Sterling v. . Chapin

78 N.E. 158, 185 N.Y. 395, 23 Bedell 395, 1906 N.Y. LEXIS 910

• Court: New York Court of Appeals
• Decided: June 12, 1906
• Status: Published

Opinions

Hiscock, J.

This action was brought for a partnership accounting of the affairs of the stock brokerage firm of E. S. Chapin & Co., composed of Edwin S. Chapin, the plaintiff’s testator, and his brother, the defendant. The Appellate Division by a divided vote has affirmed the action of the trial court in refusing to charge defendant with a balance of $37,078.80, shown by the partnership books to be due from him for the purchase price of a Stock Exchange seat, and the only questions involved upon this appeal arise with reference to such refusal to charge said defendant with this item.

After entry of the interlocutory judgment finding the copartnership between the parties and directing an accounting, such accounting was first had with the result of charging defendant with the item in question, and final judgment was entered in favor of the plaintiff for an amount- including the same. The Appellate Division, however, reversed such judgment by a divided vote, and upon the second and present accounting the referee, and upon the entry of final judgment the trial court, were necessarily controlled by such decision of the Appellate Division and compelled to exclude said item.

It may be observed at the outset, as bearing upon the equities of this litigation, that the copartnership or the testator concededly advanced about $30,000.00, exclusive of interest, with which to purchase a seat upon the Stock Exchange for the defendant; that said defendant received and became the owner of said seat, and that there is not the slightest evidence or claim that he has ever actually repaid said advance. If the judgment appealed from is to be affirmed, it must be on account of a technical release for an expressed nominal consideration, and without any evidence of a meritorious consideration or discharge of the indebtedness. It does not seem to me that it should be so affirmed, and, of course, I do'not lose sight of the rule that its reversal involves the demonstration that there are no findings of fact to sustain it, or else if there are such findings, that there is no evidence to sustain them.

The following material facts appear without any dispute whatever:

The partnership between testator and defendant was formed in 1886 and continued until May 1, 1896, when it was dissolved by mutual consent. The testator furnished the entire capital. January 20, 1887, the defendant, upon the books of 'the copartnership was charged with $30,110 cash for a Stock Exchange seat in an account which was headed “A. IC. Chapin, Hew York Stock Exchange Seat.” This account was entered upon the copartnership books by the defendant himself and there is no dispute that the charge in terms relates to the Stock Exchange seat in question.

At this time it was a rule or custom of the Stock Exchange that before a person could be elected to membership he must show that there were no outstanding claims against him, and if he had borrowed the money with which to purchase his seat it was necessary to file with the exchange a release of this claim for the benefit of the other members of the exchange. It was the intention that a person should enter upon business as a member of the exchange without having any claim against him and that the person who had supplied money for the purchase of his seat could not make a claim against him to the exclusion of other creditors. January 6, 1887, the testator executed in form a general release whereby “ for and in consideration of the sum of one dollar * * * paid by Albert K. Chapin,” he released said Chapin generally from all claims and demands which he had or might have for any cause “ and more particularly by reason of an advance of the sum of $29,000 made to the said Albert K. Chapin to enable him' to purchase a membership in the Hew York Stock Exchange.” This release appears to have been delivered to and filed with the Stock Exchange which produced it upon the trial of this action. There is not the slightest evidence that it was ever delivered to or ever seen or heard of by the defendant.

The above-mentioned account opened against defendant several days after the execution of the above purported release as above stated was carried upon the books of the copartnership to the time of its dissolution and in that account the defendant each year, exclusive of the one ending when the copartnership was dissolved, was charged with interest upon the balance shown to be due from him, and was credited with various payments, the balance at the date of the dissolution due from him being $37,078.80.

In addition to this, upon August 5, 1889, more than two years and a half after the execution of the purported release, the defendant wrote to his brother a letter, which reads as follows:

“ Dear Brother Ed :

“ Understanding that you are thinking of appointing me one of the Executors or Trustees under your will upon your decease, and being now indebted to you on account of the purchase money of my seat in the Hew York Stock Exchange, I do most cheerfully hereby agree to act as such executor or trustee or both under your will if so appointed thereby with out any commission or compensation other than a release by your will or otherwise from so much of my said indebtedness as would equal the commission or compensation to which I should otherwise be entitled.

