Case ID: ala_38/html/0175-01.html
Source: Caselaw Access Project
Author: {"author": "R. W. WALKER, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

DUMONT vs. RUEPPRECHT.
    [BILL IN EQUITY FOR DISSOLUTION OF PARTNERSHIP.]
    1. Ccn’s'cYustion of articles of partnershipr*-Where the articles of partner-’ship provided, that the active partner should be entitled to one fourth of the net-profits, and, -if his share ’of the profits did- not amount to $3,000 at tlie end of any one year, that the other partner should pay him whatever sum might be necessary to'mahe up .that amount; that. each partner might invest in the partnership, as-capital, an amount not exceeding $10,000, but should not draw out during the year, without the oonsent of his co-partner, any portion of-the .capital thus invested ; that eaoh might, from time to time, draw out of the moneys of the partnership, for his private use, a specified sum per month; and that the boohs should be balanced, and ahalance-sheetmade out, at the end of each year, — held, that the resident partner was entitled to receive $3,000 at the end of each year, although- the business of the year resulted in a loss to the firm; and that although he allowed his share of the profits, at the end of the first year, to remain to his credit on the books of the firm, it was not thereby invested in the partnership, but remained his private property, and 'might be used oi-withdrawn by him at any time. .
    2. Dissolution of partnership; deoreed as of what court of equity, in decreeing the- dissolution of a partnership, may- declare at what date the contract shall be at an end; but it may - bo questioned, whether a mere violation of the articles of x>artnership' by the defendant, not resulting- in loss or injury, would make it prope^for the court to fix the date of the dissolution at an earlier day than the abandonment of the x>artnership by the aggrieved x>arty; and where the only effect of a modification of the chancellor’s decree, so as to make the dissolution take effect as of an earlier day, would be to dexrrive the defendant of the right to the comx>ensation stipulated in the articles, and that compensation is shown to be a reasonable allowance for the services actually rendered by him, the appellate court will not disturb the decree.
    Appeal from the Chancery Court at Mobile.
    Heard before the Hon. M. J. Saefold.
    The bill in this case was filed, on the 19th April, 1839, by J. E. Dumont, against Albert Ruepprecht, asking the dissolution of a partnership which existed between the par* ties, and a settlement of the partnership accounts. The articles of partnership, the construction of which was in controversy, were in the following words :
    “Memorandum for articles of partnership, to be entered into between J. E. Dumont and Albert von Ruepprecht, both of the city of Mobile. J. E. Dumont, general and commission-merchant in Mobile, in consideration of, and in reward for the faithful services rendered to his house b.y A. von Ruepprecht, hereby agrees to take A. von Ruepprecbt into partnership, from the date of the 1st September next, for tire term of four years, under the following .conditions:
    “ The form or style of the firm .[is] to .be J. E. Dumont & Go. The business of said firm shall be-carried on in the. city of Mobile, and in such other ports as tlie partners may deem beneficial to their common interests. That A. von Ruepprecht shall be entitled to, and receive for bis share, one-fourth of all the net profits of the firm, after all losses, charges, expenses, and doubtful debts, which may have been incurred, and are incidental to the business, have been properly deducted. In case A. von Ruepprecht’s share in the net profits, as above mentioned, should not amount to $3,000, (say three thousand dollars,) at the close of each year, then J. E. Dumont agrees to pay said von Ruepprecht such sum as may be required to make up the above amount of $3,000. Each partner is to be at liberty to invest into tbe stock of the concern a capital not exceeding .$10,000, sayten thousand dollars; such sums bearing interest, at the rate of eight per cent, per annum, to the credit of the respective partners. If any of. the .partners should wish to withdraw the whole or part of his capital out of the concern, his intention is to be made .known to the other partner six months previous to such withdrawal, and must have received the consent of the ■ other partner thereto in writing. Each of the partners shall be at liberty, from time to time, to draw out of the .moneys of .the partnership any sum or sums, not exceeding the sum of $200,-(say two hundred dollars,) for his own private use every mouth. -That- each of the partners will diligently employ himself in '.the business of said firm of . copartnership, and be faithful to the other in all transactions relating .to the same, and give a due account of the same, and all letters and ■ things which may come to his hands or knowledge concerning the-said partnership, to the -ether, as the same shall -be required.
