Brown v. Chandler

27 S.E. 868, 50 S.C. 385, 1897 S.C. LEXIS 35

Opinion

The opinion of the Court was delivered by

Mr. Justice Jones.

This is an action on two promissory notes, one for $48, dated April 1st, 1888, payable January 1st, 1889, and the other for $2,000, dated March 20th, 1894, and payable January 1st, 1896. Plaintiff’s cause of action on the first note was admitted. The controversy here relates to the $2,000 note. The answer admits the execution of the note, but sets up as a defense that the note is without consideration and void, that it was executed under a mutual mistake that defendant was liable to plaintiff for the excess of defendant’s personal account over that of plaintiff during the existence of a copartnership between them, and that this liability had been extinguished by the dealings between the parties prior to the execution of the note; wherefore, the defendant prayed that the note be declared void and delivered up for cancellation.

The master, to whom the cause was referred, by consent, found, as matter of fact, “that the copartnership existing between the plaintiff and the defendant was dissolved on the 20th day of March, 1894, and that at that time there was a considerable sum due to the plaintiff by the defendant on account of their partnership transactions, and * * * that the note for $2,000 was made as a compromise settlement of the same, and is based upon a good and sufficient consideration.” The Circuit Court concurs with the master in finding that the note is based upon a good and sufficient consideration, but does not rely wholly upon the difference in the accounts of the partners as the consideration, for after alluding to this difference, the Court found, as matter of fact, “that plaintiff, in consideration of the $%ft00 note, and the assets of the partnership, amounting to the sum of $24,712.27, consisting mostly of $9,649.86 in the form of ‘accounts,’ and $3,111.93 more in the shape of ‘bad accounts,’ without a word being said as to the $4,000 advanced as capital by him, has assumed $15,866.32 of the firwCs indebtedness'''' (italics ours). Reference may be had to the official report for the Circuit Court decree and appellant’s exceptions thereto.

The exceptions will be treated as a whole. They raise directly or indirectly the question whether there is error in the conclusion of the Circuit Court that the note in question is based upon a good and sufficient consideration.

If we were to treat this case as one at law, the judgment would necessarily be for affirming the judgment of the Circuit Court, since we have no power to review the findings of fact by that Court in a case at law. Where, however, the answer interposes an equitable defense, this Court has jurisdiction to review the findings of fact involved in the determination of the equitable defense. Witte v. Weinberg, 37 S. C., 579. When this Court is called upon to review the findings of fact by the Circuit Court, it is incumbent on appellant to satisfy this Court that the preponderance of the evidence is against the conclusions of the Circuit Court.

