Caldwell v. Leiber , 7 Paige Ch. 483 ( 1839 )

The Chancellor.

The claim of the complainant which is embraced in the third exception, although in form a claim for damages sustained by the firm by the neglect of the defendant to attend to the partnership business, was in substance a claim for the extra services which the complainant had bestowed upon the business of the copartnership, beyond his rateable proportion of duty. Partners are not entitled to charge each other, or the firm of which they are members, for their services in the copartnership business, unless there is a special agreement to that effect; or where such an agreement can be implied from the course of business between the copartners, as by making such allowances in the adjustment of the accounts from time to time during the continuance of the copartnership, or from the nature of the service performed being that which is not usual for one copartner to perform without receiving a separate compensation therefor. Each partner in the management of the co-partnership business is attending to his own interest therein, as well as to the interest of his copartner; and the law implies no agreement to compensate either of the copartners for their various and unequal duties and services in the management of the business of the firm, although one of the copartners may be answerable to the other for an injury which the company has sustained by his fraudulent misconduct in violation of his duty as a partner. (CVolly, on Part. 99, note.) I am also satisfied in this case, from the articles of copartnership, that it was not intended by the parties that Leiber should devote his whole time to the business of the copartnership exclusively. I think the vice chancellor was therefore right in allowing this exception to the report. He was also right in supposing that the neglect of the complainant to interpose this claim at the time of the adjustment of the accounts, in 1830 and 1831, was evidence to show that the claim as now made is unfounded. (See Thornton v. Proctor, 1 Anst. Rep. 90.)

I think the fifth exception was properly disallowed. The allegation in the answer that nothing was ever realized on the note of Wood & Smith is not responsive to the bill, and is not supported by the proof. I think it is pretty evident that this debt was included in the personal mortgage afterwards given to Leiber & Anderson. And it would be a fraud upon the complainant for them to apply the whole property obtained under that mortgage, to the satisfaction of the debts of Leiber & Anderson to the exclusion of the debt due to the other firm. Even it if was satisfactorily proved that Leiber was not to account for this debt unless it was collected, he was still bound to use the same diligence in securing its collection as he was in obtaining payment of debts due to the other firm in which he was interested.

' The sixth exception relates to the claim of the defendant to one half the monies which went into the firm, arising from the post office. The fact that there was an agreement or understanding between the parties that the profits should go to the firm is sworn to by the defendant, in his answer. This part of the answer, however, is not responsive to the bill, and the rights of the parties therefore must depend upon the proof. In relation to this claim it is proper to remark, that neither of the partners was the post master and as such entitled to the fees and emoluments of the office. But the office was kept at their store, by an arrangement with the post master, and the perquisites were received as an equivalentforthe performanceofthe duties and assumingthe responsibilities of the office ; and the complainant took the appointment of deputy merely to enable him to perform the duty consistently with the laws and regulations of the post office department. This business, as I understand the testimony, commenced subsequent to the formation of the copartnership ; and of course no provision was made for it in the partnership articles. The understanding between the parties in relation to it, therefore, can only be inferred from the manner in which the business was transacted. It appears, from the testimony, that the business was not only conducted in the store of the firm, by the copartners and their clerks indiscriminately, but that all the accounts and entries were kept in the firm books; that the monies all went into the partnership funds; and that the sums paid to the general post office were also taken out of the funds of the firm. This mode of doing the business seems to be wholly inconsistent with the idea that one of, the partners only, who was nominally the deputy, was to have all the profits of this agency, while the firm did the business and ran the risks of the collection of the postages and of mistakes in the keeping of the accounts, &c. These circumstances, in connection with the fact that no claim to the exclusive right to the whole of the profits of this agency appears to have been made at the adjustment of the accounts, in 1830 and 1831, are satisfactory evidence to my mind that such was not the understanding of the parties. The declaration of Caldwell, that “he had-the profits of the office for the trouble of attending to it, and that the trouble of taking care of it was as much or more than the profits,” even if it could be evidence in his own favor, amounts to nothing in the decision of the question in controversy here. He unquestionably, in that conversation, alluded to the arrangement which had been made between him and the post master as to the keeping the office at the store; and not to an understanding between himself and his copartner that as between them he was to have the exclusive right to such profits. For these reasons I think this exception should have been allowed.

There is no pretence for charging the complainant with the loss occasioned by the water in the cellar, as it was a mere mistake of judgment on his part in supposing there was no danger to be apprehended from the rising of the water. Certainly one partner cannot be answerable to another for an honest mistake of judgment as to what will be most beneficial to the common interest of both. And although the complainant was told that Leiber had directed the clerks to remove these things from the cellar, he unquestionably wanted their services at that time in some other part of the business which he deemed more important to the interests of the firm. There is no ground even to suspect that his object was merely to thwart the wishes of his copartner. The seventh exception was, therefore, properly overruled.

Entries in the copartnership books, made during the continuance of the copartnership, are, as a general rule, evidence for and against the different members of the firm, in a subsequent adjustment of their accounts between themselves. And it lies upon the party alleging a fraud or mistake in such entries to prove it. I do not think there was sufficient evidence in this case to have justified the master in charging the complainant with the #70, upon the supposition that he had fraudulently interpolated the credit of the 10th of December, 1832, in the books of the firm. The ninth exception was, therefore, properly overruled.

The eleventh exception relates to a private claim against the complainant, which had nothing to do with the copartnership transactions; and as it was one of the items of set-off specified in the bill of particulars, in the suit at law, there is very little doubt that the claim was either abandoned as unjust, or that what was equitably due thereon was allowed in the adjustment of that suit. The master was therefore right in not allowing it here ; and the exception to his report in this respect was properly overruled.

I am not satisfied, from the testimony, that the firm of Leiber & Caldwell ought to be charged with the $410,27, referred to in the twelfth exception. And as all the circumstances in reference to the alleged mistake were known to the defendant long before this controversy had commenced, and he did not venture to set up such a claim in his answer, and to swear to his belief in the justice thereof, the twelfth exception was properly overruled.

The vice chancellor was clearly right in not allowing to either party costs as against the other. Previous to the commencement of the suit, and during the whole progress of it, claims have been made and resisted by each partner, as to which in the end he was found to be wrong. Neither party, therefore, had the power of adjusting these conflicting claims except by a resort to a court of equity, unless his adversary would come to an amicable arrangement, by relinquishing his unfounded claims, and thus save the expense of this litigation. It would unquestionably have been better for both parties to have submitted the questions in controversy to some of their intelligent neighbors mutually agreed upon' between them. But there is no rule of this court which compels a party to take the settlement of his claims from the legally constituted tribunals of the state, and submit them to arbitration, at the peril of paying costs to his adversary if he refuses to do so. The costs of this litigation appears to be a necessary expense of the disputes between the parties in closing up the concerns of this copartnership. It is therefore an item in the account of profit and loss which it would have been much better for both parties to have saved, by mutual concessions, or otherwise; but which loss 1 cannot charge either party with exclusively. And the share of each will. probably bear a relative proportion to his interest in the profits of the partnership business. The decree of the vice chancellor must therefore be affirmed, with a modification of the same in the matter of the sixth exception, without costs to either party on their respective appeals. That exception must be allowed ; and the sum of $327,80, for one half of the post office profits, with the interest thereon from the 25th of May, 1833, to the date of the master’s report, must be deducted from the balance decreed to the complainant by the vice chancellor. The balance, with interest thereon from the date of the master’s report, must be paid to complainant by Leiber. The decree may remain and be enrolled here, as there will be no benefit to either party in sending it back to the vice chancellor.