“Tours affectionately,

“A. K. CHAPITA

It is urged that the testator at some time made statements which indicated that he had forgiven or intended to forgive this indebtedness, and that the defendant should not be held thereupon. The record, however, absolutely fails to disclose any such testimony outside of a certain letter or statement which was excluded from the evidence and is not before us for consideration.

It seems to me that this evidence presents no question of fact, but fairly and reasonably leads to the conclusion as matter of law that the defendant became indebted to the copartnership composed of his brother and himself for moneys advanced for the purchase of this Stock Exchange seat, and that this indebtedness has never been discharged. Perhaps I can best state the reasons which lead me to this opinion by discussing the propositions upon which the respondent bases liis claim to a contrary judgment.

In the first place it is contended that the advance or loan was a transaction between defendant and the testator as individuals, and that it was not a copartnership transaction, and this contention is supported by a finding of the learned referee to the effect “ that the sum of $30,078.80 appearing on the books as ‘ A. I£. Chapin Stock Exchange Seat ’ represented moneys advanced by the plaintiff’s testator.” This contention is based solely upion the form of the release above quoted, which is executed by the testator individually, and refers to an advance of money for the purchase of the seat. In view of the fact that the testator supipilied the entire copartnership capital, out of which must have been advanced the money for this purchase if a copartnership transaction, it would not have been strange or conclusive against -plaintiff’s claim if in a release not having that pioint in mind he had definitely recited that the advance was made by himself. But this he did not do. The release was by Mm of any claims which “ he ” might have “ by reason of an advance of the sum of $29,000 made to the said Albert II. Chapin to enable him to purchase a membership in the New York Stock Exchange.” While it is very likely that a release by a copartnership would have been strictly more appropriate to cover a copartnership transaction, still there cannot be the slightest doubt that this instrument in the form adopted answered the requirements of the, Stock Exchange and would have estopped and prevented the testator from ever urging against its members his rights either as an individual or as a partner on account of the advance. The recital is “ of an advance ” with no particulars added whether made by the individual or by the copartnership. It seems to me, therefore, that this piece of evidence standing by itself and without any other testimony explaining or elucidating it would be quite colorless and indecisive upon the question of the authorship of the loan. But when we consider the fact that subsequently to the execution of this instrument the parties by an account with items extending over seven or eight years expressly and continuously admitted that the copartnership advanced the money with which to purchase this seat and that the defendant was indebted to such copartnership for such advance, all uncertainty vanishes' and we have proof which is conclusive upon this appeal that the matter was a copartnership and not an individual transaction. This account and these entries represented the last and deliberate agreement of the parties that the copartnership advanced the money for the seat, assuming all the time for the benefit of defendant that there was but one purchase. There is nothing contradictory upon this point between the release and the books. The former was executed for a certain purpose and it is indecisive upon this question. The books contain the later utterances of the parties and they are perfectly plain and explicit.

It is suggested that these entries might relate to and evidence an individual transaction between the brothers, an individual loan by one to the other, but of course tliis is at variance with the fundamental principles of bookkeeping. The books of a copartnership represent the copartnership and every transaction properly entered thereon must be one to which the copartnership is a party. When the defendant was charged upon the books of this copartnership with the cash advanced for his seat, it necessarily meant that the copartnership was the other party to the transaction and was entitled to credit for the advance thus made.

It is also urged that the release in question discharged any indebtedness and that the account referred to evidenced a merely moral and not a legal obligation.

The latter suggestion is so utterly untenable as to require little' discussion. Merely moral obligations have no place upon the business books of a copartnership. Such books contain a statement of the legal assets and liabilities of the firm, and when men enter upon their books a debit or a credit balance of many thousands of dollars they are presumed to be dealing with claims which are legally enforceable and whicli do not rest upon mere option or morality.

I, therefore, pass to the claim that the indebtedness was discharged.

