Majority
p. 489ALBERT SCHULTE and JOHN A. SCHULTE, Plaintiffs and Appellants, v. JAMES ANDERSON, Defendant and Respondent.
Headnote
I. Partnership agreement.1. CLAUSES.
1. One providing that one of the partners shall contribute towards .the capital the assets of a former firm represented on the books of that firm as bills due, or to become due (nothing being said in the agreement about the value of said assets—their nominal value however, was $16,169.36, and real value but $3,876.75), and that the other partner should put in $14,000 (in fact he only contributed $11,848.90)."
3. One providing that the profits should be shared, and all losses borne and paid equally.
3. One providing that each partner might draw weekly a certain specified sum for his own use (each drew in excess of the specified sum).
4. One providing that at the termination of the partnership, the remaining assets should be divided between the partners, to each his proper and respective proportion, reference being had to the capital stock put in and invested by them respectively.
3. ACCOUNTING UNDER SUCH AGREEMENT, ON ITS TERMINATION.
(a) Principles, where there has been a loss.[1]
1. The amount of capital which plaintiffs failed to put in should be treated as assets.
3. The excess drawn by each partner, for his own use, should be treated as assets.
p. 490Before Sedgwick, Speir and Freedman, JJ. Decided December 1, 1879.
3. The amounts collected by each partner, and retained by him, should be treated as assets.
4. The amount of the losses (no part thereof having been paid back into the firm by either partner), should be treated as assets.
5. The sum drawn by one partner for his own use, in excess of that so drawn by the other, cannot be charged against the former, in favor of the latter, for equalization.
6. The partner putting in the assets of the former firm, must be regarded as having contributed to the capital stock only the actual value thereof.
7. The total amount of assets (including therein the first four items above mentioned) should be divided between the parties in the proportions, as §14,000 is to §3,876.75, and each party should be considered as having received, on account of his share, the amount he had omitted to pay over under his obligation to share equally the losses, i. e., one-half of the losses.
Appeal from j udgment entered on report of referee.
This action was brought for the adjustment and settlement of partnership accounts of the firm of James Anderson,& Co. The complaint averred, and the answer admitted, a dissolution of the firm. A receiver was appointed in the action. An order was made, referring the action to a referee, to take and state the accounts. The referee made his report, upon.which judgment was entered in conformity therewith, in favor of defendant against plaintiff, for $864.68, besides costs, &c.
Plaintiffs appealed. The apjieal came before the court upon the report and exceptions thereto only.
The partnership agreement, in addition to what is set forth in the report, provided as follows:
“And it is further agreed by and between the parties to these presents, that the said James Ander
p. 491
son, party hereto of the first part, may draw from the cash of the joint stock the sum of $50 weekly, for his own use, and at the expiration of each year, the sum of $2,000, the same to be charged to his account; and that the said Albert Schulte, party hereto of the second part, may draw from the cash of the joint stock the sum of $25 weekly, for his own use, the same to be charged to his account; and also that the said John A. Schulte, party hereto of the third part, may draw from the cash of the joint stock, the sum of $25 weekly, for his own use, the same to be charged to his account; and the said Albeit and John A. Schulte may, at the expiration of each year, draw jointly the sum of $2,000, to be charged to their accounts in equal portion, and neither of them shall take any further sum for his own use, without the consent of the other parties hereto, to be signified in writing.”
The referee found as matters of fact:
“First. That on or about the twelfth day of April, 1875, the plaintiffs and defendant entered into a co-partnership agreement in writing to carry on the business of produce commission merchants, at the city of New York, under the name or firm of James Anderson & Co., to commence on the first day of May thence next ensuing, and to continue for three years thereafter.
‘ ‘ Second. That in and by said agreement the defendant herein, party thereto of the first part, agreed to put in and contribute towards the capital of said firm all the assets of a certain former firm, of which he had been a member, but then lately dissolved, known as Dunn & Anderson, and represented on the books of said firm as bills due or to become due (except $1,500 thereof reserved to defendant), as his share of the capital stock of said firm of James Anderson & Co., and said plaintiffs, the parties of the second part to
p. 492
said agreement, therein and thereby agreed to put in jointly the sum of fourteen thousand dollars, which, with the contribution aforesaid of defendant, should form and constitute the capital of the said copartnership ; it was also agreed therein that all the profits and losses of said copartnership should be shared and borne one-half by the plaintiffs ánd one-half by the defendant, but at the end or sooner termination of said copartnership, the remaining assets should be divided between the partners, reference being had to the capital stock put in and invested by them respectively.
