Taft v. Schwamb , 80 Ill. 289 ( 1875 )

Mr. Justice Scholfield

delivered the opinion of the Court:

The principal question to be determined in the case before us is, upon whom shall the loss, in consequence of the destruction of the building, machinery, engine, boiler, tools, etc., mentioned in the articles of co-partnership as delivered in as capital stock by Schwamb, fall? Upon Schwamb alone, or upon the parties in the proportion they are to share profit and loss? The latter was the conclusion of the court below; but appellants insist that the former is the basis upon which the account should have been stated.

The articles stipulate, “ This co-partnership to commence on the twenty-eighth day of Movember, A. D. 1867, and to continue for the term of thirteen months and three days, ending on the thirty-first day of December, A. D. 1868; and to that end and purpose the said parties above named have each delivered in, as capital stock, as follows: Fred. Schwamb, the building known as Mo. 490 South Canal street, and all machinery, including engine, boiler, tools, benches, lumber, all manufactured stock, and that under process of manufacture, now in his possession, supposed to be worth, say, $9619.37, the same to be determined by an inventory. And the said J. W. Taft and D. R. Crego shall put in, as capital stock, the sum of $2500, making a total capital stock of $12,119.37, to be used and employed in common between them for the support and management of the said business, to their mutual benefit and advantage. And it is further agreed between the parties to these presents, that the said firm of Taft, Schwamb & Crego shall pay interest, annually, to F. Schwamb on the sum of $7119.37, or on what he may have in excess of said Taft and Crego’s investment.” * * * * * “And it is also agreed that they shall and will, at all times during said co-partnership, share, bear, pay, and discharge between them, each his share of all rents and other expenses that may be required for the support and management of the said business, and that all gains, profits and increase that shall come, grow or arise from or by means of their said business, shall, after paying the expenses as aforesaid, be divided between them, the said co-partners to receive their shares as follows: F. Schwamb to receive one-half of all gains or increase, or if the business has been done at a loss, then F. Schwamb to pay one-half of all such losses; J. W. Taft to receive one-fourth of all gains or increase, or to stand one-fourth of all losses in all business transactions during said co-partnership; D. R. Crego to receive one-fourth of all gains or increase, or stand one-fourth of all losses in all business transactions during said co-partnership.”

It would, in our opinion, be difficult to employ language more clearly indicating that the “building, machinery, tools,” etc., etc., became the property of the co-partnership, and ceased to be the individual property of Schwamb, than that employed in the articles. It was delivered in as “capital stock.” What is “ capital stock,” in the sense in which the words are here used? Unmistakably, the capital or property of the co-partnership. The total capital stock represents everything of value belonging to the co-partnership, and it is therefore impossible that property delivered in as “ capital stock,” could be anything else than co-partnership property.

Being partnership property, the interest of each partner in it is to be determined by the extent of his interest in the partnership. It is said: “ Each partner is possessed per my et per tout, that is, by the half or moity, and by all, or, in other words, each has a joint interest in the whole, but not a separate interest in any particular part of the partnership property; and being so possessed, and because the title of partners is undivided, it follows'that all have a moiety or the same species of interest in the stock in trade, whether each individual partner contributes exactly in the same proportion or not; but their several degrees of interest must be regulated according to the stipulated proportions, and the different conditions of the partnership. To whatever share a partner may be entitled, in whatever sum the firm may be indebted to him, he has no exclusive right to any part of the joint effects, until a balance of accounts be struck between him and his co-partners, and it be ascertained precisely what is the actual amount of his interest.” Grow on Partnership, 47; Story on Partnership, secs. 15,16.

So, in Bopp v. Fox et al. 63 Ill. 543, this court said: “ It is a well known rule, governing the relation of partnership, that partnership property must first be applied to the payment of partnership debts, and that the true and actual interest of each partner in the partnership stock is the balance found due to him after the payment of all the partnership debts and the adjustment of the partnership account between himself and his co-partners. And, in equity, real estate forms no exception, but stands on the same footing, in this respect, with personal property, no matter in whom the legal title may be vested.”

It is undoubtedly true that the partners may, by contract, stipulate that the ownership of property may remain in one, while the partnership shall have only the irse of the property, or make any other regulation, as between themselves, they may choose, in regard to the ownership of property used in connection with the business of the co-partnership, not prohibited by law; but the present case is unaffected by any such stipulation. The stipulation here, by making the property “ delivered in ” by Schwamb “ capital stock,” excludes the idea of a reserved ownership in him, and only a mere right to use the property by the co-partnership.

But, it is contended, there is a limitation in the clause relating to the sharing of profit and loss, which shows that it was intended Taft and Crego'were only to share in the losses resulting from business transactions prosecuted subsequent to the payment of the capital stock, and disconnected entirely from losses of capital stock. This is based on the words, “losses in all business transactions during said co-partnership,” which occur in the statement of the proportion of losses to be sustained by the respective parties, in the event of loss.

