Gilchrist v. Kelley

48 N.W. 700, 85 Mich. 413, 1891 Mich. LEXIS 712

Opinions

Champlin, C. J.

The bill in this case is filed by the complainant against the defendants to set aside a settlement of a partnership transaction between the complainant and the defendant Kelley as copartners in the law business. Complainant charges that Kelley fraudulently concealed from him the value of his services in a matter in which the firm had been engaged in connection with the probating of a will and the settlement of controversies arising out of the claims made by the heirs at law of the deceased husband of Diana Richardson.

The bill was filed on the 23d day of April, 1888, and it alleged that a copartnership between the complainant and Kelley was entered into on the 1st day of September, 1885, for a period of one. year, and that a few days after the 1st of September, 1886, a settlement was had between himself and his partner, in which he sold all his interest in the firm to Kelley for $960. It appeal's that he had drawn out from the firm something like $300 during the year. He charges that Kelley neglected to enter upon the books of the firm true and proper charges for the services which he rendered to and for Diana Richardson and others, but purposely concealed the value of those charges from him, and thereby defrauded him in the settlement.

After the answers were filed and the cause was brought to an issue in the circuit court for the county of Alpena, a stipulation was entered into transferring the suit to the circuit court for the county of Bay, and it was there heard upon proofs taken in open court as in a trial at law. Hpon the hearing the complainant testified to the settlement had between him and Kelley as follows:

‘'Prior to the expiration of the copartnership I had intimated to Mr. Kelley my intention of leaving the law business, and so, on or about the 3d day of September, 1886, Mr. Kelley said, ‘ Gilchrist, have you fully made up your mind to leave the law?’ I said, ‘Yes/ He then said: ‘I think you will make a mistake. Your prospects are good. I know of no one in Alpena with better prospects than yourself. Now, I intend to try for the circuit judgeship at the coming election, and'in any event, to retire from the active practice of the law, and to confine myself exclusively to the busifiess of counsel; and if you will reconsider your decision, I will sell you my whole practice and my library, with a few exceptions, for the sum of three thousand dollars, and I will take your note in payment, and I will agree to give a bond not to practice for a certain time/ — I think it was three years. I said I didn't.believe I wanted to buy it. He then said: ‘It will take some time to close the business we have commenced, and I have carefully and fairly estimated its value, — estimated the value of the entire copartnership business to be worth about $2,500; and for the sake of a speedy settlement of our copartnership affairs I will buy out your interest on the basis of such estimate.' I thought the amount low, and I said so, and he said it was all that the business was worth. This was late in the afternoon. I think it was between five- and six o'clock; and before accepting or rejecting his proposition at that time I went to the partnership books, to see what charge had been made in the Richardson business, if any, and I found that no charge whatever had been made of any kind of the business, and it seemed to me that there must have been other business relating to which the books bore no entries. From June to September there were no entries outside of the few that I had dictated myself, possibly with a few exceptions. And the next morning I said to Mr. Kelley that there were no charges made on the books in the Richardson matter, and he hastened to say that he had memoranda of all co-partnership transactions not in the copartnership books, and that he had himself estimated from such memoranda and from the books. I said I had no means of determining for myself as to the adequacy of the estimate he had made, but if it was fair, and all the business was worth, if it included the Richardson business and all the business, I would accept the proposition; and he again said that it was fair and adequate, and that it included the Richardson business, and all the copartnership business, and he proposed to pay me with his notes with a responsible indorser; and on the 6th of September he came to me with a release or transfer prepared, and a notice for publication of the dissolution, and I signed it, and then he gave me three promissory notes for $320 each. These were made payable to the order of A. N. Spratt. They were time notes, running four, eight, and twelve months, respectively, and were indorsed by Spratt in blank.”

