Court Opinion

ID: 6661174
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:02:10.038257+00
Date Added: 2024-06-11T16:00:11.153762
License: Public Domain

Sedgwick, J.,
dissenting.
When E. G. Dovey died intestate in 1881,_ he and his son George Dovey had been equal partners in business for something over five years. He left surviving him three sons, George, Horatio and Oliver Dovey, and his widow. After *636his death his three sons continued the business until in the year 1909, when, a difference having arisen between them, Oliver claimed a one-third interest in the business. After some negotiations and consultations with attorneys, George and Horatio agreed with Oliver to give him $50,000 for his interest in the business, and executed their notes and securities in that amount accordingly. Afterwards George and Horatio brought this action in the district court for Douglas county to set aside the said agreement and cancel the notes and securities, on the ground that they were obtained by duress and fraud. Oliver had transferred these notes to other parties, and these other parties were also made defendants. Afterwards Oliver brought the notes and securities into court to abide the result of the litigation, and no further consideration was given to the assignees of these securities. There is therefore virtually one defendant, Oliver. The district court entered a decree in favor of the defendant and dismissed the plaintiffs’ case, and the plaintiffs have appealed.
The record is a large one; the briefs are extensive, and present a variety of questions for solution. It is conceded that at the time of their father’s decease the net value of the business was $52,092.42, and that George Dovey had been an equal partner of his father, and was at that time the owner of a,n undivided one-half interest in the business, of the value of $26,046.21. George was appointed and acted as administrator of his father’s estate, and used the money that came to his hands as such administrator in the prosecution of the business, and no agreement was made between the three brothers nor any questions raised or suggested as to the rights of each in the business, or their relation thereto, or their liability arising* therefrom, .until some time during the year 1885 about four years after their father’s death. It is also conceded that at the time these plaintiffs agreed to give the defendant $50,000 for his interest in' the business the net value of the business was $142,796.56, and that in the meantime the three sons and their mother had withdrawn from the business $201.-853.33.
*637The most important points in dispute between these parties now are: First. Were the notes and mortgages in question procured by duress so that a court of equity should now disregard them as a just settlement between the parties? Second. Should George be allowed a .share of the net profits in proportion to his share in the property after his father’s death? Third. Were the three sons equal partners, in the business so that each should be entitled to one-third of the net profit's? Fourth. If they were equal partners and should share equally in the profits of the business, should George be allowed interest on his excess capital? Fifth. If George is allowed interest on his excess capital, should the partners each be charged with interest on their respective withdrawals? Some of these essential disputes are mentioned in the majority opinion.
1. As to whether the notes and securities were obtained •by duress, so that a court of equity will disregard it as a just. settlement between the parties, we should consider that a part of the assets of the business at the time of the agreement of settlement consisted in a majority of the capital stock in a bank in Plattsmouth, which was doing a prosperous business, and had over $350,000 deposits of more than 1,000 depositors, and these plaintiffs were the principal officers of the bank. The plaintiff had attempted to exclude the defendant from the business, and the defendant demanded an immediate settlement and payment of the interest which he claimed in the business. He, and his attorney for him, insisted upon a settlement without delay, and threatened an action for a dissolution of the partnership and division of the assets. So far there is no doubt that the defendant was strictly within his rights, but although the business was in a prosperous condition, and the net assets seem to have been ample to guarantee the defendant whatever amount, a court of equity might decree to be due him, he insisted, not only upon his right of action for a dissolution of the partnership and a decree in his favor of the amount due him, but also insisted upon placing the assets and business in the hands of a receiver unless his demands were immediately complied with. It appears *638that such, action might, and probably would, have occasioned a loss to the business greater than the amount claimed by the defendant. The cash in the bank was $60,-000; deposits about $360,000. A run on the bank would be ruin to the business, and at least delay and loss to the depositors. For these reasons, and under the circumstances disclosed by the record, it seems certain that a court of equity should not regard this settlement as a voluntary and free act of the parties, dictated by their united best judgment of their respective rights.
The defendant contends that, by a delay of about one year after the settlement, the plaintiffs being in full control of the business, the. plaintiffs have been guilty of laches, and are estopped to question the validity of the settlement, and by their conduct have affirmed the settlement; that plaintiffs have not rescinded the sale nor offered restitution, but have acquiesced in and affirmed the sale. Many, authorities are cited by the parties, upon this and other questions involved in the settlement of the affairs of this partnership. It is not to be expected that an authority could be found presenting an exact parallel with the case at bar in all its details. I have not seen such an authority. Each case must be determined upon its own conditions. In this case the plaintiffs desired to exclude the defendant from the business, and he desired and had determined to withdraw. The only question between them was as to the amount, if anything, the defendant was entitled to receive, and they all agreed that the amount was to be determined upon the basis of the value of the actual tangible assets of the business. The defendant was out of the business by the agreement of all parties interested, and an offer to receive him back into the business would have been idle and impracticable. The conveyances which the defendant had made were of small importance as compared with the main controversy, and the rights of all parties, as affected by such conveyances, could be fully protected by the final adjudication of the principal controversies, which would include all matters incidental thereto. No interest of the defendant could suffer or be in any way affected by the
*639delay in beginning the proceedings, and that delay does not appear to be unreasonable under the circumstances disclosed by the evidence. I think the court should, upon view of the whole transaction, adjust the equities of the parties to the end that the final decree may, so far as possible, do exact justice.
