Allison v. Davidson, 17 N.C. 79, 2 Dev. Eq. 79 (1831)

June 1831 · Supreme Court of North Carolina

17 N.C. 79, 2 Dev. Eq. 79

Andrew Allison v. George L. Davidson et al.

Ml tlie member's of a partnership are necessary parties to a final settlement of the partnership accounts ; and if after such settlement one leaves his share in the hands of the acting'partner, he docs so at his ownrisk. Dutif pending’ an account, andbeforeitssettlement, one of the partners receives his share of the profits without the consent of the others, upon the insolvency of the acting partner, he must account with the others for the amount thus received.

This bill was originally filed in Iredell, in 1822, and was amended in the following year. It charged, that in the year 1817, the plaintiff entered into partnership with the defendant Davidson, and with Robert If'orkc and Robert Simonton, who were also defendants, for the purchase of slaves in this State, and the sale of them in the State of Mississippi — that each partner was' to advance S 4000, and that the profits were to be equal! v divided. That in pursuance of this agreement, a large number of slaves were purchased, which were carried by the plaintiff and Simonton to Natchez, in the State of Mississippi, and there sold. That a very large profit was made upon this adventure. That Simonton had, while at Natchez, the charge of the slaves, and received the money upon cash sales, and was the active partner. That in the year 1818, the plaintiff received from Si-monton the capital advanced by him ; but that all the defendants had, upon various pretences, refused to come to a settlement with the plaintiff, and pay him his share of the profits. The prayer was for an account, and for payment of the plaintiff’s share of the profits.

The defendant Simonton, in his1 answer, stated, that ’previous to the year 1817, a copartnership had subsisted between the other defendants and himself, in the purchase and sale of slaves — that in the year 1816, they sold a large number on credit in the State of the Mississippi, and upon the debts becoming due, it was determined that the person who went to collect them, should carry out a number of slaves with him — that Worhe had left Iredell for the purpose of making purchases of slaves, and himself and Davidson were to have followed lffm, when he met the plaintiff’s father, who proposed that the plaintiff should be taken into their copartnership, ob~ serving that as the plaintiff was a very yonng man, and entirely inexperienced, he did not expect him to be admitted upon terms of perfect equality, and that he, the father, was principally anxious to get the plaintiff into business, and enable him to acquire some knowledge of it from experience. That he, Simonton, being upon terms of great intimacy with Mlison, the elder, replied that he was willing the plaintiff should be admitted, but that hi» admission must finally depend upon its meeting with the approbation of Davidson and Worke. He denied that any other agreement as to the admission of the plaintiff, was ever made, and admitted, that $ 4000 was advanced by Mlison, the elder, for the benefit of the plaintiff, in the speculation then on foot.

The answer contained a discovery as to the purchase and sale of the negroes. To an amendment averring that he had executed a memorandum in writing, whereby the plaintiff was declared to be equally interested in the profits, Kc answered that ho had no recollection thereof.

The defendants Davidson and Worke both denied the right of the plaintiff to an account. Before the cause was feet for hearing, both Simonton and Worke died — the former, having appointed the defendant, Davidson, and Theophilus Falls and James Campbell, executors ; the latter, his wife, and John Mushat, who were severally made parties' by sci./a and all denied assets liable to the plaintiff’s demand.

Replications were taken to the several answers, and depositions filed ; in one of which á written memorandum of Simonton was proved, whereby he declared the plaintiff interested in one fourth of the negroes u now buying.”

At December term, 1829, by an interlocutory order, the right of the plaintiff to an account was established, and a reference of the partnership dealings was directed, and also an account of the assets of Simonton and Worke.

At this terra, the clerk reported, that the net profits of the partnership dealings amounted to$9,507 10, of which each partner was entitled to $2,376 25 —that a capital of $4180 was advanced by the plaintiff and $4420 91 by each of the defendants - — that Simonton received for cash sales at Natchez, $ 20,275 — that at the sarao time sales to the amount of $6.125 were made upon a credit, the notes for which •were taken payable to Simonton — that after crediting him with his own capital and profits, and the capital of Davidson which it was admitted by the latter was advanced by him, bo owed, to the copartnership $8,794 88. In relation to this balance, the clerk reported specially, that Simonlon, Worke and Davidson, had been copartners in business before the year 1817— that Simonton and Worke both died before a settlement of their various copartnership dealings had taken place ■ — that the executors of Worke-füeá a bill against the executors of Simonton, for an .account — that the matter in dispute had been referred, to an arbitrator, who had decided that the executors of Simon km owed the executors of Worke $6,127 89, which had been .paid them. That there was no direct evidence before him, whether the whole, or any part of this sura was on account of Worke1 s capita] and profits in the partnership, of which the plaintiff wtys a member ; but from the fact that nearly all the partnership effects were in Simonton*s possession, he inferred that those profits and that capital did constitute a part of the said sum of $6,127 89.

