Case ID: sc-eq_9/html/0064-01.html
Source: Caselaw Access Project
Author: {"author": "O’Neall, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

David Montgomery vs. Wm. Montgomery.
    
    Plaintiff and defendant had been copartners; at the dissolution of tho firm defendant undertook to collect the debts due. After some time they came to a settlement, and the defendant paid over to the plaintiff his share of so much of the partnership funds as he (the defendant) admitted to be in his hands : at that time the plaintiff claimed to charge the defendant with the sums of which this bill seeks to recover his share. Prom the time of the settlement to the filing of the bill more than four years having elapsed, held, that defendant was protected by the statute of limitations.
    The bill in this case was filed the 24th December, 1825. The facts will be sufficiently understood from the decrees and the Commissioner’s report.
    DeSaussure, Ch. The bill of complainant seeks a settlement of the affairs of a co-partnership in trade, which was entered into by the complainant and defendant, who were brothers. The complainant alleges, and it is not denied, that on the dissolution of the co-partnership in December, 1817, the defendant took possession of the books of account, notes, and other credits of the firm, and made collections thereon, and is accountable.
    The defendant admits the allegations of the bill, but states that about December, 1819, a misunderstanding arose between the complainant and defendant, in relation to two entries in the books, to wit, a charge against the complainant, on 16th June, 1818, of $1104 56, and another on the same day of $652 18; that the complainant admitted every thing else in the books to be correct. The defendant averred that those two entries are also correct, and were made in the presence of, and with the approbation of complainant, though the defendant admits some irregularity or impropriety as to the mode of the entries, but which did not aifect the truth or justice of them. The defendant states, further, that on the misunderstanding arising respecting those two entries, all matters were submitted, in the year 1819, to the arbitrament of Wm. Holmes and Charles Bell, who made a final settlement and division between complainant and defendant, upwards of five years before the filing of the bill of complainant, and defendant pleads the statute of limitations.
    At the hearing of the cause in the Circuit Court, witnesses were examined on both 'sides. The evidence is so material that I have considered it best to transcribe it from my notes. It is proper, first, to premise that there was no agreement in writing, nor bond, to refer the cause to arbitration, nor was any award made in writing, nor signed by the arbitrators. William Holmes was called by the defendant, William Montgomery, and testifies as follows:
    There was 'a difference between Wm. and David Montgomery, which was referred to arbitration, to witness and to Mr. Charles Bell. There were some objections by David Montgomery, but the arbitrators were informed that the objections were removed. David Montgomery objected to the arbitrators taking into consideration certain items. This objection was withdrawn. The arbitrators then examined the books, and considered the whole business, (including the two disputed items,) and made their final decision and division of the notes, &c. <fcc. The arbitrators intended it to be a final settlement. The arbitrators delivered to William Montgomery his share of the notes. David was gone, but left Mr. Bell to receive his share of the notes, &c., and they were delivered to him. It was distinctly stated to William Montgomery, that it was a full and final decision on all the books', and included the two disputed items ; and witness believed that David Montgomery was informed that it was the opinion of the arbitrators as to those disputed items. David Montgomery furnished