Iles v. Jordan

• Decision Date: 09 December 1927
• Docket Number: 12,780
• Citation: 159 N.E. 28,87 Ind.App. 220
• Parties: ILES ET AL. v. JORDAN ET AL
• Court: Indiana Appellate Court

159 N.E. 28

87 Ind.App. 220

ILES ET AL. v. JORDAN ET AL

No. 12,780

Court of Appeals of Indiana

December 9, 1927

Rehearing denied March 9 1928.

From Hendricks Circuit Court; Zimri E. Dougan, Judge.

Action by Arthur Jordan and others against Orlando E. Iles and others, in which Esther D. Iles filed a counterclaim. From a judgment for plaintiff on the complaint and counterclaim, the defendants appeal.

Affirmed.

George W. Brill, Walker & Hollett, Arthur J. Iles, Smith, Remster Hornbrook & Smith and Otis E. Gulley, for appellants.

James L. Clark and James W. Nichols, for appellees.

MCMAHAN J. Dausman, J., absent.

OPINION

MCMAHAN, J.

This is an action by Arthur Jordan, hereafter referred to as "appellee," against Orlando B. Iles, Esther D. Iles and Charles L. Libby for an accounting to determine the amount of the profits earned between December 31, 1919, and June 8, 1920, by the International Machine Tool Company, a partnership; the members during that time being Orlando B. Iles, Charles L. Libby, and appellee, and to recover a judgment against the three defendants for an amount equal to one-third of such profits, on the theory that the defendants had refused to account to or pay appellee his share of such profits and had converted the same to their own use.

The complaint charges that on and prior to June 8, 1920, Orlando B. Iles, Charles L. Libby and appellee each owned a one-third interest in the property and business of said copartnership: that said partnership was, by mutual consent of the parties thereto, dissolved on said last named day, under the terms and conditions of a certain contract between appellee and Roselba J. Jordan, his then wife, by the terms of which, appellee assigned and transferred to Mrs. Jordan his interest in said tool company, appellee reserving all cash dividends that had accrued and been distributed and which should accrue and which ought reasonably to be distributed in the usual course of business for the period from January 1, 1920, to the date of delivery of said transfer to Mrs. Jordan. The agreement between appellee and Mrs. Jordan and the instruments by which such transfer was to be made, were deposited in escrow, to be held until the agreed time of delivery arrived, which was June 7, 1920. Appellee was to be released from all future liabilities of the partnership, such future liabilities being assumed by Mrs. Jordan. Orlando B. Iles and Charles L. Libby separately and in writing agreed and consented to the transfer by appellee to Mrs. Jordan and to the dissolution of the partnership. The instrument so signed by Libby, however, stipulated that, while he consented to the dissolution of the partnership and the transfer to Mrs. Jordan, his consent should not be construed as consenting that Mrs. Jordan should then or at any future time become a partner in the business. The consent of Iles was, in substance, the same as that of Libby, except it did not contain any statement concerning Mrs. Jordan not becoming a member of the partnership. Shortly after the transfer by appellee of his interest in the business to Mrs. Jordan, she transferred her one-third interest to her daughter Esther D. Iles, wife of Orlando B. Iles, and who at all times thereafter has been in possession of the business along with her husband and Libby. Mrs. Iles at that time had full knowledge of the terms and conditions of the transfer and agreements heretofore mentioned. It is also alleged that after entering into said agreement with Mrs. Jordan, the business of the tool company was under the exclusive control and management of the defendants and that large earnings and profits had been realized and retained by them which should have been distributed among the parties entitled thereto and the share belonging to appellee should have been paid to him, but that the three defendants had at all times refused to account to or pay over to appellee his share of such earnings and profits; that appellee had demanded an audit of the accounts and business of the tool company; that the defendants, although in the exclusive possession and control of said company, its accounts and assets, refused to enter into an audit and denied the right of appellee to have an accounting; that appellee was compelled to and did secure an injunction to prevent appellants from interfering with the taking of such audit; that later an audit was made at an expense of $ 11,670.94; that, while the defendants were liable for their proportionate share of such expense, they denied their liability and refused to contribute their share of such expense; that during the time between January 1, 1920, and June 7, 1920, $ 130,000 were realized by appellants as earnings and profits from the said business, out of which appellee was entitled to receive his proportionate share under the terms of the dissolution agreement. By this complaint, appellee demanded an accounting and judgment for two-thirds of the amount paid by him for securing the audit and for one-third of the profits of the business from January 1, to June 8, 1920.

