Dovey v. Dovey
| Decision Date | 03 April 1914 |
| Docket Number | No. 17,694.,17,694. |
| Citation | 95 Neb. 624,146 N.W. 923 |
| Parties | DOVEY ET AL. v. DOVEY ET AL. |
| Court | Nebraska Supreme Court |
In an action to rescind a settlement of the affairs of a partnership and recover the consideration paid to a retiring partner on account of duress and fraud, the burden of proof is on the plaintiff to show, not only duress and fraud in obtaining the settlement, but that the consideration paid to the retiring partner is inequitable, excessive, and unjust.
In the absence of any special agreement between the partners upon the subject, the rule of law is that the partners are to share equally in both profits and losses; and the mere fact that the partners have put an unequal amount of capital into the common stock, or that one has put in all the capital and the others only their skill and industry, will make no difference in the rule.
As a general rule, where a surviving partner continues to use the capital of a deceased partner in the business, the representatives of the latter, in the absence of any agreement to the contrary, have the election either to demand interest on the capital used, or the profits earned by its use, the latter being accretions to the fund owned by them. There is, however, no inflexible rule governing all cases, but each case depends upon its own circumstances and equities.
Where plaintiffs have failed to rescind or seek a rescission of a partnership settlement, and have neglected and refused to surrender, or offer to surrender, any part of the consideration which they have received for the settlement, they cannot require a court of equity to set aside the settlement of which they complain.
Where the Supreme Court, after a careful examination of the record in a suit of equity, and a consideration of the same without regard to the judgment of the district court, is unable to say that the judgment of that court is wrong, it will ordinarily be affirmed.
Appeal from District Court, Douglas County; Troup Judge.
Action by George E. Dovey and others against Oliver C. Dovey and others. Judgment for defendants, and plaintiffs appeal Affirmed.
John Lee Webster, of Omaha, for appellants.
Francis A. Brogan and John J. Sullivan, both of Omaha, for appellees.
This is an action to recover $7,500 in money paid to the defendant Oliver C. Dovey, and for the return and cancellation of certain notes, and a mortgage given to secure the same, delivered to him on the ground that they were obtained by duress. The issues were made up, and a trial to the district court of Douglas county resulted in a judgment for the defendant, and the plaintiffs have brought the case to this court by an appeal.
The evidence discloses that George E. Dovey and his father, E. G. Dovey, as equal partners, entered into a copartnership in 1876, under the firm name of E. G. Dovey & Son, at Plattsmouth, Neb., and the partnership continued until the death of E. G. Dovey, on February 1, 1881. It is conceded that at that time the net value of the partnership assets was $52,092.42, one-half of which belonged to the plaintiff, George E. Dovey, to wit, $26,046.21. In 1881 E. G. Dovey died intestate, leaving three sons, George E., Horatio N., and Oliver C. Dovey, and his widow, Mrs. C. Dovey. Each of the sons and the widow then became the owner of an undivided one-fourth in the one half interest in the business which had belonged to E. G. Dovey, amounting to $6,511.55 each; George owning the other half interest in addition thereto. These facts are undisputed. It was alleged in the petition that after the death of E. G. Dovey the business was carried on under the same name as before, until September 22, 1909, when Oliver withdrew from the firm, and that at that time the total net assets amounted to $145,786.55; that during this whole period none of the parties placed any additional money or property in the business, and that no division of profits nor dividends were declared. The amount withdrawn by each was then set forth. It was then alleged: That when Oliver desired to withdraw, the parties were unable to agree. That Oliver employed counsel and insisted upon the employment of an accountant to examine the books. On recommendation of Oliver and his attorney, an accountant was selected, who acted under the advice of Oliver and his attorney, and presented different statements, which were all inaccurate, unjust, and erroneous, and were so indefinite and uncertain that the plaintiffs did not understand the same, and were imposed upon and deceived thereby. That Oliver demanded that plaintiffs should pay him $50,000 for his partnership interest in the business, which demand was accompanied by a threat that if the same was not paid, immediate application would be made to the court for the appointment of a receiver. That as a part of the assets of the business the firm owned and held a majority of the stock of the First National Bank of Plattsmouth, and that plaintiffs believed that if a receiver was appointed for the business, it would produce a run upon the bank, which would ruin both the banking and the mercantile business, and bring disaster to the depositors. That plaintiffs were placed in great mental distress and agony by the threat, were deprived of their free will and judgment, and in order to prevent the appointment of a receiver they, solely by reason of the duress, paid Oliver $7,500 in cash, and gave him their notes and other assets, amounting in all to $50,000.