‘1 Third. That said firm commenced business on said first day of May, 1875, as required in and by their said copartnership agreement.
“Fourth. That said defendant, pursuant to said agreement, put in and contributed towards the capital stock of said firm all the aforesaid assets of said Dunn & Anderson, less said $1,500 thereof.
“Fifth. That said plaintiffs, in pursuance of said agreement, put in jointly towards said capital stock the sum of eleven thousand eight hundred and forty-eight dollars and twenty cents in cash, to wit: said plaintiff, Albert Schulte, $6,848.20 thereof, and plaintiff John A. Schulte, $5,000 thereof:
“ Sixth. That said plaintiffs never put in the balance of the fourteen thousand dollars agreed by them as aforesaid to be contributed towards said capital stock, and amounting to $2,151.80, and they remain indebted therefor to said firm.
“ Seventh. That on or about the first day of March, 1876, said partnership of James Anderson & Co. was dissolved by mutual consent of the members thereof.
‘ ‘Eighth. That said firm, during the aforesaid period of its existence, made no profits, but, on the contrary thereof, did a losing business, and sunk all but a fragment of its capital, as hereinafter more particularly stated and set forth.
p. 493
“ Ninth. That during the existence of said firm, the plaintiff, Albert Schulte, drew out from said
Capital stock for his personal use, $1,717.75
During the same time, plaintiff John A. Schulte, drew out therefor, . . . . ■ 1,819.00 $3,036.75
Defendant during same period drew out therefor, . . 2,625.28
Defendant since the dissolution has collected and appropriated to his use, . . .. 208.42 2,833.70
Defendant has drawn out of the firm less than plaintiffs have, and to which he is entitled by way of equality before the final division of the remaining assets of the firm, ... , 203.05
“Tenth. That at the time of the dissolution of said copartnership, the whole assets thereof (irrespective of the indebtedness of the plaintiffs thereto for the aforesaid deficiency of their capital stock) amounted nominally to the sum of, . . $10,372.22
Out of which has been realized only the following sums, viz.:
Collected by plaintiffs, . $3,662.99
“ “ defendant, . . 208.42.
Isaac Newton, receiver, net, . . 81.07 3,952.48
“Eleventh. That said firm at the time of its dissolution owed the sum of $3,125, which sum plaintiffs have’ since fully paid and discharged, and said co-partnership now owes no debts whatever.
“ Twelfth. That all the assets collected by the plaintiffs as aforesaid, and amounting as aforesaid to $3,662.99, have been kept and appropriated by them, first, to the payment of the firm debts as aforesaid, and the balance to their own use; also, that the sum
p. 494
of §208.42, collected by defendant as aforesaid, has been appropriated by him to his own use.
“Also that the receiver herein has in his hands net assets,........§81.07
“ Thirteenth. That the nominal value of the assets so contributed, as aforesaid, by said defendant, as and for his share of the capital stock of said firm, was §16,169.36, but that only §3,876.65 was ever collected or realized therefrom.
1 ‘ Fourteenth. I further do find that the distributive balance of the assets of the said firm of J. Anderson & Co. amounts to . . . . . . §2,695.16
viz. :
Collected by plaintiffs, §3,662.99
“ “ defendant, . 208.43
3,871.41
Am’t capital unpaid by plaintiffs, 2,151.80
6,023.21
Deduct debts paid by plaintiffs, 3,125.00
2,898.21
Amount charged to plaintiffs supra for equality, .... 203.05
'§2,695.16
2,695.16
“ Fifteenth. That defendant, just before executing the partnership agreement, and during the negotiations' which led thereto, represented to plaintiffs the said assets of Dunn & Anderson to be good and collectible, and worth then the nominal value of $16,169.36, and plaintiffs entered into said partnership, believing and ■relying upon said representations ; but the greater part thereof were worthless and uncollectible, except to the .amount of §3.876.65 as aforesaid.