The complaint is in two paragraphs, the main difference between them being that the contract between appellee and Mrs. Jordan and the written consent of Iles and Libby thereto are made a part of one paragraph and not of the other.

Iles and Iles each filed motions to strike out parts of the complaint, which were overruled, and thereupon they each filed a demurrer to each paragraph of the complaint. These being overruled, they filed answers of denial, payment and satisfaction. Appellant Esther D. Iles filed a counterclaim alleging that after the transfer by appellee to Mrs. Jordan of the interest of the former, there was paid to him from the partnership assets $ 15,600 as an advancement on such dividends as might be declared from the business; that appellee agreed to return so much of such sum as might be in excess of the dividends actually earned for the period covered by the contract between appellee and Mrs. Jordan; that the actual profits for the year ending December 31, 1920, payable to each of the three partners was $ 26,978.65; that the share of said profits distributable to appellee was $ 11,729.22; but that by mistake and miscalculation he had been paid $ 15,600, which was $ 3,879.78 more than he was entitled to, and asking for a judgment against appellee for that amount, plus interest.

The facts were found specially and, in substance, are as alleged in the complaint. Among the facts so found, it appears that appellee and his wife, in March, 1920, were having domestic trouble, and in contemplation of an action for a divorce by Mrs. Jordan, a conditional agreement relative to the property rights of each, was entered into as mentioned in the complaint, relating to the transfer by appellee of his interest in the tool company to Mrs. Jordan. While this contract and other papers relating to the settlement of property rights were dated in March, they were placed in escrow, to be delivered after the final disposition of the action for divorce, if a decree was entered therein. This agreement, in part, provided that in case of divorce, appellee would transfer to Mrs. Jordan the following property, viz.: "One-third, being the entire interest of said Arthur Jordan, in the property known as the International Machine Tool Company, including the business, real estate, accounts and all property pertaining thereto, subject to the reservation by Arthur Jordan of such cash dividends as have accrued and been distributed and shall accrue and ought reasonably to be distributed in the usual course of business for the period from January 1, 1920, to the date of delivery by said escrow; and in addition thereto a salary of Eight Hundred Dollars ($ 800.00) per month for said period; subject also to the consent of Charles Libby and Orlando B. Iles, who are now partners of said Arthur Jordan in said business."

Orlando B. Iles and Libby consented to the proposed transfer and agreed to execute the necessary papers to carry out the agreement. The partnership theretofore existing between appellee Orlando B. Iles and Libby concerning the business of the tool company came to an end by the consent and agreement of the parties June 7, 1920, and immediately thereafter appellee was entitled to an accounting. The other two partners refused to join in taking an inventory and it became necessary for appellee to employ accountants to make an inventory and audit of the business. The reasonable cost of this audit was $ 10,446.75, and was all paid by appellee. This audit was used by the court at the trial to expedite its business and as a help to the parties in the trial. After the transfer of appellee's interest to Mrs. Iles by Mrs Jordan, the three defendants continued in the full possession and control of the business and assets of the tool company and retained all the profits of the business and at no time rendered an accounting and settlement to appellee. In July, 1922, Libby, for a consideration, conveyed and transferred his interest in said business to appellants Iles and Iles, subject to all the liabilities of the partnership, which Iles agreed to pay. The net profits of the business from January 1, to and including June 7, 1920, and which reasonably could have been declared and distributed as dividends amounted to $...