Winchester v. Glazier

152 Mass. 316 | Mass. | 1890

C. Allen, J.

The first question is, whether the defendant was entitled to draw a salary .in half-years when there were no net profits. This question is open to doubt if the partnership articles alone are looked at, but its determination does not depend merely upon the construction which would be given to the partnership articles taken by themselves alone. It is a general rule for the construction of written instruments, including deeds, contracts, statutes, and constitutions, that when the language is open to doubt, and parties whose interests are diverse have from the outset adopted and acted upon a particular construction, such construction will be of great weight with the court, and will usually be adopted by it. Stone v. Clark, 1 Met. 378. Stevenson v. Erskine, 99 Mass. 367, 375. Lovejoy v. Lovett, 124 Mass. 270, 274. Chicago v. Sheldon, 9 Wall. 50, 54. Stuart v. Laird, 1 Cranch, 299. Cohens v. Virginia, 6 Wheat. 264, 418. This rule has full force in the construction of partnership articles, and a practical construction given for several years by the partners themselves to language which would otherwise be open to doubt will usually be accepted by the court as conclusive.

The defendant was credited with the full amount of his salary in every year during the continuance of the partnership. The master finds that the plaintiff had knowledge, at least as early as 1878, that credits of salary were made to the defendant in half-years when there were no profits. At that time six such half-yearly credits had been entered, namely, in 1872, 1874, 1876, 1877, and twice in 1875. The master-reports that there was no evidence that the plaintiff ever objected to this course prior to the bringing of this suit, and that the plaintiff testified as a witness before him. The partnership continued for six yeai’s after 1878, and under these circumstances it must now be considered that under the partnership articles, as understood and acted upon by the partners, the defendant was entitled to his salary, whether there were profits of the business or not.

By a similar course of reasoning, though upon the facts the conclusion is less clear, the plaintiff must be held bound by the increase of the defendant’s salary in 1874 from $2,500 to $3,500 a year. When the partnership began, the defendant said that after the expiration of three years, if the business continued, he should insist upon more salary; beginning with 1874 thenceforward his salary was credited to him upon the books at the rate of $3,500 a year; the plaintiff had access to the books, and the master reports that his attention was distinctly called to this fact on December 31, 1877, and that it was quite probable that he was aware of it earlier, if he did not agree to it in advance; and upon the further facts found by the master, it seems to be a fair conclusion that at that time he virtually waived all objections and assented to the increase.

The next question is, whether the plaintiff is entitled to interest upon his advances to the firm and his unwithdrawn profits in excess of the $15,000, which it was stipulated in the partnership articles that he should pay in as capital. It was provided in the articles that “the capital of neither shall be taken to pay interest to the other.” So far as concerns the capital which the partnership articles call for, this may be taken as an express provision, which leaves no room for construction; and the plaintiff makes no claim for interest on his $15,000 of capital when there were no profits. But he contends that the above provision relates merely to the capital stipulated for in the partnership articles, and that it does not apply to his advances or profits left in the firm above that sum; and this appears to have been the practical construction adopted by the parties prior to the year 1877. Until that year interest at the rate of seven per cent per annum was uniformly credited on the books of the firm, both to the plaintiff and to the defendant, on all balances found due to them respectively. These books were kept under the eye of the defendant. If in 1877 he had for the first time raised the objection that the plaintiff was not entitled to this allowance, his own course of conduct for eight years would justly have been held conclusive upon him of the understanding with which the firm had received and held these sums, and the provision in the partnership articles may well be considered to be limited to the interest on capital already therein referred to. There was no provision in the articles referring to advances or unwithdrawn profits, and the understanding of the parties in relation to them must be gathered from their acts. At the beginning of the year 1877, under the practical construction adopted by the parties, the plaintiff’s advances and unwithdrawn profits amounted to $25,000 over and above the $15,000 of capital which he paid in under the provisions of the articles; while the defendant had recently drawn out so much upon his own account as to make himself indebted to the firm. Now, although interest might not be allowed to a partner for such advances and unwithdrawn profits in the absence of an agreement or understanding to that effect, yet slight circumstances may be sufficient to show such an understanding, and in the present case the circumstances are sufficient fairly to lead to that conclusion.

In the first place, the plaintiff proceeded at once to pay in considerable sums of money, and the balances taken from time to time show a rapid and nearly uniform increase of the amounts standing to his credit. There was an unbroken habit of crediting to each partner, upon the books of the firm, interest upon all balances thus placed to his credit, which is almost conclusive evidence of such an understanding. Baker v. Mayo, 129 Mass. 517. Bradley v. Brigham, 137 Mass. 545. Harris v. Carter, 147 Mass. 313. Leserman v. Bernheimer, 113 N. Y. 39. Lloyd v. Carrier, 2 Lansing, 364. Pratt v. McHatton, 11 La. An. 260. Ex parte Chippendale, 4 DeG., M. & G. 19, 36. Millar v. Craig, 6 Beav. 433. Moreover, during the whole continuance of the partnership after 1877, as well as before, the firm was borrowing money for its business in considerable amounts, and was paying interest for this borrowed money at the rate of seven per cent per annum. In addition to this, it appears that the plaintiff had added to the sum standing to his credit, and allowed it to increase by paying in money as aforesaid, and by the accumulation of interest and profits, with the expectation that he would be credited with interest on it at the rate of seven per cent per annum, and with no expectation that the provision of the partnership articles would be construed to deprive him of interest on amounts standing to his credit in excess of his capital in half-yearly periods of losses, if such occurred, nor did it appear that the understanding and expectation of the defendant had been any different.