It appears from the testimony that on or about the 24th day of June, 1886, the firm of Kelley & Gilchrist was retained by Diana Richardson, and that the firm did certain business for her, which was not entirely closed up at the time of the dissolution. Mr. Gilchrist testified upon the hearing in the court below that he did a large amount of business pertaining to the Richardson matter, and that he estimated that at least half of his time from the 24th day of June to the 1st of September was employed in that business. He also testified that he made no charge whatever for those services upon the. books of the firm; so it appears from his testimony that neither he nor Mr. Kelley had entered any charges upon the books for the services rendered in that matter up to the time of the dissolution. He further testified that some time prior to the 1st of September he had asked Mr. Kelley what charge they should make in the Richardson matter, and he said that he should wait, and make a lump charge when the business was finished. He was asked if he (Gilchrist) had formed any judgment about what the charge should be, and he replied:

feI had supposed that it ought to be a pretty good fee, but I had no idea as to what amount it would be.”

It appears further from the testimony that some time in October Mr. Kelley presented a bill against Mrs. Richardson to her, in which he charged a lump sum of $20,-000 for the services he had performed for her up to that time. Gilchrist testifies that some time in November, 1886, he learned that Kelley had presented a charge against Mrs. Richardson for services, but it does not appear that he made any effort to ascertain the amount of such charge. He says that he did ' not know the amount until he heard Mr. Kelley testify in his suit which he commenced against Mrs. Richardson to collect his charge, when Mr. Kelley testified upon the trial; and that, he thinks, was some time in June, 1887. He shows from his testimony that he was familiar with what services, by way of consultation and otherwise, were being performed for Mrs. Richardson by Mr. Kelley during the time the partnership existed; that they consisted mainly in frequent consultations between Kelley and Mrs. Richardson. He introduced testimony tending to show that at one time Mr. Kelley requested Mrs. Richardson not to inform Mr. Gilchrist about her affairs, as Gilchrist boarded with Mr. Frank Mason, who married a neiee of Mr. Richardson, and whose father was an heir at law contesting Mrs. Richardson’s rights to the property, as he (Gilchrist) might possibly speak of it. Mr. Kelley denies that he ever made such a request to Mrs. Richardson, but, on the contrary, states that she requested him not to inform Mr. Gilchrist, and that he told her that it would be impossible not to do so, as he was a partner of his in business.

Mr. Kelley also testified upon the hearing in the court below with reference to his settlement with Mr. Gilchrist as follows:

“As it approached the 1st day of September, which would be the termination of our partnership, I said to Mr. Gilchrist: 'You and the clerk should go to work and have everything on the books, and gather together everything pertaining to the partnership business. * * * You know it will soon be the ,1st of September.5 * * * .He says to me at that time, 'Can’t we continue the partnership another year?’ I said, 'No, sir;’ and he said, 'Have things been satisfactory?’ and I said: 'Mr. Gilchrist, I have ho fault to find with you, but you have been of no particular service to me, and I cannot afford to divide my earnings with you, and we will settle up on the 1st of September. You get everything on the books, and we will settle according to the books.3 And he said nothing further at that time, but for one or two or several days he and the book-keeper at times would be working on those account-books in their room, and there is where they remained. They were rarely, if ever, brought into my room, but in the going backward and forward directing the clerk to do things I would see they were working on the books. I think what appears on the books after the 1st of June was written in the last three or four days in August. About the 1st day of September (think it was the 1st) he came to the office, and says to me, ‘I have got everything on the books, I think, except what belongs to the Richardson matter;3 and he says, ‘What do you think we ought to do about that?3 I saidt ‘Mr. Gilchrist, it is a hard thing to say. The work is not completed, and the matter may largely depend upon the result.3 He says, ‘What will you give me in a gross sum, and not close up the partnership business?3

“ Q. What do you mean by that, — ‘ not close up the partnership business?3

“A. Not to wait until it was all closed up, and the money received in the different matters.

