Tichenor v. Newman

57 N.E. 826, 186 Ill. 264

Opinion

Mr. Chief Justice Boggs

delivered the opinion of the court:

It is urged the hearing of the issues raised under the pleadings involved an investigation and adjustment of the accounts of the members of the firm, and that for that reason the judgment of the Appellate Court is correct and should be affirmed. But we do not think an investigation into and determination of the partnership accounts necessary to the determination of such issues or of the issue raised under either of the counts of the declaration. The transaction evidenced by the agreement was the sale by Newman to Tichenor of the West Adams street property and the good will in the general medical practice of said Newman, such real estate and good will being valued in gross at the sum of $12,000. The formation of a partnership was, as the agreement expressly states, for the purpose of effectually transferring to Tichenor the good will of the business of Newman. The latter, in express terms, contracted to perform certain acts for the purpose of securing to Tichenor such good will, viz., that he would make known to his patrons the fact of the partnership; to the best of his ability would introduce said Tichenor to them and unto their families as a physician and as a man worthy of their confidence, and so far as should lie in his power would establish him in said practice; that he would send him, wherever not objected to by the patient, to answer calls for him and would personally attend such cases as he might be personally insisted on, and would in good faith further do whatever he reasonably and properly could to install or establish said Tichenor as his successor in said practice. These promises were to Tichenor and not to the firm. The benefit to accrue from their performance would inure to Tichenor individually and not to the firm, and a breach of these undertakings on the part of Newman would result in injury to Tichenor as an individual and not to the proposed firm. An adjustment of the damages resulting from the failure of Newman to observe and perform these things which he had undertaken and contracted to dp for the purpose of delivering to Tichenor the good will of the business could not be considered on an accounting in equity of the partnership accounts. ■ In Hanks v. Baber, 53 Ill. 292, we said: “Nor can the parties, on a bill to settle partnership accounts, introduce their individual accounts into the statement. They are not connected with, nor do they in anywise relate to, the business of the partnership. They form a separate and disconnected matter that cannot be included.” Authorities supposed to indicate a different rule will, it is believed, be found only to authorize-the interposition of a private indebtedness as an equitable set-off against an amount found due to the co-partner on the completed adjustment in equity of the affairs of a solvent co-partnership,—and this, not upon the ground a private demand of an individual, part,ner against his co-partner can be considered on an accounting of partnership accounts, but that on the completion of such an accounting it maybe considered as an independent equity and there adjusted in order to avoid multiplicity and circuity of actions. (Consult 17 Am. & Eng. Ency. of Law, p. 1276, and authorities cited in notes.) The judicial determination of the controversy at bar in an action at law does not involve any examination into and adjustment of the partnership accounts, or inquiry as to the profits or losses dr expenses of the firm, or the adjustment of any claims arising out of the business transacted by the firm. The reason of the rule that one partner cannot sue another at law except for a balance struck and a promise to pay does not exist here, and the rule has, therefore, no application. Newman contracted to deliver to Tichenor the West Adams street property and the good will of his business, so far as such good will could be delivered, and expressly specified certain acts to be performed by him to effect the transfer of the good will. These obligations of Newman as to the real estate and the good will were personal to Tichenor, and their non-performance vested a right of action in Tichenor,—not in the firm. Damages for such non-performance, if collected, would not constitute firm assets, but, if recoverable, belong- to Tichenor in his individual capacity, hence he may sue at law for an alleged breach of such undertaking. The mere fact such acts were to be performed while Newman was engaged in treating patients as a member of the firm could have no effect to change the character of his obligation or to deprive Tichenor of his individual right.

