Case Name: McLUCAS v. DURHAM
Court: Supreme Court of South Carolina
Jurisdiction: South Carolina
Decision Date: 1884-02-28
Citations: 20 S.C. 302
Docket Number: 
Parties: McLUCAS v. DURHAM.
Judges: Mr. Chief Justice Simpson, concurred.
Reporter: South Carolina Reports
Volume: 20
Pages: 302–317

Head Matter:
McLUCAS v. DURHAM.
A partnership was dissolved by written agreement, one of the partners, M., taking all the assets and assuming to pay all the debts. At the time, there appeared upon the books certain deposits to the credit of one E., and also an indebtedness by E., tbe balance in bis favor being §700, and such balance was understood by the three partners to be the real indebtedness of the firm to E. But these deposits by E. having been of trust funds, judgment was recovered against the three partners for the full amount thereof, with interest. In action by M. against the other partners for contribution, E. being insolvent, held, that M. was liable for §700 of this judgment, and the three partners jointly for the balance. Mr. Justice McGowan, dissenting.
Before Kershaw, J., Marion, June, 1882.
This case is stated in the Circuit decree as follows:
This ease was heard upon the testimony taken by the referee and the arguments of counsel. The following is a statement of the facts as I find them to be:
On September 1st, 1868, Solon A. Durham, "William Evans and the plaintiff, John D. McLucas, entered into a copartnership for the transaction of mercantile business in the town of Marion, in the said State, under the name of S. A. Durham & Co. At several dates during the year 1869, while the copartnership continued, one Asa L. Evans deposited with the said firm the sums of money specified in the complaint, to wit: April 26th, $450; and June 22d, $1,076.51, and received therefor certificates of deposits from the firm, in the firm name, written by the plaintiff and signed by the defendant, S. A. Durham, acknowledging the deposit in each case and stating that the same should bear interest at the rate of seven per cent, per annuín and be subject to the draft of the said A. L. Evans at three days’ notice. At the time of these deposits the rate of interest prevailing for the loan of money was something like twenty per cent. On March 11th, 1872, the said Asa L. Evans let the firm have the further sum of $1,000, for which he received the note of the firm payable July 1st, after date, to the order of said A. L. Evans, at Marion Court House, with interest from date at one per cent, per month.
During the existence of the copartnership, the plaintiff was the bookkeeper, and S. A. Durham and he were the managers of the business. William Evans took no part in conducting it.
On February 1st, 1873, the firm was dissolved, the plaintiff purchasing the interests therein of the other partners, assuming all the liabilities of the firm and receiving an assignment of all the assets belonging to the same. This contract was by deed of indenture executed between the parties, a copy of which is attached to the answer of the defendant, Durham.
At various dates during the existence of the copartnership and up to the dissolution, Asa L. Evans and the firm of Evans & McRae, of which he was a member, drew money and bought goods on a credit, of the said firm of S. A. Durham & Co., to a considerable amount; so that, at the time of the dissolution, it was estimated by the plaintiff that he owed the firm within $700 of the amount due on the said note and certificates of deposit, and a statement was made out for the purpose of informing William Evans of the condition of the business with a view to the purchase of his share by the plaintiff, and the aforesaid contract of dissolution showing that the liability of the firm to said A. L. Evans was only $700.
The money deposited with the firm by A. L. Evans belonged to the estate of one Samuel E. Gibson, of which A. L. Evans was the administrator, and this fact was known to the plaintiff at the time of the deposits. Asa L. Evans, in accounting with said estate^ turned over the said note and certificates of deposit as assets of the same, and a judgment was obtained after the dissolution of the firm, against all the members thereof in an action brought upon those instruments by the then clerk of the court, suing for the benefit of said estate, under the direction of the court. To the said action the accounts and liabilities .of the said Evans and Evans & McRae due to the said firm were pleaded as a discount or counter-claim.