“I said, ‘Mr. Gilchrist, I am not in a position to buy; I would prefer to sell;3 and he said at that time he would like to remain in the business, — at the time I first informed him it must be closed. I said, ‘You have plenty of money;3 and he said, ‘ What will you take foi your business and library.?3 I said, ‘There are parts of that library I would not sell for money, but the main part of it I will sell. I will sell you all the state reports and the United States reports, but there are certain text-books that I have picked up that I would not sell. Those books I would not sell. I would not sell you those, but the rest' of the library I will sell you.3 And he said, ‘What do you want for the business?3 I was sitting right at my desk, and I had just made up my mind about what amount of books I would sell him and what they were worth, — the state reports and a line of text-books. My own business was entirely distinct from the Kelley & Gilchrist business, that I had been engaged in before the partnership existed, and it represented business up to that date. I said, ‘I will take $4,500.3 ‘Well, he says, ‘it would not be much use to me to buy you out and you go into business/ And I said, ‘I will give you a contract not to go into business in this county except when I am retained by a practicing attorney. I will not keep an office open, and will not engage in practice here, unless retained by a practicing attorney here/ And he said, ‘What would you be willing to give me for my interest here?' I had not seen the books at that time, and he knew more about them than I did; that was part of his bnsiness to attend to them; and I think I asked him how much we had done that year, and he said, ‘The cash account shows about $1,700 that we have received;' and he says, ‘There is a large amount of business that has been commenced, and the work not done.' I says, ‘Don't you think it would be a fair thing to call the year's business $4,000?' and he says, ‘I should think it would.' I took $4,000 and the amount he gave me for cash services and deducted it, — the cash account, as it appears now, is seventeen hundred and odd dollars. 1 deducted the amount he gave me from $4,000, and I made the estimates on that estimate. I concluded to give him $960, and made him that offer there. I cannot remember the figures, but whatever they were the three-eighths and five-eighths would be — $960 would be three-eighths of the amount. That is the way I arrived at it. I remember it distinctly, as though it was this minute, of making figures right there before me, and deducting the amount that he gave me as the cash account; and before I had written them there he said, ‘ Iiow long will you give me to think of it?’ And I said, ‘How long do you want?' This was on the 1st day of September, and I am certain of it. And he said, ‘I would like two or three days;' and I said, ‘Take any reasonable time you desire.' And I said to him then if he could get a good partner there w,ould be no trouble for him to hold the business, and I said to him, ‘You understand that Mrs. Richardson will not do business with you. I am obligated to see her through to the end. I have promised to stand by her through the fight, and I reserve that from the bond or contract to go out of business.' And in the same connection with that I spoke of the fact that we had received a retainer from the Mason Lumber Company and from the Miner Lumber Company, and as those ran. until the 1st of January, until that time I should be under obligation to give them such counsel as they required of me, because we had received a retainer, and they would have the right to ask me any questions of their business they might come to the office and ask, — a general retainer. We would charge them whatever was right for work outside of that, and I told him I should continue until the 1st day of January for them.

