National Republican., 1886-10-26
AN ACCOUNTING ORDER
a, THE RESULT OF A LEGAL CONTEST
BLTWEEN PARTIES.
Full and Exhaustive Opinion by JUS
tice McrriolS-Mr. Latta will be Re-
quirsd to Pay About 100000 to
Messrs. Kiibourn and Olmstead

n
about $4,000. His honor said:
The case of Kilbourn and olmstead against
Iattn, No. 2, on our calendar, comes to this
court in the first instance from the court of
equity, n bill filed by Kilbourn and Olmstead
against their late co.partner, Latta, for the
purpose OF obtaining an account of the pro-
CCeds Of certain negotiations conducted within
the limits OF the partnership, as they alleye,
which have been appropriated by Latta to his
own exclusive use upon the theory that they
were not subject to the partnership obligations
Of the terms OF the partnership.
The bill In It's third paragraph defines spe-
cifCally the terms Of the partnership under
which the suit IL brought, which terms are
In The iOllOWit Z words:
THAT the interest of the said co-partner.
ship (a co-paitnership Of brokers for the pur-
pose OF dealing in real estatel in the capital.
lusinuss, and profits OF the said cOpartnership
firm Of Rilbourn Y latta was as follows, to
the said James NJ. Latta, three elRhths,
and the said John f. Olmstead, woelghths
thereof aud the losses, If any, were tobe
lorne by the said Kilbourn, Latta, and Olm'
kteau In the same proportion; and 1t was fur
lher stipulated 10y said partnership agreement,
by ana bttwecn the plaintiffs and defendant,
that all profits resulting from operations in real
cstGte, by said firm Of Kilbourn q Latta, or by
any member thereof curing the existence OF
sud partnership, sho4ld belong TO said lirn;
ard be entered uIon the books OF the firm aud
paid into the partnership account; aud 1t was
lufjh,r stipulated In said ugre omcnt, that any
information obtained by any member Of said
ship, touching real estate, with reference to IT.
sale or purchase, or the consent OF he owner
of said real estate to sell the same or the >
sire OF amy person TO purchase real estate IN
said District, was to be communicated to satl
firm or Kiibouru d L1tta, for the consideration
Of the several members, aud the action oil the
ftm thereon, and II was expressly agreed IN
said co-parnership agreement that no MEM
ber Of sad firm should, during the existence
of fsnid eoparlncrsnip, engage in the business
OF buying una selling real estate IN sad Dis
tiiCt ON his own account, or with any other per-
sons or persons, except In cases where the pro-
posed Transaction had been explained TO the
hrm. and said firm had declined to take any
pHit therein"
Under that agreement they continued to
operate, and during the progress of IL and In
violation OF Its explicit terms, Mr.. Latta en-
tered into n sub and secret partnership with
man by the name Of Stearns for the purpose
of buying aud selling real estate, the profits of
said purchases and sales to be equally divided
between Steurns and Latta.
Those operations were conducted very largely
and the whole OF them were secreted from the
firm, although the firm was made the nominal
agent for the purpose OF conducting the pur-
chases and sales; and upon the books ofthe
firm the ordinary brokerage commissions of
brokers for making purchases and sales were
entered aud credited to the firm, while the
profits which were made by Latta under this
enlargement with Stearns were not en-
tered there and the knowledge of them was
entirely suppressed from the firm. II was a
secret agreement therefore between these two
parties conducting this operation.
These operations resulted in very large profits
10 these two su6.secret parties and 1t is alleged
On the part Of tho complainant that those
profits amounted 10 the sum of forty odd thou
tand dollars. The defendant admits that they
were large profits but the quantum he does
rot set forth specifically. That is n question,
as TO the quuntum, for after consideration.
There was very large and very supcrfluous
amount of detail testimony taken In the cause.
The real testimony in the case might well have
been embraced in ten pages of foolscap. But
IL was spread over 200 or 800 pages and the
time of this court was occupied three or four
days in listening to the details of interrogatory
and answer upon very immaterlal matters.
