Case Title: Potts v. Lux

Citation: 168 Kan. 387, 214 P.2d 277

Docket Number: 

State: kansas

Court: Kansas Supreme Court

Date: 1950-01-28T00:00:00Z

Document:
168 Kan. 387 (1950)
214 P.2d 277
HARRY W. POTTS (revived in the name of Ila Belle Potts and John H. Potts, executors of the last will and testament of Harry W. Potts, deceased), Appellees and Cross-Appellants,
v.
S.E. LUX, JR., Appellant and Cross-Appellee, RALPH T. McKNAUGHT and GEORGE LISTZ, Defendants and Cross-Appellees.
No. 37,620

Supreme Court of Kansas.
Opinion filed January 28, 1950.
Tinkham Veale, of Topeka, argued the cause, and was on the briefs for the appellant.
John S. Dean, Jr., of Topeka, argued the cause, and Randal C. Harvey, of Topeka, was with him on the briefs for the appellees and cross-appellants.
The opinion of the court was delivered by
SMITH, J.:
This was an action for an accounting and for money. Judgment was for the plaintiffs on some items and for the defendant on some. The defendant has appealed and the plaintiffs have cross-appealed.
The petition stated four causes of action.
The petition for the first cause of action alleged that in 1929 Potts and Lux agreed to engage in the wholesale mercantile business as partners; that Lux agreed to advance $100,000; and that at the same time Potts and Lux made arrangements to take Listz and McKnaught into the business; it was agreed Lux was to receive five percent of $100,000 before any division of profits was made and then *389 the profits would be divided: Sixty percent to Lux; twenty percent to Potts; five percent to McKnaught; and five percent to Listz; and ten percent was to remain as a reserve in the business; and it was agreed that in case of liquidation those percentages would prevail after payment to Lux of his $100,000. The petition then alleged that it was determined the agreement under which they were operating should be put in writing and such an agreement was executed by all the parties.
This is set out here, as follows:
The petition then alleged that the above agreement remained in force until September 15, 1944, when the partnership was liquidated and since then Lux had exclusive possession; that for all the years the business had shown a profit except a loss of $2,818 in 1940, and this loss had been charged against accumulated profits; that in addition to the $100,000 put in by Lux all parties had made further investments in the business in the form of undistributed profits and it was alleged that the value of the property and assets were substantially in excess of the original investment of Lux and plaintiffs *390 believed this excess value amounted to $125,000 and Potts was entitled to twenty percent of this.
The second cause of action first made the allegation of the first cause a part. It then alleged that Potts was entitled to twenty percent of the profits but the amount paid him had not been the full amount to which he was entitled due to the fact that the personal income taxes of Lux had been charged to the expense of the business in the amount of $114,702.04. The petition then alleged that the provision of the agreement:
referred to general property taxes and did not refer to the personal income taxes of Lux, Potts or any of the defendants, and this income tax was paid not only on the income of Lux from the business mentioned but on his income from other sources, and that by reason of this payment the actual net profits were $114,702.04 in excess of the amount upon which actual distribution has been made to Potts and he was entitled to twenty percent thereof, or $25,498.34.
For a third cause of action, plaintiffs referred to the allegations of the first and then alleged that the agreement provided that after the distribution, ninety percent of the profits to Potts and defendants "the remaining Ten per cent to be placed in reserve to remain in the business until a substantial cash reserve is built up"; that this agreement was followed until 1942, at which time Lux arbitrarily transferred this cash reserve to his son Samuel E. Lux III without the consent of Potts; that Potts had twenty percent interest in this reserve, which he believed would amount to twenty percent of $12,672.33, or $2,816.06.
The fourth cause of action alleged that Potts was entitled to twenty percent of the net profits of the business from January 1, 1944, to September 15, 1944, which profits he believed to be at least $40,000 and his share would be $8,888.88.