As to the sum of $ 6,125, the amount of credit sales at Natchez, the clerk reported that $ 4,967 thereof had been collected by Davidson, to whom Simonton had delivered the bonds — that upon Davidson?s return from that place, he paid Simonlon* $ 3,463, and retained in his own hands $ 1,504, and ihst Falls, one of the executors of Simonton, had, since the death of his testator, received from the agent who collected the deists, the balance thereof, including interest, amounting to $761 90. That Davidson had received of the partnership effects the sum of $1,504 above mentioned, and also $1430 85, remitted him by the agent charged with the collection oí †]10 })011{[s gjyc(E,tipon the ci'cdit sales. ’ That at the (loath £ftniou¿onf there existed an unsettled account between him and Davidson — that this account was. by an agreement between Davidson and his co-executors, referred to arbitration, and that Davidson charged Simonton, and was allowed by the arbitrators, the sum of $ 3,250, as his share of the profits of this copartnership' — that the balance in Davidson? s far or, and which ivas awarded him, alter sundry credits, and among them the sum of $1,504 above mentioned, amounted to $2,389 98, and that, in entering up judgments, against the executors of Simonton, Davidson had uniformly retained this sum.

The clerk also reported, that the plaintiff was entitled . to interest upon the amount due him, as follows, viz. upon three fourths thereof from the time when the co-partnership operation closed, the 1st June, 1818, and upon the balance from the 1st of June, 1819.

The' clerk reported upon the account of Workers and Simonton’s assets ; but as it was agreed by the counsel at this term, to discuss the cause only so far as the-de-fondant Davidson was personally liable to the plaintiff, upon the supposition that both t'Forke and Simonton died insolvent, it is unnecessary to state the result. .

After the exceptions mentioned below were filed, the clerk, in a supplemental report, stated that he had overlooked an admission of Simonton’s in his answer, which proved that he had improperly charged the defendant Davidson with the sum of $ 1,430 85, and that it was properly chargeable to Simonton.

The plaintiff excepted to tlxe report, as follows :

1st. Because the master had not charged Davidson with the sum of $3,250 retained by him as his share of the profits of the copartnership.

2d. Because the clerk had not charged Davidson with all the money received by Simonton, so as to render him liable for the plaintiff’s capital and profits.

3d. Because the clerk had not charged Davidson with the full amount of cash actually received by him, but only with that which he retained out of collections made at Natchez.

Other exceptions were filed as to the liability of Workers executors. One of which was, that the clerk had not charged the executors of Worke with the share ■ of the profits which ho had received. These exceptions were not argued.

The defendants Davidson and Falls excepted, 1st, Because the clerk had improperly charged the former with' 81,430 85, as received from the agent at Natchez. 2d, because it did not appear whether the sum of §761 90, mentioned in the report as having been received by Falls, was partnership effects, or the separate property of Svmonton.

Of these two exceptions, the first was admitted by the counsel of the plaintiff to he well founded. The second was withdrawn by the defendants.

Badger & Devórense, for the plaintiff,

upon the questions raised by these exceptions, contended,

1. That upon the dissolution of a copartnership, partners are trustees for cadi other j that each of them has a lien upon the partnership effects for the security of his capital and profits, and that every partner is liable to the other for funds which came into his hands. (Willi-avis ex parte 11 Fes. 3 Craw shay v. Collins 15 Id. 228 S. C. 1 Jac¿¡¡‘W. 9.G7. Ilealhcotev. Hulme Id. 122 Ken-dal ca parte 17 Ves. 514 Rowlandson ex parte % Fes. & Bea. 172 Craw shay v. Maulé 1 Swans. 507 Feather stonliaugh v. Fenwick 17 Ves. 313 Long v. Majes-tre l Johns. C. It. 505).

2. That Davidson having denied the pHamtiflPs right to an account, he had rendered himself liable to the plaintiff for the balance due him, upon the same principle that a conversion made the defendant at law liable for the value of the thing converted. (3 Kent’s Com. 27. Griswold v. Wadding ton 16 Johns. 11. 491 Marquand v. JYew-York Manufacturing Co. Vi Id. 525 Feather-stonehaughv. Fenwick 17 Vcs. 298).