    “It is understood and agreed between the partners, that • J. E. Dumont is about to proceed to Europe, for the purpose of promoting by his personal exertions the interests .and welfare of the firm by all legitimate means; such as travelling, and soliciting orders for cotton from the various friends of the firm.; to form new connections for the same''; to establish special agencies where they may be established of advantage — in fact, to do all things which he may judge requisite for .the interests of .the firm. J. E. Dumont, during his absence from Mobile,, and travelling in Europe fob the benefit of the house, shall be allowed and credited $800 (say eight hundred dollars) a year, as a contribution to his travelling expenses ; the same to be charged to the general expense account. A. von Kuepprecht agrees - to remain at the place of business in Mobile, except ‘the months of July, August, and September, and undertake the management and direction of the affairs of the house in all its branches, and use his best efforts and discretion in sustaining and .extending the credit and good name of the firm. Should. Mr.-.Ruepprecht be desirous to make a trip to Europe in 1S57, or 1858, during the summer months (from end of May to,end of September), he is at liberty to do so, if.it can be .dose-without injury to the mutual interests of the partners.
    “Neither of the partners, shall, by himself, or with any other person or persons, either directly or indirectly, engage in-any business,., except the- business oí the partnership ; and neither of . them,, shall employ any of the moneys or effects of the said partnership, or engage the credit thereof, except on account and for the benefit of the partnership ; and neither of .them will give bond, or go bail, nor endorse, or .become security in any manner, for .-any person or persons whatsoever. .. The books of account of said partnership shall befcepj; by-double entry, and. shall contain a full record of all the moneys, goods, effects, debts, sales, purchases, receipts, payments, and all other, transactions of said partnership ; and that said, books, of account, together with all bonds, notes, bills, assurances, letters, and other writings belonging to said partnership, shall be kept at the counting-house in Mobile, and each of. the.partners shall have free access, at all times to examine and copy out of the same. On .the 30th September, 1857, and on the 30th September in. each succeeding year during the existence of the partnership, the books shall be balanced, a balance-sheet be made out in duplicate, and shall be signed by each of. the partners witbin one-month ; and. eacli of the partners shall take.one of the balance-sheets into his custody, and shall be bound-and concluded by every such balance-sheet respectively^, unless, some manifest error shall be discovered therein within twelve calendar months next ensuing, and.be signified by either of the partners to the other ; and then, and in such case, such error shall be rectified.
    “In witness wliereof, we have hereunto set our hands and seals to two .copies, both of this tenor, this 12th day of May, 1858.”.
    The partnership commenced business on'the 1st September, 1856, and continued without interruption until January, 185SÍ when Dumont returned from Europe, and) on the 3d February, 1859, excluded Ruepprecht from thé couuting-room, and refused all further intercourse with him. The complainant'-sought by his bill a dissolution of the partnership-, on the ground that the defendant had neglected afid mismanaged the partnership business, and had been-guilty-of several distinct violations of the-articles of partnership; the principal charges of misconduct • being) that be had drawn out from the moneys of the firm, for his own private use, a larger amount than he whs' entitled to receive, and that he loaned $3,000“ of the moneys belonging to the firm-to Magee & Cluis-, which was lost'by their failure. - The defendant filed an answer, denying all the charges of- misconduct alleged against him, except in reference to the loan-to Magee & Cluis ;.-and as to that mat* ter he alleged, that Magee & Cluis-were-personal friends of the complainant and himself, and were in good credit when the loan was made, and that the debt, instead of- being lost, was well secured.
    At the July: term, 1859r the. cause was -brought to -a hearing before Chancellor Keyes, who held, that the state of feeling between the -.par-ties was such that the partner? ship business could no longer.-be successfully prosecuted) ■ He therefore decreed a dissolution of tbe partnership, to take effect as of the 3d February, 1859, and ordered an.ao count to be taken by the master. At tbe ensuing March term, 1860, tbe.master reported, that the.business 'of the partnership during the- first year-resulted in <a profit -of $25,864 03, during the second year in a loss of $17,518 02, and-during the third year, .up,, to the time when-'the com?plainant excluded the defendant from- the counting-house, in a loss of $1,992 29 ; that-the defendant.was not personally responsible for any loss sustained by the firm, and bad not drawn at any time- more than was due to him; and that there was a balance due to the defendant, which, with interest up the day on which the report was made, amounted to $2,859 39« -The complainant filed several.ex? ceptions to the master’s report, all of which were overruled by the chancellor (Hon.’ M. J. Saefold), who confirmed the report, and rendered a decree in favor of the defendant, for the balance ascertained to be due to him. From this decree the complainant appeals, and assigns the same as error, together with the instructions to the master in taking the account, and the overruling of .the exceptions to the master’s report; and there was a cross appeal by the defendant.
    F. S. Blount, for appellant.
    P. Hamilton, contra.
    