In August, 1887, plaintiff and defendant formed a copart nership in the clothing business, in the city of Sumter. Plaintiff furnished the whole of the capital, $4,000, and the partners were to share the profits equally. On March 20th, 1894, there was a final dissolution of the partnership, evidenced by a written contract under seal of that date, signed by both parties. This contract recites that: “Whereas we, the said Albertus S. Brown and James H. Chandler, have for a number of years past been engaged in carrying on the retail clothing business in the city of Sumter, in said State, as copartners, under the firm name of Brown & Chandler, and in conducting said business debts to a large amount have been contracted and are unpaid, and we desire to dissolve the said copartnership, and have agreed so to do upon the terms hereinafter set forth. Now this agreement witnesseth: that we, the said Albertus S. Brown and James H. Chandler, have this day dissolved the said copartnership of Brown & Chandler.” The foregoing recitals show that the parties, on the 20th day of March, 1894, did not think that there had been any real dissolution of the partnership previous to that date. The master and Circuit Judge concur in finding that the final dissolution took place on March 20th, 1894, and that there had been no previous dissolution, and we can not say that the preponderance of the evidence is against that conclusion. If this be so, then appellant’s case becomes wholly groundless, for his view is that the supposed liability, for which the note was given under a mutual mistake, was extinguished by the dissolution of the partnership on April 5,1893, and again on March 17, 1894; appellant’s theory being that these alleged dissolutions operated as a discharge of the individual accounts of the partners, and that at the time of making said note, in consideration of the supposed excess of defendant’s account over that of plaintiff, there was in fact no excess at all. We are quite satisfied that the agreement of March 17, 1894, was not a dissolution, but that it provided for a dissolution at a future time, and in the meantime was intended merely to limit the partners as to the amounts they could draw out of the busi ness for personal use, and took away from Chandler the right to sign notes and drafts for the firm. The design of this agreement was not to take away from Chandler his right to share in the profits of the business, and make him a mere salaried clerk, but was to prevent unreasonable diversion of the firm’s money to personal use instead of applying the same to the firm’s indebtedness. Brown’s belief that Chandler was drawing out more than this agreement allowed, led to the dissolution on March 20th, 1894. Chandler testified that he made up his mind to get out of the business on the morning of the 20th March. If so, there was no dissolution on the 17th March. There was evidence that on the 5th day of April, 1893, Brown agreed to sell out his interest in the business to Chandler for $7,000 — $1,000 payable in cash and the remainder in four equal annual instalments, secured by a mortgage on the stock, accounts, &c. Under this agreement Brown paid Chandler the $1,000, and took control of the business, conducting it under the name of Brown & Chandler. The notes and chattel mortgage to secure the $6,000 was signed, and the papers were placed in the hands of Mr. Purdy, who then represented both parties. Mr. Chandler testified: “These papers were in the possession of Mr. Purdy, and was not to be delivered to either Brown or myself without our joint consent.” Brown testified: “When I agreed to sell Mr. Chandler the business, he and I went to the office of Mr. Purdy and signed all the papers. We put them into Mr. Purdy’s hands, with the understanding that none of them were to be delivered without the consent of both Chandler and myself.” Some time after this, upon Chandler’s stating that he would not be able to pay the first note, it was agreed by the parties that the notes and mortgage should be destroyed and that Brown should come back into the business. The terms upon which Brown was to come back into the business were not stated. We infer that the parties intended that the original status as partners was restored — as if no attempt to dissolve had been made. The $1,000 paid to Brown by Chandler on the purchase, April 5, 1893, while it had been borrowed by Chandler for the purpose, was eventually repaid to the lender out of the assets of the business. There was no notice given of any dissolution. The business was conducted under the name of Brown & Chandler, and Brown was liable for all the debts contracted while Chandler was running the business, from April 5, 1893, to the time Brown returned to the business. The recitals in the agreement of March 20,1894, may be reconciled with the view that the status as partners had been restored, as if there had been no attempt at dissolution, whereas the same could not be reconciled with the fact of a completed dissolution on April 5, 1893, and the formation of a new partnership afterwards, for the partnership dissolved on March 20, 1894, was, in the agreement of that day, said to be the partnership in which Brown and Chandler had for a number of years past been engaged. We agree, therefore, with the Circuit Court, that there was no real dissolution of the. partnership on April 5, 1893. But if there was, we think the parties agreed that the original status should be deemed restored when Brown and Chandler directed the destruction of the notes and mortgage left with Mr. Purdy subject to their joint control.