3. That Davidson, Simonton and Worke, fraudulently conspired to defeat the plaintiff of his rights, and were, liable to him in solido for the amount due him. (Bridge-man v. Green 2 Yes. sen.. 627 Jlugnenin v. Basely, •14 Yes. 273).

After the dissolution ofapart-nership, each partner is a trustee for the others as to the partnership funds in his hands. But if one of them pays over to the' acting' partner the partnership effects, unless 'jítala jldes be proved, he is not liable upon the insolvency of the hitter.

4. ¡That tbe plaintiff and Davidson, being equally interested in tko partnership, ought to share equally in the result, and hence upon the maxim that u equality is equity/’ Davidson ought to account with the plaintiff for the money he had received and appropriated to his own use. (Peacock v. Peacock 16 Ves. 49. 3 Kent 697 Finele v• iStacey Goxo 120).

Gaston, for the defend ant Davidson,

contended, that there had been no fraud on the plaintiff, nor any denial of his right. That upon the cases cited, he was in no way liable to the plaintiff, as Simonton was the settling partner, and all payments were properly made to him. He urged very strongly, that upon the dissolution of a copartnership, the profits became a debt due by the settling partner to each of his copartners; and that every one of them had the right to receive his share from him, without •accountability to the others.

Rueetn, Judge

It has been contended, on behalf of the plaintiff, that Davidson is liable for the insolvency of Simonton; because this, being a limited partnership, was dissolved on the completion of the trip ; and after dissolution, each partner has a lien on the effects for his share, and each is, to as the funds in his hands, a trustee for the others for their shares, made several by the dissolution,

This proposition must be qualified at least thus far: that the expiration of the term leaves the copartnership in existence for the purpose-of closing its concerns. And if, by the terms of the agreement and course of the business, it is plain that one of the pax-tners was to close it, was to be the acting and managing partner, a deposit of the effects of the firm with that partner, by another is justifiable.. Such a deposit is taken as made for the purposes of the business, that is, to collect the effects into one fund, in the proper hand for adjusting the accounts, ascertaining the profits, and making actual division. That, in such a case, is to be taken as the intent, until bad faith is made to appeal*. It is to be so taken, because it was so agreed. This repels the-idea, that the. payment to the acting partner of the money, in which another partner liad a share, was to defeat this latter one, and so in breach of trust. A partner, thus holding property, after the dissolution, may be a trustee for each of the others severally. But he is only liable as other trustees. He is not bound to pay to each one personally his share of that money, if, by the agreement, the whole was to be paid to a particular partner for division. For then the payment to the partner, who is the general receiver, is according to and in execution of the trust.

In the case before the court, it is plain that this last was the nature of the agreement or understanding of the parties. The whole business had been conducted in the name of Simonton alone. The plaintiff accompanied him to Natchez to make sales. Yet the sales were made by Simonton; he received all the money, altho’ the plaintiff was present, and did not even then return his capital; the bonds for the price of the negroes sold on credit were made payable to Simonton. He was looked to and trusted by all parties; and more particularly by the plaintiff, who alone went with him in person on the trip. The next year Davidson received the bonds from Simonton, and went out to Natchez to collect them. He did collect jg 4967 thereon, and on his return paid to Simonton, the sum of 55 3463 and retained § 1504. The clerk lias charged him with this last sum ; and the plaintiff excepts, because he has not charged Davidson with the, whole sum of ¡84967". If the payment had been wrongful ; if it had been against the agreement; if it had not been according to the agreement, the exception might be well founded. But under the understanding existing in this case, which wo are obliged to see from the circumstances, the payment to Simonton was a proper one. And therefore this exception is overruled.

It is said, however, that the denial of the plaintiff’s right, and of the partnership by Worke and Davidson, unmounted to a combination to defeat theplaintiffby placing the funds in Simonton’$ hands, out of his reach ; and so amounted to a convei'sion ; and that renders each liable for the other-

if several partners conspire to defraud, their co-partner out of his fits18°and6 act" with a view to effect that pur-that each is lia-lance^due^udi co-partner, on an theUpartnership accounts.

