Harvey v. Varney , 104 Mass. 436 ( 1870 )

Chapman, C. J.

The object of the plaintiff’s bill is, to procure a settlement of the affairs of a partnership which has been formed and managed in a very loose manner. The cause has been referred to a master, to whose report several exceptions are taken by each party.

The partnership was formed in this state in August 1861, and its business was at first carried on in Boston and Abington. In December 1861, the defendant Thomas J. Hunt went to Evansville, Indiana, and established a branch of the business there; and his son, Henry Hunt, came into the firm. They sent boots and shoes to Thomas J. Hunt, and he continued the business till October 1862, when he sold out his stock of goods to Peter Semonin for $10,000. But he and Semonin have since carried on the business on their joint account. It has already been decided that the interest of Hunt in that business belongs to the firm. 98 Mass. 118. Of course, it was his duty to keep proper accounts of this business, and render them at reasonable times to his copartners. Story on Partnership, (6th ed.) § 181. This duty was the more important, because he had been intrusted by them to manage their affairs at a distant place, beyond the limits of the Commonwealth. We cannot appoint a receiver to take charge of the concern as against Semonin, nor would a receiver appointed by us have any power to act in a foreign jurisdiction. Booth v. Clark, 17 How. 322. The obliligation of Hunt is similar to that of an agent, in respect to rendering accounts; and the account should be so made up in this case as to protect his copartners from being injured by his fraud or neglect. Story on Agency, (7th ed.) §§ 203, 204, 332, 333. Dodge v. Tileston, 12 Pick. 328. Presumptions are against one who is bound to account and neglects to do so; the court inquires strictly into his irregularities, and deals with him severely. Gray v. Haig, 20 Beav. 219. When business is done at different places, it is the duty of each partner to furnish to the other all their accounts at the place where he resides, and endeavor to adjust them, and pay the balance when ascertained. Beacham v. Eckford, 2 Sandf. Ch. 116. If the neglect of a party has rendered accounts intricate, his claim to interest on a balance is sometimes denied. Boddam v. Ryley, 1 Bro. Ch. 239; S. C. 2 Bro. Ch. 2. In Walmsley v. Walmsley, 3 Jones & Lat. 556, a partner having possession of the partnership books fraudulently refused to produce them, and the master was unable to state the accounts. He charged the partner ten per cent, as presumed profits. His report was objected to on that account, but Lord Chancellor Sugden said the master had acted quite correctly, and if he had charged twenty per cent, he would have confirmed the report.

These authorities indicate a disposition of courts of equity to protect the firm from losses by reason of the neglect or refusal of a copartner to render an account of matters that have been specially intrusted to him, and they also indicate the means by which a master may make up an account in such a manner as to prevent the delinquent partner from making a profit by his delinquencies. But the plaintiff’s exception to the report, because the master has credited Hunt with notes of the firm which are due to him, is not valid. The account cannot be properly made up without giving him credit for all items that are justly due to him. His refusal to account may raise presumptions that he has made profits; and of the extent to which such presumptions authorize charges to be made against him, the master is, in the first instance, the proper judge as to this, being careful to protect the firm from loss in consequence of his concealment of facts.

The second exception alleged is not an exception in substance, and requires no separate consideration.

The third and fourth exceptions relate to the account of the defendant Lane, who carried on a branch of the business in New Orleans. His obligation to account to the firm is not less stringent than that of Hunt. These exceptions must be sustained, so far as they relate to charging him with profits on the principles stated above; but credit should also be given him for all reasonable expenses, as well as for other items that appear to be due to him. It does not appear from the report, that interest should be charged to him with annual rests. Whether it should be thus charged must depend upon whether he properly retained as a partner the balance which had come to his hands, or upon what use he made of it. The general rule is, that where there is no neglect, and no profit is made from the money retained, the partner holding it is not liable for interest upon it. But in determining this matter, presumptions should be made against a partner who renders no account.

The defendants’ exceptions relate to matters which are governed by the principles stated above. Each party should be credited with expenses reasonably incurred in the prosecution of the business, and proper charges should be made to him, so that he may not make a profit by not accounting. The report should be recommitted to the master, in order that a full statement of the accounts may be completed; and upon the confirmation of his report, a receiver may be appointed, if necessary, who shall receive and apply to the payment of the debts due from the firm such sum as may be needed for that purpose.

Ordered accordingly.

After this decision, the case was settled by the parties without a further hearing.