To apply to all the causes of action plaintiffs alleged defendant had in his possession the books of the company and about September 15, 1944, Potts demanded an accounting and settlement under the agreement, which was denied except as to the year 1944, and refused to make settlement unless Potts would accept it in full payment.
The petition further alleged that McKnaught and Listz were necessary parties because they were parties to the agreement and claimed some ownership in the business.
*391 The prayer of the first cause of action was that the estate of Potts be declared the owner of a share in the business on September 15, 1944; that defendant be compelled to produce the records showing the extent of the property and assets on September 15, 1944, and that the court cause an appraisal thereof to be made as of such date and ascertain the liabilities thereof at that time, including the investment of Lux, and the undistributed profits of plaintiffs and for judgment for $27,777.76 or for twenty percent of the difference between the value of such assets and liabilities, with interest at six percent from September 15, 1944, and that the judgment be made a lien on the property of the company.
The prayer of the second, third and fourth causes of action was for a full accounting upon the items set out therein; in the second for $25,489.34, or such an amount as might be found due after the accounting; on the third cause of action in the amount of $2,816.06, or such amount as might be determined; and upon the fourth cause of action for $8,888.88, or as much as should be determined, with interest on all amounts at six percent from September 15, 1944.
To this petition Lux interposed a general demurrer on the ground of no cause of action filed. McKnaught and Listz demurred to each of the four causes of action on similar grounds. All defendants demurred to the pleading as a whole on the ground of misjoinder of parties. These demurrers were overruled and on appeal the judgment was affirmed. (See Potts v. Lux, 161 Kan. 217, 166 P.2d 694.) Just what we said and held in that appeal will be treated later in this opinion. At any rate, the case went back to the trial court, where the defendants filed amended answers. The amended answer of Lux admitted that the plaintiffs were the executors of Potts' will and that the action had been revived in their name. The answer then admitted the oral and written agreements substantially as pleaded. The answer further admitted that Lux advanced $100,000 and that subsequently between 1929 and 1944 he advanced $53,334.40, which included $10,000 transferred from his dividend account and on July 21, 1938, he advanced an additional $5,000 from his personal funds into the interest account, and that he advanced from his dividend account between December 31, 1937, and September 1, 1944, $45,849.71, which was due him under the contract. The answer further admitted that the company made profits each year from 1929 to 1943 except the years 1932 and 1940 and that the net profits were to be divided among the parties, as provided in the contract, and that Lux had paid or tendered to Potts all that was due him; *392 that at all times Lux was the sole owner of the business and Potts and the other defendants were his employees and were paid a salary and a bonus, as provided in the contract. The answer further alleged that about September 1, 1944, Potts resigned his position with the company on account of ill health and Lux made a full accounting and tendered to Potts all that was due him, less deduction for social security, but Potts demanded a much greater amount. A copy of the statement rendered was attached.
The answer further admitted that during the several years mentioned in the second cause of action deductions were made from the gross profits in determining the amount due Potts, McKnaught and Listz for income taxes paid on the income of Lux, but that when the contracts were entered into it was understood by the parties that these income taxes were to be deducted and such deductions appeared on every statement of account rendered by the auditors of the company to Potts and each year Potts and the other parties agreed to this deduction; that Potts made no objections to such deductions; that income taxes of Lux for the years 1941, 1942, 1943 and 1944 were paid in the amount of $135,376.91.
The answer referring to the third cause of action alleged that the ten percent of profits was placed in the reserve and held except for such portion as was distributed from time to time until January 1, 1940, when it was agreed that what had accumulated was to be distributed and from then on this ten percent was to be paid Samuel E. Lux III, who was to be employed by the company; that Samuel E. Lux III did enter the employ of the company and performed valuable services, and since that time with full consent of Potts had been paid; that Samuel E. Lux III continued in the service of the company from January 1, 1940, to September 1, 1944, except from August 7, 1943, to February 1, 1946, when he was in the military service.
