Keith v. Rust Land & Lumber Co.

167 N.W. 432, 167 Wis. 528, 1918 Wisc. LEXIS 92

• Court: Wisconsin Supreme Court
• Decided: June 19, 1918
• Status: Published

Opinion

The following opinion was filed April 30, 1918:

Eschweileb, J.

The disposition of this appeal required a construction of the contract of April 24, 1893, which reads as follows:

“Memorandum of agreement or understanding for the purchase of land and timber in the South, whereby it is agreed that Mr. Daniel Fitzhugh is to go South and look over any and all such tracts of land as he thinks it would be profitable for the parties interested to purchase, and work entirely and exclusively for the interests of this syndicate or association of persons; that all his expenses of so doing will be paid 'by those interested proportionately, but there shall be no pay for his services or for any other person interested herein. It is understood' and agreed that Mr. Daniel Eitzhugh is not to furnish any of the purchase money for all or any of the lands so to be purchased, but that it is to be provided by the other five members of the syndicate and he to be charged with interest at the rate of six per cent., payable annually. All purchases subject to approval. The interest of all to be the same in the land. One sixth each. D. Eitzhugh interest same as others, one sixth.”

The learned trial court held that this contract created a partnership; that in the accounting thereunder Eitzhugh should be charged with one sixth of the purchase money invested in land as of the date of each investment; that as money was received from the sale of lands or rents or trespasses or sale of timber, such money should be applied first to the payment of expenses of looking after the land and paying the taxes and with interest on each item from the date of outlay to the date of repayment, and out of the balance to return to each of those interested, other than Eitz-hugh, the capital invested; that upon money being available for such return of capital, one sixth thereof should be credited to Eitzhugh upon his obligation to his five associates based on their advance for him of his share of the capital, applying such credit first to the discharge of interest and then to the reduction of the principal; that when the net moneys received became sufficient to pay all the carrying charges and expenses and to return all the contributed capital, then Eitzhugh became entitled to an undivided one-sixth interest in the remaining lands as tenant in common and thereafter liable for one sixth of the expenses, provided there was not on hand money sufficient for such payments. That interest should be charged against Eitzhugh on advancements for carrying charges, such as taxes, etc., this being based by tbe trial court, as stated by him, upon tbe equitable principle as requiring tbe estate of Eitzbugb to do equity when bis representatives were asking for equitable assistance.

With tbe usual frankness of tbe trial court it was conceded-tbat there were difficulties in arriving at tbe conclusion be did with reference to this contract. Great weight was placed by him upon tbe provision therein found, tbat Eitzbugb is “to be charged with interest at tbe rate of sis per cent., payable annually.” But for tbe language of tbe clause just quoted tbe trial court indicated tbat bis opinion would have be'en tbat Mr. Eitzbugb was to receive a one-sixtb interest in and to all lands purchased pursuant to said contract without being charged in any way with any portion of tbe purchase price thereof, but tbat be felt it impossible to give effect to tbat language requiring tbe charging of interest unless there should be assumed tbat such interest was chargeable upon some principal sum as due and owing under tbe contract from Eitzbugb to bis associates for tbe purchase price.

In this contract tbe following features appear to us to be controlling:

First, tbat Eitzbugb is to have equally with each' of tbe others a one-sixtb interest in tbe land. We have no right to assume tbat when they say one-sixtb interest in tbe land they meant one-sixtb interest in tbe net proceeds or net profits from tbe sale of tbe land and not tbe land itself. Nor can we assume tbat when they say tbe interest of all is to be tbe same in tbe land tbat they meant tbe Eitzbugb interest was to be different from tbat of the five, they to be secured fot tbe purchase money and be to share only when all tbe purchase money has been reproduced from tbe land and not until then. Again, unless tbe interest of Eitzbugb in tbe land vested at tbe same time, to tbe same effect, and with exactly the same and no other conditions and limitations than tbe respective interests of tbe five did, then Eitzbugb did not have tbe same interest as tbe others in tbe land.

Second, it was expressly stated that Eitzbugh “is not to furnish any of tbe purchase money.”

Neither here nor in the expression following are words used to indicate that his one-sixth of the purchase price is considered as an advance. If this one-sixth purchase price is treated in the accounting, as was done by the trial court, as an advance to him or to his account by the others and to be taken out of the proceeds of the land or treated as a charge on a one-sixth interest in the land, he has in effect furnished a one-sixth of the purchase price; or again, if it be treated as a loan to him because of the requirement that he is to be charged with interest, then again he has furnished such amount within the reasonable meaning of that term.

Third, it was also expressly stated “but that it [the purchase money for all or any of the land so to be purchased] is to be provided by the other five members.” They are to provide, not advance. “Provide” means to supply; to afford; to contribute. Webster, New Internat. Diet.

