ELLEN I. MCGIBBON and JAMES R. HONEYWELL, as Administrators de Bonis Non, etc., of BELFRAGE MCGIBBON, Deceased, Respondents,
EDWARD B. TARBOX, as Survivor of the Late Firm of MCGIBBON & TARBOX, Appellant.
APPEAL by the defendant, Edward B. Tarbox, as survivor, etc., from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Delaware on the 28th day of February, 1910, upon the report of a referee.
Wesley Gould [Alexander Neish of counsel], for the appellant.
Wagner & Fisher, for the respondents.
SMITH, P. J.:
This action is brought by the administrators of Belfrage McGibbon against Edward B. Tarbox for an accounting. In 1873 McGibbon and Tarbox entered into partnership in the hardware business. On September 1, 1884, McGibbon died. At that time an inventory was taken of the stock, which disclosed the interest of McGibbon at his death to be $4,275.85, and the interest of Tarbox to be $6,332.72. At his death McGibbon left a widow and three children. The widow was the sister of the defendant and lived in his family. After some family consultation, and by the advice of an attorney, the defendant continued the business in the same firm name
for the benefit of himself and his sister and her family until the 1st of March, 1906, at which time the youngest child became of age. At that time an inventory disclosed assets of the value of $9,303.48. During that time Mrs. McGibbon had drawn for her family the sum of $13,182.69, and the defendant had withdrawn $15,022.64. The referee has charged the defendant with the final inventory of $9,303.48; has credited him with store rent to the amount of $1,137.50, and has allowed him the further sum of $4,544.50 for his personal services during that time. He has treated the amount of moneys drawn by the defendant in excess of the amount drawn by the McGibbon family as withdrawals of excess capital. But this amount withdrawn still left $216.92 as excess capital, with which he has credited the defendant, which leaves a balance of $3,404.56, which he calls the net assets of the firm for division in this action. From this sum he has directed that the plaintiffs' and defendant's costs should be taxed and adjusted and paid. It seems that $250 has been paid to Clara McGibbon. By his 5th conclusion of law he directs: 'That to the balance then remaining shall be added the sum of $250 paid to Clara McGibbon by the defendant, and the aggregate divided in two equal portions, one-half of which, less the said sum of $250 shall be paid to the plaintiff in this action, and the other one-half, plus the $250 paid to the defendant in this action.' The plaintiffs' costs were taxed at $628.77 and the defendant's costs at $100, leaving in the hands of the defendant for division the sum of $2,709.83. Add to this $250 paid to Clara McGibbon. The result divided by two makes the sum of $1,479.92. From this deducting the sum of $250 there remains the sum of $1,229.92, which the defendant was directed to pay to the plaintiffs in addition to their costs of the action.
In Robinson v. Simmons (146 Mass. 167) the head note, in part, reads: 'The representatives of a deceased partner, whose capital is used by the surviving partner in the business, may generally, if there is no agreement, elect to demand either interest on such capital or the profits earned by its use. A surviving partner who in good faith continues to use in the business his deceased partner's capital with the consent of a majority of his
heirs, is entitled to compensation for his skill and services out of the profits earned by it; and the latter's representatives will take only such profits as then remain.' At page 176 the opinion reads: 'The plaintiffs contend that in this case the rule should be that the profits accruing after the death of the intestate should be divided according to the amount of capital which each partner or person interested had in the business, and that no compensation or allowance should be made to the surviving partners for their services and skill in conducting the business. We do not think that this rule is supported by the authorities, or is just as applied to this case.' In the same opinion it is stated: 'There is, however, no inflexible rule governing all cases, but each case depends upon its own circumstances and equities.'
Under this rule the plaintiffs have the option either to demand back the sum invested with interest less the amounts that had been received, or to charge the defendant with their proportion of the profits in lieu of interest. Inasmuch as the profits have exceeded what the interest would amount to under the legal rate plaintiffs have elected to demand the profits instead of simple interest. Under that election, however, plaintiffs are entitled only to their share of the net profits after a fair and equitable allowance to the defendant for his disbursements and services. The referee, therefore, properly allowed him for the rent of his building and for his services. The amount of moneys withdrawn by the defendant in excess of those withdrawn by the estate has been treated by the referee as a withdrawal of so much excess of capital which the defendant had in the business at the death of McGibbon. During all this time, however, the defendant was contributing his services and the use of his property to the value of over $5,000, as found by the referee. It is fair, therefore, that this withdrawal of $1,839.95 in excess of the withdrawal of moneys by the estate should be deemed applicable to reimbursement to him to that extent for services rendered and for the use of his property, and should not be deemed a withdrawal of excess capital.
The defendant then at all times had in the business $2,056.87 of capital in excess of the capital ...