If the purpose of paying the money into Simonton’s hands ; or if the jmrpose of denying the plaintiff’s right in the answer, was that the money might be there, with a yjew of defeating the plaintiff of rights clearly known to those defendants, a case of flagrant fraud andperjury ]je made out, which would induce the court, as 7 7 far as possible, to reinstate the plaintiff out of the effects 0^' defendants. But it does not appear,that Works and Bavidson did .know the terms on which Simonton had a^^tted the plaintiff. And if they had, it does not appear, that the payment to Simonton was designed to de-^he pla-intiff^ or that he objected to such payment, On-the contrary, Simonton’s hands were those which the plaiiitifF wished to hold the money. He had no confidence in the others — he had in Simonton, and looked to him for what he was entitled to. The bill is filed upon the foundation that Simonton had, and rightfully had the money. The others are not made parties for the sake of relief against them ; but because they were necessary parties, against whom the partnership was to be established, and between whom the division of profits was to be made. The liability of fVorke and Bavidson for Si-monton is an after thought, inconsistent with the scheme on which the bill is framed, and inconsistent with the • true agreement between the plaintiff and Simonton. Thai those defendants miist have been aware of an interest of some sort in the plaintiff — of a kind of partnership— cannot be doubted. But both sides trusted to Simonton to determine the particulars, and as the link of their union. And whatever might be the extent of the respective interests, the general fund was to be in Simonton’s custody. The court therefore sees nothing in this part of the cast-more than in the other, to make either of thus© persons liable for more than remains in his hands. And there fore the second exception of the plaintiff is overruled.

But that each of these defendants is respectively liable for what he has in his hands, seems equally clear. When a partnership is closed by stating a final account, ascertaining • the amount of the general .fund, and of the shares of each partner, each hath a right then in receive that share. If one gets in from the holder his share, as his share, and another delays to take his, but leaves it in deposit, it must be taken that he leaves it as his own, and not the property of the whole. Each partner is necessarily a parly to such an adjustment in fact, as wejl as interest, and must know the state of his property. He leaves it at his risk; and if the general* receiver fail, the loss is that of the individual who trusted • him. But until the concern be closed by taking a final account, there is no power in any number of the partners, to the prejudice of another, to declare cither the " sum, or the shares of profits. And any effects of; the. concern received by one, remain, in respect to the rights of the excluded partner, joint property. Upon a loss of the residue, he has a right to resort to any one for his proportion of the effects in his hands. The injured partner has never consented to his receiving them as his. own ; and is therefore not bound by the division. It is* true,he who has thus gota part, may point out to thoother how he may get Ms share — where the fund for ins satisfaction may be found — and so far as that will go, he shall take it, and not disturb what has been- done. But the arrangement is no further obligatory. For example: Falls has here $761 .90, said to be of the partnership effects. If that turn out so, that will do to satisfy Mli- . . i. , ni i , , „ son -pro tanto, and he- shall look to it, ir it can be got. B ut if it cannot he got, the loss must fall on all three of these partners, Mlison, Worke and Davidson equally ; and the two last must make a common stock, for the three, of' the monies in their hands, because, as to the plaintiff, it remains joint stock ; though as between themselves and as between them and Simonton, it is several. Wherefore the exception as to the liability of Works’s executors is allowed, because it is reported, that the executors of Worke have received his capital, viz: $4,420 92, and full share of the profits, viz: $2376 27k, and yet tile L * clerk hath not charged him with the latter sum,, or any part thereof. As to the plaintiff, that remains a joint hind, tor the payment of profits.

A partner, who lias ■1'?fflved fits, must first nersSp^effecte existing in spe-cic before ho can compel con-. Mbution from a partner who'has received, his sliare-

Where offour afed^nsolvent, largely indebted Ihipfandtwoo-thers without the fourth"* re-<yived their shares from his executor, the sum ?° received tween the survi ¡ vors, joint stock,

The question yet remains, with what sum is the defen•dant Davidlson to charged, ? The clerk, states an account, in which lie ís charged with the sum of § 2934 85, which he collected of the funds in Mississippi, and gives him credit for the sum of $ 2376 27$ for his profits ; leaving a balance in his hands of $558 571. To an item of $1430 85 of those debits this defendant excepts; and the exception is allowed, because the evidence is, that Simonton received that sum, and not Davidson. This reduces the sum chargeable to Davidson, to $1504, which he retained as before mentioned. That sum this defendant claims, and the clerk submits the propriety of the claim, as for his own profits. This claim the court has already discussed, and disallows upon the principle on which the exception relating to the liability of Wovkc’s executors was allowed.

