Horn v. Lupton

105 N.E. 237, 182 Ind. 355, 1914 Ind. LEXIS 143

• Court: Indiana Supreme Court
• Decided: May 20, 1914
• Docket: No. 21,984
• Status: Published

Opinions

Morris, C. J.

This was an action by appellant against appellees Lupton and G-emmill, and Lupton as executor of the will of Eliza Lupton, deceased. The complaint is in two paragraphs, the first of which alleges that in February, 1901, appellant and appellees Lupton and Gemmill, and Eliza Lupton executed a written contract for the formation of a partnership to engage in the banking business at Pennville. A copy of the agreement, set out in the first paragraph of complaint, provides for a capital of $20,000, each partner to contribute a fourth thereof, and for the business to continue for ten years, under the management of appellee Ambrose G. Lupton, as president and appellee Gemmill as vice president, until otherwise agreed; said officers are authorized to appoint a cashier. The contract further provides that the death of a partner shall not terminate the partnership, if the survivors desire to continue the business; that in such event the business may be continued, if the survivors shall pay the personal representative of the decedent the amount invested by the decedent in the business, together with his share in the undivided profits.

It is averred that on the execution of the contract, appellant contributed $5,000, for the use of the partnership, and thereupon the business contemplated by the contract was established, and that it continued, under the sole management of appellees Ambrose G. Lupton and Gemmill, until June 30, 1905, when they, without appellant’s knowledge or consent, wrongfully terminated the partnership, and turned over to a new partnership, managed by them, all the assets of the old one including good will, money, choses in action, etc., and placed the new partnership in possession of the room formerly occupied by the old one; that the new partnership was formed by said appellees, Eliza Lupton and others. It is also alleged that the old partnership conducted a profitable business, and, at the time of its dissolution, had on hand net earnings of the value of $20,000; that during all the time of its existence, appellees Lupton and Gemmill kept $10,000 of its funds in a bank in Hartford City, in which they were interested, and of which said Lupton was an officer; that the Hartford City bank loaned said funds, but never accounted to the Pennville bank for the use thereof, and the latter never received anything for tho use of said funds.

It is averred that appellees, Ambrose G. Lupton and Gem-mill, are the managers of said new partnership, and have in their possession all of the assets of the old firm, together with all the books and papers thereof, and refuse appellant an inspection of such books and papers, for the purpose of ascertaining the amount of property belonging to the old firm. The paragraph also alleges that the old partnership matters have never been adjusted or settled; that appellant has demanded of said appellees, and been refused, an accounting for her capital invested in the partnership, and the earnings thereof; that she has demanded of them payment of the amount invested by her in the partnership, together with one-fourth of the partnership’s net earnings, which demand has been refused; that all the indebtedness of the partnership has been paid; that after the dissolution of the firm said Eliza Lupton died testate, and said Ambrose G. Lupton is the qualified executor of her will; that the business of said old firm was very profitable, and had it not been wrongfully dissolved, it would, at the termination of its ten years’ existence, as provided for by the contract, have earned $50,000, on its capital invested, instead of the $20,000 actually earned, before the wrongful dissolution. It is alleged that appellant is a housekeeper, has no knowledge of the banking business, and never inspected the books of the firm. By reason of the facts averred, appellant avers she has been damaged in the sum of $20,000 for which she demands payment.

The second paragraph of complaint alleges that appellees Lupton and Gemmill converted the assets of the old firm to their own use, instead of turning them over to another partnership, as alleged in the first paragraph. In other respects, the allegations of the second paragraph are substantially the same as those of the first.

There was no demurrer to either paragraph of complaint. Appellees answered by general denial. Appellant’s motion for a trial by jury was denied. The court made a special finding of facts, from which it concluded that appellant was not entitled to recover. Appellant’s motions for a venire de novo and a new trial, were overruled, and judgment was rendered for appellees.

1.