no evidence to prove impropriety in the 'disputed items. On being cross-examined, witness says he thinks David Montgomery was satisfied with the books in all respects, except the two items now disputed. He understood the objection was removed, but cannot say whether he was informed so by David Montgomery or by Mr. Bell. Mr. Holmes cannot say whether David Montgomery considered the settlement awarded as to those items. David Montgomery asked for proofs' of the two items, none were produced ; but David Montgomery not producing evidence against them, arbitrators did not feel themselves at liberty to set them aside. The witness being re-examined, says no objections were made. He inferred that David Montgomery was satisfied, and he inferred that he agreed the arbitration should be gone into and include all the matters in dispute, that is, the present disputed items. On being examined by the Court, witness says there was no submission to arbitration in writing, nor award in writing; but witness thinks they made entries in the books of the allotments to each, not signed by the arbitrators. He thinks that after the meeting, David Montgomery demanded proofs of the two disputed entries. Wm. Montgomery did not furnish any; but the arbitrators being satisfied with the fairness of Wm. Montgomery’s character and conduct, allowed the entries as made. The arbitrators acted upon every thing apparent on the face of the books. Arbitrators had no means to judge of the fairness of the entries, they had no evidence for or against them ; they, therefore, concluded that they were all fair, and awarded according to them.
    Mr. Charles Bell, witness for complainant, testifies as follows : — The arbitrators met to settle difference between the Montgomeries; they were mutually chosen; they understood there were particular entries in dispute. David Montgomery said he was not satisfied with the correctness of the entries ; he said he was needy, and would be glad to receive what might be due him, but that this should not take away his right to an examination. The arbitrators acted on the entries without proof for or against them. Witness did not consider the arbitrators as deciding the disputed items. David expressed dissatisfaction at these items, and made a reservation that the arbitrators should not act or decide on them,, to which Wm. Montgomery assented.
    On being cross-examined, witness says, .that Wm. Montgomery claimed the benefit of those items, and the settlement made included the two items. He believes that these two items were expressly reserved — is sure this was so, by David Montgomery in the presence of Wm. Montgomery. David went away shortly after the arbitrators began to act and make division of the notes. The only thing done was a division of the funds. The arbitrators made the entries in the books dividing the funds. Witness proves a letter of Wm. Montgomery to David Montgomery, in Sept., 1823, stating that his brother must sue in equity. Wm. Bell, being examined, said, in the spring of 1823, David Montgomery requested him to call on his brother, Wm. Montgomery, for the books of the partnership, with a message, that if Wm. Montgomery would prove the account before a magistrate, he, David, would be satisfied; but Wm. Montgomery said he would not settle till his brother David came into a Court of Justice. Wm. Montgomery always insisted that the entries were right.
    Mr. Charles Montgomery, being examined,-said the litigants were his brothers. He heard them speaking of arbitration ; but they split, on the ground, that David Montgomery objected to Wm. Montgomery’s proving the books — he required other proof. Wm. Montgomery was willing to prove them himself, and insisted they were correct. David Montgomery said they were not correct. David Montgomery has since said he was satisfied with all except the two disputed items. Heard Wm. Montgomery say the disputed items were settled by the arbitrators.
    