Referring to the fourth cause of action, Lux admitted there was due Potts from the company $5,772 less deductions for social security and withholding taxes and he was tendered that amount but refused it. A further tender was made in the answer.
The answer further alleged that written statements of account showing all profits, disbursements, receipts, losses and gains in the business were prepared by competent accountants and each year a copy given to Potts, which disclosed the amount due each party, and these were discussed item by item and Potts and each of the parties accepted the amount shown to be due and each of these *393 statements constituted "an account stated" of the account of each of the parties to the contract.
The answer of McKnaught and Listz was to the same general effect, with the addition that they both disclaimed any right, title or interest in any of the property of the company, except such amounts as were due each of them from January 1, 1946, to the time of filing the answer under the terms of the contract.
The reply was a general denial with some special denials of no particular concern here.
Philip C. Gault was appointed referee. He heard testimony and arguments and on May 6, 1948, prepared and submitted to the parties a report containing findings of fact and conclusions of law. Motions by both parties to modify these were argued before the referee and on June 14, 1948, this report, together with a supplemental report, and a memorandum opinion was filed with the trial court. The referee made thirty-nine separate findings of fact. Some of the issues of fact were determined in favor of the plaintiffs and some in favor of the defendants. He made ten conclusions of law, some in favor of the plaintiffs and some in favor of the defendants.
On June 30, 1948, defendant Lux filed a motion for judgment on the findings and amendments to the findings of fact for the amount for which he had offered to confess judgment. He filed no motion for a new trial within three days nor any motion to modify the report.
The plaintiffs within three days after the referee filed his report filed a motion for a new trial on the first, third and fourth causes of action, motion for judgment on the report of the referee on the second cause of action and a detailed motion to modify findings and conclusions and for judgment. These motions were all overruled and the trial court entered judgment approving the referee's report in its entirety. On November 9, 1948, final judgment was entered for the plaintiffs and against Lux for $43,521.67, with interest at six percent on $34,775.61 from August 31, 1944. Conclusion of law No. IX was corrected to read:
*394 On November 12, 1948, Lux filed a motion for a new trial, which was overruled. He appealed and in his notice of appeal recited that he appealed from the order overruling his motion for judgment on the findings, from the order refusing to set aside conclusions of law 6, 7 and 9, and for the reason there was no evidence upon which to predicate a verdict in excess of the amount tendered Potts by Lux, and from the judgment rendered on November 9, 1948. At this point it should be noted that the record does not disclose any motion to set aside conclusions of law 6, 7 and 9.
Ten specifications of error are set out, among them being that the trial court erred in overruling the motion of Lux to render judgment for him on the findings of fact of the referee, in approving conclusions of law 6, 7 and 9 of the referee's report, in entering judgment for plaintiffs in excess of the tender made by Lux, in entering judgment for plaintiffs upon the first cause of action, in entering judgment for plaintiffs in the second cause of action, in decreeing interest to the plaintiffs against Lux, in approving the seventh conclusion of law, in holding that the annual statements were not accounts stated, in overruling defendant's demurrer to the evidence of plaintiffs, in overruling the appellant's motion for a new trial, and in refusing to adopt the requested conclusion of law of the defendant, numbered 8, 10, 11 and 12. It should be noted here that there was no timely motion for a new trial and no motion asking the trial court to adopt requested conclusions of law 8, 10, 11 and 12. The only motion directed at conclusions of law was filed with the referee.
The findings and conclusions of the referee were unfavorable to the plaintiffs on many items. Hence their cross-appeal. This will not receive our attention until we have disposed of defendants' appeal.
