#### JAMES S. KING v. L. W. DAVIS.

(Filed 16 December, 1925.)

1. Contracts — Written Contracts — Ambiguity—Interpretation—Intent.

Tbe intention of tbe parties to a written contract as expressed by tbe entire instrument, in connection with tbe subject-matter, tbe surrounding and attendant circumstances and tbe object in view, control tbe interpretation of tbe contract when tbe language used therein is ambiguous or of doubtful import; and tbe words employed are given tbeir ordinary meaning, when reasonably permissible, and if tbey bave more than one meaning, tbe one will be accepted wbicb appears to carry out tbe intent of tbe contracting parties.

3. Partnership — Dissolution — Banks and Banking — Insolvency — Dividends — Contracts.

Where upon a dissolution tbe partners agree to tbe portion each should bave from the firm deposit in a bank in tbe bands of a receiver, and a debt due by one partner to tbe bank is offset against tbe firm’s deposit, without tbe knowledge of tbe other, a dividend of tbe insolvent bank paid to tbe party wbo bas offset bis individual debt to the bank, is due and payable by him to bis copartner, to the" same extent and in the same amount as if no offset bad be,en effected.

8. Offset — Counterclaim.

An offset in part of a debt due is not a payment *pro tanto,*but an allowance made to the credit of tbe one owing tbe other a larger amount, or tbe balancing of tbe accounts when both are in an equal amount.

Appeal by plaintiff from *Durm, J.,*April Term, 1925, New HaNOvee Superior Court.

Affirmed.

Material facts: Tbe plaintiff and defendant were partners in tbe elotbing and men’s furnisbing business, in "Wilmington, N. 0., plaintiff *738being one-tbird and defendant two-thirds owner, under tbe firm name of L. W. Davis & Co. On IT March, 1923, the partnership was dissolved. The agreement of dissolution was in writing, plaintiff selling out the tangible business to the defendant (except the accounts due by customers). Defendant was to pay all debts. The accounts were to be collected by either copartner and divided between plaintiff and defendant — one-third to plaintiff and two-thirds to defendant. The lease of the premises was assigned to defendant. The controversy arose over the following: “It is understood and the above agreement and sale is made upon the further condition that the funds on deposit in the Commercial National Bank at the time the same closed is the joint property of L. W. Davis and James S. King, and that all dividends and payments on account of said deposit shall be divided, when received in the proportion of *Yq*thereof to James S. King and % thereof to L. W. Davis.”

The plaintiff alleges: “During the continuance of said copartnership and on 30 December, 1922, said copartnership had on deposit with the Commercial National Bank of Wilmington, the sum of $6,306.90; on said 30 December, 1922, said Commercial National Bank was closed by an order of the Comptroller of the Currency, and thereafter a receiver for said bank was appointed by said Comptroller of the Currency on or about 1 February, 1923, since which time said receiver has been in charge of and administering the affairs of said bank; under the terms of the agreement of dissolution hereinbefore mentioned the aforesaid sum of $6,306.90 so on deposit with said bank was and continued to be the joint property of plaintiff and defendant in the proportion of one-third to plaintiff and two-thirds to defendant and it was by said agreement provided that all dividends and payments on account of said deposit should be divided, when received, in the proportion of one-third thereof to plaintiff and two-thirds thereof to defendant. That at the time of the closing of the Commercial National Bank of Wilmington and the appointment of a receiver therefor, defendant was individually indebted to said bank by a certain note in the sum of $2,500; that on or about 17 April, 1924, of which fact plaintiff was not at the time informed, defendant obtained by way of offset against the deposit in said bank belonging to plaintiff and defendant the amount of defendant’s individual note for $2,500 to said bank, which said amount of $2,500 was thereupon charged against said deposit of $6,306.90, leaving a balance on deposit in said bank to the credit of said copartnership of $3,806.90; Thereafter and on or about 1 August, 1924, the receiver of said Commercial National Bank of Wilmington paid to its depositors a dividend of 10% and among others said receiver paid to defendant, as representing said copartnership the sum of $380.69; subsequent thereto', without informing *739plaintiff of tbe fact of tbe offset of defendant’s individual note herein-before referred to, and leaving plaintiff to believe tbat a dividend of 10% upon tbe full and original deposit of $6,306.90 bad been allowed and paid, defendant paid to plaintiff as bis one-tbird part of a 10% dividend on said total deposit of $6,306.90 tbe sum of $210.23 and plaintiff accepted tbe same under tbe belief, induced as hereinbefore stated, tbat a dividend of 10% bad been allowed and paid upon tbe full deposit, whereas in truth and fact, plaintiff is informed and believes and upon such information and belief alleges tbat tbe said receiver paid to defendant a dividend on said deposit less tbe amount of defendant’s note offset as hereinbefore stated, to wit, a dividend on tbe sum of $3,806.90, and plaintiff’s one-tbird part thereof being tbe sum of $126.89. Thereafter, and upon being informed of tbe facts as herein alleged, plaintiff demanded of defendant tbe payment of one-tbird part of tbe amount of $2,500 offset as hereinbefore alleged, and tbe payment of plaintiff’s one-tbird part' of tbe dividend paid upon tbe balance of said deposit after deducting said offset, less tbe amount of $210.23 paid to plaintiff by defendant as hereinbefore alleged, but defendant has ‘failed and refused and continues to so fail and refuse to pay tbe amount demanded, or any other sum on account thereof. Tbat by reason of tbe matters and things herein alleged defendant is indebted to plaintiff in tbe sum of $764.55 with interest on tbe sum of $749.99 from 1 August, 1924, at tbe rate of six per cent per annum. Wherefore, plaintiff prays judgment against defendant for tbe sum of $764.55 with interest on tbe sum of $749.99 from 1 August, 1924, until paid and for costs and such other relief as plaintiff may be entitled.”

