Elliott v. Murphy Timber Co.

• Decision Date: 16 March 1926
• Citation: 117 Or. 387,244 P. 91
• Parties: ELLIOTT v. MURPHY TIMBER CO.
• Court: Oregon Supreme Court

244 P. 91

117 Or. 387

ELLIOTT v. MURPHY TIMBER CO.

Supreme Court of Oregon

March 16, 1926

Department 2.

Appeal from Circuit Court, Multnomah County; Walter H. Evans, Judge.

Suit by E. H. Elliott against the Murphy Timber Company for an accounting. From a decree for defendant, plaintiff appeals. Reversed and rendered.

Martin L. Pipes, of Portland, for appellant.

Sidney J. Graham, of Portland, for respondent.

RAND J.

This is a suit to compel the defendant to account to plaintiff for alleged profits growing out of their joint performance of a contract, which was entered into between them on February 21 1917, and which was completely executed on plaintiff's part on June 30, 1921. Except as hereinafter stated, the contract consisted of a written offer and acceptance, which because of a dispute over its legal effect, is set forth at length, and is as follows:

"Portland, Oregon, Feb. 21, 1917.

"Mr. E. H. Elliott, Portland, Oregon--Dear Sir Confirming our verbal understanding regarding the purchase of the logging equipment and contracts of the Bramhall Timber Company by our company, and in consideration of valuable services rendered by you in acquiring said property, and the further consideration of valuable services rendered and to be hereafter rendered by you in the operation of said logging contracts, and in further consideration of the sum of $1.00 to us in hand paid, the receipt of which is hereby acknowledged, we hereby agree that after the net profits accruing under these logging contracts shall amount to a sum equal to the sum paid the Bramhall Timber Company for said equipment and contracts plus the amount paid for any new equipment which may be purchased or acquired by us in logging under these contracts, we agree to transfer to you an undivided one-third interest in said equipment and contracts, and we agree that you shall be entitled to receive and we will pay to you one-third of all of the future net profits which may be made in logging under the contracts acquired from the Bramhall Timber Company, it being understood, however, that you are to receive no net profits until the purchase price and cost of the above mentioned equipment, including any new equipment purchased to log under the Bramhall Timber Company contracts has been repaid from the net profits as herein specified.

"We further agree that we will pay to you to manage under our direction logging operations under the contracts purchased from the Bramhall Timber Company the sum of $200 per month as salary, said amount to be charged to the expense of logging operations. Yours truly, Murphy Timber Company, by Edward Murphy, Pres., by B. J. Vaughan, Secy.

"Accepted: E. H. Elliott."

On July 4, 1918, this contract was modified by an oral agreement of the parties that thereafter plaintiff should receive $250 per month, instead of $200 per month, and on October 8, 1919, it was further modified so as to comply with the terms of the following letter:

"Portland, Oregon, Oct. 8, 1919.

"Murphy Timber Co., Portland, Oregon--Gentlemen: In consideration of your advancing more money than you first agreed to at our operation at Kerry, Oregon, I hereby agree to accept a one-quarter interest in the profits of said operation when we have finished there instead of a one-third interest as our present contract calls for.

"Yours very truly,

E. H. Elliott."

After the execution of the contract, the parties thereto entered into the performance thereof, and continued to perform the same until the termination of the enterprise on June 30, 1921. Some 41,000,000 feet of logs were out and marketed under the contract. After the termination of the enterprise, plaintiff demanded of defendant a statement of the amounts which the defendant had expended and received in carrying out the contract. Defendant rendered a statement which showed an excess of expenditures over receipts, and it is now admitted that in some respects the statement so rendered was incorrect. Being dissatisfied therewith, this suit was instituted, and from the evidence introduced the trial court found that in performing the contract the defendant had received the aggregate amount of $441,917.68; both parties concede the correctness of this finding. The court also found that in carrying out the contract, the defendant expended the sum of $468,229.74; this amount is in dispute on this appeal. It also found that the plaintiff received the sum of $2,285.54 in excess of the amount he was entitled to receive as salary under the contract; this finding is not disputed by plaintiff. A decree was entered in conformity to these findings, dismissing plaintiff's complaint with prejudice, and giving judgment in favor of defendant for $2,285.54, with costs and disbursements, from which decree plaintiff appealed.

Going to make up this sum of $468,229.74, which the court found to be the aggregate of the expenditures made by defendant under the contract, are two items, both of which plaintiff contends were not properly chargeable under the contract, and these are the only items in dispute upon this appeal. The first is for $1,966.26, the aggregate of an account appearing on defendant's books as "discounts paid"; the other is for $27,299.25, an amount arbitrarily fixed by defendant as a proportionate part of the salaries of its officers, and of the rentals and other expenses of its Portland office during the time this contract was being performed. If the amount of these two items cannot properly be included as an expenditure under the contract, the total cost of operation would be only $438,963.23, which would leave a profit of $2,954,45, and vest a one-third interest in the equipment in plaintiff.

We think that neither of these two items should have been included in the computation made by the trial court. The first consists of discounts allowed by defendant to purchasers of logs for prompt payment of current bills, and would be allowable if corresponding discounts obtained by defendant in payment of the joint bills had been accounted for. There is no proof from which the amount of discounts obtained by defendant in carrying on the enterprise can be computed, and it would be inequitable for defendant to charge plaintiff's account with discounts in the one case, without giving him credit for discounts in the other.

Before considering the other disputed item, it is necessary to dispose of the principal legal contention in controversy upon this appeal. Plaintiff contends that under the terms of the contract, the parties, while engaged in its performance, were joint adventurers, and that their rights and liabilities are to be determined by the same rules that govern in ordinary partnership cases; while defendant contends that the contract is a mere contract of employment, and creates a relation of agency only, and that the rules of law applicable to an accounting between partners ought not to be applied in this suit. We do not deem this question very material to the determination of the suit. Whatever their relation may have been, their rights and liabilities rest upon their agreement, and where a contract provides as this does, for payment by one party to another of profits received, it is the duty of the one receiving such profits to account to the other, for otherwise there would be no way by which such party could determine whether there were any profits. The duty to account arises whenever one party is in possession of profits to which another person is entitled to share, regardless of what their relationship may have been at the time the profits were earned. When an employer has received profits in which, by the terms of his contract, an employee is entitled to share, it is as much his duty to account to the employee, as it would be if the relation of partners or joint adventurers existed between them. "The right to go into equity for an account is not confined to a partner. Any employee paid by a share of the profits may maintain a bill for an account, though he is not a partner, since a court of law is unable to take such an account. Harrington v. Churchward, 29 L. J. N. S Ch. 521; Katsch v. Scheneck, 13 Jur. 668; Ferry v. Henry, 4 Pick. [Mass.] 75; Hallett v. Cumston, 110 Mass. 32; Bentley v. Harris, 10 R.I. 434 [14 Am. Rep. 695% BD (distinguishing Hazard v. Hazard [Fed. Cas. No. 6279] 1 Story, 371)." Parsons on...