Keiley v. Turner

31 A. 700, 81 Md. 269

• Court: Court of Appeals of Maryland
• Decided: March 27, 1895
• Status: Published

Opinion

Bryan, J.,

delivered the opinion of the Court.

This suit was instituted by the appellant for the purpose of obtaining a settlement of the partnership business of J. J. Turner & Co. The firm was composed of Joshua J. Turner, his son-in-law John D. Keiley Junior and his son Joseph J. Turner. The record is a very large one, and is filled with elaborate examinations and cross-examinations of witnesses, and with long and minute statements relating to the matters in controversy, made up from the books and papers of the partnership and from other sources. We were informed at the argument by the counsel on both sides that the subjects of dispute were few in number. But to make a just and intelligent disposition of these questions required a careful and attentive examination of the whole record, so as to understand the respective rights and duties of the partners, and the nature, extent and character of their dealings with each other.

We will state so much of the proceedings in the cause as may be necessary to explain the grounds of the opinion which we have formed in regard to this controversy. The bill of complaint alleges that on the nineteenth day of March eighteen hundred and seventy-eight, a co-partnership was formed between the complainant John D. Keiley and Joshua J. Turner and- Joseph J. Turner Junior, under the name and style of J, J. Turner & Co., and that the business of the co-partnership was to deal in fertilizers and agricultural goods of every description. A paper called a copy of the articles of co-partnership was filed with the bill, marked “ Complainant’s Exhibit No. i,” and it was alleged that three copies of the articles of agreement were executed and signed by all the partners, which were identical in every respect, except in the provisions relating to the salaries of the partners. These provisions will be noticed hereafter. The paper filed with the bill states that during the continuance of the partnership Keiley’s salary should be four hundred and fifty dollars a month, and that the salary of Turner Junior, should be three hundred dollars a month during the same period; no salary was allotted to Turner, Senior. In his answer Turner Junior says: “That whilst there were three copies of said articles, as stated in said bill, prepared, yet, as he remembers, only one of them was signed by the parties, of which complainant possessed himself, and is the Exhibit No. I, so filed with said bill.” And Turner, Senior, says in his answer: “ That the partnership stated in said bill was entered into, and that the articles filed as Exhibit No. I constitute the agreement therefor then made, and that, although three copies thereof may have been written, yet, as he remembers, only one of them was signed, and that is the one filed with said bill.” We think it very evident that the draughtsman of the bill inadvertently designated his exhibit as ,a copy when he intended to charge that it was an oi'iginal paper, as it really is. The provisions relating to the salaries above mentioned as being different in the different copies of the articles of partnership are thus alleged in the bill of complaint. After stating that the matter was discussed in the Turner family, it is said: “It was suggested that the' difference between the sum to be allowed said Joseph J. Turner Jr., as above proposed, would cause jealousy and ill-feeling on the part of the latter, and it was urged that the matter should be so arranged that the difference should not be known to said Joseph J. Turner Jr., and accordingly it was arranged that Mr. Joshua J. Turner should be allowed 150.00 per month on the books, and your orator and Joseph J. Turner Jr., $300.00 each per month ; the allowance to said Joshua J. Turner, however, to be for the use and benefit of your orator. In the preparation of the articles, which were signed after the partnership had begun, the amounts. to be paid as salary to each partner were left blank on the three drafts, but at the time the articles were read and approved and executed, the amounts to be allowed to each partner were stated as being $300.00 each per month to your orator and Joseph J. Turner, Jr., and $150.00 to said Joshua J. Turner, as above agreed upon, but the two drafts of said agreement, that were retained by your orator and said Joshua J. Turner, had inserted in them the amount of $450.00 per month to your orator, and $300.00 to Joseph J. Turner, Jr., the actual amounts to be paid under the agreement aforesaid, between your orator and said Joshua J. Turner. Thus it came about that said Joshua J. Turner was credited on the books of the firm with $150.00 per month, which he was to pay to your orator as part of his salary. And settlements were had between him and said Joshua J. Turner on the basis of said agreement, your orator having received some payments on account of said allowance of $150.00 per month, from said Joshua J. Turner in other ways, and some in money drawn from the firm and charged to said Joshua J. Turner, as agreed, but a large sum yet remaining due him on this account. Your orator does not claim that in stating the partnership account prayed for, salaries shall be allowed on any other or different basis than the agreement among the members of the firm, that is to say, $300.00 each per month to him and said Joseph J. Turner, Jr., and $150.00 per month to said Joshua J. Turner, but he claims that as between himself and said Joshua J. Turner, the amount credited to the latter for salary shall be treated as credited to and due to your orator under the agreement aforesaid.” Responding to this statement, Turner Junior, in his answer says, that all previous negotiations in regard to salaries were merged in the articles of co-partnership, and that “as to the arrangement therein provided as to the payment of salaries, his only knowledge is as therein contained, and he is prepared to abide thereby; but as to any sub-arrangements between said Keiley and his father as to any division of his salary he knows nothing, is not a party thereto, nor in any manner connected therewith.” And Turner, Senior, in his answer says : “That, however, the matter of salary was arranged at the time, and this defendant, in his then state of health, not attaching any great importance thereto, by reason of the relationship of the parties, he did agree to the alterations of the articles as stated, and entries were made for the purpose of family peace, as stated.” The articles provided that the partnership should continue for three years ; it is alleged, however, in the bill, that it was continued until the thirty-first of December, eighteen hundred and eighty-two, when it ■ was finally dissolved. The complainant alleges that upon a settlement of the partnership affairs it will be found that a large sum of money is due to him. The prayer of the bill is for an account and for the payment of the balance due. After answers by the Turners, and the taking of testimony, an account was decreed and several different accounts were stated by the Auditor. In the meantime Joshua J. Turner had died, and the Safe Deposit and Trust Company had been appointed his executor. After hearing, the Court below ratified statement No. 2 of Account E, which showed a balance due by Keiley, and it decreed the payment of this balance to the executor of Joshua J. Turner. Keiley has appealed to this Court.

