Appeal by defendants from the Circuit Court of Cook county;
the Hon. LEONARD C. REID, Judge, presiding. Heard in the second
division of this court for the first district at the June term,
1949. Decree affirmed. Opinion filed March 13, 1951. Rehearing
denied April 24, 1951. Released for publication April 24, 1951.
MR. PRESIDING JUSTICE SCHWARTZ DELIVERED THE OPINION OF THE COURT.
Rehearing denied April 24, 1951
This case comes to us on appeals and cross-appeals from a decree entered February 23, 1949, in an accounting suit by the estate of Howard B. Jackson against his surviving partners in the firm of Jackson Bros. & Co., grain and stock brokers. The controversy arose soon after the death of Howard B. Jackson on January 19, 1923, and suit was commenced December 30, 1927, by Florence May Jackson, as executrix of the will of Howard B. Jackson. Arthur S. Jackson, principal surviving partner and coexecutor under the will, did not of course join in this suit. For more than 23 years, this suit has wandered through our courts and has finally arrived here accompanied by a record of approximately 4,000 pages plus exhibits and about 800 pages of briefs. All in all, this controversy, originating 28 years ago and now in its 24th year of litigation, bids fair to make an unenviable record in this jurisdiction.
Florence May Jackson died June 5, 1946, and the Continental Illinois National Bank and Trust Company of Chicago, as administrator de bonis non with the will annexed of the estate of Howard B. Jackson, deceased, was substituted as plaintiff. We will at times refer to plaintiff as Florence May Jackson.
The principal issue is the extent of the surviving partner's duty to disclose information bearing on the value of deceased partner's interest and to account therefor. The controversy has finally centered on five accounts.
One of these is the Frank G. Jackson Capital Account, which plaintiff claims was merely in the name of Frank G. Jackson as nominee for Howard B. Jackson. The Special Commissioner recommended and the court found that this account belonged to Howard B. Jackson and a decree was entered against the estate of Frank G. Jackson, which had defaulted, and against the estate of Arthur S. Jackson, appellant and defendant cross-appellee, with respect thereto for $176,228.37 plus simple interest at 6% from January 19, 1923, making a total of $452,013.71.
The other accounts (sometimes referred to as the anonymous accounts) were shown on the books as trading or customers accounts as follows:
Account #735, which the Special Commissioner found to be a firm account and therefore that Howard's estate would be entitled to 25% and on which he recommended a decree for $49,727.13 together with interest at 5% per annum compounded annually from January 19, 1923, the total amounting to $177,095.96. The court sustained exceptions as to this and held defendants not liable.
Account #700, Grain, which the Special Commissioner found to be a firm account with a credit of $40,525.40, of which the estate of Howard B. Jackson was entitled to 25%, together with interest at 5% per annum compounded annually from January 19, 1923, the total amounting to $36,081.33. The court sustained exceptions as to this and held defendants not liable.
Account #728, which the Special Commissioner found to be a firm account and on which he recommended a decree for $22,129.56 together with interest at 5% per annum compounded annually from January 19, 1923, the total amounting to $78,811.22. The court sustained exceptions as to this and held defendants not liable.
R.J. McFadden account, which the Special Commissioner found to be in the name of a fictitious person and actually a firm account and on which he recommended a decree for $163,227.37 together with interest at 5% per annum from January 19, 1923, the total amounting to $368,621.85. Compound interest on this account was not recommended. The court sustained exceptions as to this and held defendants not liable.
For an understanding of this case, it is best to begin with a short history of the firm involved. Exhibits included in the record date back to 1913. Howard B. Jackson and his nephew, Arthur S. Jackson, were at that time equal partners in a general brokerage and commission business. The enterprise prospered. Commissions earned in 1913 were $86,471.66. In 1917, when Howard Jackson became vice-president of the United States Grain Corporation, they rose to $308,729.95. In 1922, the year before Howard died, they totaled $1,273,023.02. The firm is at times referred to as having been the largest grain brokerage business in the world. Its customers numbered in the thousands and its books and records were correspondingly voluminous.
On July 1, 1917, the day Howard assumed his duties as vice-president of the United States Grain Corporation, he executed a written partnership agreement with Arthur S. Jackson, whereby it was agreed that the business would be continued in the name of Jackson Bros. & Co., with Howard and Arthur as the only partners, sharing profits equally. On the same day, Howard sent a letter to the firm in which he said that he desired his brother Frank Jackson, who was employed by the firm in a minor capacity, to receive his (Howard's) share of the profits while he was engaged in government service.