Defendant first demurred to tbe complaint. Tbe demurrer was overruled and tbe defendant answered. Tbe defendant admitted tbe material allegations of tbe complaint and, “be expressly refers to tbe agreement of dissolution therein referred to, for its terms and effect.”

Defendant alleges: “Tbat tbe sum of $210.23 was tbe full amount tbat tbe plaintiff was entitled to receive from tbe defendant, either under, tbe terms of tbe dissolution agreement referred to, . . . or in law, or in equity; and tbe defendant alleges tbat is tbe only sum tbat be was due and owing tbe plaintiff on account of the said agreement or declaration of dividend, or otherwise, and tbat he does not owe tbe plaintiff any other amount by reason thereof, or for any other reason. Tbe defendant denies tbe allegations tbat be owes plaintiff $764.55 with interest,” etc.

Tbe court below rendered tbe following judgment:

“This cause coming on to be beard before bis Honor, Albion Dunn, judge of tbe Superior Court, and tbe plaintiff moving for judgment on tbe complaint filed by him, and tbe answer filed by tbe defendant; and *740the defendant moving for judgment also on said pleadings, and the. court, after hearing the arguments, being of the opinion that the plaintiff is not entitled to recover hereunder, hereby allows the motion of the defendant and adjudges that this action be dismissed at the cost of the plaintiff. It is further ordered, adjudged and decreed by the court, the defendant consenting thereto, that all dividends or payments to be made by the receiver of the Commercial National Bank shall be paid to the plaintiff in proportion of one-third of the original deposit in said bank at the date of its failure without regard to the offset heretofore allowed to the defendant, and that the balance of said dividends and payments shall be paid to the defendant.”

Plaintiff duly assigned the following as error and appealed to the Supreme Court: “Error in the action of the court in rendering judgment in favor of the defendant upon pleadings. Error in the action of the court in refusing to render judgment in favor of plaintiff upon pleadings.”'

*Ruarle & Campbell for plaintiff.*

*Bellamy & Bellamy for defendant.*

ClaricsoN, J.

On 30 December, 1922, the copartnership of L. W. Davis & Co., had on deposit with the Commercial National Bank of 'Wilmington, N. C., the sum of $6,306.90. On that date the bank was closed by order of the Comptroller of the Currency. On 1 February, 1923, a receiver for the bank was appointed. Plaintiff, and defendant dissolved copartnership 14 March, 1923. At the time the. bank was closed, defendant was individually indebted to the bank in the sum of $2,500. The receiver charged the individual indebtedness of defendant against the $6,306.90, leaving to the credit of the partnership the sum of $3,806.90. On 1 August, 1924, the receiver paid a 10% dividend to depositors — to these depositors $380.69. Defendant gave plaintiff of the 1 amount $210.23.