There is no controversy in this case but that Lux, Potts, McKnaught and Listz were associated together in the wholesale grocery business, at first under an oral contract, and later under the written contract pleaded, and that Potts severed his connection with the firm September 15, 1944. The answer of Lux admitted that the company made a profit in all but two years, and that after deducting items of expense provided for in the contract the net profits were to be divided among the parties according to the terms of the contract. The referee found in Finding No. 17 under the written agreement the termination of the connection of Harry W. Potts with the Lux-Witwer Company gave him a right to a share of the undistributed profits, *395 although there was no receivership, forced sale or liquidation in the ordinary sense. This finding is not attacked by the appellant here.
When Potts severed his connection with the company McKnaught made up a balance sheet purporting to show the financial condition of the company on August 31, 1944. At the trial of the action, this balance sheet was used as a starting point by both parties and the question tried was the amount of undistributed profits in the company on August 31, 1944. The contest as to the first cause of action centered around a number of items plaintiffs claimed should have been included in the undivided profits. On two of these the referee found for the plaintiffs and on the rest for the defendant. Appellant on his appeal argues that the referee should have found and the court should have given judgment for him on all these items.
The first of these deals with a fund we shall refer to as the reserve for bad debts. It is covered by Finding No. 22 of the referee's report. That was, as follows:
As already noted, defendant filed no motion with the trial court outside of his belated motion for a new trial, to modify or change in any way the report of the referee, either as to findings of fact or conclusions of law. G.S. 1935, 60-2924, provides, in part, as follows:
In this case the referee was appointed to hear and determine all the issues.
The section providing for a new trial is G.S. 1935, 60-3001. It provides, as follows:
G.S. 1935, 60-3003 provides, as follows:
It will be noted the referee found that plaintiffs should recover $3,191.27 on the first cause of action on account of this item. Appellant argues the trial court erred in refusing to sustain his motion for judgment on the findings as to this item. In his argument he quotes at some length from the testimony before the referee on this point.
At the outset we are confronted with the question of the extent to which this question may be considered by us in view of this record. Plaintiffs argue there is nothing here before us.
Appellant did not question the correctness of the findings of fact. This is accentuated by a statement in his brief, as follows:
We have held that "the verdict or decision" referred to in the above statute includes the report of a referee on the whole issue. (See Milling Co. v. Schreiber, 102 Kan. 172, 169 Pac. 222.) That is a leading case on the subject. There we said:
The rule seems to have been first stated in Bank v. Refining Co., 89 Kan. 738, 132 Pac. 832. There we said:
See, also, Alexander v. Clarkson, 96 Kan. 174, 150 Pac. 576. There we said:
We shall examine finding 22 with the idea of ascertaining whether it required a judgment for defendants on the item covered by it. The question being examined was whether the net worth figure in plaintiff's Exhibit 1, the balance sheet furnished Potts when he left the company September 1, 1944, was correct, or if not correct, what items should be added to it and what items taken away. The referee found that $15,956.37 should be added to it on account of a reserve fund for bad debts and that plaintiffs should recover twenty percent of that amount, or $3,191.27. It appears from the finding that under the regulations of the Internal Revenue Bureau a taxpayer has the option to either deduct as item of expense his actual losses and bad debts or to set up a reserve of one-fourth of one percent of accounts receivable as a reserve for bad debts. Defendants saw fit to adopt the latter course. Through the years they had operated by setting *398 aside such a percent. By the time Potts left this amounted to $15,956.37. The finding shows that as a matter of fact there were no bad debts. The company was a good collector. The result was that this amount was a part of the assets of the company. Defendants argue that this fund was a trust account set up to remain during the period that the company was in operation and could not be distributed as an item of net profits. No authorities are cited to sustain this view nor are we favored with the regulation of the Treasury Department or any statement as to the practices. It would seem odd that the company would be required to keep this fund intact on its books "ad infinitum." Defendants quote at length from the record a colloquy between counsel for both parties at the time of the trial before the referee in which they argue counsel for plaintiffs conceded such to be the case. On account of the failure of defendants to file a timely motion for a new trial we shall not examine this record on the question whether the finding of fact was sustained by substantial evidence. Since this argument actually is directed at the proper conclusion of law to be drawn from the findings of fact we have examined it to see whether such a concession as is claimed by defendants was made by counsel for plaintiff. We find none. Defendants took the position that Potts was entitled to twenty percent of the current assets only. Once the accounting took the course that he was entitled at the time he left the company to twenty percent of the assets that had been built up through the years, then the conclusion is inescapable that this fund was part of the assets and Potts was entitled to his share of it. We conclude that this finding did not require a judgment for defendants as to this item.