   R. W. WALKER, J.

Much of the controversy in this case ¡turns upon the construction to be given to the articles of partnership; and the most material questions presented b.yfthe ¡.record, w'ill be disposed of, when the respective ¡¡rights and duties of the parties under the articles are ascertained.

By their agreement, -these .parties formed a partnership, ■one-fourth of the net profits of which was to belong to Ruepprecht; and it was stipulated, that if Ruepprecht’s share of the net profits should not amount to $3,000 at the close of each year, Dumont was to jgay Yarn such sum as might be required to make up the amount of $3,000. It is too clear for dispute, that by this contract Dumont guarantied that Ruepprecht should receive in any event $3,000. This was the minimum -sum. If one-fourth of -the .net profits exceeded that sum, he was entitled -to -the excess; but, if his stipulated share .of the profits for ¡any year did not reach that amount, or if no profits were realized, Dumont was, in either case, personally bound to pay him that sum. It appears that 119 profits were ¡realized during the second year? and according .to -the agreement Dumont became .personally liable to pay Ruepprecht $3,000. Unless, therefore, there was something in the conduct-of the-latter which deprived him of that right, the fact that he credited himself with the sum of $3,000 on the books of the firm, for the .second year, forms no ground of complaint.

It is shown-that Ruepprecht’s share of the profits of the first year was $6,466-01 ;~that during that year he drew out $3,376 28 f that during the second year he drew out $2,994 10', and that during the portion of the third year that he continued in charge of the business, he drew out $1,724 63. The right' of Ruepprecht to draw out more than $200 pen month, and the question whether his share of the profits of the first year, beyond $200 per month, was, as between the parties, liable to the payment of the losses of the second year, may be considered together.

The stipulation that, if Kueppreclit’s share of the profits did not amount to-$3,000 at the dose of each year, Dumont was to pay him such sum as might be required to make up that amount, and'the clause which-provides that the books shall be annually balanced, and a balance-sheet made out and signed by each partner,- show two things — -first, that, as between the parties, Ruepprecht was to bear no part of the losses of any year, except so far as they might reduce his share of the profits of that year-to $3,000 f and, second, that each year’s business was to stand by itself, and be closed by itself. Each partner had, by the articles, the privilege of investing in the stock of the concern a capital not exceeding $1-0,000, — the sum so-invested to bear interest to the credit of the partner putting ihim; and neither partner was to be at liberty to withdraw any part of the capital thus invested, without giving .his co-partner notice, and obtaining his-consent to the withdrawal. The articles do not, as it seems- to u% require the partners to let their respective shares of the profits of any one year remain in its business for the succeeding year. • On the contrary, we think that, at the close of each year, eaeh partner became entitled to his share of the- profits of that year; as his private property, to be disposed of as he might please. He was not bound to invest it as so much capital in the stock of-the concern. If he did so-iavest it, he was entitled to interest upon it. But the mere fact that Ruepprecht suf- - fered-a portion .of. his-share of the profits of the first-yearc to-remain to Ms credit on the books oí the firm, without drawing interest, was not an investment of that amount in the capital-stock of the concern, but a.mere deposit of so much money, to be subject to his order, and-to be drawn out when he might -choose. The firm was his debtor to that amount, and, as between .the partners,-.this sum was not liable for the losses of .the succeeding,year.

The articles- provided, -that each,partner should be at liberty, from time to time, “to draw out of the moneys of the partnership” any sum,.not exceeding $200, for his own private use every month. This clause cannot be construed as prohibiting the partners from drawing out tbe respective .shares -of profits which, at tbe close of each year, might stand to their credit on the books of the firm. The balances, thus ascertained, were not “tbe moneys of tbe partnership,” but tbe private property of the partners respectively. .The prohibition has reference solely to the funds of the firm in hand before the result of the current year’s business is .settled, and it cannot be applied to the balances of profits which, on the annual .settlements provided ..for, might be found .due to each partner. These ascertained balances became private property ; and if they were simply left with the firm, but not invested as capital, they are to be held as .money loaned the firm by the partner, and not as ‘money oí the partnership.’