Plaintiff contends that, under the dissolution agreement, the settlement should be as follows:

> He was entitled to % of $2,500.00.$ 833.33

> He was entitled to % of 380.69. 126.89

> $ 960.22

> Defendant paid him. 210.23

> Defendant owes plaintiff amount sued for.$ 749.99

> *741Defendant contends tbe money in bank in tbe joint names was .$6,306.90

> His portion was %. 4,204.60

> Plaintiff’s portion Ys. 2,102.30

> $6,306.90

> Tbat from bis portion of bis individual note should be deducted. 2,500.00

> 'Leaving bis portion.$1,704.60

> Plaintiff’s portion. 2,102.30

> $3,806.90

Tbe dividend, 10%, received was $380.69. Plaintiff’s portion be paid bim was $210.23, and tbis was all be was entitled to receive.

Tbis is tbe controversy for us to determine. Botb parties, without citing any case like it to guide us, have left tbe matter for tbe Court like a “feather on tbe water.” Botb reason, as they contend, on general principles and come to opposite conclusions. “Tbe construction of a contract, when in writing or agreed upon, is a matter of law for tbe courts.” *Barkley v. Realty Co.,*170 N. C., p. 482. “‘If a contract is expressed in plain and unambiguous language, neither courts nor juries may disregard it and by construction or otherwise substitute a new contract in tbe place of tbat deliberately made by tbe parties.’ *Engine Co. v. Paschal,*151 N. C., 27; 7 A. & E. Enc., 118; *Dwight v. Ins. Co.,*103 N. Y., 347.” *Ollis v. Furniture Co.,*173 N. C., 546.

In those written contracts which are sufficiently ambiguous or complex 'to require construction, tbe general rule is tbat tbe intention of tbe parties is tbe polar star. Tbis can be gathered from tbe language of tbe entire instrument, tbe subject-matter, setting of tbe parties, tbe surrounding and attendant circumstances and tbe object they bad in view. Tbe same light which tbe parties possessed when tbe contract was made. Ordinarily, in arriving at tbe intent, words are used in tbe meaning generally accepted. If tbe words employed are capable of more than one meaning, tbe meaning to be given is tbat which it is apparent tbe parties intended them to have. 4 Page on tbe Law of Contracts, sec. 2020 *et seq.; R. R. v. R. R.,*147 N. C., 382; *Simmons v. Groom,*167 N. C., 271; *Lewis v. May,*173 N. C., 100; *Ollis v. Furniture Co., supra; Miller v. Green,*183 N. C., 652; *McGullen v. Daughtry, ante,*215.

Applying these accepted rules of construction, tbe parties were partners, tbe plaintiff having one-third interest and tbe defendant two-tbirds. *742In tbe dissolution, plaintiff sold all tbe tangible property to tbe defendant and bé assumed all debts. Tbe cboses in action were to be collected by either and tbe clear intention was that tbe division of tbe cboses in action should be tbe same as before dissolution. "When tbe question of tbe deposit in bank arose, tbe writing now in controversy, tbe idea was tbe same — •“% thereof to James S. King and % thereof to L. W. Davis.” When tbe dissolution took place, tbe bank was in tbe bands of tbe receiver. Defendant owed tbe bank $2,500. He was entitled to two-thirds of tbe $6,306.90 — $4,204.60. Tbe receiver allowed tbe defendant to set off bis share in tbe partnership account against bis individual note. It did not and could not affect tbe interest of plaintiff’s one-third in tbe fund. Tbe language in tbe agreement in controversy “all dividends and payments on account of said deposit shall be divided,” etc. Tbe set-off against defendant’s two-tbirds portion of tbe fund was in no sense a dividend or payment under tbe contract clause in controversy.

“Set-off. A counter-claim or cross-demand; a claim or demand which tbe defendant in an action sets off against tbe claim of tbe plaintiff, as being bis due, whereby be may'extinguish tbe plaintiff’s demand, either in whole or in part, according to tbe amount of tbe set-off.” Black’s Law Die. (2 ed.), p. 1079, and cases cited.

Tbe decision in *Blount v. Windley,*68 N. C., 1, was on appeal to tbe Supreme Court of U. S., affirmed' — 95 U. S., 173 (L. Ed.), 424. *Mr. Justice Miller*says: “Tbe idea of set-off is not tbe same as payment. It is doctrine of bringing into tbe presence of each other tbe obligations of A. to B. and of B. to A., and by tbe judicial action of tbe court make each obligation extinguish tbe other.” 24 R. C. L., p. 796; *Putnam v. Russell,*17 Vt., 54; 42 Am. Dec., 478.

After a careful consideration of this case, we are of tbe opinion that tbe judgment of tbe court below should be

Affirmed.