The answer alleged that after the death of E. G. Dovey the assets were taken over by a new firm composed of Oliver, George, and Horatio as equal partners; that in addition to one-half interest in the firm, E. G. Dovey left about $50,000 worth of other property which was taken over by the partnership and treated as personal property. Positive denial is made that the selection of the accountant was made by Oliver or his attorney; that he was partial or unfair, or that any threats were made or duress suffered. It was also alleged that Oliver's interest, which he offered to sell for $50,000, was conceded to be worth $52,276.76, when taking good will into account, and that this offer was a fair compromise of the firm affairs; that Oliver had determined, on failure of an amicable adjustment, to bring suit for dissolution and receivership, and so told plaintiffs, but this was not intended or understood as a threat, but as a matter of prudence and good judgment, and that the settlement was reached by the plaintiffs after a thorough investigation and conference with their attorneys; that plaintiffs took possession of the business on December 22, 1909, and have been in control thereof ever since; that defendant had incurred other obligations and liabilities on the assumption that the notes would be paid, and that plaintiffs have been guilty of laches, and are now estopped from disputing the validity of the settlement.
On the trial, after both parties had rested, the court rendered a tentative or interlocutory opinion, finding that the evidence showed that an agreement was made about July 22, 1885, between the parties that they should become equal partners in the business; that Mrs. Dovey was at no time regarded as a partner in the firm, but that the money and property which went into the business belonged to her as an interest-bearing loan; that the peculiar situation with respect to the bank placed plaintiffs' minds in such a condition that the threatened appointment of a receiver amounted to duress, in order to be relieved from which they executed the settlement. Having found that the partnership was actually formed in 1885, and not in 1881 as alleged, the court gave the parties leave to amend their pleadings to correspond with the facts. Plaintiffs asked, and were given leave, to file an amended reply setting forth the assets as they claimed them to be on July 22, 1885. Additional evidence was taken with respect to the condition of the books and the assets, and at the conclusion of the testimony the district court handed down a further opinion, in which he held substantially that it was the duty of plaintiffs to put the bank and the depositors out of the reach of danger which might arise from the affairs of E. G. Dovey & Son, and that a rescission would have the effect to place defendant as he was before the transaction took place, and the plaintiffs would find themselves in the same predicament as to the bank, with the same right on the part of Oliver to proceed. Plaintiffs were also held to be estopped from opening up the transaction, and the action was dismissed for want of equity.
While the pleadings are based upon the idea that the firm was dissolved upon the death of E. G. Dovey, the evidence is clear that what actually took place was that the business was carried on in the same manner as before, until July, 1885. At the time that E. G. Dovey died Oliver was about 20 years old, and had been working in the store several years, and Horatio was about 17 years of age. He had been attending school at Nebraska City, had come home, and a short time afterwards in 1881, or early in 1882, he went into the First National Bank as a clerk. At that time the firm had only a few shares in the bank, which was practically owned and controlled by other parties. Horatio continued to work in the bank as a clerk until about the time he became of age, which seems to have been early in 1885. According to the testimony of Oliver and Horatio, in July, 1885, Horatio was dissatisfied and was about to go away, and it was then agreed between the three brothers that if Horatio would not leave, but would take part in the business, the three brothers should become equal partners. Oliver surrendered or gave up his claim to the portion of his salary as a clerk, not withdrawn by him, which at that time would, as he testified,amount to about $3,200. This agreement is denied by George, but the circumstances surrounding the transaction...
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