Case Name: Fernich-Murphy Printing Company, Respondent, v. C. L. Palmer, Appellant
Court: Washington Supreme Court
Jurisdiction: Washington
Decision Date: 1921-01-03
Citations: 113 Wash. 566
Docket Number: No. 15839
Parties: Fernich-Murphy Printing Company, Respondent, v. C. L. Palmer, Appellant.
Judges: 
Reporter: Washington Reports
Volume: 113
Pages: 566–570

Head Matter:
[No. 15839.
Department Two.
January 3, 1921.]
Fernich-Murphy Printing Company, Respondent, v. C. L. Palmer, Appellant.
Contracts (71) — Construction by Parties — Ambiguity. The construction of the parties to the contract will control where the manager of a corporation was to receive in addition to his salary, one-half the net earnings of the business after deducting monthly depreciation and bad accounts contracted thereafter, and the parties accepted statements from time to time showing the payment of interest in determining the “net earnings”, and there was evidence of an agreement that interest should be taken into consideration.
Costs (72) — On Appeal — Apportionment. Both parties having appealed, and neither having prevailed, no costs will be allowed.
Cross-appeals from a judgment of the superior court for King county, Smith, J., entered July 18,1919, upor findings in favor of the plaintiff, in an action on con-tract, tried to the court.
Affirmed.
Peterson & MacRride, for appellant.
Lane & Thompson, for respondent and cross-appellant.
Reported in 194 Pac. 785.

Opinion:
Main, J.
The pupose of this action was to recover one-half the loss sustained in the plaintiff's business during the time the defendant was manager thereof. The trial to the court, without a jury, resulted in findings of . fact, conclusions of law and a judgment sustaining a recovery in the sum of $456.40. From this judgment the defendant appeals, and plaintiff prosecutes a cross-appeal.
On the second day of April, 1917, the plaintiff, being then the owner of a printing business of some considerable value, by written contract, employed the appellant to become manager thereof. The contract makes it plain that the defendant was to have no interest in the business as such, fixes his salary at forty dollars per week, and contains a provision for one-half of the profits above a certain percentage and also a liability for one-half of the loss. There was a provision that, on June 30 and December 31 of each year, a balance should be struck for the purpose of determining profits or loss. Immediately upon the execution of the contract, the defendant took charge of the business and conducted it until the 15th day of January, 1918, when the contract was terminated by the plaintiff in accordance with its provisions. At the time the peformance of the contract was entered upon, no balance was struck in the business and no inventory was made. The contract contained the following:
"It is further agreed that, if the net earnings of the business, after deducting monthly depreciation and bad accounts which have been contracted after the date hereof, shall exceed thirteen per cent on the amount of business done, that the party of the second part shall be entitled to receive one-half of such excess, and if there be a loss the parties hereto shall share fifty per cent each in such loss, it being understood and agreed, however, that such profit sharing arrangement shall not be construed as giving the second party any interest in the business, but only as a method of determining the salary of second party."
By this paragraph, the net earnings of the business, "after deducting monthly depreciation and bad accounts which have been contracted after the date thereof," were to be divided as therein specified, and if there were loss, each party should share fifty per cent thereof.
The defendant's first point is that it was error for the trial court to include, in the amount of the judgment, interest which had been paid by it upon outstanding obligations; the argument being that, since the .contract provided for deducting monthly depreciation and bad accounts, it evidenced an intention to exclude interest in determining net earnings. The plaintiff, upon its cross-appeal, claims that the court erred in not including the interest in the judgment. The record does not disclose the view of the trial court upon this question. The plaintiff argues that the language referred to is sufficiently ambiguous to justify the court in receiving evidence as to the construction that the parties themselves put upon the contract during the time the defendant was acting as manager. As we view the contract, we are unable to adopt either contention as to its construction. It provides for the deducting, in determining net earnings, depreciation and bad accounts (which had been contracted after the date hereof). This shows an intention to distinguish between monthly depreciation and bad accounts which had occurred prior to the execution of the contract and those which might accrue subsequent to that time. It cannot be construed as embodying the intention of the parties as to what should be deducted from the gross earnings in order to determine net earnings. Aside from the interest, there were other items, such as the payroll, cost of supplies and material, and rent, which obviously are items which should be taken into consideration in determining the net earnings. We find nothing in the contract by which the parties themselves attempted to define what was meant by "net earnings."
The question, then, arises whether, in determining net earnings, the contract not having defined what is meant thereby, interest upon obligations owing by the plaintiff should be taken into consideration and deducted from the gross receipts. What would be the rule upon this question, as a matter of law, if the parties had been silent upon it throughout, is not necessary here to determine. Statements were prepared by the bookkeeper of the plaintiff's each month and delivered to the defendant. From time to time these contained items showing the payment of interest. The defendant claims that he objected to these items, but we think the weight of the evidence is against his contention. The president of the company, and also the bo oldie eper, testified to a conversation between the president and the manager in which the matter of interest was discussed and that it was agreed between the parties that it should be taken into consideration in determining the net earnings.
By the plaintiff's cross-appeal, it is sought to have the items of interest added to the amount of the judgment, which it claims was not done. But conceding that, by the construction put upon net earnings by the parties themselves, they were to be taken into consideration, it does not follow that the judgment should be increased. The items of bad accounts and monthly depreciation are of such a character that they cannot be measured with very great exactness. Considering all the evidence upon this branch of the case, we are of the opinion that it does not justify a modification of the judgment.
The defendant's second point is that the trial court was in error in finding that the parties, at the end of the first fiscal period, or June 30, 1917, had agreed upon an adjustment or settlement up to that time. The plaintiff insists that the business prior to June 30 should be taken into consideration in determining the amount of liability, if any. The trial court found, upon evidence which is conflicting, that the plaintiff and defendant had agreed that neither should make or have any claim against the other, either for losses or profits, accruing to the business up to the thirtieth day of June, 1917. It is our view that the holding of the trial court upon this question was in accord with the weight of the evidence.
Both parties having appealed, and neither having prevailed, no costs in this court will be allowed to either party.
The judgment will be affirmed.
Holcomb, C. J., Mount, Mitchell, and Tolman, JJ., concur.