'•'•Sixteenth. That defendant, after the execution of
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said agreement, and on the morning of the day of the commencement of the said business of the copartnership pursuant thereto, made a like representation to plaintiffs, and verbally agreed that same might be re-charged to him if not collected.
“ Seventeenth. There is no evidence that defendant knew or believed, at the time of making said representations, the same would prove to be otherwise than he so represented.
“ Eighteenth. There was no consideration whatever to defendant for said agreement, either of benefit to him or of loss to plaintiffs.
“ Nineteenth. That, just prior to such dissolution, the defendant, James Anderson, verbally agreed with the plaintiffs that such of the aforesaid assets contributed by him as had proved to be worthless and uncollected, should be charged back upon the books of the firm to his private account, and the same were accordingly so charged back to him.
“ Twentieth. There was no consideration to the defendant whatever for said agreement, whether of. benefit to him or loss to plaintiffs.
“Twenty-first. That, shortly after said dissolution, defendant disaffirmed said agreement, and refused to be bound thereby.”
And as conclusions of law, from the facts so found :
“ First. There being no allegations of fraud or deceit in the complaint, the representations made by defendant to plaintiffs, before the formation of the partnership, were but a mere expression óf his opinion of the value of the qssets, and does not enter into or effect the partnership agreement afterwards executed.
“ Second. For like reasons the similar representations of defendant, subsequently made on the day said firm commenced business, were but a like mere expres
p. 496
sion of liis opinion, and the verbal agreement that same might be recharged, if not collected, with no consideration therefor, was a mere nudum pactum. .
“ Third. That the subsequent verbal agreement made just prior to dissolution, authorizing said uncollected assets to be charged back to plaintiff, and being without any consideration, was also a mere nudum pactum. Defendant did not sufficiently long acquiesce in the so charging back of said assets to him to be bound thereby.
“ Fourth. That the business of said firm of James Anderson & Co. has not been profitable, but, on the contrary, it has lost most of its capital, and that its entire assets amount to but the sum of $2,695.16.
11 Fifth. That the division of said remaining assets among the parties should be in proportion to the amount of their respective contributions to the capital stock of said firm—to wit:
To the plaintiffs,.....$2,033 63
“ defendant, , . . . 661 63
“Sixth. That defendant is entitled in addition thereto to aforesaid sum mentioned in the ninth finding of fact, viz., . . 203 05
“ Seventh. That all the said residuary assets are in plaintiff’s possession, none of them being in possession or control of defendant.
“Eighth. That the sum of $193.70 now held by the receiver herein, should be paid over to defendant by him, less the sum of $112.63 for his commission and charges as such receiver, and said receiver is not entitled to any other or further sum ; the balance so to be paid over by said receiver is $81.07.
“Ninth. That said balance in the hands of the receiver belongs to the parties hereto, in proportion to their aforesaid contributions to the capital stock, as follows, viz.: to plaintiffs, $58.25, to defendant, $22.82, and that said defendant on receiving said balance shall
p. 497
credit said sum of $58.25 on the judgment to be entered herein against plaintiffs.
“ Tenth. That defendent is entitled to judgment against plaintiffs for the sum of $864.68, besides costs of this action, in which costs should be taxed the charges andcommissions of the receiver aforesaid.”
Edward P. Wilder, attorney, and of counsel, for appellants, among other things, urged:
I. The Referee has apparently omitted to make any apportionment of the losses of th'e firm, or else has done it on the theory that defendant has contributed and lost $16,169.86, the nominal value of those “ assets” of the old firm of Dunn & Anderson, instead of $3,876.65, their real value. An arithmetical calculation based upon his own “findings”' will speedily demonstrate the actual loss of the firm..
Plaintiffs contributed cash, . •. . $11,848.20
Defendant contributed “assets” which realized, cash, . . . . 3,876.65
Total capital stock, =.....$15,724.85
All of this, he finds, was lost and sunk “ but a fragment,” and he furnishes' us the figures whereby to determine that fragment.