But let us, for the moment, concede that the sale by Chandler to Brown, April 5, 1893, was a dissolution of the partnership, and in law operated to cancel the private accounts of the partners, and let us further concede that Chandler’s account while he conducted the business alone should not properly form any part of the consideration of the note, since as to that he was both creditor and debtor, then it becomes important to ascertain when the new partnership was formed after April 5, 1893. Appellant’s attorneys in their argument say it took place either in the fall of 1893 or in the early spring of 1894, and that the time is immaterial. Chandler testifies that it took place March 1st, 1894, and Brown testifies it took place about the middle or latter part of October, 1893. The burden of proof is upon Chandler, who seeks to set aside a settlement of the partnership affairs on the ground of mutual mistake, and the proof he offers should be clear and convincing. We have been shown no reason to believe that Chandler is more credible or accurate than Brown, and it appears in the evidence that Brown in the fall of 1893 took an active interest in the compromise of some of the debts of Brown & Chandler, joining Chandler in giving notes for the credit portion of the compromise, and securing the compromise by obtaining his father’s indorsement on the notes. As to these compromised debts, Chandler testified: “Some of these debts were contracted while Brown was a member of the firm.” From this we infer that some of these debts were contracted by Chandler when he had charge after April 5, 1893. It is, therefore, more than likely that Brown would then be solicitous about whether Chandler would be able to pay the notes and mortgage, and upon ascertaining that they would not be paid, agreed to their destruction and his restoration to his old place in the firm. We, therefore, accept Brown’s statement that he went back into the business in October, 1893, especially since appellant in his argument does not urge to the contrary. Then what was the state of the personal accounts of the parties from October, 1893, to March 20,1894? Did not the account of Chandler largely exceed that of Brown during that period? We find in the testimony, “Exhibit C,” that Chandler’s account for the year 1893 was $7,142.74, which included the $lj000 paid to Brown, April 5,1893, which Chandler charged to himself, which, for the purpose of this argument, may be taken from Chandler’s account and charged to Brown’s. Brown’s account for the year 1893 was $527,01; from January 1,1894, to March 20,1894, Chandler’s account was $1,030.25, and Brown’s account for the same period was $30.85. We have no means of ascertaining from the testimony how much of the account of 1893 was made after October, 1893, but appellant kept the books, or had charge of them previous to October, at least, and was in a position to know the facts, and it was incumbent on him to show the facts, to sustain his plea that there was in fact and in law no excess in the account of Chandler over Brown’s. It is sufficient for us to know that Chandler’s account from October, 1893, to March 20, 1894, largely exceeded that of Brown’s, and from Chandler’s standpoint, that the excess in his account over Brown’s formed the consideration of the note. His contention that the note is without consideration must fail: Chandler testified that “the consideration for said note was the difference between my (his) and the plaintiff’s personal account, while witness (Chandler) was a member of the firm of Brown & Chandler, and while witness owned the business of Brown & Chandler.” He also testified: “On the 20th March, 1894, my personal account was $21,000 about, and Mr. Brown’s about $9,000, including the $1,000 paid him from the money got from Pearson. It did not appear on his account, it was charged on my account.” He further testified in reference to the settlement: “We thereupon began figuring on the accounts, and I finally agreed upon $2,000, and consented to give my note for it, payable in January, 1896.” Appellant’s testimony is inconsistent with his contention. But the real consideration of the note in suit is expressed in the agreement of March 20th, 1894. This contract shows that in consideration of Brown’s agreeing “to assume, pay, satisfy and discharge all debts and obligations of the said firm of Brown & Chandler, and to hold the said James H. Chandler harmless on account thereof, &c.,” Chandler transferred to Brown all his interest in the assets of Brown & Chandler, and executed the note in controversy; and in this contract it was expressly agreed, under seal, that “the signing of this agreement and of said note shall conclude the settlement and adjustment of said copartnership affairs between the said Albertus S. Brown and James H. Chandler.” The firm’s liabilities were $15,866.32, and its assets, including stock, fixtures, and $12,761.79 of accounts, good and bad, amounted to $24,712.27. Brown had furnished the original capital, $4,000, and under the agreement to share equally in the profits of the partnership, Chandler had drawn out from August, 1887, to March 20, 1894, $20,543.13, against Brown’s $7,900.98. The difference in the accounts of the partners, whatever it was, went into the settlement of the partnership affairs. This settlement was the voluntary act of Chandler, who was in position to know the facts, and in the absence of fraud or mistake sufficient to set it aside, he must abide by it.

The judgment of. the Circuit Court is affirmed.