We regard this as but another, although not precisely accurate, mode of stating that losses in the partnership business shall be borne in the proportion there stated.

We have already seen that the property put in by Schwamb became partnership property, and the clause providing for the j)ayment of interest by the firm to him on $7119.37, or the excess in the amount paid in by him over that paid in by Taft and Crego, is a recognition that the firm was indebted to him in that amount. This shows, then, at the outset, the firm had a capital of $12,119.37, but was indebted $7119.37, and the ownership was in the proportion of $2500 in Schwamb, to $2500 in Taft and Crego jointly, or one-half in Schwamb and one-fourth each in Taft and Crego; from which it would result Schwamb should have one-half the profits and bear one-half the losses, and Taft and Crego each should have one-fourth the profits and hear one-fourth the losses, as is evidently intended by the clause under consideration. There is, in no view, in our opinion, anything in the clause negativing the idea that loss of capital should be borne in this proportion, and, in the absence of a contrary agreement, this is the equitable distribution of the burden.

Another clause in the articles of co-partnership is as follows: “And it is further agreed between the said parties, that, if, at the expiration of said co-partnership, said Taft and Crego shall wish to continue in said co-partnership, and bicorne equal owners in the capital stock, they can do so upon a renewal of said co-partnership. The tools, fixtures and machinery shall be put in at a discount of ten per cent from the present inventory price.”

This expressly recognizes the right of Taft and Crego to become equal owners in the capital stock on the terms then provided for, and, by implication, that they were then owners, but not equal owners, of the capital stock. There is nothing which can be said, even inferentially, to recognize an individual ownership in property used by the co-partnership, in Schwamb. The subsequent equal ownership may be, not of property then owned by Schwamb, but of the “ capital stock.”

On the 1st of January, 1870, which was at the expiration of the term of co-partnership, as provided by the articles, the following was indorsed on the original articles and signed by the respective parties:

“By mutual consent, the above agreement will continue until January 1, 1871, with the exception of the interest of the partners, each partner’s interest to be equal; that is, each one to have one-third of all profits, if any, and stand one-third of all losses in all business transactions during the continuance of this contract, the amount drawn out by each partner to be equal.

J. "W. Taft,

Frederick Schwamb,

D. R. Crego.”

We think it clear that this was a continuation of the original co-partnership as provided for in the clause quoted from the articles, and that they thenceforth became equal owners in the capital stock. It is expressly provided that each partner’s interest is to be equal. If each partner’s interest is equal, then each has an equal interest in the capital stock, and, by consequence, should equally share in profit and loss, and the subsequent statement of the proportion of profit and loss to be shared can not be presumed to have been intended as a limitation, other than as to the matters connected with the partnership, in contradistinction to losses that might be sustained outside of those matters.

It is claimed the court erred in excluding evidence offered for the purpose of showing that the parties intended their interests should be different than we have held they were, under the written instruments made for the purpose of expressing their intentions.

The pleadings disclose no fraud or mistake in the execution of these instruments. It is charged in the bill, and admitted in the answer, that the partnership was formed, and re-formed, under them, and that the business was carried on pursuant to their terms.. There is no cross-bill praying that they, or either of them, be corrected to conform to the intentions of the parties. It is- admitted the capital stock was made up, in the first instance, in the manner recited in the original articles. The professed object of the introduction of the evidence, however, is to explain a latent ambiguity.

This evidence has no tendency to prove a latent ambiguity. Its effect, if received, could, at most, but tend to prove contracts different from the construction we give to the written instruments'—in other words, to contradict the writing by parol, and it was properly excluded. Mason v. Park, 3 Scam. 534-5; Collender v. Dinsmore, 55 N. Y. 208; Norton v. Woodruff, 2 Comst. 155; Giles v. Comstock, 4 Comst. 272.

The objection that the interlocutory decree recites that the court found that the building, machinery, etc., had been burned, without any evidence, is frivolous. The effect of that decree is merely to determine tlie rights of the jiarties under the contracts, and to state the basis upon which the account was to be taken. This recital might have been wholly omitted without affecting the case, and its insertion in nowise prejudiced appellants.

The objection, that all the costs are decreed against appellants, when, since the object of the suit was to obtain a construction of the written instruments in which the parties were mutually interested, they should have been divided equally, we do not think well taken. Appellants, by an unauthorized construction of the written instruments, and by refusing to account on any other basis, necessitated the bringing of the suit, and the payment of the costs properly falls on them.

We are of opinion there is no error in the record, and the decree will therefore be affirmed.

Decree affirmed.