What has been said applies with equal force to the contract entered into by Newman to guarantee that the actual earnings and receipts of the co-partnership would reach a specified sum. Newman was selling to Tichenor the good will of his business and receiving a consideration therefor. As a part of that contract he undertook to guarantee the value of such good will for a limited period. The partnership was formed for the purpose of enabling Newman to invest Tichenor with the good will which the former had sold to the latter. They were to share equally in the earnings and receipts of the firm. The true construction of the guaranty which is set forth in the third clause of the contract is, that Newman guarantees that one-half of the gross earnings of the firm (collected, or earned and not collected,) will equal the amount of $2500 per annum during the time of the existence of the partnership, and that if one-half of such gross earnings do not equal said sum he will account to Tichenor for or pay him the deficiency. The guaranty further provided, such deficiency, if any, should be credited upon an indebtedness due from Tichenor, as an individual, to Newman in his individual capacity, if such indebtedness has not been otherwise paid. The firm had no interest in this guaranty and its adjustment would not properly enter into consideration on the hearing of a bill to wind up the partnership. An investigation as to the right of recovery in an action at law to enforce this guaranty does not involve an examination into the state of the accounts of the partnership or of the relative rights of the partners, each to the other or to the firm. It would be necessary it should be known in such an action the total amount collected, and earned and not collected, by the firm, and for that purpose it would be entirely competent, in an action at law, to receive proof of the amounts collected, and earned and not collected, by each and both of the members of the firm. If one-half the total of such gross receipts and earnings should be found to amount to the sum of $2500 per annum, the guaranty would be fulfilled without regard to the expenses of conducting the business, or which of the partners had earned or which had collected the amounts entering into and constituting such total sum. If one-half of such earnings and receipts did not equal the sum of $2500 per annum, the obligation of Dr. Newman, under his guaranty, would require him to answer to Dr. Tichenor for the deficiency. The undertaking and the guaranty of Dr. Newman set forth in the declaration were in his capacity as an individual and were to Dr. Tichenor as an individual, and are enforceable in an action at law, and may be enforced in that forum without entering into an investigation of the state of accounts between them as partners. The circuit court misconstrued the guaranty to obligate Dr. Newman to guarantee that the net share of Dr. Tichenor in the business of the firm should equal the sum of $2500 per annum. The guaranty has no relation to the expenses of conducting the business, but only to the volume of the business in gross. Our conclusion therefore is, the Appellate Court erred in refusing to remand the case.

There is error in the record which made it necessary the judgment of the circuit court should be reversed. It appeared from the evidence the parties entered into the practice of medicine and surgery as partners, as contemplated by the agreement recited in the declaration, and that such partnership continued for the period of time mentioned in the agreement, and the evidence sufficiently tended to establish the appellee, Newman, failed and refused to comply with the obligations imposed upon him by the second clause of the contract, to make known to his patients and patrons that he and the appellant were partners in the practice of medicine and surgery, or to introduce appellant to said patrons and their families as worthy of confidence as a man and a physician, and otherwise, as required by said agreement, to aid in establishing said appellant as successor of said appellee in said medical practice, and, in general, that appellee failed to do and perform that which he had undertaken to do, as set forth in said second clause, of the agreement, for the purpose of effectually transferring to the appellant the good will of the business or medical practice of the appellee. The evidence also further tended to show the “actual earnings and receipts” of the co-partnership during the period aforesaid did not amount to the sum total as guaranteed by the appellee by the provisions of the third clause of the agreement.