The other item making up the judgment for plaintiffs on the first cause of action will be referred to as the item of fixed assets of the company. It consisted of warehouse equipment, trucks, office furniture and equipment and a store building located at Junction City. This item is dealt with in finding No. 24. The referee increased this item from $4,642.01, the amount at which this item was carried on the books of the company, to $14,078.57. These assets were carried on the balance sheet made up by McKnaught at the book value as $4,642.01. As a bookkeeping practice, this property was put on the books wherein it was acquired at some figure. The record does not disclose just how that figure was arrived at. At any rate for income tax purposes depreciation was taken each year. For instance, the book value of the warehouse equipment was $739.40, and against this *399 had been charged depreciation so that the book value for purposes of the balance sheet was $78.83. The same practice had been followed as to the other items. The referee found all these items were worth $9,436.56 more than the $4,642.01, at which the property had been carried on the balance sheet furnished Potts. Twenty percent of this was $1,887.31, for which judgment was entered. Defendants argue that there was no evidence at all upon which the referee based this increase in value of these assets. The defendants filed no motion for a new trial and did not attack this finding in any manner. They have insisted in their brief in this court that they were satisfied with the findings. The only motion they filed in the trial court was for judgment on this finding among others, that is, they argued before the trial court that even though this finding was correct, still they were entitled to judgment. In this court for the first time on appeal they make the argument that this finding was not sustained by the evidence. We shall not consider on appeal an error that was not presented to the trial court. (See Waller v. Capper, 143 Kan. 164, 53 P.2d 836; Lish v. Wehmeyer, 158 Kan. 339, 147 P.2d 712; and Lechleitner v. Cummings, 159 Kan. 171, 152 P.2d 843.)
We have, however, examined the record on this point. The referee took the value at which these assets were put on the books and then noted how much this value had been depreciated. The result was so low that it would have been absurd to find this to be the actual value. There were included a Pontiac sedan and six trucks, one of them refrigerated. The book value was only $4,914.71, and this had been depreciated down to $1,380.70. In August, 1944, there was no established market price for this equipment. It would not do to take the replacement cost. That would not be fair to defendants. It would be too high. The referee considered the book value and original cost and disregarded the depreciation allowed to be taken by the revenue department. Original cost is a proper element to be considering in fixing value. (See 20 Am. Jur. 338, 339; State v. Handler, 142 Kan. 455, 50 P.2d 977; and City of Baxter Springs v. Foshay Co., 110 Kan. 409, 204 Pac. 678.)
We have concluded that finding 24 does not require judgment for the defendants.
We go now to a consideration of the second cause of action. This deals with an adjustment plaintiffs argue should be made on the books of the company on account of the fact that the company paid the income taxes of S.E. Lux, Jr., during all the years the *400 company was in operation. The plaintiffs pleaded in their petition that the amounts paid Potts from time to time were not the full amounts due him because the net profits were decreased by charging the personal taxes of Lux to the expenses of the company. Lux admitted in his answer that deductions were made from the gross profits to pay his income taxes but alleged that the written contract had been interpreted by all the parties to mean that this should be done and further that the deductions appeared on each annual statement that was furnished each year to all the parties and all the parties, including Potts, agreed to them. The answer pleaded that from 1941 to 1944 taxes on the income of Lux, exclusive of income from Lux-Witwer, were deducted in the amount of $6,591.80, and for the same years taxes on his income were withheld in the amount of $128,785.11, making in the aggregate income taxes of Lux amounting to $135,376.91 were paid by the company and these payments were in the annual statements and accepted each year by all the parties.
