Kehr v. Stauf

J. F. Daly, J. The principal issue of fact in this case is, whether the parties were to share equally in the profits of the business, or proportionately to the capital each contributed. The referee has found that the copartnership ■ agreement was that the profits were to be equally divided. This agreement was not in writing, and the plaintiff and defendant, the sole witnesses to it, contradict each other. Where the determination of the issue depends upon the credibility of the witnesses the General Term is not disposed to disturb the decision of the referee (Quineey v. Young, 5 Daly 335, 338; Ellis v. Howe Maehine Co., 9 Daly, 79; Monell v. Marshall, 25 How. Pr. 425; Mazetti v. New York & Harlem R. R. Co., 3 E. D. Smith 102). In this case, however, we are referred to a written admission by defendant as a corroboration of plaintiff’s testimony, and to other circumstances in support of his version of the agreement. While alleged verbal admissions of a party are regarded as the weakest kind of evidence, his admitted written declarations make evidence of the strongest kind against him. In Molloy v. New York Central &c. R. R. Co. (10 Daly 453), we ordered a new trial in an action tried before a jury, because the party in interest had made a written statement prior to the trial, which contradicted his evidence on the stand. In that case we adopted the view of the court in Boyd v. Colt (20 How. Pr. 384), where the plaintiff swore one way and the defendant another, and a letter of plaintiff was produced and read in evidence wherein he admitted facts showing the truth of defendant’s version of their agreement; and it was held by the General Term of the Supreme Court that the letter unexplained was conclusive against the plaintiff, and that the jury were bound — 118 — to disregard his oath when flatly contradicted by his own letter written long before the action was commenced. In this case the plaintiff produced a letter written to him by defendant on December 13th, 1879, a month before the commencement of this action, which is brought to have the copartnership decreed dissolved and for an accounting. Its significance will be seen by a brief statement of the co-partnership dealings. The defendant was the son-in-law of plaintiff, and had been taken into partnership by him on January 1st, 1877. The plaintiff at that date had dissolved his former firm of Kehr, Kellner & Co., taking the assets and assuming the liabilities of the old concern. The business carried on by them was the manufacture of furniture. When the new firm with defendant was formed on January 1st, 1877, the books showed a total gross capital of $196,-800.25, subject to the liabilities of the old firm $86,817.28, leaving a net capital of $109,982.97, of which $99,982.97 was contributed by plaintiff, and $10,000 was contributed by defendant. The defendant did not contribute in fact more than $500 in cash. The balance of his capital was made up for him by plaintiff. How it was made up is of no consequence in determining the issues in the case, beyond the fact that it was actually a gift or a credit to defendant from his father-in-law, the plaintiff. Defendant alleges that plaintiff gave his daughter (defendant’s wife) $5,000, in order that she might lend it to defendant to be contributed as capital. Plaintiff alleges that he gave the $5,000 to defendant out of his own assets. The other $5,000 was made up by a credit on the books as upon a note of defendant for $4,500, and by defendant’s aforesaid contribution of $500 in cash. Defendant was thus enabled by plaintiff to make up a capital of $10,000 as against plaintiff’s capital of $99,982.83. Plaintiff’s version of the agreement is that this arrangement was made in order that defendant might draw profits on that amount, of capital. Defendant swears that the agreement was that the profits were to be equally divided. It may be said here that this arrangement corroborates — 119 — plaintiff’s version of the agreement. If profits were to be equally divided there was no necessity for making up fictitious capital for defendant at the precise sum of $10,000. It was only necessary to make the agreement for equal shares. The making up of a nominal capital at a particular amount would seem to have been designed as a basis for computation of profits. By the copartnership agreement the plaintiff was to draw $4,000 per annum, and the defendant $2,000 per annum as salary, before profits were divided. The profits for the year 1877 were $24,557.03. In the early part of January, 1878, a balance sheet was prepared by the bookkeeper of the firm, showing the plaintiff credited on the books with $22,324.54 of these profits, and defendant credited with only $2,232.49. This balance sheet was shown to defendant. He says that he took it to plaintiff and told him that the bookkeeper had made a mistake in crediting the plaintiff with nine tenths of the profits and himself with one tenth; that plaintiff replied that he had given no orders on the subject, and the bookkeeper, not knowing their agreement, had probably followed the custom of the old firm, giving each partner profits in proportion to his capital; that defendant said it was not right, he had better have it changed, and have one half of tibe profits credited to him; that plaintiff said it was no matter, -they knew what their agreement was; that defendant said he only wanted it understood that it was not right, and that he was entitled to half the profits; that plaintiff then said if defendant had no confidence in him he would have the books changed; that defendant answered lie was satisfied, he preferred to have it as it was, and had every confidence in him. Nothing more was said. The books were not changed. The profits of the year 1878 were $2,948.91. In January, 1879, a balance sheet was made up by the bookkeeper showing that the plaintiff was credited on the books with $2,727.76 of that amount, and the defendant with $221.15. This balance sheet was handed at the time to defendant. He says that he told plaintiff a few days afterwards that he noticed that the bookkeeper — 120 — had credited the profits the same way as before; that plaintiff said he would speak to the bookkeeper and tell him to credit them equally with the profits. The books were not changed. In September, 1879, according to the defendant’s testimony, he had a conversation with plaintiff in which he claimed that his profits for the last two 3rears and a half were