At the outset I am at much loss to find any evidence that the release can, if it was so intended, properly affect or discharge the copartnership claim against defendant. It did not purport to- discharge any claims which might accrue in the future to the testator, much less to the firm. Many days after it was executed the defendant charged himself upon the copartnership books with cash advanced for his seat. Those entries mean that on that day the firm advanced the money and first became his creditor upon the transaction in question.. Presumptively and in the absence of evidence showing the contrary the money was advanced upon the date when it was charged upon the books, and this claim now before us did not exist when the release was executed and could not have been discharged by it. And there is nothing unreasonable in this view, for the copartnership might very well at this later date come into tlie transaction and advance the money and take up an indebtedness which had theretofore been carried elsewhere. What I emphasize is, that we have here the uncontradicted and unexplained admission of the defendant by entries which are binding upon him, that at a certain date the copartnership advanced money to or for him, and that this copartnership indebtedness was not affected by a prior individual release of one copartner.

However, passing by this and assuming upon some vague and undefined theory, rather than in accordance with any proof that the release might relate to the same transaction evidenced by the entries, and might possibly, therefore, affect the indebtedness proved thereby, I still do not think such result was, in fact, either intended or accomplished.

I have already referred to the rule of the Stock Exchange, which required an assurance that a proposed member was free from indebtedness as a protection to the members against any claim which any person might have for moneys advanced for the purchase of his seat. The defendant was about to become such member. The testator, whether he did it as an individual or by means of the copartnership capital which he had solely furnished, advanced the money for the qmrchase of the seat. He executed the instrument in question which, as between him and the Stock Exchange, would have operated to prevent any claim for this advance in whichever form made. It was delivered to, retained by and upon the hearing produced by the Stock Exchange. So far as appeal's the defendant never saw or heard of it, and it seems to me that upon this evidence alone the fair presumption would be that the testator executed the instrument simply for the limited purpose of complying with the rules of the Stock Exchange and that otherwise said release was not intended to cancel any indebtedness. And upon this point the finding of the learned referee seems not only not to oppose, but expressly to sustain the theory which I am urging. He finds “ that thereafter and on the 6tli day of January, 18.87, said release was deli/oered to the New York Stock Exchange for the purpose of enabling the defendant to obtain membership i/n said Exchange a/nd so to be in a position to make use of his seat therein.”

But again we are not left to evidence which standing by itself might be indecisive.

In the natural order of things the release to. the Stock Exchange would first 'be executed to enable a person to become a member, and then sometime thereafter the seat and membership would be granted, and so not unnaturally we find a few days after the date of the release these entries made upon the copartnership books which were binding upon the defendant not only because he was a member of the partnership, but because they were actually made in his handwriting, which stated that on that day the copartnership had advanced upwards of $30,000 for the purchase of the seat. And still later upon every year for seven years down to the dissolution of the firm we find the defendant regularly charged upon these books, thus binding upon him, with interest upon this advance, and still further in addition a letter expressly acknowledging his indebtedness. It seems to me that such an account and such entries ought to mean something; that a man does not permit to be carried upon the business books of a copartnership of which he is a member an indebtedness of over $30,000, likewise acknowledged by a letter written with reference to death and testamentary administration, unless he owes it, or that an indebtedness which by the intention of the parties has been legally and fully discharged and canceled is thus thereafter entered and carried along in open and current account. It seems to me that these acts are so deliberate and long continued and are so utterly inconsistent with and opposed to the idea that this indebtedness had been canceled that we ought not to permit such effect against an estate from a purported release executed for a merely nominal consideration, unless we are compelled to. I do not think we are thus compelled to, but that in the manner indicated such effect may be given to both the release and the entries upon the books as will accomplish the true intent and understanding of the parties. The former as found by tiie referee was executed for the limited purpose of assurance and protection to the Stock Exchange; tiie latter represented and confessed the true situation between the parties.

In the discussion already had I have referred to and considered the findings of the. referee adopted by the courts so far as I desire to, with one exception. A finding apparently as of fact has been made, being the ninth one of the referee, that the execution of the release heretofore referred to and the “delivery of tiie same to the New York Stock Exchange operated to release and discharge- the defendant from any obligation to repay the amount so advanced to him by the plaintiff’s testator for such purchase of a seat in the said New York Stock Exchange.” This conclusion is one of law and adds nothing to the findings already considered.

The judgment should be reversed and a new trial granted, costs to abide event.