The jury allowed the discount to the amount of the note and interest and found a verdict for the plaintiff to the amount of the said certificates of deposit and interest, and judgment was entered accordingly for the sum of $2,362.47. A. L. Evans was then insolvent and had been since 1873. After the dissolution of the firm, William Evans died, and the defendant, John G. Blue, administered on his estate. Plaintiff claims to be placed in the same position as if the entire discount set up against the claims of A. L. Evans had been allowed, which would entitle him to have the defendants contribute to the payment of the judgment equally with him. There was no distinct agreement between A. D. Evans and the firm that his account and that of Evans & McRae should be allowed as a discount against the said deposits, but the plaintiff, and the defendant S. A. Durham, supposed and believed, at the time of the dissolution, that they would be so allowed as discounts, and the statement exhibited to William Evans was based upon that assumption, and he sold his interest upon that basis. They were all equally mistaken in this belief and there were no circumstances of fraud, misrepresentation, concealment or deception upon either part.
Upon these facts I conclude as matter of law that the plaintiff is not entitled to the relief demanded. I add here my reasons for these findings and conclusions, so far as I deem necessary. One of the grounds upon which the plaintiff claims relief is the want of notice of the trust affecting the money deposited; that S. A. Durham had notice and did not communicate the same to him; that it was Durham’s duty to inform him and his failure to do so led to his assumption of a liability in his contract of dissolution far in excess of that he supposed he did. If there had been such concealment, plaintiff’s case would have been very strong against Durham. I have been constrained to find that plaintiff had notice of the trust. He seeks to avoid the effect of his contract of dissolution and purchase on the ground of mistake superinduced by the concealment of a fact by one of the co-partners which it was the duty of the latter to communicate.
The affirmative and burden of proof is upon him. The testimony which he has produced to sustain this allegation of want of notice is overcome, or at least neutralized, by the testimony of A. L. Evans and S. A. Durham. A. L. Evans is disinterested and says in his testimony that he thinks the plaintiff was notified — “had no doubt of it.” Durham, having no greater interest than plaintiff, testifies positively that plaintiff was informed that the money deposited belonged to the Gibson estate. Durham and plaintiff are equally credible and respectable witnesses. I am, therefore, compelled to find against the plaintiff on the ground of notice. There were some circumstances tending to corroborate the one and the other of them, but not enough to east the beam on the side of the plaintiff.
The question of law presented is, whether upon the facts found' the mutual mistake of the parties is of such a character as to-entitle the plaintiff to relief. It cannot be said to have been a mistake as to any fact existing at the time of the contract of dissolution. It was rather an erroneous opinion as to what-would be the result of the transactions between the firm and A.. L. Evans. It was a mistaken estimate as to the profits or advantages to accrue to the plaintiff, from the purchase shared in good faith by all the parties. They might all have believed that they had a valid discount to the amount claimed, which could be maintained in law, notwithstanding their notice of the trust. ' If so, it was a mistake as to the legal effect of the transactions.
The general rule (as is well known) is that mistakes of law. furnish no ground for relief in equity, since all are presumed to know the law. 1 Story Eq., § 137. And the exceptions are said to be few in number and to have something peculiar in their character. Hunt v. Pousmaniere, 1 Pet. 15; Bank of United ‘States v. Daniel, 12 Pet. 32. In this State it has been supposed that there has been a departure from the rule, and that, courts of equity will relieve against clear mistakes of law. Lowndes v. Chisolm, 2 McCord Ch. 455, has been cited at bar to establish this. But there Judge Colcock, who delivered the opinion, appears not to have gone further than to say that there-are cases of mistakes in law in which the courts will grant relief, but he admits the general rule to be otherwise. He seems to-rest that case upon the doubtful condition of law of mortgages after the acts of 1791 and 1797.
In the latter case of Keitt v. Andrews, 4 Pioh. Eq. 349, the executor and the legatees had agreed upon the settlement of an estate, and had actually settled upon the basis of an erroneous construction of a will. The error was mutual, and there was no circumstance of fraud, management or undue influence. The court refused to relieve against the settlement. Like this case, the error there was rather an error of opinion as to the legal effect of the transactions than a mistake either of fact or law. It seems to me that the plaintiff could with as much reason claim relief if any assets of the firm, estimated to be good at the time of the dissolution, had since been ascertained to have been bad at that time, as demand it in this case. It is a case of hardship, but it will not do to make the defendants share it under the circumstances.
It is, therefore, adjudged that the complaint be dismissed, and that the plaintiff pay the costs herein, to be adjusted by the clerk and inserted in the judgment, and that the defendants have execution therefor.