Plaintiffs, he says, drew during the co-partnership, .....$3,036.75
Plaintiffs, he says, have collected since the dissolution $8,662.99, from which they have paid the debts of the firm, $3,125, leaving in their hands, . . . 537.99
Total saved by plaintiffs, . . . $3,574.74
Defendant, he says, drew during the copartnership, ......$2,625.28
Defendant, he says, has collected since the dissolution,..... 208.42
Total saved by defendant, . . . $2,833.70
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Besides these sums, the receiver, he says, holds in his hands, subject to proper charges, $193.70.
These three sums, then, comprise the aggregate of the “fragment” saved from the wreck of this firm’s capital, and the total loss, therefore, may be summarized as follows : 1
Capital invested,....."$15,724.85
Saved by plaintiffs, who are chargeable therewith, . $3,574.74
Ditto by defendant, . . 2,833.70
Held by receiver (subject to charges), .... 193.70
6,602.14
Total loss sustained by the firm, . $9,122.71
Of this loss, according to the partnership agreement, the plaintiffs shall bear one-half and defendant one-half, i. e., each party shall bear $4,561.35. In point of fact, the parties have borne the loss in the following ratids :
Plaintiffs have paid in, ... $11,848.20
“ “ drawn out and collected, 3,574.74
Actual loss borne by plaintiffs, . . $8,273.46
From which may be deducted the sum held by the receiver, . . . 193.70
$8,079.76
Defendant has paid in, . $3,876.65
“ “ drawn out, &c., 2,833.70
Actual loss borne by defendant, ,........ 1,042.95
Making the total, as before, . . . $9,122.71
It is obvious that these losses can be equalized only by the defendant paying to the plaintiffs the difference
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between Ms actual loss, $1,042.95, and the sum of §4,561.35, which, as seen above, is his just apportionment of the firm’s total loss, $4,561.35 — $1,042.95 = §3,518.40. It is clear, then, that if we give plaintiffs the whole of the $193.70 in the hands of the receiver, the plaintiffs would still be entitled to a judgment against the defendant for the sum of $3,518.40.
III. To credit the defendant with the face value of a lot of worthless and uncollectible book accounts would be grossly unjust to the plaintiffs, who have paid in their cash. The referee apparently reconciles it by saying that defendant contributed certain “ assets,” whose nominal value was $16,169.36; that his representations in regard to them were “without consideration,” the mere expression of his “opinion,” and that plaintiffs took them, as it were, for better or worse. But he also finds that plaintiffs entered into the co-partnership, and put in their money “believing” in his representations ; also, that the defendant himself recognized their binding force upon him at the dissolution of the partnership, by agreeing that the great uncollected and worthless majority of them be charged back to his personal account; that they actually were so charged back. And yet he says all this must go for nothing, and defendant must be credited as if he had actually contributed and lost $16,169.36. The proposition is too absurd for serious refutation. The referee himself repudiates it when called upon to divide the “remaining assets,” and apportions the major part of them to the plaintiffs; whereas, to be consistent, he should have awarded the greater sum to the defendant, in the ratio of $16,169.36 to $11,848.20. The pittance in the hands of the receiver is again divided in the same way.
IV. The articles provide that plaintiffs and defendant shall share equally the losses. How, what are the losses of this firm ? Clearly, it cannot have lost what
p. 500
it never had. Those uncollected accounts of the old firm of Dunn & Anderson were, and still remain, mere claims, choses in action—blank paper. Defendant, when he transferred them to the books of the new firm, agreed to take them baqk if not collected, and he took them back. The new firm never had the money represented by them. It never “lost” that money. It was not sunk in any business or venture of the firm. Whether there was “consideration” or not for defendant’s agreement that his worthless contribution to the capital stock of the firm be charged back to him, that it was so charged back is an accomplished fact on the. referee’s findings. To the extent to which he took back his contribution, he withdrew his capital, and the capital so withdrawn by the consent of all the partners cannot be deemed a “loss ” incurred in the business of the firm. The firm simply did not acquire that money.
