Phillips's Appeal

68 Pa. 130, 1871 Pa. LEXIS 167

• Court: Supreme Court of Pennsylvania
• Decided: May 8, 1871
• Status: Published

Opinion

The opinion of the court was delivered,

by Agnew, J.

On the question of jurisdiction of the bill in this case the members of the court are equally divided. Jurisdiction of the case is therefore sustained on this ground. I would dismiss the bill.

Before examining the merits of this case it is proper to notice the practice of proceeding before a master, which has been so vigorously assailed. It is objected that it is contrary to correct equity practice, and inconsistent with the duty of the court and the right of trial by jury to appoint a master to report the facts and such a decree as he may deem proper to be- made by the court. But this matter is not well understood by the learned counsel. If there be no chancery jurisdiction over the subject of the bill his animadversions should have been directed against that; as is well shown in the cases of The North Penna. Coal Co. v. Snowden, 6 Wright 488; Norris’s Appeal, 14 P. F. Smith 275; Tillmos v. New York Dyeing and Printing Co., 17 Id. 507. But when the jurisdiction rightfully exists there can be no conflict with the law or the Constitution; for then it is not only the duty but the right of the court so to regulate the practice before it as to secure the most accurate and full development of the case in aid of its own functions. Its power is statutory and ample: Act of 16th June 1836, §§ 3, .21, Brightly’s Dig. 928, pi. 21, 33. By reason of the large amount of equity business, original and appellate, it has become impossible for this court to examine every case, ab ovo and in detail; but we must be brought directly to the points of the contest. This can be done only by a preliminary hearing before a competent master, who can take time to examine the case well, and report upon it intelligently and accurately. The effect of this is to eliminate from the controversy that which is undisputed, and to develop the true points of contest. The error of the learned counsel was in supposing the proceeding before the master is a trial which judicially determined the rights and liabilities of the parties, with a bare appeal to us, when it is but a process to develop them for our consideration; the party dissenting from the master’s views bringing the real points of the contest into our view by his exceptions. Our rules, therefore, make provision for the appointment of masters, both general and special, and for their powers' and duties: Rules in Equity 62, 64, 65, &c. No rule limits the subject of reference to the master; but what shall be referred to him is a matter in our own discretion; for his province is merely ancillary: 2 Maddock’s Ch. 505, 506, 509; 2 Daniel’s Ch. Pr., ed. 1865, pp. 1294, 1299, 1301, note 4; 3 Daniel’s Ch. Pr. 2197. The effect of an appointment of a master to report the facts and a proper decree is no doubt to bring into the report not only the facts directly proved, but his deductions of fact and conclusions of law, in order to arrive at the decree. But there is no impropriety in this, as it only serves to develop the cause fully, and is not binding on the parties unless approved by us after an examination of the matters in dispute. The conclusiveness of a master’s report is sometimes spoken of. But properly speaking no report is conclusive. That would be to make the judgment of an officer performing an ancillary service superior to our own. The weight due to a master’s or auditor’s report depends on the matter in question. When he reports facts directly proved by the witnesses we are accustomed to give his report great weight, because of his superior opportunities of judg7 ing of the credibility of the witnesses and the effect of their testimony. But when the fact is a deduction merely from other facts reported by him, his conclusion is simply a result of reasoning, of which we are as competent to judge as he. Then if we find a master supporting a conclusion by false deductions, or upon erroneous views of the character and weight of the facts actually found, it is not only our right but our duty to correct his error. When in order to arrive at a proper decree he also states his conclusions of law, they are but opinions submitted for our adoption, if we think they are founded in reason and law. Hence the report of a master is neither a decision nor an infallible guide, but is a serviceable instrumentality to aid us in performing our own functions. It is obvious, therefore, that in this .case the master, under the terms of his reference, could not perform his whole duty vyithout finding the facts in relation to the final contract, deducing his conclusions therefrom, ascertaining the value of the stock, the amount of the dividends received, and pronouncing his conclusions upon the whole case. In doing this he has lightened the labors of the court, and really served the interests of the appellants by stripping the case of unfounded allegations and immaterial facts, and bringing it down to the few terms of the final or modified contract. Upon the testimony of John L. Newbold he found this contract to be, that the plaintiffs for their services in procuring the subscriptions to the Maple Shade Oil • Company which they had obtained, were to have the one-sixth part of the profits of $95,000, or $15,833.33-J- in stock at subscription price, and one-third of 5000 shares of reserved stock. But we think the master erred in his conclusion that the one-sixth of the $95,000 or $15,838.33J, was payable in stock. We think the clear and decided weight of the testimony on both sides is, that this sum was payable in cash. The master sets out in a material error by giving to the answer of the defendants less than its due weight; overturning it by the unsupported testimony of a witness whose attitude in the cause entitles him to no greater weight than the testimony of any one of the defendants. The defendants in their answer deny expressly and responsively to the bill, that they were to pay the one-third or the one-sixth of the $95,000 in stoek.