This case came to this court upon the following exceptions: Because his Honor erred in holding: “1. That there was no distinct agreement between A. L. Evans and 8. A. Durham & Co., that his accounts and the accounts of Evans & McEae should be allowed as discounts against the certificates of deposit and the note. 2. That the plaintiff had notice that the money received by S. A. Durham & Co. from A. L. Evans, for which the certificates of deposit and note were given, belonged to the estate of S. E. Gibson. 3. That the defendant S. A. Durham was not chargeable with a failure to communicate his knowledge of the trust attaching to the money received from A. L. Evans to the plaintiff, his copartner. 4. That there was no ‘ mistake as to any fact existing at the time of the contract of dissolution/ when it is admitted on all hands, that no liability to the estate of S. E. Gibson was embraced in the statement upon which the contract was based, nor contemplated by any of the parties to the contract. 5. That the mistake in this case is not of such a character as to warrant the court in relieving the plaintiff from the hardship it entails. 6. Because his Honor erred in not holding that the plaintiff and the defendants should contribute equally to the satisfaction of the judgment in favor of the estate of S. E. Gibson against the members of the late firm of S. A. Durham & Co.”
Mr. O. A. Woods, for appellant.
Mr. W. W. Harllee, contra.
February 28th, 1884.

Opinion:
The opinion of the court was delivered by
Mr. Justice McIver.
On February 1st, 1873, John D. McLucas, S. A. Durham and William Evans entered into a written agreement for the dissolution of a mercantile copartnership under the name of S. A. Durham & Co., which had existed since September 1st, 1868, a copy of which is set out in the " Case." One of the terms of said agreement was expressed in the following words: "The said J. D. McLucas further assumes all the liabilities incurred by the said firm of S. A. Durham & Co. since September 1st, 1868, and hereby obligates himself to pay and discharge said debts and liabilities out of the proceeds of the choses in action of the said firm, hereinafter transferred to him, and to use all due and proper diligence to raise money by means of said choses in action, and to apply it promptly, when collected, to the payment of said debts of said firm herein assumed by said McLucas."
One of the liabilities of the said firm, as it appeared on their books, was a balance due to A. L. Evans, amounting to $700, which arose in this way: the said A. L. Evans, at different times, deposited with the said firm of Durham & Co. considerable sums of money, which were credited to him individually on the books of said firm, and contracted large accounts upon the faith of such deposits; and the balance above mentioned was the difference between the amount of such deposits and the amount of the accounts due by him. There can be no doubt that when the agreement for dissolution was entered into, all the parties based their action upon the condition of the firm as shown by the books, and by a balance-sheet taken from the books and shown to William Evans, who does not seem to have been an active partner, and was not so familiar with the condition of the business of the firm, or with the books of the concern, as the other two partners, who had had the principal management of the business.
It turned out that the money deposited with the firm of Durham '& Co. by A. L. Evans was not his own money, but belonged to the estate of Gibson, of which he was the administrator, though the money was deposited to his individual credit and not in his representative character, and there was nothing whatever on the books of Durham & Co. to indicate that such money belonged to the Gibson estate, or that the firm was in any way indebted to said estate. Some time after the agreement for dissolution was entered into, A. L. Evans was required to turn over to the clerk of the court the certificates of deposit as part of the assets of the estate of Gibson, and an action was brought by him-against S. A. Durham & Co. to recover the amount of such deposits, in which they attempted, unsuccessfully, to set up as a discount the amount of their claims against A. L. Evans; and judgment was recovered against said Durham & Co. for the sum of $2,362.47, the amount of said certificates of deposit with interest. The object of this action is to require the defendants to contribute their ratable proportion to the payment of said judgment, upon the ground that the liability thus judicially ascertained against S. A. Durham & Co. was not one of the liabilities which the plaintiff had assumed to pay under the agreement of dissolution.