In June 1919, a new partnership agreement was entered into between Arthur S. Jackson, Howard B. Jackson, James E. Cairns and Edward O'Neill. Frank Jackson was not a party to this agreement. The agreement recited that Arthur S. Jackson and Howard B. Jackson had been conducting the business as a copartnership under the firm name of Jackson Bros. & Co. and provided that the partners should be entitled to net profits on the following basis: Howard B. Jackson 30%, Arthur S. Jackson 40%, James E. Cairns 20%, and Edward Earl O'Neill 10%.
On July 31, 1920, a new partnership agreement was executed with Arthur S. Jackson, Howard B. Jackson, Frank G. Jackson, James E. Cairns, Edward E. O'Neill and Edward Hymers as partners with the following percentages: Howard B. Jackson 25%, Arthur S. Jackson 38%, James E. Cairns 19%, Edward E. O'Neill 10%, Frank G. Jackson 4%, and Edward Hymers 4%. This agreement contained a provision whereby in the event of the death of any partner, the value of his interest should be determined and paid to his estate after an accounting and statement of the capital and assets of the partnership had been made, and the surviving partners should thereby purchase the interest of the deceased partner so as to continue the business without interruption. Either Howard or Arthur Jackson could require the withdrawal of any of the other partners upon ten days' notice and by payment only of his proportionate share of the accrued profits of the firm. The agreement also provided that the furniture, fixtures, partnership name and good will belonged and should continue to belong exclusively to Howard and Arthur Jackson, each with an equal share, and upon the death of either Howard or Arthur were to pass to the survivor.
This was the agreement in effect at the time of Howard B. Jackson's death. His will, made approximately six months before his death, bequeathed his entire interest in the partnership name, good will, furniture and fixtures to Arthur S. Jackson; set forth the procedure to be followed in making a settlement of his interest in accordance with the partnership agreement; and stated "My said partners shall assume all the debts and liabilities of the partnership and may purchase my interest in said capital and assets. . . ." He devised and bequeathed all his property to the Harris Trust and Savings Bank as Trustee, with a provision that the income thereof should be paid to his wife if she survived him, for her life; after her death the income was to be paid to his brother Frank. Upon the death of both his wife and Frank, the trust was to terminate and the principal and accumulated income given to his nephew Arthur, and if he were dead, then to the lawful heirs of Arthur. The will named his wife and Arthur as executors. Both were duly appointed and served as executors until the death of Arthur on September 28, 1933. Thereafter, the wife served as sole executrix until her death.
Following Howard's death on January 19, 1923, the surviving partners had an accountant, Hiram E. Decker, prepare a statement of the capital assets, debts and liabilities of the firm, determine the value of the decedent's interest, and establish a suspense account as provided by the partnership agreement. This statement was served on Howard's widow and executrix and thereafter there was paid to the estate the full amount shown in the accountant's statement as the value of Howard's share, $356,553.28, together with interest at the rate of 6% per annum. Not long after the death of Howard, his widow questioned certain accounts on the partnership books and asked for an accounting thereof. Many of these accounts appeared on the books merely under a number or the name of a dummy or fictitious person. Howard's widow felt that there was a question as to whether these anonymous accounts were not, in fact, accounts of operations by the partnership itself or by Howard Jackson. After the controversy arose various accountants were employed by her to examine the books of the partnership. The first of these, Arthur Young & Co., made two reports, one dated February 15, 1923, and the second June 1, 1923. In 1929 one Angus Steven was employed by Florence to make such an examination. His balance sheet for the firm is in evidence as Defendant Lou B. Jackson's Exhibit 2. This balance sheet was in accordance with the records of the firm. It showed the value of Howard B. Jackson's interest to be $356,053.28 and also showed that the value of Frank Jackson's share was $176,228.67.
Some time prior to this, negotiations had been instituted with a view to settling the claims advanced by Florence Jackson, and in July 1925 the amount of $100,000 was agreed upon. Pursuant to appropriate orders of the Probate court, this amount was paid to the Harris Trust and Savings Bank as agent for the executrix. Mrs. Jackson executed a release, but on July 8, 1926, petitioned the Probate court for permission to return the $100,000 to the surviving partners. On May 23, 1928, the Probate court found that certain of the surviving partners were willing to accept the return of this money. Its ...