The testimony of Mr. Newbold was not entitled, under the circumstances in evidence, to the great weight given to it by the master. Supposing him to be legally competent to testify, yet he had evidently a strong bias of feeling and of interest of a personal kind. He was one with Brooke & Barrington in the enterprise, and was to receive one-third of its profits. He assigned his interest, it is true, in absolute payment, he says, of his debts; but the assignment was to his brother-in-law, and for a sum small in comparison with that found by the master on his testimony, having a surplus to return to himself, or to fill the pocket of his near relative. One or the other would gain largely by his testimony. His testimony is also-seriously contradicted, not only by the two Phillipses, but by Brooke and himself. In his first examination on the 4th of June 1867, referring to the final or modified agreement, he testified that Isaac N. Phillips, Brooke and he, had a conference together in Brooke & Barrington’s office, and that Phillips said to Brooke, “ as you have only got $100,000, instead of $200,000 of the subscriptions, I propose to reduce your compensation to one-sixth of the $95,000, and one-third of the 5000 reserved shares.” This he gave as a quotation of the language of Phillips, and as a proposition made in a personal interview at which he was present. But Brooke’s account is, that two of the Phillipses, Isaac and Thomas, came to his office-door and called him into the hall, and there stated to him that he had not raised the $200,000 to pay Dr. Egbert, and that unless he and Barring-ton would consent to modify the agreement, to wit, to receive one-sixth of $95,000, which was the stock profit, and one-third of the 5000 reserved shares, the company could not go through, and they would go up into the country and endeavor to raise it themselves. He says then that he went into the back office with the Messrs. Phillips and repeated the conversation they had had in the hall to Newbold in their presence. This is essentially a different version from that given by Newbold. Two years and a half after-wards, on the 7th of December 1869, and after Brooke had testified as just stated, Newbold was recalled, and then said he was sitting in Brooke & Barrington’s office, when Isaac Phillips came in. “ He called Mr. Brooke out into the hall, as he has stated, and he and Mr. Brooke returned into the office and they stated to me the proposition which Mr. Phillips had made to Brooke in the entry.” Then, as if to give color to his former statement, he says: “As I have stated before, Mr. Phillips said, You have only got one-third of the amount required subscribed, and I want to reduce your compensation. I will give you one-sixth of the profits of $95,000 in stock at subscription price, and one-third of the 5000 bonus shares in lieu of the former agreement.” But even with this attempt at reconciliation there is a manifest diversity in the statements of himself and Brooke. The two Phillipses also directly contradict Newbold’s statement, and agree with Brooke’s in ail except the mode of payment, which they assert was to be cash and not stock. This is the very point of the contest, whether the payment of the $15,833.33-J- was to be in cash or stock, and in regard to it, we think the weight of the evidence is clearly with the defendants. After the general statement of Mr. Brooke, above given, he was asked to answer this question: “ Please state as near as you can recollect the words used by Isaac N. Phillips, in proposing the modified agreement as testified to by you.” He answered: “As near as I can remember, one-sixth of the $95,000 stock profit, and one-third of 5000 reserved stock. . He put it in figures, $15,833.33^- in dollars, to represent the proportionate amount of the stock interest at subscription rates; he did not use these words to me, but I never gave my assent to receive money in lieu of stock at subscription rate.” Thus Brooke himself yields substantially the precise form of the contract proved by Newbold, and that which is noAV sought to be established. He admits that Phillips did not use the precise language he must prove to make the sum payable in stock, but that Phillips put it in dollars, and seeks to avoid the consequence by averring that he did not consent to receive money in lieu of stock. But his consent is immaterial — for the clearly proved fact in the case, and the finding also of the master, is, that Brooke & Barrington had failed to accomplish the subscription under the first agreement and cannot enforce it. He has nothing, therefore, but the modified agreement to resort to, and that he must take as Phillips proposed or obtain nothing. He was the only witness on his side to the proposition made in the hall, and Newbold’s testimony, contradictory as it is, is but second hand. There is nothing, indeed, in their testimony which ought to overturn the answer. But we have, in support of the answer, not only the positive testimony of Isaac and Thomas Phillips, who made the modified agreement, but the testimony of two others corroborating them. The Phillipses state distinctly and positively that the payment of the $15,833.33$ was to be cash and not in stock. Their testimony was taken after the law had gone into effect making them competent as witnesses, the court having made an order to open and remand the first report of the master, and to take the testimony of all the parties. The two Richardsons, who at one stage of the business had an admitted interest in it, prove the clear and distinct admissions of Brooke & Barrington, that the payment was to be in cash and not stock. They had a deep interest in knowing the truth of the ease, and the only way the master disposes of their testimony, is by attributing to the Richardsons a want of frankness — a willingness to sustain their pecuniary interest at the expense of their candor and truth. But the Richardsons are strongly fortified by circumstances. They had left Philadelphia for home before the rupture between Brooke & Barrington and the defendants had taken place, their bill being filed against all the parties on the 29th of March 1864, just twenty days after the modified contract had been concluded. The committee, in the mean time, proceeded to Venango county to examine the land and assist Phillips in making the payment. The report of that committee was made to the subscribers on the 28th of March 1864. The paper referred to by Newbold and Brooke, w'hich was presented by Isaac N. Phillips for signature, they say, was not presented until after the return of the committee, and no controversy began then, but it took place only at the second interview in reference to this paper. The bill of the Richardsons was filed on the 29th of the month, and under these circumstances expressly charges that “ said Brooke & Barrington, so as aforesaid agreed to receive instead of half of all said profits, the sum of $15,838.33$ in aash, and 1666$ shares of stock of said company, to be delivered by the said Phillips.” Now here is an assertion made by the Richardsons against their own interest, if stock was then more desirable than cash, and still more to the purpose, it was ante litem motam, as to the present controversy, and therefore not likely to be fabricated. Following the bill the defendants filed their answer, in which they admit the agreement as thus averred by the Richardsons. This contract with the plaintiffs the defendants have never denied, but always professed to be willing to fulfil, even as shown by the testimony of the plaintiffs. Indeed, they offered to the plaintiffs and the Richardsons, to deposit the money and stock if they would accept it, in the hands of any one they would agree upon to abide the result of the controversy between themselves. They offered to Brooke also, to pay the amount over to him, if the plaintiffs would indemnify them against the Richardsons. The plaintiffs have never agreed to accept performance of the modified contract as thus shown to be, their demand being for stock instead of cash; insisting upon a term in the contract, which the evidence clearly shows did not exist. Besides, an action was brought in the names of the plaintiffs and the Richardsons against the defendants in Lawrence county on the 10th of October 1864, to recover the cash and stock under the modified contract, as understood by the defendants. It is true, that the plaintiffs and the Richardsons litigated as to the right of the latter to use the names of the former in the action. But this did not make the action less potent as a barrier to the defendants’ performance. They could not know whether the action was rightfully brought or not in the names of the plaintiffs. That was not their controversy. They could only await the result of the battle between the claimants, a contest which actually resulted in the defeat of these plaintiffs by the verdict of a jury. There is therefore no ground on which to rest the finding that the defendants ever declined to perform the modified agreement as they admit it to be, and as the proof is. This being the case, it is evident that the plaintiffs are not entitled to bold the defendants to the highest price the stock has since attained. The decision in the case of The Montgomery Bank v. Reese, and in Musgrave v. Berkendorff, applies only to a refusal to .perform the contract, whereby the plaintiff suffers the loss in the advance of the price of the stock refused to be conveyed or transferred by the defendants. The plaintiffs are therefore entitled to a decree for the payment only of the sum of $ 15,833.38-J with interest, and for the value of 1666f shares of the stock at subscription price, together with the dividends received by the defendants thereupon, and interest on the dividends, as well as interest on the value of the stock since the last dividend was declared. We append a statement resulting in the sum for which a decree is now made.