.It appears that Ruepprecht did not draw out more than .$200 per mouth.,till the result of the first year’s business was known. After that he drew more; but he did not draw out during -that year as much as his share of the profits. Independent oí ,this, we think, it is too late for Mr-Dumont to complain-that Mr. Ruepprecht drew out more than $200 per month during,the first,year. The balance-sheet of that year’s business.was made out on the 30th September, 1857, and forwarded to Mr. Dumont. That balance-sheet .showed that the share of profits to which Ruepprecht was entitled was $6,466, and that the amount which stood to his credit on the books of the firm at the close of the year - was $3,089 73. From this it was apparent that Rueppreclit must have drawn out $3,376'28 daring that year. Though thus¡ notified that Ruepprecht had drawn out more than $200 per month during the first year, Dumont made no eomplaint on that account for more than twelve months; and-we think it is now too late to insist upon it.

The sums drawn out by Ruepprecht during tbe second year amount, in the‘aggregate,'to $2-,994 10; - whereas the balance of profüsálue him on-account of the first year's business was -$3,0-89' 73. This- -balance, we have seen, he liad a right to draw, when, and imwhat sum he-chose. The firm mademo profits during the second year; 'and according fo’tbe articles Dumont was bound to pay Ruepprecht at the end -of that year $8',G0Q. This amount, added to the unexpended balance of -the first year’s profits, ($95 63,) left to his credit 'at the beginning of tire third year $3,095 -63. During the third year; R-uepprefcht drew - oiit but f 1,724 66; so' that" he was -not,- at any 'time during the second or third year, equal'in 'his drafts to tire amount due him at the close of the preceding year.

Y/hat we have said "‘disposes of the controversy between the parties," so far-as it relates to the construction to be given- to the articles-of partnership. -All the other questions- -presented --byH-tbe record arise out of certain charges of misconduct and violation -of duty, made by the complainant against the defendant. The first specification we shall consider separately, and pass it by for tbe present. We do not deem it necessary to go into a detailed discussion of the other charges, but content -ourselves with saying in reference to them, that, after a careful examination, of the evidence, we think that no case of misconduct, or gross neglect, by the defendant, resulting in injury to the firm;- has -been made out.

The first specification relates to a loan-of $3,000 of tbe money .of the firm by Ruepprecht to "Magee & Cluis. In thus lending the money of the firm, Ruepprecht was guilty of a breach-of the -articles of partnership. When a dissolution.-is--decreed-for- such a cause, the-eourt may declare at what date the contract of partnership shall be at an end. Durben v. Barber, 14 Ohio, 315; Johnston v. Fogg & Vanderslice, 27 Ala. 432. It is now insisted, that the dissolution in this case should be made to date back to the 12th March, 1857, the time at which the loan was made to Ma-gee & Cluis. But it appears that, although Magee & Cluiefailed, their note has been settled by other parties, in pursuance of an arrangement for that purpose made by Ruepprecht, so that, in point of fact,.,no loss has been sustained by the firm*of J. E. Dumont & Co. It may be questioned,, whether a mere violation of the articles, without injury, would make it proper for the court to fix the date of the-dissolution at a time earlier than the abandonment of the partnership by the aggrieved party. Indeed,, none of the-cases which assert the principle, that the court may declare at what‘date the contract shall be at an end, seem to have fixed the dkte of,the dissolution at. a time prior to such abandonment, ancfc notice thereof to the offending partner.

In the present case, we do not perceive that the action of the chancellor, in regard t© the date of the dissolution, affords the appellant any just cause of complaint. All the profits that were made by the firm, were made during the first year j and this loan of the firm money was not made until near the close of the business season, when most of the profits had been realized. Of bis- share of the profits which accrued prior -to the date of the loan, Rueppreclit would noti'be deprived by a decree fixing, that as the time of tire dissolution. The only effect oí such a modification of the decree would'-'be to deprive the defendant of the annual allowance of ;$3,000, to which, under the articles, he was entitled after . the first,year. But it is shown that Rueppreclit conducted the business of. the concern, devoting his whole time thereto, from the date of the loan, until he was excluded from any.;further interference with the affairs of .the firm-by the complainant* in January, 1S59. For the services rendered by him .during" this period, a court of equity, supposing that :the dissolution should relato back to March, 1857, would not refuse him just coinspensati'on; and, on the facts disclosed, we cannot say that $3,000'¡per annum would be too large an allowance for such services. Por these reasons, we are not disposed to disturb this feature of the decree.

On the whole,-,our opinion is, that the appellant (Dumont) .has failed to show any reversible error, and the decree must be affirmed.-

On -the suggestion of the counsel for Ruepprecht, the appeal taken by Mm is dismissed, at his costs.