If the five others get the one-sixth of the purchase price repaid to them out of the proceeds of Eitzhugh’s one-sixth interest in the land, or out of the land as an entire thing, then the five have in effect advanced that one-sixth of the purchase price; they have not contributed it, they have only advanced it.

We shall not here assume that these parties meant other than the plain ordinary meaning of the words and expressions that they used.

Trouble is experienced with the provision that Eitzhugh is “to be charged with interest at the rate of six per eent¡, payable annually.” It is a confusing expression as there used. We do not, however, think that this confusion in the one clause can require that contradiction should be forced into the other clauses.

It was held by the court below that interest presupposes a principal sum upon which it can be charged and, none being found in the terms of the contract, one must be imported, otherwise there is nothing upon which the interest charge is to be supported.

This appears to us to be an inverted process and an exalting of the incident above the principal. The result of the adoption of such view in the court below was to throw awry-other and plain provisions of the contract. It in effect construed the language of the contract herein practically as though it contained the express provisions found in the contract involved in the case of Rust v. Fitzhugh, 132 Wis. 549, 112 N. W. 508, apparently between the deceased and one of the other parties to the agreement herein and drawn the year preceding the contract here. A comparison of such contracts makes evident the substantial distinction between a contract for net profits as in that case and for an undivided interest in real estate as in this case. The language of that contract, so far as pertains here by way of comparison, was as follows:

“Now, in consideration of one dollar to me in hand paid, receipt whereof is hereby confessed and acknowledged, I hereby agree to account for and pay over to W. A. Rust, his heirs or assigns, the one-fourth (¿) of the net proceeds derived from the sale of said lands above referred to. By net proceeds, are meant all payments of principal and interest for said lands, taxes thereon and expenses connected with the care and sale of the same to be first deducted from the amounts received as principal and interest from.the sales of said lands, and the balance remaining being the net profits, one fourth of the same to be paid by me to said Rust.”

It is also urged that the construction by the court below should be adopted, for otherwise it would appear that Fitz-hugh in this case was getting large returns for a small consideration. The enterprise, however, was one involving possibly a long interval before anything could be realized therefrom; it evidently was more or less of a speculation as to whether it would make large or any returns, and it involved tbe pitting of tbe time and undoubted experience and integrity and standing of tbe deceased against tbe capital tbe others bad-or could procure, and we see no reason wby tbe one should be regarded as less entitled to large returns, than tbe other, and especially so when tbe parties themselves do say, as here, that “tbe interest of all to be tbe same in tbe land. One sixth each. D. Eitzhugh interest same as others, one sixth.” Tbe manna of large returns could not fall upon him and miss them. He could only make purchases of such real estate as met their approval. They bad tbe veto power and be bad no unlimited field for investment. They evidently bad faith in him. That was a valuable asset, and with bis time and energy necessarily expended for several years be surely contributed a valuable consideration sufficient to support this contract. It is not for a court, in a case like this, to measure and compare respective considerations now by tbe results as though those results were a certainty and not merely a hope, and not a prophecy even, in 1893. Rust v. Fitzhugh, supra.

We are satisfied from tbe language of this contract, then, that there was no obligation whatsoever on Eitzhugh’s part to furnish, or any right on the part of the others to charge him with, or deduct from his one-sixth interest in any sale of the lands, this one-sixth of the purchase price as was done in the accounting.

He was, however, “to be charged with interest at the rate of six per cent., payable annually.” We think the most reasonable construction to be given to this feature is that he was to be charged in favor of the other five with interest annually on a sum equal to a one-sixth of the purchase price as it was from time to time paid for the land until such time as there should be realized from the sale of the real estate a sum equal to the entire purchase price with accrued interest. Then such charge against Eitzhugh on that basis to cease.

No objection is made by tlie appellants to an allowance in favor of defendants of interest on advancements made by them for expenses and taxes until repaid by sales of the land, so no change twill be made in the accounting in that regard, and the enterprise may therefore be charged with such expenses taxed and disbursements with interest as was done in the accounting approved by the trial court.

It is urged that by the retention, without apparent objection on the part of Fitzhugh, of the statement sent him in May, 1907, he became bound by all the items and charges therein, among which were charges for the one-sixth purchase price and interest thereon. But between such a statement and a written contract the contract must govern, and defendant cannot assert such declaration on its part in the teeth of the contract any more than it was allowed by the court below to assert its claim for interest on interest embodied in the same statement in the face of sec. 1689, Stats., providing that, unless agreed to in writing by the party sought to be charged, past-due interest shall not be compounded nor interest paid on interest.