      The letter referred to in the evidence, is one by Wm. Montgomery, dated 10th Sept., 1823, and directed to David Montgomery. In this letter he informs his brother that he had consulted Mr. Gregg, and had given him a statement of the matters in dispute between them, and that there could be no deci- - sion of the Court of Common Pleas on it; so that he, David, would have to bring his suit in the Court of Equity.
    On the argument of the cause, the counsel for the defendant stated that the decision by arbitrators, on all the disputed points, is a bar. That he did not rely on the ground of the award in this case, as there was doubt'from the evidence whether all the matters in dispute were referred to the arbitrators or decided by them, but that the statute of limitations applied to the demand, for Wm. Montgomery had always stated that he did not owe David any thing more.
    That, substantially, the transactions in this cause made out a case of stated account subsequent to the termination of the co-partnership to which the statute of limitations applied, and he urged that taking the evidence of the award and the statute of limitations together, they made out a case against the demand of complainant.
    In examining this case, it appears that nothing could have been conducted more loosely. There is no written reference to arbitration, nor is there any clear parol evidence of what disputed points were left or intended to be left to arbitration, nor is there any award in writing stating the. points in dispute and deciding on them. The parol evidence is also contradictory as to what was done or decided on by the arbitrators. The witnesses, two of whom were arbitrators, are'entirely at variance as to what took place. Under all these circumstances, I see nothing which can sustain the plea of an' award, which was in a great measure abandoned at the hearing by the counsel for the defendant.
    With respect to the plea of the statute of limitations, I do not think it can be applied to such a case. It was a co-partnership, in mercantile transactions. At the expiration of the co-partnership, the books and notes and papers of the concern were all left in the hands of the defendant to collect, and he was bound to account, and he cannot protect himself against such an account by the statute of limitations. Besides, in his letter of the 10th Sept., 1823, he recognizes the existence of an unsettled dispute between them in relation to the concern, and informs him that by the advice of counsel he must file a bill in equity to settle it. I am, therefore, of opinion, that these pleas cannot be sustained and must be overruled.
    It is, therefore, ordered and decreed, that the defendant do account with the complainant, before the Commissioner, on the subject of the two disputed items stated in the pleadings, and which formed the only subject of difference between the parties.
    The defendant moved the Court of Appeals to reverse Chancellor DeSaussure’s decree upon the following grounds:
    1st. Because the complainant was concluded by the award and settlement.
    2nd. Because the complainant was barred by a stated or settled account.
    3d. Because the complainant was barred by the statute of limitations.
    The Court of Appeals suspended the cause until the whole case should be brought up.
    On the order of reference made by DeSaussure, Ch., the Coihmissioner made the following Report:
    “ Complainant and defendant entered into co-partnership as merchants, in March, 1816, and dissolved that connection in Dec., 1817. The defendant took the books, <fcc., and became the collector for the firm. In June, 1818, after the dissolution of the firm, it appears that defendant paid complainant the sum of $1104 56, and made the entry in the books of the late firm, in the words, ‘ Cash on settlement, $1104 56.’ Upon the same day defendant credits himself with the further sum of $652 18, and entered that credit in the books of the late firm in these words: ' By settlement, $652 18.’ Both of these entries are in the hand writing of defendant; no complaint seems to have been made of these entries until 1819, when some fruitless efforts were made to settle the dispute between the parties. These gentlemen, are brothers, and it gives me pleasure to add, that from the commencement of the partnership to the end of the reference, they entertained for each other the highest respect and most unlimited confidence in each other’s integrity. This is probably the reason why their transactions have been so irregularly conducted and are now so utterly inexplicable. The complainant seems to have some vague suspicion of a sheer mistake, and calls upon defendant for a general account of all the transactions of the concern. This general account the defendant has rendered upon oath, and swears that it is as full and complete an account as the transaction is susceptible of at this time.
    “ The parties and their solicitors attended before me and examined several witnesses, and, to my utter surprise, upon reviewing carefully and repeatedly the testimony, not one of the witnesses testified to a single fact which explains in the most distant degree the matters in dispute. In this state of things I see no alternative but to let the subject remain, where I found it, in perfect darkness. The whole business has been so loosely managed by both parties — both parties have had free access to the books, placing unlimited confidence in each other, and neither of them skilled in the science of book-keeping — neither of them ought to be permitted upon a bare surmise of mistake, without even making a charge of fraud, to compel the other, after this lapse of time, to render an account of the transactions in a more perspicuous and merchant-like manner than the books furnish, which were kept with the knowledge and approbation of both parties. Submitted.”
    On exceptions to the above Report, the following decree was made by.
    - Harper, Oh. The complainant and defendant were partners in trade. The partnership began in March, 1816, and was diss.olved in December, 1817. The present bill was filed for an account, charging that after the dissolution of the firm, the defendant retained possession of the books of the firm, and collected debts. The defendant filed an account with his answer, but pleaded an award and the statute of limitations ; which pleas were overruled by the decree of Chancellor.DESAussuRE, made in February, .1823. The account filed was taken from the books of the firm, and it appeared that there \vere but two disputed items, to wit: a charge made on the books against complainant, in the hand writing of defendant, of the date of the 16th January, 1818, of §1104 56, “ Cash on settlement,” and a credit, on the same day, to defendant, in his own hand writing, of §652 18, “ by settlement.” These items were referred to the Commissioner by the order of Chancellor DeSaus-sure, who has reported certain evidence, and added, that he cannot come to any satisfactory conclusion ; to this report the complainant has excepted—
    