Appellant contends there was error in denying a trial by jury. If the cause was one of equitable jurisdiction, there was no error. It will be noted that the first paragraph of complaint alleges that there has never been any adjustment or settlement of the partnership business; that there were large net earnings, and that appellees Lupton and Gemmill had permitted another bank to use this partnership’s funds in its own business without recompense. Law courts are not possessed of the special machinery required for dealing with complicated accounts and interests. Powell v. Bennett (1892), 4 Ind. App. 112, 29 N. E. 926; McBride v. Stradley (1885), 103 Ind. 465, 2 N. E. 358; 30 Cyc. 715, 716; 1 Story, Eq. Jurisp. (12th ed.) §683. In refusing a jury trial there was no error, because, on the facts stated, the cause was one of exclusive equitable cognizance.

The court found the facts specially, and concluded therefrom that appellant was not entitled to recover. Appellant excepted to the conclusion. By the special findings it is shown that in February 1901, appellant, appellees Ambrose G. Lupton and Gemmill, and Eliza Lupton, executed the partnership agreement set out in appellant’s complaint, and pursuant to the provisions thereof established a partnership banking business at Pennville; that each of the partners contributed $5,000 to the prosecution of the business, and the same was continued under the management of appellees Ambrose G. Lupton and Gemmill until June 30, 1905; that appellant took no part in the management or conduct of the business, and never inspected or examined the books of the bank; that on certain dates there were various amounts apportioned among the partners as net earnings of the business; that on June 30, 1905, the value of each partner’s interest in the bank was $5,800, which interest consisted of his original investment, and $800, as his share of the undivided profits, after deducting certain taxes unpaid, some interest on certificates of deposit, and some unearned discount. On said day, appellee Ambrose G. Lupton tendered appellant a written agreement, already signed and acknowledged by himself and Gemmill, for the formation of a partnership, to exist for ten years, which was substantially the same as the former contract, except that it provided for a capital stock of $25,000, instead of $20,000. He requested appellant, who was his sister, to sign and acknowledge the contract, and told her that the purpose in increasing the capital was to meet the competition of a newly-established rival bank, in Pennville; that appellant refused to execute the contract, and refused longer to continue as a partner in the bank; that thereupon $5,800 was deposited to appellant’s credit in the bank, by said Lupton and Gemmill, and a certificate of deposit for said amount was issued and made payable to appellant; “which certificate of deposit was handed to the plaintiff by the defendant Lupton, whereupon the plaintiff told the defendant Lupton, to keep said certificate, and that when she wanted said cerifícate she would call for it. That the defendant Lupton placed said certificate in said bank, for the use of the plaintiff, and ever since said time said certificate and the money represented by said certificate remained in said bank for plaintiff, and at all times subject to her order.” The court further finds that on June 30, 1905, after the above occurrence, new articles of partnership were executed by said Eliza Lupton, appellees Lupton and Gemmill, and other persons, and that this new partnership, on July 1, 1905, “took over to itself” the property and assets of the old partnership, and assumed all the liabilities of the latter, and thereafter conducted said banking business until September 9, 1905, when Eliza Lupton died; since that time the business has been conducted by the surviving partners.

Prior to the commencement of the action appellant demanded of appellees the payment to her of her share of capital invested, and earnings realized thereon, and damages on account of the dissolution of the partnership. The complaint here was filed in May, 1906.

2.

3.

4.

Appellant contends that the court erred in its conclusion of law. The answer to this question depends on the construetion placed on that part of the court’s finding which we have italicized. It was appellees’ theory that appellant was not entitled to recover because, on June 30, 1905, she accepted the $5,800 certificate of deposit, as the equivalent of all her right, title and interest in the partnership property, on a dissolution created by her. Unless she did so accept the certificate, she was entitled to a judgment for $5,800, with interest from the time of making a lawful demand. The legislative purpose in making provision for speeial findings of fact, with conclusions of law thereon, was manifestly to make the ease easily reviewable by setting forth the exact grounds on which the judgment rests. 38 Cyc. 1953. A special finding, under our statute, (§577 Burns 1914, §551 R. S. 1881) - is a statement of the ultimate facts from which the law determines the rights of the parties to the action. Perkins v. Hayward (1890), 124 Ind. 445, 24 N. E. 1033; 8 Ency. Pl. and Pr. 933; Norris v. Jackson (1869), 9 Wall. (U. S.) 125, 19 L. Ed. 608. In passing on a finding of facts, to determine its sufficiency to support the conclusions of law, statements of evidence, or findings of mere evidentiary facts, must be disregarded as surplusage. Bartholomew v. Pierson (1887), 112 Ind. 430, 431, 14 N. E. 249. In Taylor v. Canady (1901), 155 Ind. 671, 675, 57 N. E. 524, 59 N. E. 20, it was said: “The office of a special finding is not to state the evidentiary facts, that is, such facts as prove the existence of the ultimate or inferential facts. Such evidentiary and probative facts are to be considered by the court in determining the existence of the substantive ultimate facts, but their statement in a special finding is improper.” Of course the “court” referred to in the foregoing paragraph is the trial court. This court has no original jurisdiction, except ancillary. The law vests in the jury, or trial court the exclusive power to determine facts, and this court has no power to infer the existence of an ultimate or inferential fact from evidentiary facts found, however logieal such inference might be; and this is true if all the evidence be embraced in the findings. Whitcomb v. Smith (1890), 123 Ind. 329, 332, 24 N. E. 109; Behler v. Ackley (1909), 173 Ind. 173, 89 N. E. 877. To this rule there is an exception in case the evidence is documentary. It is the function of the court to construe documents. Bolton v. Clark (1903), 162 Ind. 471, 477, 68 N. E. 283.