“After that he went to his room and adjusted his desk by putting the papers in the drawers, fastening the desk, and put some papers in he had, and went out. The next day I do not think he came to the office at all. Once or twice he came in and went and got something out of his desk, and it went along until the 6th of September, and then he came in and said, 'I will accept the amount you offered me for my interest.’ I said: 'Mr. Gilchrist, you had better buy me out. You are a young man, and you say you want to continue the business. I am making you á good offer. You have got money and rich relatives, and there is nothing in the way of your success if you get a good partner.’ He says: 'I do not think I could keep the clients if I should buy your business. I do not think I could keep the old clients.’ 'Well,’ I says, 'Mr. Gilchrist, I do not feel as if I could go and ask my friend to indorse or to help me raise $960. I will make you this offer: We will settle everything, and we will divide the business. You take a case and I will take a case, and if you intend to go into practice you will have something to start with, and will have business right from the start.’ He said, ' I do not want to wait until it is closed up and have to take my chances.’ ' Very well,’ I said, ' you come in in an hour. Mr. Spratt is in the city, and I will try and have the notes indorsed.’ I had agreed to get Spratt, because he wanted responsible men that the bank would take, and if he bought me out he was to give me his brother’s, and was to have the same time,— 4, 8, and 12 months. There was not any money to be paid, and he asked me if his brother would be satisfactory, and I told him, 'Yes, for any amount.’ And I telephoned to Mr. Spratt at his house, and asked him to come to my office, and he came down. I told him what I wanted, and he indorsed those three notes; and just about the time he got away, and perhaps he hadn’t got out of the office, when Mr. Gilchrist came in, and I told Mr. Gilchrist, 'I have got the indorsements here.’ And I called the clerk in there and directed him to take my seat and write the agreement, — the agreement of dissolution. I dictated that paper to the clerk sitting at my table in my room at the office. Mr. Gilchrist sat right by and heard me dictate it. I also dictated that one, and I signed it, and Mr. Gilchrist signed it, and I gave him three notes, and closed the transaction; and he went into his room and gathered some things, adjusted his desk, and went away; and the next day he took his desk out of the office. The papers were signed on the 6th day of September, 1886, the date of those notes. I want to state here another thing that took place right at the time or before these papers were signed, and before I gave him these notes. I said to Mr. Gilchrist: £J am satisfied if you would wait until this business could be closed up, and do the best you can towards helping in closing it up and getting the money out of it, that you would realize more than I offer you; but T cannot afford to advance the money and take the chances, and pay you the last cent there is in it/ I urged him to wait until the business was closed up, and help me close it up, and take his chances; and he said he preferred to take that sum now than to wait until the matter was closed up.”

He further testified that he made the offer of I960—

“Upon the basis of a fair and reasonable average of the business we had done. I made that upon the basis of the business that I had done in former years, other years. I had done from three to four thousand and forty-five hundred a year, good and bad. That had been about the extent of my business, and I took that as about the average of what we had done that year. It may have been a little less or a little more than I had done the year before. I think the business that year 'was less. There was a falling off from 1885 to 1886 in the law business in Alpena county. There was a very perceptible falling off that year from what it had been in former years.”

With reference to the knowledge which Mr. Gilchrist had of the work which he had rendered the Kichardson estate during the time preceding the 1st of September, he testified:

“ He knew substantially everything that had been done. He knew everything pertaining to the business transaetions. He did not know of the little peculiar characteristics of my client that took place at her house. I did not tell him that, and I did not consider it my duty te tell him that; but he had a general knowledge of what had transpired. He was present whenever Mr. Turnbull or Mr. Sleator came down there. When I sent for them to come and consult with me in regard to any matter, Mr. Gilchrist was present and heard the discussion. He was present at every piece of work that was done with the clerk, and that the clerk worked on, and he knew what I was doing. He heárd' the telephone ring, and knew who it was called me, and asked if it was Mrs. Richardson, because she called very frequently. He always knew where I went, and when I came back. He asked me to keep him advised as to this property, and what they would probably do with it, because he and his brother anticipated that they might become purchasers when it was in a condition where it could be sold.”

The circuit judge, before whom the hearing was had and the witnesses examined, entered a decree dismissing the complainant’s bill.

As to the fraud charged in the bill of complaint, the complainant’s case is supported exclusively by his own testimony. Those charges are met and denied by the testimony of defendant Kelley. They all arise and are founded upon what was said and done at the time the parties talked over and settled up their partnership business. The vital question hinges upon the credit which this Court should give to the testimony of these two witnesses.

Aside from the legal proposition that fraud will not be presumed, but must be established by satisfactory-evidence, the almost uniform practice of this Court is, with a few exceptions, where there is a conflict in the testimony of witnesses, to give to the opinion of the presiding judge in the court below, who has had an opportunity to see the witnesses and judge of their veracity, great consideration in weighing the testimony of such witnesses. It seems to me that before we can arrive at a different conclusion from that of the court below we must disregard entirely the testimony of Judge Kelley, a man who has resided in Alpena for more than 20 years, who is well known in the community where he lives, and has the respect and confidence of the electors in the twenty-sixth judicial circuit, who have elected him to fill the high and responsible position of circuit judge, an office which he now holds. Speaking for myself, and in view of all the testimony, I must say that I rely upon the truth of the statements of Judge Kelley in his version of what was said and done at the time of the settlement between himself and complainant. When it is considered that every fact as to -the nature or extent of the business which had been done at that time for Mrs. Richardson was well known to the complainant; that nothing respecting it was concealed from him, and no misrepresentation made to him concerning it; that at the time of the settlement Judge Kelley offered to sell his interest in the partnership, including all he had done for Mrs. Richardson, and including his law library, with few exceptions, for $4,500, and not to keep his office open, nor practice law in the county unless retained by a practicing attorney there, — the idea of fraud perpetrated upon Gilchrist is entirely dispelled.

