Baker v. Cummings

• Decision Date: 21 February 1898
• Docket Number: No. 189,189
• Citation: 42 L.Ed. 711,18 S.Ct. 367,169 U.S. 189
• Parties: BAKER v. CUMMINGS
• Court: U.S. Supreme Court

169 U.S. 189

18 S.Ct. 367

42 L.Ed. 711

BAKER

v CUMMINGS.

No. 189.

February 21, 1898.

This suit was commenced by appellee, Cummings, on February 1, 1890, by a bill filed on the equity side of the supreme court of the District of Columbia against Baker, the appellant. In substance, the bill set forth the formation about the year 1874 of a partnership between Cummings and Baker for the practice of law in the city of Washington; that the expenses were to be borne and the profits shared equally between the partners; that the firm some years thereafter became attorneys for the collection of claims against the United States in favor of certain inspectors of customs, for arrears of pay claimed to be due them. It alleged that on September 6, 1886, Cummings sold to Baker all his interest in the fees earned, but not then divided, and those yet to be earned from such claims, and that there was consequently a dissolution of the partnership as to these matters, but that it continued as to all other business until September, 1889, when the partnership was dissolved. The object of the bill was to procure a cancellation and annulment of the sale of the fees in inspector cases made as above stated, and of the written instrument of assignment by which it was evidenced, on the ground of false representations claimed to have been made by Baker to Cummings in the negotiations for the sale, which representations were averred to have brought about the consent to the sale, and the execution of the assignment to carry out the same. The fraud specified was in substance, this: That Baker had misrepresented the amount of the fees then actually earned by the firm, and undivided between the partners, on the inspectors' claims, for which appropriations had then been made by congress, by stating to Cummings that the then earned fees only equaled about $20,000, when in truth and in fact they were, to the knowledge of Baker, about $32,000; that as to the future claims then in the hands of the firm, but not then allowed by the treasury department, or appropriated for by congress, Baker had knowingly largely understated the amount thereof, by representing them to be only $80,000, when in fact they then amounted to about $275,000. The relief prayed was an annulment of the sale; a full settlement of the partnership affairs, treating the fees in the inspector cases as being a part of the partnership assets; and, in aid of the final settlement which was asked, there was also a prayer that Baker be enjoined from prosecuting an action instituted by him against Cummings in December, 1889, to recover $2,712.81 and interest, it being averred that Baker's right to this amount was involved in a settlement of the entire partnership affairs.

The answer of Baker denied that there had been any fraud practiced upon Cummings in the purchase of his interest in the fees in the inspector cases; and the alleged misrepresentations as to both classes of fees, whether earned or to be earned, was expressly denied. The averment that the complainant had sold his interest in the fees on a basis of his ownership of one-half therein was directly traversed, and on the contrary it was alleged that the assignment resulted from the following circumstances, and had been made upon these conditions: That the existence of claims by inspectors of customs against the government had been discovered by Baker, and that he had procured the business of prosecuting them for the firm for a compensation, in most cases, of 25 per cent. of the sum collected, and had, substantially by his own labors, pressed them to a successful issue, and that the result of his exertions had been to earn for the partnership a considerable sum of money, which had been, prior to 1886, divided between the partners equally; that during the course of the business Cummings had given little or no attention to the inspectors' claims, but on the contrary had neglected, not only these claims, but the partnership affairs generally; that, in consequence of these facts, for months prior to September, 1886, Baker had determined to put an end to the partnership, and had so informed Cummings; that for the purpose of preventing this dissolution, and securing a continued association with him (Baker) in business, which Cummings desired, an agreement had been entered into between the partners that Cummings, instead of taking an equal interest in the earnings of the firm from the inspectors' cases, should dispose of his rights therein on the basis of his having only a one-third, instead of a one-half, interest; that on this agreement as to the proportion in which the partners should be entitled to the fees, and Cummings' judgment of the future result of claims unallowed and unappropriated for, which were in their very nature largely conjectural, the sale was made for a consideration of $15,000 cash to be paid by Baker to Cummings,—the latter to retain in addition the full amount of all fees due to him for his services as assignee of an insolvent banking firm, which latter amount, without the release, it was averred, would have been an asset of the partnership, and was estimated to equal $10,000, of which Baker's share would have been one-half.

