Miller v. Lord , 28 Mass. 11 ( 1831 )

Wilde J.

delivered the opinion of the Court. Several preliminary questions have been referred to the Court on a hearing upon the bill and answer, it being understood that a further hearing may be had, and evidence offered, should the decision of the Court on these questions make it necessary.

The bill is founded on articles of copartnership between the parties, and seeks to obtain from the defendant, who was the acting partner, an account of the partnership concerns.

The defendant denies his liability to account, resting his defence on an agreement by which the plaintiff, for a stipulated sum, released and transferred to the defendant his share in the property and concerns of the partnership, and he contends, that the plaintiff’s only remedy is on this agreement, in an action at law. The plaintiff contends that this agreement is void, or if not, that it does not oust the Court of its jurisdiction in equity ; but that he is entitled to have an account stated, according to the stipulations and true construction of the agreement.

First, it was objected by the plaintiff, that the agreement was void for uncertainty. But it is quite clear that this objection cannot be sustained. The supposed uncertainty relates to the question of interest, and a few other items which were agreed to be submitted to arbitration. As to the interest, the agreement is silent; and as to the other items, they are excluded by the terms of the agreement, and are open to examination. How far these disputed items are necessarily settled by the defendant’s purchase of the plaintiff’s share of the partnership effects, is a question to be settled hereafter ; but however it may be settled, it cannot affect the validity of the agreement in other respects.

The second objection of the plaintiff is, that there was a misunderstanding between the parties as to the principal matter of the agreement, so that there was not such a union of minds as is necessary to constitute a binding agreement. This misunderstanding, however, is not sufficiently proved. All that appears by the bill and answer is, that the parties, after the agreement was made, put a different construction on it; an occurrence by no means uncommon. It is true, that the parties declare that they understood the agreement differently .at the time it was made, but it does not appear that the construction which either party put on the agreement was made known to the other party until after the agreement was concluded ; both parties, therefore, are bound by the terms of the agreement, and it is to be construed by the Court. It would be a most dangerous doctrine, to hold that a party might release himself from the obligation of a contract by declaring that he understood it in a different sense from its true construction. The cases cited on this point give no support to such a position. In the case of Woollam v. Hearn, 7 Ves. 211, which was a bill for the specific performance of a written agreement for the lease of a house at a rent of £ 73 per an nuin, it appeared by the testimony, that in the oral negotiation the plaintiff had been made to understand by the other party, that he was to have the premises at the rent of £ 60, the former rent. So in the other cases cited, the misunderstanding of the parties jvas established by evidence. Higginson v. Cloues, 15 Ves. 520 ; Lindsay v. Lynch, 2 Sch. & Lef. 7 , Clowes v. Higginson, 1 Ves. & Beam. 532.

Considering, then, the argument as valid, the question next to be considered is, whether it ousts this Court of its jurisdiction as a court of equity. And we think very clearly it does not. The whole' object and effect of the agreement is, to transfer to the defendant the plaintiff’s share of the profits and effects of the copartnership. The defendant’s counsel admit that the private account between the parties remains open. To settle this account the books of the concern are to be examined ; what items of account are to be included in the plaintiff’s private account, and what belong to the profits, is to be determined ; and for these purposes an account must be stated. It cannot be doubted, drat such a subject of inquiry is peculiarly proper for a court of equity. It is doubtful, certainly, whether an adequate remedy could be had in a court of law, for an account could not be stated and understood without the examination of the books, and if the defendant should refuse to produce them, the powers of a court of law to compel the production of them would be found defective.

The difficulties attending the settlement of long and difficult accounts, especially between partners, in a court of law, have long been known and felt, and to remove them was the object of the statute conferring equity jurisdiction on the Court in such cases. And we think that in all cases where an account is to be stated between partners, this Court has jurisdiction under the statute.¹ More or less difficulty may be involved in different cases, but this difference cannot be ascertained until after an examination of the partnership accounts, and will not affect the question of jurisdiction.