On the hearing it appeared the appellant had not executed the note for $2000 mentioned in the agreement and in the guaranty clause. The court refused to allow the appellant, plaintiff below, to introduce proof which, as counsel for plaintiff contended, would show the failure to give said note for $2000 was brought about by acts of the defendant below. The ground of the exclusion of this evidence was a lack of an allegation thereof in the declaration. This ruling was correct. It was incumbent on the appellant to allege in his declaration compliance on his part with the obligations of the contract or to allege facts justifying or excusing such performance. The agreement between the parties was, the appellant should pay a gross sum of $12,000 for the premises (No. 492 West Adams street) and the good will of the business of the appellee, said sum of $12,000 to be paid as follows: $500 in hand, $9500 within twenty days after delivery of an abstract showing good^and clear title to the real estate, and the execution of a note, with security as mentioned, for $2000, which note was to be dated and delivered when “the transaction was consummated.” The appellee complied with his duty with relation to the delivery of the abstract and deed to the real estate, and “the transaction would be consummated,” within the true meaning of those words, by the payment of the sum of $9500 and the execution of the note. The consideration for the undertaking of the appellee to perform the acts agreed upon to be performed for the purpose of securing to the appellant the good will of the business of the appellee was performance by the appellant of his undertaking to pay the money and execute and deliver the note. These undertakings of the parties were not independent, but mutual and dependent, and it was incumbent upon appellant to complywith that which he had undertaken to do (unless non-compliance was excused or justified) before he could be permitted to maintain an action to recover damages for a failure on the part of appellee to comply with the obligations of the -contract on his part. (Hungate v. Rankin, 20 Ill. 639.) We said in Henderson v. Wheaton, 139 Ill. 581: “The rule is well settled that ‘where an act is to be performed by the plaintiff before the accruing of the defendant’s liability under his contract, the plaintiff must aver in his declaration, and prove, either his performance of such conditiomprecedent or an offer to perform it, which the defendant rejected; or he may aver his readiness to fulfill the condition until the defendant discharged him from so doing or prevented the execution of the matter which was to be performed by him.’ ” The appellant did not seek to amend his declaration, but his counsel admitted to the court and jury the note had not been given and that appellee was entitled to a credit of $2000. The court, over the objection of the appellee, accepted the statement and admission of counsel, and, at the request of appellant, instructedthe jury, in substance, to deduct the sum of $2000 from any sum allowed the appellant for his damages because of the alleged breach of the contract by the appellee. In this there is error. Whether the appellant was ready and able to deliver the note, with security, as required, and had been excused from doing so or was justified in failing so to do, were issuable facts, and should have been averred in the declaration in order the appellee might have notice thereof and have opportunity to make defense thereto. The action taken by the court may have been otherwise prejudicial to the appellee in that it was an invasion of the province of the jury. The ruling that the appellant should be permitted to admit the appellee was entitled to a credit of $2000, and the instruction to that effect, were likely to be regarded by the jury as an assumption on the part of the court that the appellant was entitled, under the evidence, to recover a larger amount than $2000.

It was error to permit the appellant to testify to conversations which, as he alleged, occurred between himself and appellee prior to the execution of the contract, as to the value of the practice of appellee. The guaranty incorporated in the written contract measured the liability of the appellee with respect of the value of such medical practice, and all prior statements were merged, as it were, in the writing.

It was not essential to the right of appellant to maintain the action he should affirmatively show he held a license from the State Board of Health authorizing him to practice medicine and surgery in this State. The relation of physician and patient did not exist between the parties, and the action was not for the recovery of the fees or charges of a physician. The appellant testified he was a graduate of the St. Louis Medical College and had been engaged in the practice of medicine and surgery for a period of about sixteen years. Without deciding any proof at all on the question was required, the proof produced was prima facie sufficient and was not controverted. North Chicago Street Railway Co. v. Cotton, 140 Ill. 486.

The agreement made it incumbent upon the appellant to use his best efforts to promote the interests of the partnership, and the undertaking* of Dr. Newman to guarantee that the earnings and receipts of the firm would reach the stipulated amount was based, in part, on compliance on the part of appellant with this agreement. Evidence tending to show that appellant did not use his best efforts to promote the interests of the partnership or that he engaged in the transaction of other business, whereby the earnings and receipts of the firm were injuriously affected, was competent to be considered, but it was not error to refuse to permit the appellee to prove that the name of the appellant appeared in the city directory of 1895 as secretary and treasurer of a corporation. The appellant was not bound by the statements contained in the city directory.

The complaints preferred by the respective parties to the rulings of the court in' the matter of granting and refusing instructions are disposed of by what has been hereinbefore said.

The Appellate Court correctly decided the judgment of the circuit court should be reversed, but erred in refusing to remand the cause. The judgment of the Appellate Court and that of the circuit court are each reversed, and the cause will be remanded to the circuit court for further proceedings in conformity with the views herein expressed. Each party will pay the costs by him made in this court.

Reversed and remanded.