      “ 1st. Because he has allowed the entry of §1104 56, made in the books of William Montgomery, without any evidence that such payment was made by him.
    
      “ 2d. Because he has allowed the entry of §662 18, also made by Wm. Montgomery, without any evidence that he paid the same.
    “ 3d. Because the Commissioner has not reported in favor of complainant the balance due to him.”
    The question made was, whether the defendant was bound to prove the charge made against the complainant, by other evidence than that of his answer and the entries in the books. On this point I do not see any reason to doubt — the bill is for an account generally, and the decree of Chancellor DeSaussure, is, that the defendant is bound to account — though all the other items were admitted besides those in question.
    It is perfectly well settled that an answer is no evidence, except in reply to the charges of the bill, and the bill makes no specific charge as to these items. This is not like the case of the defendant charging and discharging himself in giving an account of one connected transaction. It is by the other and undisputed particulars of the account that the defendant is charged ; his alleged payment to complainant is quite a distinct affair. It is the familiar practice of every day, that the defendant who is called upon for an account, must vouch or prove in some manner the credits given to himself, or the charges made .against complainant.
    Nor do I think there is more room to doubt with respéct to the entries in the books, even if these had been made during the continuance of the partnership. I should doubt whether they ought to be admitted as evidence. Original entries are made evidence from necessity, to show the ordinary daily transactions of the firm — but the necessity hardly exists of admitting them to shew a settlement between the partners of the firm. But they were made after the dissolution of the firm. They were no longer the books of the partnership, and the entries were but the memoranda of the individual. It was urged, that the defendant was the agent of the late firm, and of the complainant. He was the agent for the purpose of making collections, and settling with the debtors of the firm. Though the acts of an agent will bind the principal as to third persons, it would be a novelty that his own statements should be taken as evidence in his own favor in settling with his principal. The evidence, so far as it goes, gives room to suppose that there may have been some mistake with respect to these entries. The testimony of Mr. Young is pretty distinct as to defendant’s admissions, the day before these entries purport to have been made, of his being personally indebted to the complainant on account of cotton sold to about the amount charged by the entry of $1104 56. If he paid that sum, “as he was an unskilful merchant and accountant,” he is not unlikely to have made a memorandum of it on the partnership books.
    Do the credit given defendant for $652, and the charge of $1104 against complainant, relate to the same transaction, or distinct ones 1 If they relate to the same transaction, there must certainly be some mistake. Defendant states in his answer, that the charge of $1104 was inartificially made — that but half the amount was actually paid, but that this ought to have been charged against complainant, and separately credited to himself in account with the firm, and that instead of this, he made a double charge. If this be so, the transaction cánnot have authorized the credit of $652. Yet it is difficult to conceive that they were distinct transactions. Can the parties have made two separate settlements on the same day ? This can hardly be imagined. Can a new transaction have arisen between the first and second settlement ? It was attempted to be explained in argument, by supposing that the credit of $652 “ by settlement,” may have referred to an aggregate of- payments by defendant on account of the firm, but I suppose all the payments so made are specified in detail in the account now rendered — so the account purports, and if so they ought not to be again charged in the aggregate. It is ordered and decreed, that the exceptions be sustained, and that the defendant pay to the complainant the amount that shall be found due on the foot of the account rendered, after striking out the items in question, and that it be referred to the Commissioner to reform the account accordingly.
    The defendant renewed his motion, to reverse Chancellor DeSaussure’s decree upon the grounds above stated.
    He also moved to reverse Chancellor Harper’s decree, upon the following grounds:
    1st. Because the Chancellor erred in sustaining the complainant’s exceptions to the Commissioner’s Report, and decided contrary to the evidence, in striking out the two items in question.
    2d. Because the Chancellor erred in deciding that the defendant was bound to prove those two items by other evidence than his answer and the books.
    3d. Because the Chancellor erred in deciding that the defendant could not insist on the same defence by way of answer, after his plea had been overruled.
    
      Blanding, Gregg,Hor appellant.
    
      DeSaussure, contra.
   The opinion of the Court was delivered by

O’Neall, J.

In the view which we have taken of this case, it will only be necessary to consider, whether the complainant’s claim is barred by the statute of limitations.

It is perfectly obvious that, so long as a partnership continues, the possession of one is the possession of both, and consequently the statute of limitations cannot be interposed by either. So soon as the partnership is dissolved, this joint tenancy is ended, and the partners then stand as other individuals in society, each claiming for himself. At the dissolution a new relation may be, as was in this case, created between them. If one undertakes- to collect the partnership funds and account to his co-partner for his share, this creates a direct trust, and so long as it continues the statute could not be a bar. But whenever it is ended by an account and actual division of the partnership funds, as far as the collecting partner admits them to be so, this is an end of the trust; and as to any matters which one claims and the other denies to be his right, the statute then begins to run. Starke vs. Starke, (3 Rich., 438,) Moore vs. Porcher, (Bail. Eq., 195.)

