Riley v. Brown

This is an action for the dissolution of a partnership and for an accounting of its affairs. Plaintiffs, at the times herein mentioned, were copartners doing business in the state of Ohio under the firm name of Armacost, Riley & Company. Defendant was engaged in business at the city of Redlands, in this state, where he

The trial court found that the partnership for the growing, packing, and marketing of the cantaloupes was entered into by plaintiffs on the one side, and as one of the parties thereto, and 'by defendant on the other side, and as the other party thereto; that under their agreement plaintiffs, as one party, were equal partners with defendant, as the other party; that the profits and losses were to be shared and borne equally by and between the two parties; that plaintiffs, as the one party, and defendant, as the other, were to furnish an equal amount of capital; that the business of the partnership was to be conducted by defendant, and that it was to be under his direction and control. An accounting was had during the course of the trial, as the result of which the court further found that plaintiffs are entitled to be paid by defendant the sum of $107.58. A final judgment was entered accordingly on January 11, 1922, decreeing a dissolution of the copartnership as of December 24, 1921, and adjudging that plaintiffs recover from defendant the above-mentioned sum. Appealing from that judgment, plaintiffs claim that the trial court committed error in taking the account, and that but for such error a much greater sum would have been found to be due them.

The precise nature of the partnership agreement and of the respective rights and obligations of the parties thereunder could be determined only from a consideration of a mass of correspondence passing between plaintiffs and defendant over a considerable period of time. Following the introduction of this correspondence, and after the learned trial judge had announced from the bench that he would find the partnership agreement to be as above stated, an informal con-' versation ensued between court and counsel relative to the accounting which the parties desired should then be taken in order to determine the balance, if any, which might be

In addition to the books kept by defendant in the name of Brown & Ford, there was also a set of books kept by him in the name of “Gold Banner Association”—a corporation with which defendant was connected. Some of the items pertaining to the business of the partnership between plaintiffs and defendant were entered in each of the two last-mentioned sets of books, and did not appear in the books kept in the name of Brown & Ford. The sums advanced by plaintiffs, and by Ford on behalf of defendant, and which were to meet the expenses of growing, packing and marketing the cantaloupes, were entered in the Brown & Ford books; but of those sums which defendant disbursed from his own moneys in the business of his partnership with plaintiffs, some were entered in the books which he kept in the name of C. M. Brown, agent, and some in those which he kept in the name of the Gold Banner Association.

Following the court’s order of reference, the accountants made an audit of the books which defendant kept in the name of Brown & Ford—the books which counsel for appellants have termed the “partnership books.” No audit was at that time made by the accountants of the other books kept by defendant, notwithstanding these other books showed the disbursements made by defendant from his own moneys in his conduct of the partnership business. Having made this partial audit, the accountants filed their report with the court, showing a balance due from defendant to plaintiffs considerably in excess of the sum which the court found to be the amount due plaintiffs. After the filing of this report the trial was resumed, it having previously been continued to enable the accountants to audit the boobs and to make their report. On resuming the trial and upon learning that the accountants had audited only the Brown & Ford books, the court made an order, over plaintiffs’ objection, re-referring the matter, with directions to the account

Prior to the commencement of the action, namely, on August 20, 1917, defendant rendered a statement to plaintiffs which showed that at that date there was due to the latter, as a result of the partnership venture, a balance of $1,104.28. Defendant testified that at that date it was not possible to render a complete statement, and that the one rendered by him gave only an approximate statement of the condition of the partnership affairs at that time. Again, on July 13-, 1918, which was prior to the commencement of the action, defendant rendered another statement to plaintiffs, showing that at that date the balance due the latter was $4,555.72. Defendant testified that this statement was prepared by his bookkeeper, and he pointed out what he claimed were manifest errors appearing on the face of the statement and which improperly augmented the true balance due plaintiffs.

Appellants earnestly contend that the court erred in ordering the re-reference, in receiving the supplemental report in evidence and in considering the items shown thereon. This objection is based upon the theory that the original report, showing, as it does, the result of an audit of the Brown & Ford books, is the only report which is founded upon an audit of the “partnership books,” and that, therefore, no item shown on the books kept in the name of “C. M. Brown,

[1] Unquestionably it is true, as appellants claim, that the presumption of correctness which, as between the partners, attaches to entries in partnership books to which all of the partners have access, does not attach to entries in the private books of one of the partners. Entries in other than partnership books to which all the partners have access must be established by extrinsic proof. (Wheatley v. Wheeler, 34 Md. 62 ; Adams v. Funk, 53 Ill. 219 .) [2] But in this case we are confronted with a stipulation the terms of which are so broad that it includes all account-books kept by respondent, and it expressly dispenses with extrinsic proof as to all items shown by such books, excepting only such items as might be specifically objected to by one of the parties. Indeed, in the instant case there were no partnership books. The books of the firm of Brown & Ford were not the books of the partnership between appellants and respondent. At any rate, they were no more the boobs of that partnership than were the books kept by defendant in the name of “C. M. Brown, agent” and -“Gold Banner Association.” The entries which related to the affairs of the partnership between appellants and respondent were scattered through these three different sets of books, and were there interspersed with numerous other items relating to the different enterprises in which respondent was interested. This situation evidently was recognized by court and counsel when the stipulation was made, for when that arrangement was entered into it was expressly agreed, not that an audit should be made of the “partnership books”—there were none —but that the accountants should “ascertain from the books and accounts of the defendant” the partnership receipts and disbursements. And in the original order of reference, which was based upon this stipulation, it was ordered that “all books of original entry, and all books, documents, checks, papers or memoranda whatsoever, pertinent to the transaction of the partnership business between plaintiffs and defendant, now in the possession or control of the defendant, be furnished to the referee for the purpose of this reference.” The terms of the stipulation and of the order were broad enough to include, as it doubtless was intended that they should include, all of the several sets of books

