126 Mich. 142 | Mich. | 1901
The main issue in this case is sufficiently stated in 113 Mich. 626 (71 N. W. 1087). It is now before us for final hearing upon the proofs. The record is voluminous, and contains 1,480 pages. Accurate books of account were kept, in which were entered all the transactions of the firm in their dealings with others, and also with each other, so far as the amounts drawn out by each of the partners are concerned. The following questions are submitted for determination:
2. Should his estate be charged with one-third of the interest paid upon the notes given by the three for the purchase of the Bewick interest?
3. Should a deposit in the Detroit Savings Bank, amounting to $17,165.25, be charged wholly to the complainants, or to the firm ?
4. Should the estate receive $625 as salary due Joseph for t\ months of the year in which he died, or $1,000, to cover the entire year ?
5. Are complainants entitled to salary or compensation for services since the death of Joseph, during the settlement of the estate ?
6. Should complainants be credited with the sum of $956.46 for discounts on notes not drawing interest, taken by and charged to them on maturity ?
Complainants, for some time prior to 1867, carried on a lumbering business under the firm name of “A. W. Comstock & Company.” In 1867 Charles Bewick became an equal partner. The firm name then became “Bewick, Comstock & Company.” The business consisted of lumbering, banking, and carrying trade by vessels. They had no written articles of partnership. The business was very successful, and, as stated in the former opinion, in 1886 its property was estimated to be worth nearly $1,000,000. In that year Mr. Bewick offered to sell out to his copartners for $300,000. The offer was accepted, and Joseph became a purchaser of one-third of Mr. Bewick’s interest. He thus became the owner of a one-ninth interest, each of the other partners owning-four-ninths. The new firm was known as “Comstock Brothers.” Bewick made no bill of sale of the personal property to the new firm, but executed deeds of the real estate. Fifty thousand dollars was paid in cash, each of complainants contributing $15,000 of that amount; the-other $20,000 being paid by the money of the firm. Six notes were executed, signed by each of the brothers
It is the contention of the defendants that the books of account were kept upon the theory that the purchase price was paid out of the assets and profits of the firm, and that these books conclusively show that Joseph was to pay nothing for his interest. It is the theory of the complainants that the books do not necessarily sustain this theory; that Joseph purchased this interest, and agreed to pay therefor $100,000; and that in the settlement the purchase price should be charged against him. The court below sustained the claim of the defendants.
Defendants invoke the rule that when the books of a copartnership clearly show the relative rights and interests of the partners, as well as the respective claims or contentions which they made relating to the same during its existence, nothing short of documentary evidence should be allowed to change such rights and interests as they appear upon the books. ■ This rule is conceded by counsel for the complainants, but they insist that the authorities upon which the rule is based present no such case as that presented by this record.
August 15th, 1883.
Sundries, to capital stock.................................$39,000
A. W. Comstock & Co., to bal. transferred----------$26,000
Chas. Bewick..........................-........... 13,000
Sundries, to capital stock................................- 24,000
A. W. Comstock..............-.................... 8,000
W. B. Comstock.................................... 8,000
Chas. Bewick, agreement------------------1.......- 8,000
No other entry of “capital stock” was made until August 4, 1886, when the following entry was made:
August 4th, 1886.
Capital stock......................................$300,000
To Chas. Bewick..............-...........................$300,000
On August 5, 1886, the bookkeeper made the following entry:
Chas. Bewick, to sundries-------------------------$300,000
A. W. Comstock..........................-............... $15,000
1-6 of San Diego..................-........$5,000
1-4 of Alcona............................... 10,000
W. B. Comstock.-.!..........................-............. 15.000
1-4 of Alcona..............-................ 10,000
Cash........................-.............. 5,000
Alpena Banking Company. 20.000
Bills payable.............. 250,000
Notes as on bill-book.
Jan. 12th, 1893.
Profit and loss.......................•.............§237,000
To capital stock___________________________________________§237,000
To balance the account, as it represents nothing.
