Thurston v. Hamblin

Sheldon, J. The first question in this case is raised upon the plaintiff’s claim that he was entitled to one half of the profits that might be made in any one quarter regardless of whatever losses might have been sustained in previous quarters. The result of this contention, if sustained, would be that if, after an unbroken series of losses sustained throughout many successive quarters, some profits finally should be realized in any one quarter considered by itself, he would become at once entitled to receive one half of such profits as a net gain, while the defendants would have to apply their share in the profits of such special quarter towards reimbursing themselves for their previous losses. The manifest result of this construction under any probable state of affairs would be to give to the plaintiff a much larger share of the profits than would be received by the defendants, and in the events that have happened might give the plaintiff a large profit and leave the defendants to bear a large loss. The agreement cannot be so construed. The words “ net profits ” in the fourth clause of the agreement relied on, “ to be computed and paid quarterly ... in each year,” must be taken in the ordinary acceptation of those words, to mean whatever net profits have then accrued from the business since its beginning, or since the last division of such net profits. These net profits would be substantially represented at any one time by the amount of the receipts from the business, the sums due for goods sold, and the value of stock, materials, tools and plant on hand, less the amount of the investment, of payments made or liabilities incurred for expenses, and any losses sustained by reason of bad debts or otherwise. In other words, they would be what should remain as the clear gain of the venture, after deducting from the net value of all assets on hand the capital invested in the business and all outstanding liabilities. Park v. Grant Locomotive Works, 13 Stew. (N. J.) 114, 121. It is to one half of these net profits computed at the end of each successive quarter that the plaintiff is entitled. And as the plaintiff’s right to this amount would become vested at the end of each quarter when, so reckoned, there were any net profits to be divided, and the amount so due to him should have been paid to him at once, it follows that his [159] share of any net profits once realized, is hot to be cut down or diminished by the amount of any subsequent losses. This was the doctrine of Hitchings v. Ellis, 12 Gray, 449. Accordingly the defendants’ fourth and sixth exceptions to the master’s report were properly sustained. But it may be that the defendants’ eleventh exception should not have been sustained. It is true that the defendants’ tabulation did not show actual profits in any quarter, or anything more than that the sales of goods in certain quarters exceeded the expenses of those quarters. But the defendants’ books had tieen ill kept, and were found to be erroneous and not wholly trustworthy, and did not furnish sufficient data for ascertaining the true state of the accounts. They do not appear to have indicated the value of the stock or plant on hand at the end of the respective quarters. It may be that they included, at any rate the master might have found that they included, in the column headed “Expenses” the amounts ($3,000 in all) advanced by the defendants as capital of the business. But this table, incomplete and somewhat inaccurate as it was, was presented by the defendants as a statement of the whole result of the business. It was the evidence upon which they largely relied to sustain their contention that the expenses of the business had exceeded its receipts, and so that there were no net profits. Wisconsin Sulphite Fibre Co. v. D. K. Jeffris Lumber Co. 132 Wis. 1. As against them, and in view of the fact that the table which they put in evidence did not purport to measure the success of the business. and to determine the time when, if ever, it should be considered that net profits had been realized or to ascertain the amount of such net profits in any other way than by comparing expenses with receipts, we are of opinion that the master was warranted in finding that the tabulation of the defendants’ expert did show profits in certain quarters, if, after correcting the statement of the expenses by making proper deductions for interest erroneously charged, he found that there were any quarters in which the receipts were greater than the amount of the expenses of that month and the deficits of the preceding months. Whether this should be found, depended upon a calculation which we have not, upon the master’s report, the means of making. [160] We agree with the ruling of the Superior Court that the defendants were not entitled to charge interest upon the amount advanced by them in carrying on the business. Rishton v. Grissell, L. R. 5 Eq. 326. We are inclined to the opinion, upon the facts which are stated in the master’s report and the tables which are annexed to it, that a full statement of the account as rendered by the defendants, with proper corrections for the charges of interest made by them and with the correction that would be further required if it should turn out upon fuller investigation that the sum of $3,000 advanced by the defendants for capital of the business had been included in the tabulation of expenses put in by them and so should not again be charged in the final statement of the account, might show a small balance in favor of the plaintiff. We have not however before us sufficient data for determining these questions. Ordinarily, under such circumstances the case would be recommitted to the master to state'the proper account. But the defendants do not desire this; and as the plaintiff has failed to avail himself of the permission given to him by the Superior Court to ask to have this course adopted, we must infer that' he also does not desire it. It cannot be said to appear now that the plaintiff is entitled to recover anything from the defendants; and the decree of the Superior Court must be affirmed. So ordered.