In order to weigh the testimony fairly, we ought to view the situation as it appeared to the parties at the time. So far as the Richardson case' is concerned, its phase was entirely new, for no litigation in that section of the State had ever occurred involving such large interests. _ The attorneys engaged had no conception of what the charges under such ■ circumstances ought to be. The'y viewed it in the light of their services for ordinary litigation, and, whatever the possibilities for large or extraordinary charges, they were offered to Gilchrist by Kelley, with a portion of his library, for $4,500. Gilchrist declined to buy, but proposed to sell; and he sold to Judge Kelley upon nearly the same basis. Soon thereafter Kelley talked with Detroit lawyers, and made up his mind that he ought to be paid a large amount for his services, and made out and rendered to Mrs. Richardson a bill for $35,000. Mrs. Richardson did not regard his services of so much value, and he brought suit. No amount had been agreed upon between Mrs. Richardson and Judge Kelley as to what he should charge for his services, and no charge had been made at the time of the settlement, — he having stated to Mr. Gilchrist that when the services were completed he should charge a lump sum. The charges he made were in fact largely speculative, and must in the end depend upon what a jury should find the services performed were reasonably worth. Dpon the trial Gilchrist was sworn as a witness for Mrs. Richardson, and, with a view of showing that the services were not worth what Kelley charged, Gilchrist testified the amount for which he sold his three-eighths interest in the partnership, which included the greater part of the charges against Mrs. Richardson. Gilchrist knew at the time he testified, if he did not before, what Judge Kelley claimed his services were worth, and he made no claim that he had been defrauded, or that the value of such services had been misrepresented to him. If he ever was defrauded, it was at the time of the settlement, and the fact whether he was defrauded at that time depended upon the success of Judge Kelley and his winning the suit with Mrs. Richardson.

The law requires one who has been defrauded to act promptly upon the discovery of the fraud. Gilchrist did not act promptly in seeking redress, but lay quietly ’ by, waiting the outcome of Kelley’s suit with Mrs. Richardson. He did not say: “It has been misrepresented to me, but as a partner I offer to furnish my share of the expense of prosecuting it to a successful issue, and give my services if need be.” On the contrary, he .waited until with great expense Kelley recovered judgment in the court below, and not then did he make a claim. He waited until after two arguments in the Supreme Court, after all the expense had been incurred, after all the risk of loss had terminated, before he put forth any claim. He was awaiting the result, and if Kelley was successful in the suit then he had been defrauded, and the facts had been misrepresented by Kelley in the settlement; but, if Kelley lost the suit, and after all the costs and expenses of the prosecution had been incurred, and all the costs he would be adjudged to pay, then he had not been defrauded, and Kelley had_ taken no advantage of him. This expresses the true situation. Had a majority of the Supreme Court concurred in the opinion filed by the minority of that Court, it is very probable that we should never have heard of the suit of Gilchrist v. Kelley. His position is one that does not commend itself to a court of equity. It is a speculation upon the uncertainties of a law suit, where he had nothing to lose in any event, and a chance to gain by setting up a stale claim of fraud if the suit terminated to Kelley’s advantage.

It is not my purpose to review all the testimony or state all the facts in detail. The record abounds with testimony with reference to other suits and other proceedings which are entirely immaterial to the issue in this case.

I think the decree of the circuit court was right, and should be affirmed, with costs.

Long and McGrath, JJ., concurred with Champlin, C. J.