Whatever the entry of August 4th may mean, it does not seem to us conclusive evidence that the complainants were to pay the entire amount of the Bewick purchase, and make a donation of one-third of it to Joseph. We think the explanation given by the complainants’ counsel the reasonable one:
“When Harry Bewick on August 4, 1886, charged, ‘Capital stock, $300,000,’ and credited Charles Bewick with the same, his only idea was to give Bewick a credit to balance what was being charged to him, namely, the $50,000 paid down, and $250,000 credited ‘bills payable.’”
It is unnecessary to enter into a further discussion of the entries on these books, and the deductions drawn therefrom by counsel for each. side. We think it proper to look elsewhere to determine what the real transaction was. In doing this it is unnecessary to consider the testimony of the complainants,' or to determine whether their testimony is competent under the circumstances of its introduction.
The six notes given to Mr. Bewick for $250,000 were not, upon their face, partnership notes, but were notes of the individuals, and upon their face imported that each was to pay one-third of the amount. 1 Bates, Partn. § 452; 17 Am. & Eng. Enc. Law, 1031. On these notes, therefore, Joseph was equally bound with the others. The manner of giving these notes is of no little significance, because it appears that they were the only notes or contracts ever given by the firm which were not signed, “Comstock Brothers.” One of the notes for $25,000, at the request of Mr. Bewick, and for reasons which throw no light upon the relations between the
“On this purchase each was to get one-third of my interest, and each was to pay $100,000. Joseph had no money, and they said we had a good deal of lumber and logs on hand; as they would sell and get the money, these notes would be paid from the proceeds. In talking that over with Joseph, my recollection is that it was to be charged up to his account, — the purchase, — and his-share would be paid out of his ninth interest.”
On cross-examination he testified: “He [Joseph] said that A. W. and William B. had sold him one-third of my interest.”
Harry Bewick testified that his father made a proposition to sell his one-third interest in the business, which was accepted, and that:
“When the papers were to be drawn up, they notified me that they had sold Joe Comstock one-third of my father’s interest. As I understand it, they agreed to let Mr. Joe Comstock in on the same basis as themselves. At the time when it was talked over as to who would purchase from my father, Joe, A. W., and Will were all in the office, and each was to pay to my father $100,000. * * * The deeds were made out to Joseph B., A. W., and W. B. Comstock.”
Balfour Lee testified to a conversation with Joseph a few days after he had become a member of the firm, and congratulated him upon it. The witness testified: “He [ Joseph] said that he had it all to pay for yet.”
One Benjamin C. Jolly, who kept the books of Com-stock Bros, from September 15, 1890, to September 15, 1892, testified to a conversation with Joseph'-in the spring of 1892; that Joseph.told him “that, when Bewick sold out, he was taken in as a partner, getting a third of his interest, for which he was to pay a hundred thousand dollars. He said his interest was worth $60,000. He-'
To sustain the contention of the defendants would be to disbelieve the testimony of these four witnesses, and draw deductions from entries upon the books which upon their face are silent as to how Joseph obtained his interest, — books which upon their face do not even show that he was a partner; for the books continued right along, without change of name or balancing of accounts. It is entirely reasonable and consistent with the books and the evidence above given that neither party considered it necessary to place the exact transaction upon their, books, which they might easily have done. The business continued to be carried on the same as before. No new books were opened and kept. We think it is established by a fair preponderance of the evidence that Joseph was to pay for his share, and in the final settlement it should be charged to him.
The authorities cited and relied upon by the learned counsel for the defendants do not, we think, go so far as to exclude parol testimony in this case, or to make the accounts upon the books conclusive.