The court allowed as a charge against the account of the Fitzhugh land purchase under date of September. 21," 1908, an item as follows: “Portion of office and clerk’s services for years 1899 to 1907, inclusive, two years at $200, seven years at $500, $3,900.”

There was also allowed under date of May 1, 1909, a further charge for interest on the above charge from dates of yearly charges to the date of entry thereof, $871.56. There were a number of other corporations in which the stockholders of the defendant company were also interested and dealing in lands and lumber or acting as holding companies. They had offices and officers together, and as between some of them charges were made from time to time apportioning the office rent and clerk’s hire. These items so entered as to such charges of office rent were made after the account bad been submitted to Mr. Eitzbugb in- May, 1907, and without further notification to or consultation with him. The contract herein provided, “but that there shall be no pay for his [Eitzhugh’s] services or for any other person inter•ested herein.”

Such an allowance for office rent and clerk hire would be in effect an allowance for services, directly contrary to this provision of the contract. It was also a material change in the account after it had been renderéd to Mr. Eitzhugh, and the defendants have not lifted the presumptions that should be indulged against them by the rendering of such a statement. Such a statement was in the nature of a declaration on their part at least of what their claim of charges was and should, under the testimony here, bind them.

A further substantial change of the account of May, 1907, was made under date of December 31, 1908, and allowed by the court by an item of $821.63 as a portion of one Duschau’s salary and expenses from 1905 to 1908 in looking after certain of the land connected with the Eitzhugh land purchase. It appears from the testimony that this charge was made by an officer of the defendant company upon merely a written statement rendered to him in the account of one E. W. Gilchrist, a signer to the contract of 1893 and who was largely interested in his own behalf in Southern lands and by whom Duschau was employed and paid. There was also, after Eitzhugh’s death and in May, 1909, a further charge against his account of interest from the average date of entries on Gilchrist’s books of this item of $821.63. There was no other proof as to this than that such item was received by defendant’s officers as being on the books of Gilchrist. There was no proof of the actual payment of that item. These items should have been disallowed on the same grounds as the preceding ones also.

Oomplaint is made by the representatives of the deceased, Eitzhugh, that interest was improperly allowed upon the personal account of Daniel Fitzbugb witb tbe defendant corporation and tbat tbe same should bave been treated as an open account current and interest allowable only from tbe date of tbe last entry thereof. Without discussing this account in detail, we are satisfied tbat tbe view taken by tbe trial court as to this matter of interest ought not to be disturbed and as to tbat account or balance as found and'determined by him in tbe findings tbe judgment is affirmed. ■

The disposition tbat is being made of tbe Fitzbugb land account will undoubtedly so alter tbe situation herein tbat tbe balance due tbe plaintiffs on account of tbe land deal under tbe contract of April, 1893, will be larger than tbe balance found due tbe land company on tbe personal account between Fitzbugb and tbe defendant company, and tbat would make it immaterial to consider tbe question whether tbe balance in favor of tbe land company should be adjudged a lien upon tbe interest of the plaintiffs in tbe balance of tbe real estate. Should it, however, be a material question, we hold tbat there is no ground for such a bolding as was made by tbe trial court. There was no such lien created by act of tbe deceased, nor is there airy warrant in tbe contract for such a disposition. It would in effect make tbe claim of tbe Rust Land Company on its personal account witb Fitzbugb a preferred claim as against all tbe other creditors of tbe deceased. Tbe record as it is before us indicates tbat there are a large number of claims filed against tbat estate and far in excess of its apparent assets. There was some discussion at tbe commencement of tbe bearing of these two matters as to whether or not it might be finally adjudicated tbat any found balance in favor of tbe land company upon tbe claim it filed in tbe probate court should be held to be a lien upon any interest tbe plaintiffs might be found to bave in tbe real estate, yet we are satisfied there was no sufficiently definite stipulation to tbat effect to authorize tbe determination by tbe court below as be did on tbat point, even if there were sufficient authority in the attorneys representing the estate to so bind it and so affect the rights of creditors. Upon this latter point we express no opinion.

By the Court. — The judgment of the circuit court so fal-as it affects the determination as to the amount of the claim of defendant against the estate of Daniel Fitzhugh is affirmed, but so far as it affects the rights of the parties under the contract of 1893 it is reversed, and the cause remanded with directions for the taking of an account in accordance with this opinion, appellants to have costs and disbursements in the case.

Siebeciceb, J.

I am of the opinion that the trial court correctly construed the contract in question and properly stated the account between 'the parties and hence the judgment should be affirmed.

WiNsnow, C. J., and RoseNbebby, J., dissent.

On June 19, 1918, a motion by the respondent for a rehearing was denied, with $15 costs and costs of motion; and a motion by the appellants to amend the mandate was denied, without costs.