Where an act-iüg partner dies apSpoIntedoaneo^-to exe c“pal-tncrjS retains liis pro-from8 the tor, he is bound to account with ates for the sum regained.

the only sum which the plaintiff has a right to consider as joint property in his hands ? This brings me consider the first exception. That relates to this state of facts: Davidson is one of the executors of Simon-ton, and by arbitration between him and his co-execu~ t°rs> their accounts were settled after the death of the testator. Upon that occasion, Davidson gave Simonton cl-etjjt for the sum of $1504, and charged him with the sum of g 3250, as “his iourth part oí profits on sale oí* negroes the last trip to Natchez,” and a balance was awarded to Davidson, which he has retained. This was an excess of $ 873 72$ above his actual profit. It has been contended for, first, that this excess alone is open to Mlison, because lie received the other as Ms own profit. That has been already answered. Next, that no part of it is accessible to Mlison, because there are judgments against Simonton’s executors for a very heavy amount, on specialties, not satisfied, and that Davidson will be bonnd to answer for this sum as assets, to those creditors. If such were the facts, the court would not take them now : for if the act, by which he attempted to appropriate that sum to his ownsatisfaction,did not effectually appropriate it, it must he left for the benefit of those, whose legal priorities would overreach both these parties. But such is not the case. In taking all the judgments this retainer has been «Wowed,and the judgments (rendered since the receipt of the assets, and the appropriation of this portion of them) are all quando; as appears from the report of Simonton’s estate, which the defendant does not except to. Those judgments never can reach this money. (Mara v. Quin. 6. T. R. 1.) The case is then this : that this defendant has retained the money upon a ground, which as between him and the plaintiff, is for their joint benefit, and it can never be taken from him by any body having a better right. Can he be permitted to keep off the plaintiff by allegation, that he ought not to have retained at all. The very proposition pronounces its own answer. For these reasons, the plaintiff’s first exception is allowed.

. Where an act-i^idtpayableto himself f°r parf- and dies, in e-g.uity these partnership effects-

The defendant Falls excepts to the clerk’s report, charging him with having the -sum of g>76l 90 of the partnership effects in his hands. This sum was received by him since the death of Simonton, as the balance due on bonds taken on the sale of negroes. That fact is clear. The bonds were payable to Simonton, who transacted the business ; which enabled Falls to collect them. But they are not the assets of Simonton. They are, in this court, the effects of the copartnership, and belong to the surviving partners. If the partnership property cannot be traced, it necessarily falls into the general funds of the possessor, as mon$y. But if it remain in specie or securities, it is joint property and survives. Wherefore the exception of Falls is overruled.

The effect of these several judgments is, that Falk must pay into this court for the use of the plaintiff the said sum of S 761 90, with interest thereon from this day, unless the whole be paid to the clerk or the plaintiff within thirty days, and in default of such payment within that time, that execution issue therefor with interest as aforesaid. As it does not appear, that Falls is insolvent, that sum must be taken, for the present, as available to the plaintiff, and therefore the i’csidueofthe plaintiff’s stock, namely, gl80,- with interest thereon from the 1st day of June 1818, to the 1st day of September 1831, viz: jS 145 80 making together the sum of $ 325 80 must be first satisfied thereout, which will leave abalance thereof of $>466 10 applicable towards the plaintiff's profits. The sum then due to the plaintiff as principal money, by way of profits, will be $ 1910 17h which with the profit of $>2376 27a belonging to the defendant Davidson, makes an aggregate of $4286 45 ; towards which the said sum of $3250, received and retained by Davidson, is applicable to the respective profits belonging to each — namely, to Davidson the sum of $ 1858 05, and to Allison the sum of $ 1391 95 with interest on the sum of $ 927 95 (part thereof) from the 1st day of June 1818, and $418 (the residue thereof) from the 1st day of June 1819, until paid: and it is decreed that execution may forthwith be sued therefor.

This sum is thus ordered to be presently raised from the defendant Davidson, as that which the plaintiff will be entitled to receive from him, upon the supposal, that Eobert Worke’s estate is insolvent. Equity' will adjust the loss equally between the three; but at present' the estate of Worke is reported insolvent, and the counsel have not thought proper to dispose of the report upon that part of the case. Should it turn out to be otherwise* that estate will hereafter be compelled to pay its proportion of the plaintiff’s demand, and Davidson will then stand in the plaintiff’s shoes, for such sum as he hereby is made to advance, which fVorke’s estate ought in the' first place, if able, to do.

All the said matters are ordered and decreed accordingly ; and the other matters excepted to, and all the other questions appearing upon the report and pleadings are reserved for the further decision of the court.

Pee. Cueiam — Decebe accoediNgx.v.