The amount of salary due to Keiley gives rise to one of the principal questions in the case. It will be observed that Complainant’s Exhibit No. I fixes his salary at four hundred and fifty dollars a month. Both of the answers admit that this agreement was signed by all the partners, and they do not admit or allege that any other one was signed, and there is no evidence that any other was signed. This agreement, therefore, according to the ordinary course of practice, is established as the contract between the parties. The answer of Turner Junior states that his only knowledge on the subject of salaries is what is contained in this exhibit, and that he is prepared to abide by it, and he disclaims any knowledge of what is styled sub-arrangements between Keiley and Turner, Senior, as to any division of his salary. The answer of Turner, Senior, distinctly states that “he did agree to the alterations of the articles as stated, and entries were made for the purpose of family peace as stated.” We see, therefore, that there is a perfect agreement as to Keiley’s salary at four hundred and fifty dollars a month; and as to the very peculiar method of stating a portion of it on the books to the credit of the elder Turner for Keiley’s benefit, all knowledge of an agreement to that effect is denied by the younger Turner, while it is admitted by the elder. A majority of the Court are of opinion that Keiley is entitled only to a salary of three hundred dollars á month as against the assets of the firm, and that if he is entitled to the additional amount, $150.00, his recourse is entirely against the estate of Turner, Sr. After the first day of August, 1881, there were no entries of salaries on the books of the firm. This omission was with the knowledge and consent of all the parties. There was evidence which the appellant’s counsel argued sufficiently and satisfactorily explained this omission. But the majority of the Court think otherwise, and hold that Keiley is not entitled to any salary after this date. The writer of this opinion is constrained to hold a different view on both of these questions, but as the Court’s judgment has been pronounced, any discussion of them would tend to no result and would be superfluous.