In Adams v. Gordon, 98 Ill. 598, there were written articles of partnership, specifying that the two partners had contributed capital stock to the sum of $20,000. The articles provided that the copartners “shall share equally in stock and all profits and losses that may accrue in their business during the continuance of their copartnership,” and that, upon the winding up of the concern, all gains and increase in stock were to be divided between them, share and share alike. One of the partners died. The other partner sought to prove that he had put in more of the capital stock than the deceased partner. No credit was given upon the books to the surviving partner. Two partial settlements had been made, in which no such claim
In Knapp v. Edwards, 57 Wis. 191 (15 N. W. 140), there were no profits or losses aside from the destruction of the property by fire. The firm had no assets except some real estate, and no debts. The plaintiff’s investment had been fully accounted for by sums drawn out by him and by loss by fire. The defendant had put in more capital than the plaintiff. It was held that plaintiff was not chargeable for any sum beyond his investment. The reasoning of the court is this:
“Neither is the defendant entitled to be allowed any more than he has already received from the firm, although he invested in the business more money than did the plaintiff. This is so because the firm met with no losses other than by the fire, and hence it would be unjust to require the plaintiff, in addition to losing his whole investment, to pay several hundreds of dollars to his partner. It being settled that the firm made no profits and suffered no other loss, the plaintiff cannot be held chargeable for any sum beyond his investment.”
In Cunningham v. Smith’s Ex’rs, 11 B. Mon. 325, books of account had been kept to show the correct amount of purchases and sales. It was sought to charge one of the partners with from 25 to 30 per cent, more, because other concerns in the like business had made large profits. The books were kept under the general superintendence of both partners, and, as the court said, “furnish evidence of a high character between them, and which has not been successfully impeached.” It was therefore held that the general evidence of the profits made by others was inadmissible.
All that is decided in Ryder v. Gilbert, 16 Hun, 163, is that, in the absence of evidence of the precise amount of the respective shares of the partnership, the presumption is that they are entitled equally. The question arose under a proceeding for the distribution of the proceeds of an execution sale against one of the partners.
In Van Ness v. Van Ness, 32 N. J. Eq. 669, it was simply held that where a member of a firm, whose duty it is to keep the accounts, claims to have omitted to enter credits to which he is entitled, he must make satisfactory proof of such mistakes.
Topliff v. Jackson, 12 Gray, 565, goes no further than to hold that the books of the partnership are prima facie evidence against each partner.
The circuit judge said that the evidence did not clearly satisfy him that “this"$17,000, or some part of it, did not go into that transaction.” Neither the books of the banking company nor of Comstock Bros, show what particular moneys were loaned for the above three notes. Mr. A. W. Comstock testifies positively that the money drawn from the Detroit Savings Bank was finally used for that purpose. "We find nothing in the record to justify the conclusion that he testified untruthfully, or that he acted dishonestly in the matter. Without entering more into detail, we are satisfied that it was; that this was a partnership transaction; that each partner must bear his proper share of the investment, and is entitled to his share of the bonds and stock, or the proceeds thereof if sold.
The authorities cited and relied upon by counsel for complainants from this State do not decide the question. They all hold (and such is the established rule) that real estate is personal property for the purpose of settling and paying the debts of the partnership. In Way v. Stebbins, 47 Mich. 296 (11 N. W. 166), it was held that partnership lands are to be equally divided among the survivors and the heirs of the deceased when there are no partnership debts to be satisfied. In England all the partnership assets are held to be personalty, and, after the payment of partnership debts, must be divided as person
‘ ‘ Equity will not go further, and convert it [realty] into personalty for additional purposes, such as for the mere purpose of division, unless the intention to convert for more than partnership purposes appears; hence, in this country, the widow has dower out of a partner’s share in the surplus, and the share goes to the heir, and not to the executor.” 1 Bat'es, Partn. § 297.
The reasons for the English rule are stated in T. Pars. Partn. § 271. That author states the rule in America to be that, after the real estate has been subjected to the payment of the debts of the partnership, what remains—
“Becomes at once real estate, or, rather, all the incidents and qualities of real estate revive. This rule goes upon the ground of a trust imposed upon all who hold the legal title, in behalf of all partnership objects; and, that trust once discharged, the residue resumes its former character.” T. Pars. Partn. § 272.
The decree of the court, therefore, as to the partition of the lands, must be sustained. A division of the personal assets obviously would be very difficult, and, unless the parties can agree upon a division of these, we think the surviving partners should be authorized and directed to proceed to collect the debts due the firm, sell the personal assets, and divide the proceeds.
The decree will be modified and entered in accordance with this opinion. Complainants will recover costs of this court.
