Dickey v. M'Cullough

2 Watts & Serg. 88

Opinion

The opinion of the Court was delivered by

Rogers, J.

'This is in form an action of ejectment, but in substance a bill in equity for an account of the profits of certain real estate, and to compel a re-conveyance of the whole or a moiety to the plaintiff. It is a remedy well understood in this state, and although the machinery is not in all cases very well adapted to attain that object, yet through the instrumentality of a jury, it has been effectually used to give equitable relief. The plaintiff was the equitable owner of a salt-works, grist and sawmill, with the appurtenances. The property in controversy was acquired by a parol exchange between the plaintiff and Robert Lowry, the former owner, consummated by the delivery of possession. The plaintiff put the premises in repair, in consequence of which he became so much embarrassed as to become unable longer to carry on the works without pecuniary aid. And for this reason, (as it would seem,) he was induced to enter into'an arrangement with the defendant, which resulted in the agreement of the 11th April 1836, modified by the subsequent agreement of the 23d July 1836. On the construction of these instruments the cause mainly depends. In the article of the 11th April, Dickey agrees that he will procure Lowry, who held the legal title, to convey the premises in dispute in fee simple to M’Cullough. He at the same time transfers to M’Cullough a lease of the salt-works, &c., with all tools, fixtures, &c., necessary to carry on the works. In consideration whereof, after reciting that Dickey was embarrassed and unable to carry on the business without assistance, he agrees that he will commence and start the salt-works, &c., and carry on the same, for the term of three years from the date of the article ; that he will take the personal property of Dickey at a fair valuation; and moreover, (and this would seem to have been Dickey’s principal inducement,) that he would loan to him money to an amount sufficient to pay certain judgments, rendered against him. It was further agreed that M’Cullough should pay to Dickey for his services 1500 per annum, in four equal quarterly payments; that at the end of the three years, or if. the term terminated sooner by agreement, &c., M’Cullough, upon being refunded the money advanced, and interest, and being indemnified against the contracts and engagements of Dickey, will allow to Dickey the one-half of all the profits, &c., after deducting the salary, as before provided, together with the other incidental expenses. And further, in the event as above specified, he engages to convey to him the undivided half of the two lots of ground, with the buildings, &c., and the undivided half of the lease of the salt-works, with the appurtenances. Neither party was at liberty to assign without consent, and each to have the refusal of the other’s interest. To enforce a compliance with these contracts, this suit is brought, and the first question is, as to the legal character of the instrument ; and although I do not hold it very material in arriving at a correct result, yet we think that it is a conveyance of the legal title, with a declaration of trust, that the vendee will hold the property on the terms and conditions specified in the articles of agreement; that is to say, in trust, that if Dickey performs his part of the agreement, by causing the conveyance, &c., to be made, that he, M’Cullough will carry on the works for the term of three years, and of course, will supply the means required for that purpose; that he will take the personal property at a fair valuation; that he will loan Dickey money to pay the judgments against him; that he will employ him at a fixed salary: that he will allow him the one-half of the profits, and that he will at the end of the term, or sooner termination thereof, convey to him one half of the property. M’Cullough, in addition to the capital to be furnished by him, agrees to give his personal attention to the business, whether with or without compensation is nowhere said, and neither party is at liberty to assign without consent, &c. If the case depended on the original agreement, it would be attended with comparatively little difficulty. It would be the duty of M’Cullough, in the first place, to relieve Dickey by advancing money to pay the judgments, to take his personal estate at a fair valuation, to be deducted from the amount advanced, the difference constituting the debt. In addition, M’Cullough would be bound to furnish the necessary capital, and to give his personal attention to the works, and perhaps, upon a fair construction of the agreement, without compensation. Dickey would have a qualified management of the works, and would be entitled for his services to a fixed salary, to be paid quarterly. . The profits, if any, at the end of the term, or sooner, would be divided between them. The profits would be ascertained by deducting, among other things properly included under the head of expenses, interest on the capital, payment of the ground-rents, and the stipulated salary to Dickey. And if it should so happen that the money advanced was refunded out of the profits, or in any other way, and a complete indemnity given, as is provided in the article, Dickey would have the unquestionable right to call for a re-conveyance of one moiety of the premises. On the supposition that both parties had performed their contract in good faith, there would be no difficulty in a settlement on the principles indicated.