2. Plaintiffs contend that the excess capital of George E. Dovey, $26,046.22, and Mrs. Dovey’s capital, should be profit-sharing, thus entitling George to five-eights of the profits of the business. The profits, however, were produced by the capital and the personal services which the partners contributed to the business. It is impossible to ascertain what proportion of the profits arose from the use of the capital, unless we can ascertain the relative value of the services of the respective partners. This it is impossible to determine from this record, and therefore there is no basis upon which the profits arising from the capital can be determined. I have no doubt that these three brothers, under the circumstances in this case, should be regarded as equal partners in the profits and losses of this business from the time of the decease of their father. It is a fundamental principle of the law of partnership that, unless otherwise expressly agreed, the partners shall share equally in profits and losses, and when these brothers undertook to conduct this business together, each having a financial interest therein after their father’s death, and each giving his personal attention to the business without any agreements as to profits and losses, the law will undoubtedly regard them as equal in that respect. Mrs. E. G. Dovey has apparently taken no part in the business, except that she has allowed the use of her capital, $6,511.55, and her one-fourth share of the various amounts derived from her husband’s estate and used in this business, upon which she is entitled to simple interest at 7 per cent, per annum, 'dieducting of course as partial payments such sums as she has received from the business. Amounts received by her from time to time should be applied, first, in payment of accrued interest due her, and the remainder, if any, applied to reduce the principal. If the credits to her *640account and debits for withdrawals are so numerous and irregular as to make computation, as partial payments are usually made, so difficult as to be impracticable, the computation should be made for each business year as shown by the books, so that she is not charged with interest-on the withdrawals unless and when those withdrawals exceed the interest due her on her capital used in the business.
3. Should George be allowed interest on the excess of his investment? This presents a question of more difficulty, and, in connection with the question of interest on the withdrawals from the business, contsitutes the principal difficulty in this case. There is no doubt that when men agree to form a partnership, and that each shall give his attention to the business, -and that each shall furnish capital in specified unequal amounts, and their agreement contains no provision for interest on the capital so furnished' it will be presumed that they have incorporated into their contract all of the points upon which they agreed, and from this presumption the law will imply that the services of the parties and other conditions which they had in mind were by their agreement offset against the use of the capital so furnished by each. In this case it cannot be found from this record that these parties made a contract of partnership in which the law would imply that they had inserted all of their agreements. For four years after the father’s death the business was conducted by the three brothers without -any agreement between them, or any suggestion of any necessity for an agreement, and then there was an informal talk, in which one of the brothers desired to withdraw from the business, and George requested him to remain, and, according to the preponderance of the evidence, it was stated by George that they would be partners in the business, an'd perhaps it was stated that the partnership should be an equal one. There was no attempt to formulate or agree upon any details of a partnership agreement, and no suggestions that George was under any obligations to continue his excess capital in the business. This conversation between the brothers amounted to nothing. *641more than a confirmation of the pre-existing conditions, and there was of course no contract implying that George should allow his excess capital to remain for any length of time in the business. If George had agreed that while the partnership continued he would contribute $26,000 more than either of the other partners, and had not in that agreement stipulated for interest on this excess capital, the law would imply that no interest was to be paid, but under the circumstances in this case there is no ground for such an implication.
4. It is a universal rule of equity that when partners, who are equal as to profits and losses, withdraw from the business an unequal amount of the profits without any special agreement or objection on the part of any one, they will in final settlement be charged with the profits so withdrawn, but without interest thereon. I think, therefore, that the three brothers were equal partners in the profits and losses; that George Dovey should be allowed from the assets his excess contribution of the capital, $26,046.22, with simple interest thereon at 7 per cent, per annum from the death of his father to the 22d day of September, 1909. The share of Mrs. E. G. Dovey should, of course, be deducted from the net assets before the division between the three partners, and also the excess capital of George as above stated. The defendant Oliver was on that date entitled to one-third of the remaining assets, and was also entitled to one-third of the profits withdrawn by the three brothers. The total profits withdrawn by the three brothers, admitted in the pleadings, amounted to $197,319.03, of which Oliver withdrew $41,665:71. He was therefore entitled to $24,107.30, in addition to his one-third of the net assets at the time of the agreed dissolution of the partnership.
The third paragraph of the syllabus of the majority opinion seems to have no .application to this case. All of the heirs continued the business together after their father’s decease, and consented to the use in that business of all the money derive'd from the estate, and had equal advantage of such use.
*642The majority opinion says that “George’s five-eighths interest in the business became profit-sharing pro rata on the death of E. G. Dovey.” If that is so, it seems impossible to reach the conclusion that Oliver, “at the time when the dissolution took place in 1909, had an interest in the firm amounting to at least $45,000,” as is also stated in that opinion.
The majority opinion inquires, “Can it therefore be said that his (George’s) offer to divide the profits equally was not dictated by sound business judgment?” George’s “offer” was nothing more than a statement that they were equal partners from the time of their father’s death, as above shown.
It is said in the opinion that “Partners are not entitled to interest on their respective capital unless there is some agreement to that effect.” Several cases are cited, some of which hold that where a partner agrees to contribute excess capital, and does not stipulate for interest thereon, no interest will be allowed. But no case is cited holding that when there is no agreement to contribute excess capital, but merely an understanding that an equitable adjustment of the whole matter shall be made, and the business and capital are principally the property of one of the partners, no account shall be taken of such condition in adjusting the equities between them. As I have already stated, it is the agreement to furnish capital (presumably against the more valuable services of the other partners), without specifying in the agreement that interest shall be allowed on the capital so furnished, from which the law implies an agreement to furnish it without interest. George was familiar with the business, and had been active in the management thereof for several years before his father’s death. It is conceded, and it might well be conceded, that George’s services were worth much more to the business than Oliver’s services were.
Upon the above computation it would be found that Oliver has received $15,000 or $20,000 more than he was entitled to, and a court of equity should adjust the whole matter accordingly.