Statement of sum to be paid.

One-sixth of $95,000, payable in cash, ..... $15,883.33 Interest thereon from date of incorporation till May 1st 1871,

seven years fifteen days,........ 6,689.55

$22,522.88

1666| shares of stock at $6.66§, _.......$11,111.11

Total dividends received amounting to $11 per share at par, $10, 18,333.33 Interest on the dividends received, averaged from January 1st

1865 to May 1st 1871,........ 6,966.66

Interest on $11,111.11, subscription value of 1666§ shares of stock since dividends ceased to be declared, .... 3,555.55

$62,489.53

And now, May 8th 1871, the decree at Nisi Prius in this case is reversed and modified; and it is now ordered and decreed that the defendants, Isaac N. Phillips, Charles M. Phillips, Thomas W. Phillips, and John Phillips, do pay to the plaintiffs the sum of $62,489.53, and that the costs be paid by the parties in equal proportions. And it is further ordered that execution for the debt above decreed to be paid, do stay until the result of the action No. 20 of December Term 1864 in the Court of Common Pleas of Lawrence county, brought in the names of the plaintiffs and of John R. and Alexander Bichardson against the said Phillipses, shall be determined, or until the said plaintiffs, Brooke & Barrington, shall give sufficient security, to be approved by this court, to indemnify the said defendants against the claim of the said Bichardsons in the said action.