thus appears that a further settlement or adjustment at some indefinite future time was contemplated. The son did not have the $75,000 in money or in assets readily controvertible into money, and hence the father said that he did not consider that it was “ at present due and payable ” to him. He stated that the son had been involved by his imprudence and compelled to take real estate heavily incumbered for his security; that it would take much time before the son could realize from the real estate, and that it would be evidently unjust for him or his heirs to demand payment of his claim until his son had had a reasonable time to realize from the assets out of which it arose. If the son’s assets did not turn out' as estimated there was to be a corresponding deduction from the sum of $75,000, and the final adjustment in case of his decease, he said: “I must and do confidently, cheerfully leave with you.” In the face of these statements and others contained in the letter, how can it be said that any sum was absolutely established as payable to the father? Clearly the $75,000 was not presently payable. The son was not at once in default for not paying it. The father could not have sued him for it without a demand, and could not have recovered it without some proof that it had become payable according to the terms of. the settlement as contained in the letter. How much was. a reasonable time to realize upon the son’s assets? There is no proof showing this, and it may have taken many years. If the $75,000 ever became absolutely jpayable in the life-time of the father, when did it become payable? In the absence of any proof whatever, in the absence of any demand, how is it possible to fix any ■definite time from which interest would have to be computed ? The father evidently treated his son as the depository of ■ the money due him, and he drew upon his deposit from time to time, as he needed money for the support of himself and family, and in

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this view the sum could not draw interest until demanded. There was, we think, absolutely no basis for the allowance of interest; but if we are wrong in this, yet we think upon the facte the referee could justly draw the inference that it was the understanding of the parties that the sum should not draw interest.

It may be said with much'force that it is improbable that the father supposed that he was living upon and using up his principal, when the interest would have been ample to support him. Evidence as to the relations and transactions between the father and son during the fifteen years after the settlement might clear up this mystery. But at the time the letter was written it is evident that the father did not expect to live long, and for some reason not explained by the meagre evidence nothing was done to set the interest running.

"We do not feel certain that in the denial of all interest absolute justice is done to the next of kin. But this action was not commenced until more than twenty-four years after the settlement, nearly ten years after the death of Asa and nearly five years after the death of Henry B. Worthington, and the great lapse of time has probably rendered it difficult if not impossible to furnish a legal basis by evidence, if it ever existed, for the allowance of interest.

Our conclusion, therefore, is that the judgment should be affirmed, with costs.

All concur, except Buger, Ch. J., and Peckham, J., dissenting-