V. We have another basis for ascertaining the loss sustained by the firm :
(a) Plaintiffs have drawn for their use, . $3,036.75
Defendant has drawn for his use, . . 2,625.28
Plaintiffs’s overdraft, therefore, = $836.75
Defendant’s overdraft, therefore, = 425.28
Owed to the firm, therefore, by the parties, .... $1,262.03
(5) In the next place, the moneys of the firm collected by the parties since its dissolution, constitute a part of its ‘ ‘ assets.” Defendant has collected $208.42. Plaintiffs have collected $3,662.99, from which they have paid out all the debts of the firm, $3,125..
Leaving in plaintiffs’ hands,' $537.99
“ in defendant’s hands, 208.42-
“ in hands of receiver, 193.70 = $940.11
To. which add the over-drafts {supra), ..... 1.262.03
Total remaining assets of the firm,. $2,202.14.
p. 501
NOW.
Capital cash contributed by plaintiffs,..... $11,848.20
Capital “assets” contributed by defendant, . 3,876.65
Total investment, . . $15,724.85
Drawn legitimately by plaintiffs, •......$2,200.00
Drawn legitimately by defendant, -..... 2,200.00 7 7
Present assets (including overdrafts, collections, &o.,' . 2,202.14 6,602.14
Actual loss of the firm, . . . $9,122.71
Thus verifying the conclusion reached {supra) in Point I. The reasoning there pursued sufficiently demonstrates that plaintiffs are entitled to judgment against defendant for $3,518.40. This result, it will be remembered (Point I., supra) was reached by assuming that all of the money held by Isaac Newton, the receiver, should be paid to plaintiffs, and their actual loss was, in the calculation, diminished by said sum of $193.70. Whatever remains, therefore, of this sum, after allowing the proper charges of the receiver, should be ordered to be paid by him to the plaintiffs.
L. B. Bunnell, attorney, and of counsel, for respondent, urged:
I. The theory adopted by the referee was correct. There can be no pretense that the articles of agreement do not express the intention of the parties. Representations made before they were executed cannot avail to change the agreement,' nor could subsequent acts, unless acquiesced in sufficiently long to amount to an intention to change its terms. “A written agreement cannot be enlarged or altered in its operation, by evidence of other prior oral
p. 502
agreements, in consummation of which the written agreement is alleged to be erroneously or deficiently executed” (Peet v. Cowenhoven, 14 Abb. Pr. 56 ). “ When the terms of an instrument are plain and unambiguous, the intention of the parties is to be learned therefrom'” (Westcott v. Thompson, 18 N. Y. 363 ). “ The rights of the parties must in general be determined by the language of the contract” (Newton v. Woodruff, 2 N. Y. 153 ). “The intention of the parties is to ascertained, except in cases of latent ambiguity, by a development of the circumstances under which the instrument was made” (Reynolds v. Commercial Fire Ins. Co., 47 N. Y. 597 ). The referee had the parties before him, heard all the circumstances in detail under which the agreement was executed, and has found, as matter of fact, that the agreement clearly expresses the intention of the parties. The appellants concede that the referee found correctly as to the facts. So far as the written contract is clear, either in particular words or upon a consideration of its legal effect, no evidence extrinsic of the writing, can be received to contradict or explain its meaning (1 Cow. & H. Notes to Phill. on Ev. 468, 470). Evidence of declarations made at the time of executing an instrument to show that the instrument was executed upon a condition not expressed therein, is incompetent (Van Bocklin v. Tyler, 62 N. Y. 105 ). Representations made before the agreement was made are immaterial (lb.). The referee was therefore right in disregarding testimony tending to show that the parties contemplated something not expressed in the agreement. In respect to the representations made after the agreement was -executed, there are still weightier reasons for disregarding them. Anderson’s verbal agreement to assume the payment of the uncollected accounts, and allow them to be charged to his private account, could' not avail to alter or change the
p. 503
articles of copartnership or the relation of the parties to each other, for ; 1. It was .not in writing. 2. After the old assets of Dunn & Anderson had become part and parcel of the capital of James Anderson & Co., they did not belong to Anderson, but to his firm, and such an agreement would be, in effect, an undertaking to pay the debt of a third person, and hence void under the statue of frauds. 3. It was without consideration. The mistake under which the learned counsel for the plaintiffs has all the while labored, is in assuming that Anderson’s capital was represented by dollars and cents instead of property. It was not cash, and never so considered. It was to the capital stock what any other property would have been which belonged to the firm, but was lost or destroyed by fire, or had otherwise become inconvertible into cash. As it was, he contributed it as his share of the capital stock. It was not his fault that so small an amount was realized there from. The loss, from whatever cause, was a firm loss, and must be treated as such. Now the articles of agreement provide, that after payment of the debts the assets remaining shall be divided—one-half to the defendant, and one-half to the plaintiffs, reference being had to the capital actually contributed. We have then, as found by the referee, the following data from which to determine what each partner shall receive.