Nor does the dissolution of the partnership oust the Court ■ of its jurisdiction. The act of 1823, c. 140, extends to all disputes between copartners and their legal representatives,² where there is no adequate remedy at law ; and consequently it must have been intended to operate on disputes arising after the partnership is dissolved, by the death of one of the partners or otherwise; and so it was decided in the case of Chandler v. Chandler, 4 Pick. 78.

Considering, then, the transfer of the plaintiff as a valid contract, we are to determine what is the- true construction of that contract; and as to this the only question is, whether, under the transfer of profits, the defendant is entitled to' charge interest on the sums annually withdrawn by the plaintiff from the stock, in pursuance of the articles of copartnership. This question depends rather upon the articles of copartnership, than upon the subsequent agreement and transfer. If, by the articles of partnership, the plaintiff was liable to the claim of interest, then undoubtedly the defendant is entitled to charge it by virtue of the plaintiff’s release and transfer of his share in the profits and effects of the firm; otherwise not. The general principle is, that where there is no agreement to - pay interest, none can be charged until the principal sum falls due ; for if interest is not included in the terms of the contract, it can be only claimed as damages for the detention of the debt. There are, however, some exceptions to this rule; as where fraud is proved in the party to he charged, and in cases depending on mercantile usage. And on the latter ground the defendant rests his claim. But this supposed usage is neither proved nor admitted, and consequently cannot at present affect the question. In the case of Stoughton v. Lynch, 1 Johns Ch. R. 467, it was held that a copartner was liable to account for interest and profits made on any sum withdrawn from the partnership funds, but was . not so liable for money withdrawn for the partner’s private .expenses in pursuance of the articles of copartnership. We however give no opinion as to the question of mercantile usage. If that usage should be deemed material by the defendant’s counsel, it must be eitl.er proved or admitted before it can affect the construction of .the articles of partnership, or the rights of the parties. How far such a usage, if established, would bear upon the case, it is not necessary now to decide, but there is certainly nothing in the stipulations or the conduct of the parties previous to the transfer, which can support the defendant’s claim of interest. By the terms of the articles of partnership, the inference is, that the sums to be withdrawn were considered as a division of profits in advance ; and even if they were considered as loans, they were loans not upon interest; they were withdrawn under a written contract, and the presumption is, that if interest was intended to be charged, it would have been so expressed in the contract. It appears, also, that the defendant, in making <up accounts of profits during the partnership, did not charge any interest on the sums withdrawn.¹

Upon the whole, it appears to the Court, that the contract of transfer and relinquishment is a valid contract binding on both parties ; — that a mere misunderstanding as to the construction of the terms of the contract, the same being fairly made, and the misunderstanding being unknown at the time, is no sufficient reason for annulling the contract; — that this contract does not oust the Court of its jurisdiction in equity, the accounts between the parties being only partially liquidated ; — and that the construction of the contract of release is such as has been stated.

As to the form of the bill and its sufficiency, we think it well enough: On a bill to compel a party to account, it is sufficient to pray in substance, that he may be held to account. This includes something more than barely to state an account; a party bound to account is bound thereby to pay any balance that may be found due. The prayer in the bill is, that the defendant may be required to render a just and Lue account of all moneys received by him, and of all the goods and effects of the concern ; and also of all other matters relating to said concern; which last clause is equivalent to a prayer for general relief.

Referred to a master.

1 Bat the equity jurisdiction of this Court under the St. 1823, c. 140, did not extend to suits between the members of a manufacturing or other corporation. Pratt v. Bacon, 10 Pick. 123; Russell v McLellan, 14 Pick. 63. See May v. Parker, 12 Pick. 34.

2 It seems that the heirs of a deceased partner are “ legal representatives, within the meaning of this statute (Rev. Stat. c. 81, § 8). Johnson v. Ames, 11 Pick. 173.

1 Interest is not allowed on partnership accounts generally until after a balance is struck, on a settlement between the partners. Dexter v. Arnold, 3 Mason, 289.