The referee dealt with this question in finding 12, 13, 14, 27, 28, 29, 30, 31, 32 and 33. They are, as follows:
Following these findings the referee made conclusion of Law No. VI, as follows:
*412 The first argument of defendants on this point is that the contract itself by its express terms provided that these taxes should be paid before profits could be divided. The clause of this contract upon which they rely is, as follows:
This argument is not seriously urged by defendants. Indeed it would be so unusual for the words "regular reserves for taxes" to be held to cover such an item as the income taxes of one of the parties that the statement of the proposition would seem to be its best refutation. Besides the best answer to his argument is that the payments were carried under some other head on the books.
The defendants do seriously urge that the annual statements were accounts stated extending over a period of fifteen years and the plaintiff should not be permitted to recover any additional amounts than the amounts found due him based on these statements. Many authorities are cited where it is held that parties cannot go behind accounts stated.
The best answer to this argument is that for the years 1939 and 1940 the personal income taxes of Lux were charged to expense under the head of merchandise purchased. The expert accountant did not know of it when he was making up the accounts. The referee did not find that Potts ever knew such a charge was being made. None of the parties gave any explanation for such a charge. It is difficult to conceive of any reason for carrying on the books in such a manner, except to conceal the fact that it was being made even from the accountant who was making up the annual statements. At any rate, none of the statements set out any income tax item except 1941 when such an item appeared for a special reason for that year. It is the rule that an account stated is only prima facie evidence of its correctness. (See Clark v. Marbourg, 33 Kan. 471, 6 Pac. 548; McCue v. Hope, 97 Kan. 85, 154 Pac. 216; Rodgers v. Slavens, 101 Kan. 4, 668 Pac. 1088; Swaller v. Milling Co., 116 Kan. 329, 226 Pac. 1001; and 1 Am. Jur., pp. 285-287, sec. 30 and 31.
The matter is dealt with as well as anywhere in Swaller v. Milling Co., supra, as follows:
Here McKnaught, one of the defendants, kept the books. He *413 caused the payment of the Lux income taxes to be carried on the books under other heads. No fraud is pleaded and none is found but such a practice was to say the least irregular. There is no mystery about the law of accounts stated. It springs from the rule of fair dealing that one cannot take two irreconcilable positions. Here defendants are relying on a finding that they concealed an item on the books so that an expert accountant could not find it and then arguing that Potts was bound by such a statement. We have concluded the argument that the annual statements were accounts stated so that Potts could not go behind them is not good.
Defendants next argue that all the parties interpreted the contract to mean that "taxes used in it meant taxes." How could Potts make such an interpretation when he did not know about the taxes being paid and charged? This argument is not good.
The same answer may be made to the argument that Potts is estopped by the statements from making an additional claim.
Defendants next point out that the 9th conclusion of law ordered judgment for the plaintiff "with interest on said amounts at the rate of six percent per annum from August 31, 1944." The judgment of the trial court included an item for this interest. Defendants argue that this was error because the claim on August 31, 1944, the date when Potts severed his connection, was unliquidated. They argue that interest may not be allowed before judgment on an unliquidated claim except from the time the claim is judicially determined. The statute on interest is G.S. 1935, 41-101. It reads, as follows:
There are two provisions of the above section pursuant to which interest might have been allowed in this case. The amounts due plaintiffs were for practical purposes liquidated  all that remained once the question of law was settled was to compute the amount of applying the twenty percent. (See Smith Bros. v. Hanson, 106 Kan. 32, 187 Pac. 262; Emerson v. Indemnity Association, 112 Kan. 426, *414 211 Pac. 622; Young v. Newbold, 119 Kan. 394, 239 Pac. 1106; also, Thompson v. Howard Motors Co., 122 Kan. 339, 252 Pac. 468.)