The Circuit judge found as matter of fact that the plaintiff, as well as the defendant Durham, did have notice of the trust character of the money deposited with the firm by A. L. Evans; that, though there was no distinct agreement between A. L. Evans and the firm that his accounts should be allowed as discounts against the said deposits, yet " the plaintiff and the defendant S. A. Durham supposed and believed at the time of the dissolution that they would be so allowed as discounts, and the statement exhibited to William Evans was based upon that assumption, and he sold his interest upon that basis. They were all equally mistaken in this belief, and there were no circumstances of fraud, misrepresentation, concealment or deception upon either part." And as matter of law he found that the plaintiff was not entitled to the relief demanded, and he therefore rendered judgment dismissing the complaint.
Accepting as correct the conclusions of fact reached by the Circuit judge, (inasmuch as there was a conflict of testimony, and it cannot be said that such conclusions are without any evidence to support them, or are manifestly against the weight of the testimony,) the only question remaining for us to decide is, whether, upon the facts so found, the plaintiff, as matter of law, is entitled to relief. It is clear, from the facts as found, that the parties never intended that the plaintiff should assume the payment of any debt to the estate of Gibson, for none of them knew of any such indebtedness at the time of the dissolution. It is equally clear that they all assumed that the amount of the indebtedness of the firm to A. L. Evans was only $700. The books showed no indebtedness whatever to the estate of Gibson, and only showed a balance of $700 due to A. L. Evans. It is manifest, therefore, that if the Circuit decree stands, the plaintiff will be required to pay some $1,600 more than he understood he was assuming to pay, and that much more than the other parties understood that he was assuming to pay. How, then, can it be said that the minds of the contracting parties ever meet upon such a result ? And this is an essential ingredient in every contract.
It is true that the terms of the written agreement, by which the plaintiff assumed the payment of the debts of S. A. Durham & Co., are very comprehensive. "All the liabilities incurred by the said firm of S. A. Durham $; Co. since September 1st, 1868." And if it stood alone, might be sufficient to embrace any debt, whether known or unknown, of the said firm. But the testimony leaves no doubt of the fact that such agreement was based upon the condition of the firm as shown by the books, or by the balance-sheet taken from the books. The plaintiff, in his testimony, says: " My assumption of the liabilities of the firm was based upon the statement [the balance-sheet] referred to above." Durham says: " Had a general idea of the books, my capital in the concern, and my liability to the firm ; upon this I based my offer to McLucas." Certainly the balance-sheet was exhibited to William Evans before the agreement for dissolution was entered into, as he, not being an active partner, had no other means of ascertaining the condition of the concern; and such is the testimony. There is as little doubt that all parties understood, at the time the agreement was entered into, that the accounts of Evans were to be discounted against the amount of his deposits. This the Circuit judge has found as a fact; and that William Evans sold his interest with that understanding.
These facts being established " by proofs entirely satisfactory;" equity will reform the written contract so as to make it conform to the precise intent of the parties. As is said in 1 Story Eq. Jwr., § 152, " Sometimes, by mistake, the written agreement con tains less than the parties intended; sometimes it contains more; mid sometimes it simply varies from their intent by expressing •something different in substance from the truth of that intent. In all such cases, if the mistake is clearly made out by proofs entirely satisfactory, equity will reform the contract so as to make it conformable to the precise intent of the parties." Applying this doctrine to the case in hand, the agreement for dissolution •should be regarded as binding the plaintiff to assume the payment of the debts of S. A. Durham & Co., as they appeared upon the books of that concern, or upon the balance-sheet taken from the books; and, inasmuch as no debt there appeared to be due the estate of Gibson, and only a balance of $700 due to A. L. Evans, the plaintiff cannot be held to have assumed any liability to the estate of Gibson, beyond the balance there appearing to be due to A. L. Evans, which, in reality, inures to the estate of Gibson.
The result, therefore, is that the judgment of the Circuit Court should be reversed, and that judgment should be rendered that the plaintiff pay the sum of $700 and interest on the judgment recovered by R. K. Clark as clerk of the Court of Common Pleas for the county of Marion against S. A. Durham, John G. Blue, as executor of the last will and testament of William Evans, deceased, and John D. McLucas, for the sum of $2,362.47, and that the plaintiff and the defendants herein are equally liable for the payment of the balance due on said judgment.
The judgment of this court is that the judgment of the Circuit Court be reversed, and that the case be remanded to that court with instructions to render judgment in accordance with the views herein announced.
Mr. Chief Justice Simpson, concurred.