If, by reason of the acts of the parties, such was the right of the plaintiff in 1877, we cannot see that anything has happened since then which impairs that right. It appears that in that year a new bookkeeper was employed, who looked over the partnership articles and noticed the provision in regard to interest above mentioned, and consulted the lawyer who had drawn them up, but who, of course, had no power at that time to affect the rights of the parties by trying to explain what the articles meant, and under his advice, and with the knowledge and sanction of the defendant, but without the knowledge of the plaintiff, he undertook to correct what was deemed by him to have been an error in crediting interest to the partners in half-yearly periods of losses, and charged back to the partners the interest so credited, as well as the excess over the capital stipulated for as on the capital itself. At this time it was highly advantageous to the defendant, and disadvantageous to the plaintiff, to have this change made. The plaintiff had a large amount standing to his credit in the firm, and the defendant almost nothing. It is not likely that the plaintiff could at once withdraw the excess above his part of the capital without serious injury to the firm, which at the time was borrowing money in considerable amounts at seven per cent. It was not at this time in the power of the defendant, without the assent of the plaintiff, to change the construction of the articles which had thus been adopted and acted upon, and had thus become of the same force in respect to what was already paid as if written out therein. It becomes a question, therefore, whether the plaintiff gave any such assent to this change as to be binding upon him. It is certainly true that his protests against the change might have been more vigorously expressed than they were, but the facts reported by the master are insufficient to show an assent thereto on his part. We are, therefore, brought to the conclusion, that the change by which the interest was charged back to the partners was unwarranted, so far as concerns the interest upon the sums standing to their credit in excess of the capital mentioned in the partnership articles. In respect to advances made to the firm, and unwithdrawn profits left with it, after the accounting of January 31,1878, the case stands differently. After that time the defendant did not intend to allow any interest except when there were profits, and the plaintiff knew that he did not. Upon any new advances, or new profits, which were left with the firm, no interest should be reckoned, since such was not the understanding of the parties.

It must further be considered at what time interest should cease upon the sum which on June 30, 1877, stood to the plaintiff’s credit in excess of his $15,000 of capital. The interest on the $15,000 of capital when profits were made would, of course, cease with the dissolution of the firm. The excess above the capital stipulated for stands more upon the footing of a loan, and in such case would bear interest until repaid. If the firm had not had the benefit of the plaintiff’s money, it would have been under the necessity of borrowing money elsewhere, or of curtailing its business. It seems to be more in conformity with the understanding of the parties to treat the excess standing to the plaintiff’s credit on June 30, 1877, as a loan, to be repaid with interest before any division of profits should be made, the interest to run until repayment. Morris v. Allen, 1 McCarter, 44, 47. Ex parte Chippendale, 4 DeG., M. & G. 19, 36. Wood v. Scoles, L. R. 1 Ch. 369. Interest at the rate of seven per cent having been credited at all prior accountings, the plaintiff was entitled to retain that amount. So far, however, as the understanding for interest remained executory, only six per cent can be allowed, the agreement not being in writing. Pub. Sts. c. 77, § 3. Marvin v. Mandell, 125 Mass. 562, 564.

A further question arises upon the claim of the plaintiff to be allowed twenty per cent of the salary received by the defendant from the firm of Ira Parker & Co. The defendant became a member of that firm with the plaintiff’s consent, and at the beginning his share of the profits was divided between the plaintiff and the defendant in the same proportions as the profits from their regular business. When a renewal of that partnership was made, it was agreed that the defendant’s share of the profits thereof should be divided equally between the plaintiff and the defendant; but the defendant thenceforth received a special salary from that firm of $2,000 a year, which he kept for his own use. Upon the facts stated by the master, the plaintiff is not entitled to share in this. He knew the facts, and no entry of this salary was made in the books, and no claim to share in it was made by the plaintiff till after the dissolution of his partnership with the defendant.

The Palmer and Bates note appears to have been signed by the defendant for the plaintiff, and the defendant was entitled in some form to recover the amount paid thereon by him from the plaintiff. As a method of accomplishifig- this result, it was charged in the partnership account, and although it was not a partnership matter, yet this method of adjusting a matter between the partners might properly be adopted, if not objected to. No wrong to the plaintiff appears in this transaction.

The same considerations apply to the note for $2,500 as to the Palmer and Bates note.

Unless the parties agree, the account will be stated by the master in accordance with these views.

Ordered accordingly.