5.

The italicised portion of the court’s finding is a condensed recital of the testimony of appellee Lupton, concerning a conversation and transaction between him and appellant, at their mother’s residence. This cannot be held as other than a finding of a mere evidentiary fact. It is not the equivalent of a finding that appellant accepted the certificate. It is not claimed by appellees that Lupton was intending, in this transaction, to make any tender to appellant of the amount due her. There was no plea of payment or tender. If under any conceivable theory of the pleadings evidence of tender would have been competent, it is manifest that the trial court entertained no such view, for there was no judgment for plaintiff for $5,800, a necessary result if the proffered certificate had been deemed a lawful tender of the amount due. The appellees and court relied on the theory that appellant accepted the certificate as the equivalent of her share in the partnership property, on dissolution. "We are of the opinion that the court erred in concluding against appellant’s right of recovery on the facts found, after disregarding the finding of evidentiary facts; but we also are of the opinion that the ends of justice would be better sub-served by granting a new trial, rather than by ordering a restatement of the court’s conclusions of law.

6.

7.

Appellant claims error in various matters in the overruling of her motion for a new trial. The evidence shows without conflict that when this action was commenced all the firm debts had been paid. Appellant correctly insists that she was entitled to a finding of such fact. There was no finding on that matter. The evidence shows that during the life of the partnership, a large part of its funds — averaging about $17,000 — was kept on deposit in a Hartford City bank, in which appellees Lupton and Gemmill were interested. The Pennville bank received interest on these deposits to the extent of about two per cent. The funds of the Pennville Bank, were generally loaned at six per cent. The court’s finding that-appellant’s share in the assets of the bank, on June 30, 1905, was $5,800, is based solely on the evidence in relation to capital contributed, and undivided profits as shown by the bank’s books, which did not show receipts from the Hartford City bank in excess of two per cent. A managing partner must act in perfect faith in transacting the partnership business, and is not permitted to retain any profits derived from the use of its funds in his private business. Love V. Carpenter (1868), 30 Ind. 284; 30 Cyc. 459.

8.

It is claimed by appellant that the trial court, in the hearing of this cause, proceeded on the theory that the act of March 4, 1905 (Acts 1905 p. 182) to “regulate the business of banking by individuals, partnerships and unincorporated persons”, had the effect of dissolving the partnership here in controversy, on June 30, 1905. If such theory was adopted, it was erroneous. The act expressly contemplated the continuance of banking partnerships on condition that they should comply with the statutory regulations. The capital here was more than required by the provisions of the act. The original partnership agreement had not been acknowledged by the parties interested therein, but such acknowledgment might have been made on or prior to July 1, 1905'. The evidence shows that bank furniture and fixtures constituted less than one-third in amount and value of its capital stock. The act of 1905 required also a statement that the responsibility and net worth of the individual members of the firm should equal an amount double that of the capital. A compliance with the regulations of the act of 1905 authorized a continuance of the business under the original contract.

Appellant presents many other questions, but it is not probable that they will arise on another hearing, and we therefore deem it unnecessary to consider them. Judgment reversed with instructions to sustain appellant’s motion for a new trial.