By the articles of partnership it appears that the elder Turner contributed all of its capital, and that it consisted of stock in trade, merchandise, land and buildings suitable for carrying, on the business. This capital was valued at one hundred and twelve thousand, two hundred and forty-nine dollars and seventy-eight cents, and it was agreed that he should be paid interest on this sum half yearly at the rate of six per cent, per annum, and that this payment of interest should be considered an expense of the business, and so charged on the books. There seems to be no dispute about the amount due him except in one particular. In the settlement of the accounts he took into his possession the stock and merchandise of the firm which remained on hand, and he charged himself with it at a valuation fixed by himself and the younger Turner. Keiley knew that he had taken possession of this merchandise and did not object to it. But the question is about the value of it. As Keiley assented to the appropriation of it, he is entitled to its value at the time; he would not be entitled to any increase in value ; neither is he to lose by any depreciation. We see nothing in the record which can justly give any ground for a question of fraud in the transaction. It is simply a question of amounts and value. The parties differ very materially on these questions, but this is a very usual occurrence in lawsuits. The principal item is a quantity of ammoniated phosphate. Turner, Senior, is charged with five hundred and ten tons as belonging to the firm, while Keiley contends that he ought to be charged with six hundred and twenty-six and a fraction. The question is not entirely clear upon the evidence, but, after a careful consideration of it, our best judgment is that the firm owned five hundred and ten tons, and that the remainder pf the ammoniated phosphate which Turner had in his possession was his individual property. The valuation presents a question of considerable difficulty. A good deal of testimony was taken on the subject, and calculations were made by the plaintiff’s counsel to show the average válue of the phosphate during the preceding year. This would give an approximation more or less accurate. We have, however, an estimate of more satisfactory. It is a valuation made by Turner himself. He shipped all of this merchandise to New Orleans in his own name and insured it in his own name. The amount of phosphate was estimated at six hundred and twenty and a-half tons, and it was insured for twenty-four thousand dollars. It is shown by the testimony of Willson, the marine insurance agent who effected the insurance, that it is usual to add ten per cent, to the invoice cost in insuring cargoes. So that we may assume that the amount insured was the value of the phosphate with ten per cent, added. A very simple calculation will show the value to be placed on the whole mass of six hundred and twenty and a-half tons; and the proportion of value to be assigned to five hundred and ten tons is equally easy of ascertainment. This amount will be charged to Turner as the fair price of the phosphate at the time he took it into his possession as his individual property. A loss was sustained on the shipment to New Orleans, which was caused in great measure by the failure of the purchasers of the phosphate to pay for it. With this loss Keiley has no concern.

The interest on Turner’s capital was credited to him down to December thirtieth eighteen hundred and eighty-two. It appears that he did not draw his interest semi-annually as it accrued, but let it remain as part of the capital of the firm ; and that he was allowed interest on these successive contributions of capital, which was computed from the several times at which the interest became due. It was stipulated in the articles of partnership that the salaries and the interest on Turner’s capital should be paid out of the funds of the partnership. It was further stipulated that the profits should be equally divided between the partners, and that the losses should be borne in the same proportion; and that the salaries should not be considered as losses sustained by the business. The meaning of this latter provision is very evident. The salaries were to be paid at all events, and were not to be diminished on account of any losses which might occur. It was urged by the appellant’s counsel at the argument that this rule was violated in the preparation of the balance sheet filed and marked “ Defendant’s Exhibit Examiner F. A. L. No. 2.” As the books from which this balance sheet was made up have not been shown to us, we have not the means of deciding on the merits of this suggestion. The record shows us that Keiley allowed large portions of his salary to remain in the hands of the firm. These sums were used for its benefit, and were contributions on his part to its capital. He ought to be paid interest on these amounts, not on the ground that payment was withheld by the firm, but for the reason that he furnished money which was used in the transaction of fits business. Payments of salary were due monthly, and from the time they became due interest is properly chargeable for his benefit; that is to say, each month’s salary is to bear interest severally as it became due, in the same manner as interest was allowed to Turner on the half-yearly instalments which were payable to him.

(Decided March 27th, 1895.)

We have stated our views on the questions which the counsel informed us at the argument were the matters of difference between them. The result is that Statement No. 2 of Auditor’s Account E is rejected and set aside, and the decree of the Court below is reversed and the cause remanded, to the end that an account may be stated in accordance with this opinion, and a decree passed for the payment of the sum thus ascertained to be due.

Decree affirmed in part and revei'sed in part; the costs in this Court to be equally divided, and the costs below to be paid by the appellees.