1. Partners were to contribute capital in full, to wit: the defendant agreed to contribute old assets and plaintiffs agreed to contribute §14,000.
2. Defendant contributed all.
Plaintiffs contributed only, §11,848.20
Amount realized from old assets, 3,876.75
3. Plaintiffs drew out, . . 3,036.75
Defendant drew out, . . 2,625.28
4. Plaintiffs collected, .... 3,662.99
Defendant collected, .... 208.42
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With these data the referee makes distribution.
This brings us to the second question.
II. Admitting that the articles of copartnership require the referee to take the amount realized from the old assets as one of the data for' computation, instead of one-half the entire capital, the referee was right in the mode of distribution, for we have now the amount of capital contributed in actual cash by plaintiffs, $11,848.20, and by defendant, $3,876.75, making a total capital of $15,724.95.
How we have,
1. By the terms of the partnership, profits were to be divided equally. There were no profits.
2. Partners were to pay contributions to capital stock in full.
Plaintiffs did not by $2,151.80..
They were, therefore, indebted to the firm in that sum.
3. Plaintiffs collected, dr had of the assets at dissolution, . . . . $3,662.99
The defendant had, . 208.42
$3,871.41
The plaintiffs paid debts, , . 3,125.00
$746.41
Add unpaid capital, • • 2,151.80
$2,898.21
Plaintiffs drew out, $3,063.75
Defendant drew out, $2,625.28
Collected since, 208.42 2,833.70
Plaintiffs’ overdrafts, . , $203.05
5. To equalize the parties, give the defendant $203.05. That is to say, take from the assets $2,'898.21, that sum, and we have $2,695.16, which is the sum to be distributed.
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The matter is now one simply of proportion: $15,742.95 : $11,848.20 :: $2,695.16 : $2,033.53, plaint-. iff s’ share.
$15,724.95 : $3,876.75 :: $2,695.16 : $661.63, defendant’s share.
In the same way the amount in the hands of the receiver gives, for plaintiffs’ share, $58.25 ; defendant’s share, $22.82. Except as to these amounts, the assets were in the hands of the plaintiffs. In order to get the assets actually on hand, the overdrafts of the plaintiffs, which were given to Anderson to make his drafts equal to the plaintiffs’, are taken out, to wit, $203.05. But this was only constructively given to Anderson ; and in order to reach the sum he ought to receive, we must add it to the sum found above, $661.63. This gives us $864.68. The judgment should be affirmed.
The agreement of the parties states, specifically, their obligations and their interests in the capital and profits.
The plaintiffs were bound to contribute $14,000.in cash to the capital. The defendant was bound to put in “all the assets of the firm of Dunn & Anderson represented on the books of said firm, as bills due, ór to become due, except the sum of $1,500.” Assuming that the defendant was not bound to make the real value of these assets equal to their nominal value, the agreement, after providing that profits and losses were to be shared and borne equally, has the reasonable and equitable provision that at the “end, or other sooner termination-of their copartnership,” the copartners will make a final account, and all and every the stock, and stocks, as well as the gains and increase thereof, which shall appear to be remaining, either in money, &c., debts or otherwise, shall be divided between. them, to each his proper and respective proportion, reference
p. 506
being had to the capital stock put in and invested by the respective parties.”