But the main facts are entirely plain, en-
thely specific and distinctly made out by the
testimony of Olmstead, one of the complain
ants, IN answer 10. the interrogatores pro-
pounded to him on the part Of the defendant,
IN which he states explicitly that the terms of
the partnership were the Identical terms con-
iaint d in the third paragraph of the bill which
His testimony is sustained by great deal of
written testimony, by schedules of the opera
tions Of the partnelship. showing, upon the
face OF all these collateral papers that such in
point Of fact were the joint terms of the part
Dership. Independent, therefore, of other tes
timony these portions of testimony which
have enumerated are quite sufficient in the eye
OF court of chancery to outweigh the denial
of the defendant in his answer and to estab-
lish the facts relied upon by the complainants
Assuming that the facts were established by
that ort OF testimony, were II admissible, the
defendant contends, and that is the chief
no partnership involving any transactions in
real estate would result substantially in an in
can be established by parole; but that within
the fourth section OF the statute frauds 1t is
necessary that such partnership should be
established by writing' and that otherwise
there is no redress for violation of faith in
spCct of such transactions.
There Is, II is true, n very great conflict of
authorities upon that subject But the court IS
satisfied that the vast weight of opinion, run
ming parallel with the instincts and require
ments Of natural Justice, is on the side of the
maintenance of such partnership by parole
proof
The leading case upon the subject is the case
Of Dale VS.. Hamilton in Hare, and while that,
80 far as England is concerned, is to some eX-
tent shaken by the case of Cadick and another,
yet IL is recognized in the writer's on partner
ship in England as establishing the doctrine, of
whom chiefly may be mentioned m Linaley IN
following. pages. That case reviews the doc.
trne and authorities very largely. 1t very
coplonsly eriticises them, and in aid OF that
review. of the authorities, upon the strongest
reasoning to the pslicy and objects of the
statute OF fraud maintains distinctly that such
a partnership need not be ayouched by writing
within the fourth section of the statute. That
authority is thoroughly sanctioned In this
country by numerous decisions, amongst the
chief Of which may be noted the case Of Ches-
ter VS. Dickerson In 81 New York at page /,
and the case in 63 Iowa at page 6i.
II is true there are authorities, as have said,
the other way, but the best weight OF the au-
thorty and the reason of the case follows the
case as first decided by Vice Chancellor Wigram
In @ llare) where, 1t is held that such part
neIship need not be established by writing but
Is good independently of It, And that doc
trne this court accepts fully, and 1t would be
very Sow at any time to accept a technical
doctrine for the defeat of the purposes of JUS
tiCe and right between man and man.
That being therefore the doctrine, and the
partnership being established, II was clearly
proved mot controverted indeed that dealings
had occurred in this way and that profits had
been made. Then the contention was made
on the part OF the defendant that If that were
court to obtain redress for the violation Of that
Ogreement, but that the only redress that the
party could have was in his action for damages.
ifany such lay at all, in court of law for the
injury the defendant sustained by reason of
the violation OF the partnership papers by the
defendant, Latta, and his redress therefore
was an action founded In damages and being
u parole contract II would be damages IN an
action of assumpsit and not in an action OF
covenant as II would have been In the case of
But we do not read the law that way, The
principles regulate the action of a court of
Chancery In such respects with regard to the
abuse Of the condolences of partnership, the
taking advantage OF partnership transactions
and making profit out of that independently
and privately which belonged to the partner
ship properly, and in good faith should go to
it, are SO distinctly laid down In two or three
sections Of Story on Partnership that that will
be a full vindication of the holding of the court
In this particular case read first from Sec
Zone of the most faithful duties and obllga.
tions of all the partners is strictly TO conform
themselves to all the stipulations contained In
the partnership articles md also TO keep with
in the bounds and Limitation of the rights,
powers, authorities, and acts belonging and
appropriate to the discharge the partnership,
trade or business. Every known deviation
from and every excess of the exercise of such
rights, powers authorities and acts which
produce any loss or injury to the partnership
tothat extent are to be borne by the partner
who occasions Il loss or injury; he is bound to
indemnify the other partners therefor"
Again, In section III, he says:
"But there are many implied duties and OBJ
legations, even though they nre not expressed,
as here they are all expressed, of an equal i'm
poriance though not perhaps always of so
obvious nature Thus, for example, 1t Is u