much more than he had drawn, and plaintiff did not deny the fact, but said that the profits would have to remain in the firm. The plaintiff denies that these alleged conversations took place. He swears that when the balance sheets were delivered each 3rear to defendant the latter took them home to examine and returned them without objection. The fact that balance sheets were so handed to defendant and the books show no alteration of the per centage of profits credited to defendant during the whole period of the copartnership, is strong corroboration of plaintiff’s version of the copartnership agreement. It is difficult to conceive defendant permitting his account on the'books to be balanced each year upon such a basis if it were a false one. In the year 1879 the defendant, as he expressly admits in his answer, became addicted to the vice of gambling, and withdrew from the copartnership large sums of money amounting to about $7,000; he also executed and delivered in the name of the copartnership, but not for its benefit nor in the course of its business, but for his own purposes, three promissory notes amounting in the aggregate to the sum of $13,915.60. One of these notes was made October 2d, 1879, for $5,875, one on October 9th, 1879, for $4,840.60, and one on November 27th, 1879, for $3,200. Defendant, by December 13th, 1879, had drawn from the concern in cash $11,444.73, viz: $1,507 in 1877, $3,093.05 in 1878, and $6,844.68 up to December 13th, 1879. If his share of the profits were one half, his total drafts in money would not have amounted to what he was actually entitled to draw from the firm in cash, for his account at the end of December, 1879, would have stood as follows: — 121 — Half profits for 1877, 1878, 1879 . . $14,766 28 Salary for same period „ . . 6,000 00 $20,766 28- Total drafts in money .... $12,193 28 Balance to his credit .... $ 8,573 00 If on the other hand he had been entitled to share in the profits according to his proportion of capital, his account at the same date would have stood as follows: Share of profits for 1877, 1878, 1879 . $ 2,684 77 Salary for same period .... 6,000 00 $ 8,684 77 Total drafts in money .... $12,193 28 Overdrafts . . . . . $ 3,508 51 This being the comparative state of matters at the time, the defendant then made the written admission which has been referred to, in the shape of a letter dated December 13th, 1879, written and sent by him to the plaintiff, and which is as follows : “December 13th, 1879. “ Dear Father:—I believe it would be only an act of justice due to you by myself to candidly inform you by letter of what I sincerely regret and honestly confess, I am personally ashamed to tell you to y0ur face. My account has been largely overdrawn this' year, and think you should be made acquainted with the reasons for my heavy expenditure. I began the year by paying all my outstanding bills, and considered myself free from debt. But in an unhappy hour I was tempted by some of my companions to visit out of curiosity one of the so-called ‘club houses.’ While there I was enticed to join in a friendly game of cards, and, unfortunately, won a large sum of money. I subsequently visited this club house, and at various times gambled and lost very heavily. In order to retrieve my losses, I have vainly struggled from time to time to win back and make my losses — 122 — good, but only succeeded in sinking myself deeper and deeper. I have paid off all this indebtedness with the exception of one debt of $120, after which I am a free man again. My misery and grief during this period was greater than can be confessed to you. I bore a smiling face in the office, which taxed my courage, but my heart was sore and sad, and to such an extent that it affected my health. I beg of you to grant me your forgiveness for this unbusinesslike behavior, promising that if you will overlook and pardon my bad conduct this year that I will turn over a new leaf and become a different man in the future, attending closer to my business, and seeking in every way by industry and fidelity to business in 1880 to partly make up my deficiencies in this respect this year. I have received a terrible lesson'from associating with evil companions, and it will be a sad warning to me to beware of them in future. Everything I possess I owe to your kindness' and generosity, and it stings me with remorse to see and feel ho-w I have abused it. I acknowledge my fault, and personally appeal to you from my heart to make me a happy son once more by granting me your forgiveness, allowing me another chance to regain your lost favor and confidence, solemnly promising to cut loose and avoid all my former companions, to return and be economical in my personal and household expenses, be very attentive to business, and endeavor to do all that lays in my power to merit your forgiveness. George.” This letter seems to be irreconcilable with the position of a man who, at the time of writing it, had $8,573 of unused profits to his credit in the concern, but is plainly consistent with his condition if he had overdrawn his account $3,508.51, or to any large amount. The version of the agreement as to profits which plaintiff gave would show defendant’s account to be overdrawn; the letter expressly admits that his account is largely overdrawn; and on the question of fact this letter, unexplained, ought to be deemed conclusive evidence of the truth of plaintiff’s testimony, upon the authority of the cases cited. As between plaintiff and defendant on the question of — 123 — veracity, the referee has seen fit to give credit to the latter, in the face of the above letter, and in the face of the undisputed fact that defendant, without the knowledge of his copartner, and without authority, issued notes in the firm name to the amount of nearly $14,000 for his own-private purposes; one being used in stock speculations, one to secure an alleged antecedent debt to his father, and one being used to gamble with at horse races. The testimony of a party who would attempt to rob the copartnership in that manner needs, in my opinion, strong confirmation to justify its acceptance where it is merely contradicted by another witness; but where it is contradicted hy his own writing it ought to be rejected as unworthy of belief. The judgment should be reversed and a new trial ordered, with costs to abide event. Van Brunt and Van Hoesen, JJ., concurred. Judgment reversed and new trial ordered, with costs to abide event.