It is seen, at once, that Anderson, not having invested as much as the Schultes, inasmuch as his contribution proved to be of the value of only $3,876.65, while they had contributed $11,848.90, it was their right and interest to have the accounting include, as assets, all that had been drawn out for the personal use of the partners above what they were entitled to draw out. What was properly drawn out was to be equally shared by the parties, while, if what was improperly drawn out was returned, as it should be, to the firm, the plaintiffs would be interested in it, to a far greater extent than the defendant.
The referee proceeded upon the position that the respective proportions of interest in the assets at dissolution, were represented by $11,848.20, the cash put in by plaintiff, and $3,876.75, the cash value of the assets put in by the defendants. I think this was erroneous in making the proportion of the plaintiff too small. For, the assets were increased by charging the plaintiffs with the amount of their capital which they liad failed to contribute as they agreed. That is, the assets were supposed to include this amount, viz. : $2,151.80. It was in effect proposed to consider it as cash. If the plaintiffs had to bear this burden, they could not be deprived of the advantage of its being part of capital contributed by them. And then, the proportion would be as $14,000 is to $3,876.75.
Again, I think there was a mistake in the mode of ascertaining the assets.
In the course of the business, as is stated above, the plaintiffs and defendant had drawn from the firm more money than was allowed by the partnership articles.
The plaintiffs had drawn, . . . $3,036.75
The defendants had drawn, . . 2,625.28
The referee finds that it was the right of the defend
p. 507
ants to draw from the estimated assets, $203.05, to .equalize the amount drawn by him and the amount drawn by plaintiffs, and afterwards, at the end of the accounting, the plaintiffs were held liable to pay the whole of this $203.05. I think there were two errors. 1st. The defendant was not entitled to draw from the assets this sum, because he was entitled to have only the proportion; this has been already stated. 2d. There is no provision of the articles that permit him to draw any amount for the purpose of equalizing his drafts with plaintiffs. Each was entitled to draw but $50 a week for the forty-four weeks they were in business—that is, $2,200. All above that sum should have remained undrawn, and the plaintiffs should return to the assets,.....$836.75 And the defendant also, .... 425.28 The assets should, in view of the referee, be increased by the amount of the capital which plain tiffs should, but had not contributed, viz.,......2,151.80 The plaintiffs had in their possession money collected by them,..... 537.99 The defendants,....._ 208.44 Cash in receiver’s hands, .... 81.07
The sum total should be divided according to the proportions in which each was entitled to share in the assets, and that result would show what each had the right to have. If one had received an amount of the assets actually, which, with any sum they had not paid to the firm, but should have, would exceed the amount they wrere entitled to, out of the assets, the excess should be paid to the other party, and this excess would be the correct amount of the judgment.
So far, no attention has been paid to the effect upon the result of a correct application of the provisions of the articles, that provided that the loss should be borne equally. As soon as a loss occurred, the only way
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that each could actually bear it equally, would be to pay one half of its amount back into the firm, or, in case it was not paid, to be charged with the one-half, in his individual account, and then, at a later time, to perform the obligation expressed by such a charge. This not having been done before the close of business and the final accounting, these charges in gross, viz., the whole of the losses, should be treated as the plaintiffs’ deficiency of capital was treated, and should increase what was called the assets of the firm, exactly the same as if third persons had promised to bear the losses, and the assets so increased should be divided in the proportions above specified, and each party should then be considered as having already received on account of his share the amount he had omitted to pay over, under his obligation to share equally the losses, i. e., one-half ol the losses.
The result of this would be so different from the result of the accounting below, that there should be a new trial and a new accounting, with costs to the plaintiff to abide the event of the accounting.
Judgment reversed.
Speir and Freedman, JJ., concurred.
Cases cited
- Peet v. Cowenhoven 14 Abb. Pr. 56 p. 502
- Westcott v. Thompson 18 N. Y. 363 p. 502
- Norton v. Woodruff 2 N. Y. 153 p. 502
- Reynolds v. Commerce Fire Insurance 47 N. Y. 597 p. 502
- Bokkelen v. Taylor 62 N. Y. 105 p. 502