On the 25th Dec., 1817, the copartnership between the complainant and defendant was dissolved. The defendant undertook to collect the funds of the copartnership, and continued to do so until Dec., 1819, at which time a division of the partnership effects took place. The whole concern was then settled, except the two items which are now in dispute, and of which the complainant insisted he was entitled to the one-half, and which the defendant denied.-' In 1817 the relation of partners ceased between them, and the defendant for the complainant’s moiety, became his trustee. In December, 1819, this trust was ended, and each stood in his own right, the one claiming and the other denying a right to participate in a specific fund. From this time the statute of limitations commenced to run in favor of the defendant. It is, however, said that the statute can have no application to accounts between merchant and merchant, and that this is a case of that kind. I have always understood the saving of the statute in this respect to' apply to cases of mutual accounts of debit and credit between merchant and merchant. So long as this mutuality of account continues, of course the statute does not apply; but the moment the mutuality of the account ceases, there is no longer anything to prevent the attaching of the statute. The one lias the right to demand from the other the balance due, and in assumpsit, or debt, to sue for and recover it. Against each of these actions, the lapse of four years from the accrual of the cause of action is a bar. The accrual of the cause of action, and the time to bar the prosecution of it, is to be computed from the date of the last item in the account. This saving of the statute has, however, no application to the case now before us. So long as they were merchants they were partners and no action at law could be maintained by either against the other. They were, in law, one person, and in Equity, where their accounts must be settled, each is considered as holding for both. Hence the statute could not, in this saving, have had any reference to accounts between partners, for there was no necessity for any such saving to prevent the statute from affecting them. But if the case was in other respects within the saving, the settlement in 1819 ended the mutuality of the account, and from that time the statute, in this point of view, would also commence to run. Before a debt is barred by the statute, a slight acknowledgment will be sufficient to prevent its operation. But the acknowledgment, in that case, must be in words, or in effect, an admission of a subsisting debt, which the party is liable to pay. If a party, without qualification, proposes to refer a case to arbitration,'it has been held to be enough to take a case out of the statute. This proceeds on the notion that it is an admission that something may be due. So, if one admits that a debt is just, it will be enough to prevent the operation of the statute. But if a proposition to refer to arbitration, or a recognition of a demand claimed by one against another, is accompanied by an explicit denial that any thing is. due, it will not take the case out of the statute, for the law cannot imply a promise against the express words of the party. ll.'Eng. C. L. R., 134. The rule is, I think, correctly stated in a note to 2 Stark, on Ev., 895, referring to Clementson vs. Williams, 8 Cranch, 72. " It is not sufficient to take a case out of the statute, that the claim should be proved, or acknowledged to have been originally just: the acknowledgment must go to the fact that it is still due.” In Brown vs. Campbell, 1 Serg. and R., 176, Tilghman C. J., says “ I never can agree that a letter, which denies that the defendant was ever liable to the plaintiff’s demand, will avoid the act of limitations, merely because it is not denied that payment has been made.” See 2, Stark, on Ev., 895, note 1.

The defendant, in his proposition to arbitrate, in his conversations about the dispute between himself and his brother, and in his letter of the 10th September, 1823, uniformly denies that there was any mistake in the entries complained of, or that he was, in that respect, at all indebted to the complainant. None of these are, therefore, sufficient to prevent the operation of the statute, which had run out more than two years before the filing of the bill.

I regret that between brothers, and two honorable and just men, it should have been thought necessary by one of them to rely on this legal defence, more especially when, from the examination which the cases have received on the Circuit, I am satisfied that the justice of it is with the complainant. But it is our duty to shut our eyes to all the facts, except such as relate to the statute of limitations, and being satisfied that they are not enough to prevent its operation, we are bound to allow to the defendant the protection of its bar. It is. therefore, ordered and decreed, that the Circuit decrees be reversed, and the complainant’s bill be dismissed without costs.

JOHNSON and Harper, JJ., concurred.

Decrees reversed.