The money found to be due plaintiffs was due Potts on September 1, 1944. His widow has been kept from it ever since. If she ever receives any of it, it will be more than four years after it was due and at the end of expensive and vexatious litigation. During all this time defendants have been using plaintiff's money to carry on its business. We have concluded that the trial court did not err in allowing interest to the amount found due plaintiffs.
It follows that the judgment of the trial court is affirmed as to the defendant's appeal.
We go now to the cross-appeal of plaintiffs. The referee found in favor of the plaintiffs on the items that have been discussed and in favor of defendants on many others. None of these items have to do with the first cause of action.
The first of these we shall consider is referred to as the overcharge on rent. The referee dealt with it in Finding No. 23, quoted above.
Their argument amounts to a request that we examine the evidence and reach a different conclusion on the facts. But little would be added to this opinion by detailing the evidence on this point. Suffice it to say that while a different result as to the facts might have been reached by the trier of the facts, there was substantial evidence to sustain the finding and we will not reexamine it here on appeal.
The same may be said of the next five items argued by plaintiffs. Plaintiffs ask us to go into the accounting action and actually have another accounting on the record. This we never do.
The next item argued by plaintiffs has to do with the third cause of action. In it plaintiffs claimed in their petition that the amount due Potts should be increased because S.E. Lux, Jr., from 1941 on arbitrarily conveyed to S.E. Lux III, his son, ten percent of the annual net profits. The referee dealt with this in Findings 35 and 36. In these he found that the written contract was orally modified by all the parties to permit this. There was substantial evidence to sustain this finding and there is nothing we can do about it.
Plaintiffs argue that the trial court should have made two findings suggested by them as to the profits for 1944 rather than the findings that were made. Again we find that the findings of the trial court were made on substantial evidence and we will not disturb them here.
*415 The next argument of plaintiffs has to do with the relationship of the parties. They point out that the referee based his decision on the item of good will on the sole ground that the arrangement between the parties was not a partnership. Plaintiffs argue that we decided when the appeal was here before that it was a partnership. (See Potts v. Lux, 161 Kan. 217, 166 P.2d 694.) We did not go quite that far. We held the petition stated facts that gave Potts a right to an accounting. When the case was finally tried the referee found on substantial testimony that there was no partnership but a contract of employment with profit sharing features. We find nothing wrong with this conclusion.
Plaintiffs next argue that the trial court erred in admitting the testimony of McKnaught, Listz and Lux as to conversations with Potts. Their point is that this testimony was incompetent because it was of a transaction with a deceased person. In their answers these defendants disclaimed any interest in the outcome of the action. Plaintiffs maintain that these disclaimers were in reality only qualified disclaimers and that McKnaught, Listz and Lux were actually testifying in their own behalf. In the first place, the referee found that since there was a question as to the admissability of the testimony of Lux the findings were not based on his testimony. As to the testimony of McKnaught and Lux, the only qualification of their disclaimer was that they were not forfeiting any right they had under their contract with Lux. That would not affect the interests of Potts. Potts pleaded that they had a share in the contract. Actually they testified against their own interests. In Collins v. Hayden, 104 Kan. 351, 179 Pac. 308, we said:
(See, also, Bungard v. White, 132 Kan. 349, 295 Pac. 684.)
Plaintiffs next point out that the referee placed the burden of proof on them and argue that this was error. They argue that since defendants had agreed to share profits with Potts, defendants had the duty of keeping accurate accounts and this carried with it the burden of proof. They argue the rule is in point here because all the *416 books and records of the company were in their possession. All the books and records of the company were available to plaintiffs. We find no matter upon which they failed to prove because they did not have the books and records.
The judgment of the trial court is as to the appeal affirmed, and as to the cross-appeal is affirmed.
HARVEY, C.J., and PRICE, J., not participating.