The answer moreover averred that at the time of the sale Cummings had full information of the condition of the business in the inspector cases, and dealt with his eyes open; that, as a partner, he was not only familiar with the general manner in which the business was conducted, but also, about two weeks prior to the sale, he received from Baker papers nd documents which fully informed him of the exact condition of the claims, his interest in which it was proposed to sell,—the papers and documents in question having been handed to Cummings during the pendency of the negotiations, in order that he might ascertain the precise situation.

In addition the answer averred that immediately after the sale, and before Cummings had cashed a check for $15,000 given him by Baker in payment of the amount of the purchase price, Cummings was put in possession of papers and documents which were acted upon by him, and which, if any fraudulent representation had been made in relation to the sale, fully informed him of the fact in ample time to have protected his interest, and, although this full information was given him before the purchase price was collected, Cummings made no pretense of any deceit practiced upon him, or made any complaint as to the contract, but continued in the partnership as a member of the firm as to other business, and that the first complaint which was made by him of any unfairness in the transaction was nearly three years after the sale, and then only after Baker had insisted upon payment to him by Cummings of a sum which Baker claimed was due him, and had moreover expressed his unalterable intention to dissolve the partnership. The defense of the bar of the statute of limitations was specially pleaded.

At the hearing a decree was entered for complainant, and a reference was made to an auditor to state the accounts between the parties. Pending the hearing on such reference an appeal from the interlocutory decree was prosecuted to the court of appeals of the District of Columbia, where a judgment of affirmance was rendered. 4 App. D. C. 230. Subsequently, on confirmation of the report of the auditor, a final decree was entered in favor of the complainant for the sum of $32,772.14, with interest thereon from the 1st day of July, 1895, until paid, in which sum was embraced a credit to Baker of the items claimed by him in his action at law against Cummings. From this final decree an appeal was taken to the court of appeals for the District, by which it was affirmed. 8 App. D. C. 515. This appeal was then taken.

S. R. Bond and Geo. F. Edmunds, for appellant.

F. H. Mackey, for appellee.

Mr. Justice WHITE, after making the foregoing statement, delivered the opinion of the court.

Before approaching a discussion of the issues which we deem it necessary to pass upon in order to conclude the controversy which the record presents, it will subserve the purpose of clearness of statement to give a brief outline of the proof as to matters about which there is no substantial controversy, and to point to the controverted question; thus eliminating from view irrelevant contentions, and concentrating the attention on the material issues:

(1) The existence of the partnership was established as alleged, and the fact that the claims of the inspectors had been unearthed by Baker, and had been mainly secured by him for the firm on a contingent fee of 25 per cent., and had been almost exclusively prosecuted by him, was established beyond question. That Cummings had not given any great attention to the business for several years, and that Baker was dissatisfied therewith, and had threatened to dissolve the partnership many months before September, 1886, though not explicitly admitted by Cummings, was also conclusively established.

(2) The sale of Cummings' interest in the inspector fees, both earned and unearned, for a consideration which embraced a cash payment of $15,000, was also established beyond dispute. That, in the negotiations which preceded the sale, Cummings contemplated something besides a mere division between himself and Baker in equal proportions of the rights of each in and to the fees, were also indisputably proven. This is testified to by Cummings himself as follows:

'I said: 'Mr. Baker, I make you this proposition: I will take one-half fees in all the cases in which we have powers of attorney and contracts prior to the 1st of January, 1886, or I will take one-third of all the fees in all the cases (leaving him two-thirds), or I will take $15,000, as you offer, according to what you think is the best for me."

Undoubtedly, also, the proof establishes that when the sale was made the fees for cases allowed and appropriated for, then undivided, amounted to about $32,000, and...