Gyger's Appeal , 1869 Pa. LEXIS 214 ( 1869 )

The opinion of the court was delivered,

by Sharswood, J.

It is not necessary to consider any of the assignments of error, except the 5th and 7th. The court were clearly right in decreeing the account; and the master adopted and applied correct principles on. all questions raised before him, except as to interest and costs. In regard to his conclusions of fact from the evidence, there is no such palpable error as, according to the well-established practice in chancery, would have justified the court in correcting his report.

The 5th assignment of error is “in charging John Gyger interest prior to the settlement of accounts between the parties.” Mr. Bindley remarks that the principles upon which, in taking partnership accounts, interest is allowed or disallowed, do hot appear to be well settled: 1 Bindley on Partnership 649. In some cases it has been held that the period of the dissolution of a partnership is the proper time to make a rest for this purpose: Stoughton v. Lynch, 2 Johns. Ch. R. 209; Hollister v. Barkley, 11 N. H. 501. Judge Story has laid down a different rule. “Interest,” he says, “is not allowed upon partnership accounts generally, until after a balance is struck on a settlement between the partners, unless the parties have otherwise agreed or acted in their partnership concerns:” Dexter v. Arnold, 3 Mason 289. Vice-Chancellor Sandford, of New York, in Beacham v. Eckford, 2 Sandf. Ch. R. 116, after a review of all the authorities, came to the conclusion that there is no general rule established, but that the allowance or refusal of interest depends upon the circumstances of each particular case. This seems much the safest principle to adopt in view of the confidential relation of the parties, and the variety and complication of such accounts. No unbending rule could be laid down which would not, in particular instances, work great injustice.

There are equities in this case which we think ought to weigh in favor of the accountant. Mr. Gyger undertook to liquidate the business of a banking firm with a large amount of outstanding and doubtful debts due to it, and a correspondingly large amount of liabilities. To do so without loss, it was necessary that he should continue to receive deposits and issue certificates of loan, by which he was enabled, in effect, to borrow at a low rate of interest, in order to meet the liabilities as they fell due. For this purpose he was also at first compelled to make advances. Thus he gained time for the collection and conversion of the assets, ■which, after much trouble and considerable litigation, he accomplished without serious loss. Of his diligence and fidelity there is no question. He occupied the banking-house of the old firm, and as he used a part of it for his private business, he is very properly charged with a fair rent for such part. The master has, however, added interest on this rent as well as upon a balance, which he strikes May 1st 1865, a date adopted, probably, in reference to the sale of the banking-house. He allows him interest on the amounts advanced by him before that period. According to well-settled principles, he has disallowed all compensation for his services in liquidating the business: Beatty v. Wray, 7 Harris 516; Brown v. McFarland, 5 Wright 129. Had Mr. Gyger proceeded immediately to press the collection of the debts due to the bank, it is highly probable there would have been no capital or profits to divide, if the partners would not have been obliged, out of their separate estates, to meet a considerable deficit. It was impossible for him to know at any time what the balance really was until it was finally ascertained and struck by the master; -for it is to be observed that there was no agreement as to what amount of rent should be paid, and the apportionment of the expenses between his own private business and that of the old firm, carried on in the same building and by the same clerks and servants, had to be settled. He might not unreasonably expect that under the circumstances his late copartners would not object to allow him a reasonable compensation for his services. The rule which denies it altogether in his case works hardly, for the whole trouble and responsibility were thrown upon him. He did make a partial distribution of funds in his hands — at what time we are not informed. In view of these facts we are of the opinion that the d'ate of the actual settlement and ascertainment of the balance is the period from which it would most comport with equity to compute the interest. The account should therefore be corrected by striking out the item of credit of $219.82, on one side, and the items of charge of $801.40 and $777.19 on the other side.

The 7th error assigned is, that the court below erred in charging all the costs upon John Gyger. In equity costs do not always follow a decree against a party. They rest on the sound discretion of the court, and are to be awarded or refused, according to the justice of each particular case: 3 Daniell’s Ch. Pr. 2. It has been decided that wherever an account is intricate or doubtful, there should be no costs, Pitt v. Page, 1 Bro. P. C. 1, and this is especially applicable to partnership accounts: Collyer on Partn.. 339. In such cases the costs are usually divided, or what is practically the same thing, are taxed on the partnership effects: Hutcheson v. Smith, 5 Irish Eq. 117; Jones v. Morhead, 3 B. Monroe 385; Taylor v. Cawthorne, 2 Dev. Eq. 221. There were conflicting claims in this case on both sides, and each party has been found as to some of them to be in the wrong. There wert questions of real doubt and difficulty as to the amount of rent, and the apportionment of expenses as well as to interest and compensation. It is not easy to see how they could have been settled without a suit or a reference to mutual friends. We cannot give so much weight as the master has done to the general denial by defendant in his answer of liability to account. It was not that which rendered the suit unavoidable. The costs of this litigation appear; therefore, to be a necessary expense in consequence of the disputes between the parties in closing up the concerns of this copartnership. It is an item in the amount of profit and loss, which it would have been much better for all the partners to have saved by mutual concessions or otherwise, but which cannot in equity be charged upon one of them exclusively: Caldwell v. Zeiber, 7 Paige 508. We are of the opinion that all the costs in the court below as well as the costs of this appeal should be paid out of the partnership money in the hands of the defendant, John G-yger, and that he should be allowed a credit therefor in his account.

Decree reversed, and record remitted to the court below, that the decree may be there modified according to this opinion.