The contract, as is seen, is not without a valuable consideration, and we are at a loss to see any thing to support the allegation of usury. Nor is it of any consequence in this controversy. At the time of the original contract the parties appear to have had great confidence in each other, but which did not long continue; for, shortly after, they became mutually dissatisfied and desirous of changing their personal relations. M’Cullough was anxious to be relieved from the management of the works, so as to be able to engage in other business, and Dickey was equally desirous that he should have no further personal superintendence over them. These inferences may be fairly deduced from the testimony. Actuated by these feelings and motives, they enter into the agreements as contained in the three several instruments of the 23d of July, viz., the releases, as they have been, termed, by Dickey to M’Cullough, and the agreement, or lease, to Martin. These instruments cannot well be understood on any other principles; but with this key to their construction the intention of the parties is manifest. It must be remarked that the latter are not distinct and independent agreements, although subsequent, but are modifications, or alterations of the original contract, and, of course, must be construed in connexion with each other, and as one instrument. Dickey agrees to alter or modify the original agreement, so far as to relinquish his right to be employed as a manager, at a certain salary. He consents to dispense with the personal services of M’Cullough, and agrees to the contract with Martin. This appears as well from the agreements and written proofs, as from the evidence of Martin, who testifies that this arrangement was made with the consent, and at the instance of Dickey, who, it was understood, was to have an interest and an agency in the business. In the release of the same date, for a reason which is not very apparent from the instrument itself, Dickey agrees to surrender his claim to the profits until he shall have paid, or refunded the amount advanced by M’Cullough. This has been erroneously construed to be an absolute release of the moiety of the profits to which he was entitled under the original agreement. To this construction we cannot accede. Taken in connexion with the previous contract, it cannot fairly be said to amount to anything more than a surrender, or waiver of a right to the payment of $500 for his services as agent, and an agreement that his share of the profits may be immediately applied to the repayment of the loan, without deduction. A different construction is unreasonable, for no cause can be assigned for any other change in the first agreement. It harmonizes with the written documents, and accords with the actions and conduct of the parties, so far as their intentions have been disclosed by the evidence, written and parol. Dickey seems to have been fully impressed with the notion that the works, when well managed, were profitable — that his ill success was caused by a want of capital. He was soon convinced that M’Cullough was an unfit manager. M’Cullough (disappointed, perhaps, in his just expectations) had an equally unfavourable opinion of Dickey; and this resulted with the consent and approbation of both, in the arrangement with Martin. To maintain that this is a violation of the part of the agreement which inhibits either party from assigning their interest in the contract, is contrary to all the evidence, written and parol. But although this is very clear, yet we perceive no>thing which exempts M’Cullough from rendering an account of profits, whether in the shape of rent, or otherwise. The agreement with Martin was rescinded, but whether with or without the consent of Dickey, does not appear; and afterwards, or perhaps at or about the same time, M’Cullough undertakes to sell his interest in the premises to James Donnelly. There is no evidence that Dickey either consented to the rescission of the contract with Martin, or that he agreed to the sale or assignment to Donnelly. The plaintiff contends that this is in violation of the contract, and a forfeiture of M’Cullough’s title, of which he can avail himself in this suit. But this is a bill in chancery for an account; and after releasing all claim to the personal services of M’Cullough, and agreeing, as it is in proof he did, to the contract with Martin, Dickey has precluded himself from insisting on this act as a forfeiture of the defendant’s title to a moiety. It is unlike the case of Hamilton v. Elliott, (5 Serg. & Rawle 375), which decides that an estate on condition may be forfeited by a non-performance of the condition, in a reasonable time, and that the estate is revested in the person who is in possession, without the formality of an entry. For, where a person once dispenses with a condition, he cannot afterwards enter for a subsequent breach of the condition. If he has any remedy, it is by an action of covenant on the article for a breach of the condition. But, notwithstanding, there is nothing in the case which prevents the plaintiff from electing to require, as here, an account of the profits while under the management of Donnelly, independently of the subsequent re-transfer of the premises. Under this view of the case, let us direct our attention to the proper manner of stating the accounts, and this has been already indicated in the preceding remarks. M’Cullough would have the right to charge Dickey with the amount of money advanced. From this must be deducted, in the first instance, the value of the personal property; the balance will show the amount of the actual debt. From this deduct the profits, if any, of the works, from the time of the contract until the trial. Whether there were any profits, must be decided by the jury; and, in investigating this part of the case, the plaintiff has a right to require the production of the books which were, or ought to have been kept. They are the best evidence; and a refusal, or an inability, as is justly said in Cassel v. Spayd, (3 Watts 445), to furnish a just and true account, is sufficient to warrant a charge beyond what can be shown to have been received. So, if there has been any violation of the contract, by a refusal or neglect to furnish the necessary capital, and a loss has been occasioned thereby, he may be charged, by the jury, with all the profits that might have been received. The property, it appears, was burthened with ground-rents, which have been extinguished by Donnelly. In the estimation, the defendants will be entitled to charge, as part of the expenses, interest on the purchase-money, as well as interest on the capital. If the profits should exceed the amount required to pay the outlays of the defendant, the plaintiff will be entitled to a verdict for an undivided moiety of the premises, and for the surplus profits. But if it should be less, we cannot agree that the verdict should be for the defendant. This, it must be recollected, is in the nature of a bill in chancery. The jury, under the direction of the court, are bound to do what a Court of Chancery would do; that is to say, state an account, and order a reconveyance, on payment of the balance due. This may be done by a conditional verdict. The law is not so unreasonable as to require a tender before the commencement of the suit, because the sum due is uncertain, and the very object of the suit is to ascertain that which is uncertain, and which only the accountant may know. No Court of Chancery has required a previous tender; and in this respect the proceedings are identical.

As to the bills of exceptions, we think the court was wrong in overruling the testimony of the exchange. It was part of the title, and, on that ground, was admissible in an action of ejectment ; besides, it should have been received for the purpose of showing, in part, the consideration of the contract. So, evidence of the value of the premises was pertinent, having a bearing on the construction of the contract. Evidence of probable profits of other establishments of a similar description, ought not to be received, except from necessity, and in no case where better proof is in the power of the party, as by production of his own books, which, if kept as they ought to be, will remove all doubts as to the profits. The settlement between M’Cullough and Martin was improperly admitted, as it was made in the absence of Dickey. The books were the best evidence. In estimating the profits, the losses which were incurred in the course of the business, without any default or mismanagement, must be deducted. It is alleged by the plaintiff that 500 bushels of salt were on the premises at the time of the contract, the property of the plaintiff, and, as such, went into the possession of the defendant, who sold the same, and applied the proceeds to the payment of a judgment of Lowry against the defendant. If this be as stated, Dickey is entitled to a deduction to that amount, by the terms of the agreement. The plaintiff offered to prove, by the declaration and admission of Lowry, that the property belonged to Dickey; that it was a pledge for a debt due to Lowry. Surely, the admission of Lowry, who is dead, against his own interest, is evidence; that it is in the form of a deposition, detracts nothing from its force or admissibility.

Judgment reversed, and a venire de novo awarded.