To protect the parties from any implication that the report of the accountants might he accepted as conclusive evidence of the correctness of the items shown therein, the stipulation included a provision to the effect that there was reserved to either party, when the report should be made and filed, “the right to object to the allowance of any item as a matter of law.” From the remarks made by the court and by counsel at the time when the stipulation was being entered into, it is evident that the right thus reserved to object to the allowance of any items “as a matter of law” was understood to mean the right to object to any item which the objecting party for any reason might deem to be an improper credit or an improper charge. Immediately preceding the definite formulation of the stipulation counsel for appellants employed this language: “All we want is what the books show, saving our right to object to items which we do not think are proper charges”; and the court, when framing the stipulation and proposing it to counsel for their acceptance or rejection, said: “If the books show an item that you think is not a proper charge, you have a right to object to it; and Mr. Brown will deliver everything he has in the shape of books of account.” The net result of all that was said by court and counsel at the time when the stipulation was being framed is, therefore, substantially this: The accountants to whom the matter was to be referred were to audit all the books and documents in respondent’s office or under his control, relating to the partnership’s affairs, and were to make a report thereon; and all items shown on such report were to be deemed to be correct and were to be admitted by the parties, save alone such as might be specifically objected to as improper charges. This was the course which was pursued, and properly pursued, by the learned trial judge throughout the trial after the parties had entered into the stipulation. Pursuant to this understanding, appellants did specifically object to a few of the items shown on the two reports, upon the ground that those particular items were not proper charges against them; and thereupon respondent introduced extrinsic evi

[3] The next ground of assault upon the supplemental report is that it shows items in respondent’s favor which were records of disbursements made by him after the expiration of the term during which the partnership was to continue and after this action was commenced. There is no merit in this contention. Respondent acted as the liquidating partner. After the expiration of the cantaloupe season of 1917—the season during which the partnership was to continue—respondent was engaged, over a considerable period of time, in winding up the affairs of the partnership business. [4] Without doubt, his right to be credited with every item of disbursement made by him from his own personal funds while thus engaged in liquidating the affairs of the copartnership is as unimpeachable as is his liability to be charged with all collections made by him on behalf of the firm during that period. [5] But though a liquidating partner is entitled to be credited with all disbursements made by him during the period of liquidation, entries of such disbursements in books kept by him in his possession and under his sole control, and to which his partners have no access, are not, as a general rule, admissible in his favor as against his copartners. (52 L. R.. A., p. 846, note to Chick v. Robinson.) Where, however, as in the instant case, the parties have expressly stipulated to refer all books kept by the liquidating partner to an accountant to take an account therefrom, it does not lie in the mouth of either party thereafter to object to the use of such books as evidence. (Cameron v. Watson, 10 Rich. Eq. (S. C.) 64.)

[6] As a further ground of objection to the supplemental report it is urged that respondent is estopped to claim credit for any item shown thereon for the reason that each of the statements rendered by him on August 20, 1917, and on July 13, 1918, shows a greater sum of money to be due to appellants than is shown on the supplemental report. The circumstances testified to by respondent support the conclusion that neither of these statements was rendered or accepted as a final settlement and agreement fully settling the right of the parties. Neither statement was intended to show a final balance reached upon consideration of all of the partnership affairs. Prepared, as they were, during the

It has been said by our supreme court that a party is not precluded from asserting a claim merely because it is in

[7] To constitute such estoppel it is essential that the party invoking it shall have been misled by the prior conduct or the prior inconsistent claim of the other party; also that he shall have changed his position in reliance thereon (Muller v. Mayor, 63 N. Y. 353 ); and that either he shall have been prejudiced or the other party shall have been benefited by such conduct or inconsistent claim. (21 C. J., p. 1205; Stein v. Leeman, 161 Cal. 502 [ 119 Pac. 663 ].) As was tersely said by the learned author of the opinion in Allen v. Hance, 161 Cal. 196 [ 118 Pac. 529 ]: “Whatever may have worked the estoppel, whether the estoppel rests in judgment, deed, contract or in pais, in its essence it amounts to but this, that a man is forbidden to show the existence of a fact because by his past conduct, his declarations, his agreement, his deed or a judgment it would work an injustice and an injury to his adversary to permit him to do so.” The appellants in this ease were not misled to their prejudice or to respondent’s benefit by anything contained in either of the statements. Indeed, appellants were not misled at all; for they never acted upon either statement, nor did they change their position by reason thereof. On the contrary, they brought this action praying for an accounting by the court of all the affairs of the partnership and for a recovery of such sum as that accounting might show to be due them. To attain the purpose of their suit they expressly stipulated, in substance and effect, that accountants to be appointed by the court should “ascertain from the books and accounts of the defendant” all of the items necessary to enable the court to strike a correct balance—irrespective of what might

The judgment is affirmed.

Works, J., and Craig, J., concurred.