Court Opinion

ID: 6131729
Source: CourtListenerOpinion
Date Created: 2022-02-04 21:13:03.092455+00
Date Added: 2024-06-11T08:53:38.213324
License: Public Domain

Learned, P. J.
(dissenting):
The contract between the bank and Olmstead was that, in compensation for his services, he should “ receive such sum or sums from the net profits of the institution as such profits, after paying all incidental expenses, may warrant, not exceeding $1,000 per annum.”
When the case was before this court on a former appeal, the court thought that, in estimating these profits, the whole period of five years, during which Olmstead was in the employment of the bank, should be taken into account without making annual rests, and reducing the profits of one year by the losses of a subsequent year. It was, however, held by the Court of Appeals (90 N. Y., 363) that this was not the true construction of the contract; that the contract was to pay the sum of $1,000 “ in annual payments out of the profits of the preceding year if earned; ” that if profits were “ earned he was entitled to be paid, and the bank could not charge *543against the profits of one year the losses of a succeeding year.” The decision necessarily implies two things: First. That the profits of each year can be, and should be, determined at its end. Second. That when so determined they are not to be affected (as to this contract) by subsequent losses.
Now, as this institution was a savings bank, the duty of which was to invest its money, and keep it invested in securities, it is not to be supposed that the parties to the contract contemplated a sale every year of the securities of the bank, in order to determine what the profits of, the year had been. It must have been contemplated that, without any such sale, the parties could annually ascertain how much the nets profits of the year had been.
Without making such a sale, there is no way of determining the -amount of profits except by a comparison of the assets with the liabilities. And it seems to be agreed upon, on both sides, that such a comparison was proper and necessary, in order to carry out the contract as interpreted by the Court of Appeals. For it must be noticed that the question is one under the contract ¡ that is how, wnder the contract, is it to be ascertained whether the net profits in .any given year “ warrant ” Olmstead’s receipt of any salary ? By using the word “ warrant ” the parties meant that the payment of Olmstead’s annual compensation should not reduce, at the time of . payment, the assets below the liabilities. The only way to determine what the net profits would “ warrant,” at the end of any year, was to ascertain the value of the assets and to deduct therefrom the liabilities. This would show the total net profits. Deducting from that sum the net profits of the preceding year (if any remained after paying Olmstead), the residue would be the net profits of the year in question.
Olmstead was appointed August 19, 1867. We judge that nothing was shown as to the profits of the first year.
On July 1, 1869, there is a statement which shows an excess of assets over liabilities of $648.48. The Court of Appeals say that there is no evidence that any of this was lost before August 20, 1869. It does not appear how much of this was made in 1868 and how much in 1869. But it is assumed by the Court of Appeals, and by the learned justice at the circuit, that this sum is to be taken as the net profits of the year ending August 20,1869 ; unless *544errors or improper calculation should be shown, as hereafter mentioned.
Now, in regard to this statement, the important question arises as follows: Among the assets were $6,000' in United States six per cent bonds. They cost $6,540, according to the statement. They were inventoried in the statement at their market value at that time, viz., $7,170. The plaintiff claims (in order to deprive Olmstead of part of his compensation for that year), that the bonds should be estimated thus :
Cost of bonds....................................$6,420 28
Accrued coupons, $180 gold, worth................. 246 15-
Total....................................... $6,666 48
JBy this estimate the value of the bonds is reduced by $503.57, and, of course, the net profits are reduced by the same sum.
The plaintiff admits that the net profits are to be ascertained by • a comparison of assets with liabilities, but he insists that in making that comparison the bonds should be estimated at just what they cost. Suppose, however, that the bonds, since their purchase, had depreciated to fifty per cent of their cost, would it have been just to estimate them still at cost and to' allow Mr. Olmstead compensation on that basis ? This would be to pay him a salary out of supposed net profits, when, in fact, the bank might not be able to. pay its liabilities. A depreciation in market value is no more real than an increase in market value. If these bonds had fallen to fifty per cent in the market, Olmstead could not have had them estimated in the statement at the cost price. ' ’ '
The Court of Appeals have distinctly said that the bank, under this contract, cannot charge against the profits of one year the losses of a succeeding year. They must have anticipated the suggestion made by the plaintiff’s counsel, viz., that the bonds might subsequently depreciate, so that in the end there would be in this invest- • ment no profits. And they have said that the subsequent losses shall not, under the contract, take away the right to compensation.
If the net profits are to be determined (as the plaintiff admits) by deducting liabilities from assets, why should the bonds be estimated at what they cost ? The question is, what are “ the net profits of *545the institution;” and those are determined by finding out how-much more it has than it owes. Suppose Olmstead, on the 20th of August, 1869, had sold these United States bonds; he would have received for them $7,170. And the plaintiff admits that in that case the net profits of the institution would on that day have been just what Olmstead now claims them to have been. Then suppose that the next day Olmstead had bought the same amount of bonds for $7,170. The bank would then be in precisely the same con- *' dition in which it actually was without any such sale and purchase. It could not be denied that if he had done this “ the net profits of the institution ” would have been $648.43. Is it a sound construction of the contract to say that by such a sale and purchase he would have become entitled to compensation to which he is not entitled?
We must remember that the question is only as to a mode of determining compensation for services. Are not Olmstead’s services shown to be valuable when .an investment 'which he made has increased in value ? Does not the actual condition of the bank at the end of each year furnish the basis to which the parties, had reference in their contract ? What difference whether the assets of the bank are in cash on hand or in investments 1 The point is, how much are the assets ?
As to the Dorner lot, the resolution is not very clear. The learned justice was right in holding that the parties could agree as to its value for the purpose of estimating profits, and was also right in holding that the resolution did not have the effect of such an agreement.
But it may be remarked that if an agreement between the trustees and Olmstead as to the value of property would be material in determining net profits without any sale, it would seem that proof of actual value would be equally effectual.
Another point which has not been argued may be suggested. In estimating net profits the plaintiff deducts the dividends paid to the depositors. The bank could declare such rate of dividend as it chose. If these dividends were to be deducted in order to determine the net profits, it would seem that under this construction the bank might make dividends which would consume all the profits and leave nothing with which to compensate Mr! Olmstead.
I think the defendant was entitled to have the bonds estimated *546at market value. This would make a difference in defendant’s favor of $503.57. If plaintiff stipulates to deduct that I think judgment should be affirmed; otherwise, reversed. 5 „ ,
Judgment affirmed, with costs.