Folsom v. Marlette

By the Court, Belknap, C. J.: This is a suit for an accounting between partners, in which each demands a balance due from the other. The partnership was formed on the 29th day of September, 1880, and continued until the 27th day of May, 1890, when it was dissolved. Its business was that of contracting for the cutting of cord wood and logs, and the sawing of timber, to which the business of merchandising was subsequently added. They were equal partners. The district court ordered judgment in favor of respondent for the sum of $6,540 49. From the judgment and an order refusing a new trial, defendant has appealed. The assignment of errors will be considered seriatim. 1. Wells, Fargo & Go. Account: Between February 24, 1885, and the month of October following checks aggregating the sum of $1,300 were drawn upon and paid by the hanking house of Wells, Fargo & Co. of San Francisco, of which the books of the firm made no mention. Appellant contends that respondent is chargeable with this amount upon the theory that he drew the checks. Conceding, for the purpose of the case, that respondent drew the checks— although the district court expressly failed to find the fact — it does not follow that he is responsible to appellant for the amount. During the business season of each year the firm employed a bookkeeper, whose duty it was to correctly keep the books and accounts. This person was not the servant of the respondent only, but of the firm, and any errors or mistakes made by him were not chargeable to one member of the firm only, unless under special circumstances not existing here. 2. Herbert Account: In the month of August, 1889, appellant received the sum of $550 in part payment of an account against one Herbert. The amount was credited to the account, and cash debited on the journal and petty ledger. Appellant contends that respondent should be charged with the sum. The failure to properly charge these payments may he attributable to some innocent cause, as no suggestion *465 of improper conduct has been hinted at. Respondent, as before said, cannot be charged with mistakes which may have been made in bookkeeping. 3. Valenzuela Account: The firm sold goods to Valenzuela and sustained a loss of about $1,250 upon the account. It is claimed by appellant that Folsom agreed with Marlette that the goods should not be sold to the debtor without a guarantee of a third party for the payment of the account, and that afterwards the goods were sold without such guarantee, and a loss occurred in consequence. This contention is answered by the fact that the testimony is directly conflicting, and the district judge, by disallowing the claim, must impliedly have found in favor of respondent upon this point. 4. Respondent paid to the creditors of the firm, after it had discontinued business, a short time prior to its dissolution, the sum of $16,747 72. The district court allowed interest upon this sum amounting to the sum of $7,224 06. The money thus paid is properly treated as an advancement for the benefit of the firm. Lindley, in his work upon Partnership, says: “An advance by a partner to a firm is not treated as an increase of his capital, but rather asa loan, on which interest ought to be paid; and, by usage, interest is payable on money bona fide advanced by one partner for partnership purposes, at least when the advance is made with the knowledge of the other partners.” (Vol. 1, p. 390.) The propriety of this charge admits of no question. The firm had no capital. It had been in the habit of paying interest at its banker’s upon overdrafts for a long time. Appellant has not suggested in his testimony that this money was not advanced with his knowledge and acquiescence. Under these circumstances the charge of interest is equitable. (Baker v. Mayo, 129 Mass. 517; Morris v. Allen, 14 N J. Cl. 44; Berry v. Folkes, 60 Mass. 576; Collender v. Phelan, 79 N. Y. 366.) 5. On or about the 29th day of July, 1889, respondent, with consent of appellant, appropriated certain personal property belonging to the firm to his own use, charging himself therefor with the sum of $7,717 17 upon the books of the firm. There had been no agreement touching the valuation to be fixed on the property, and, upon the trial, under the *466 terms of a stipulation filed in the case by counsel, appellant objected to the price so fixed by respondent. This stipulation, among other things, provided “ that a transcription of the firm books, that had been introduced in evidence, should be treated as a correct transcription, and as to all items and all balances appearing in said transcription, opposite to which is a red cross, such items and balances áre disputed by defendant, S. H. Marlette.” Accordingly, appellant, Marlette, did cause an “ X ” in red ink to be set opposite this item, thus indicating that he contested the valuation placed upon the property by the respondent, Folsom. Evidence was introduced touching the value of the property, and the fact was also shown that respondent had charged himself with $7,717 17 for it. Upon all of the testimony introduced the court found as a fact that the value of the property was $5,000, and charged the respondent with that sum in the adjustment of the accounts. Appellant claims that respondent should be concluded by the value fixed by himself upon the books of the firm, and therefore respondent should have been charged with $2,717 17 more than the value fixed by the findings. It must be stated, as a matter of fact, that there was no objection to the introduction of testimony tending to establish a lower valuation than the charge made by the respondent. Appellant must have expected that the district court would have placed a greater valuation than that which the respondent had charged himself, otherwise there was no reason for the objection being taken. When the contest upon the charge was inaugurated by the appellant, under the peculiar circumstances of the case, the question of the value of the property was reopened, and respondent had the right to establish a lesser value as the appellant to establish a greater value. He took the risk and must abide the result. As the respondent has been allowed interest upon the advance he made for the benefit of the firm, it is only equitable that the appellant should be allowed interest upon the value of this property, fixed at $5,000, from the date of its appropriation by respondent. 6. Wages: Appellant absented himself from the locality where the firm operated a considerable portion of the time. Respondent charged him for his services for a portion of the *467 time. The first item of this nature was charged during the winter of 1882-3, and amounted to the sum of $300. No contention is made touching this charge. During the year 1885, $1,050 was charged. The court allowed this charge, after having deducted the charge for wages during the month of July of that year. The general rule undoubtedly is that one partner is not entitled to charge the other compensation for his sevices without special agreement. There was no special agreement in this case, and the majority of the court are in favor of the enforcement of this rule. One member of the court, however, dissents from this view, holding that as these charges were made during the course of business, that as the books were accessible to appellant, and that a statement containing these charges was delivered to him upwards of two years prior to the dissolution of the firm, and no objection having been made then, or afterwards, until this proceeding was commenced, he should be deemed to have acquiesced in the charge. The charge will be stricken out. The case will be remanded to the district court, with instructions to modify its judgment by disallowing respondent the $1,050 allowed as wages, and to allow him simple interest at the rate of 7 per cent per annum, instead of 10 per cent per annum, upon the advances made by him after they had ceased to do business together, and also allow appellant the same interest on the $5,000, the value of the property, from July 29, 1889. Under the circumstances of the case, the costs in the district court should not be allowed respondent; and that court will also correct its judgment by ordering each party to pay his own costs; the judgment, as corrected, to bear legal interest from date of original entry. The judgment thus modified and corrected is affirmed; each party to pay his own costs upon this appeal.