Kimberly v. Arms

Decision Date05 March 1889
Citation32 L.Ed. 764,9 S.Ct. 355,129 U.S. 512
PartiesKIMBERLY v. ARMS et al
CourtU.S. Supreme Court

On the 27th of April, 1878, the complainant, Kimberly, and the defendant Hannah M. Arms, executed the following articles of agreement:

'Articles of agreement made and concluded this 27th day of April, A. D. 1878, by and between Hannah M. Arms, of Youngston, Mahoning county, and state of Ohio, party of the first part, and Peter L. Kimberly, of Sharon, Mercer county, and state of Pennsylvania, of the other part, witnesseth, that the said parties have agreed, and by these presents do agree, to associate themselves in the art, trade, and business of leasing, prospecting, buying, mining, working, and operating and dealing in lead, iron, silver, gold, and other minerals, together with the lands on which the same may be located, and to do and perform all things belonging to said trade or business, which said copartnership shall commence on the 27th day of April, A. D., 1878, and continue until dissolved by either or both of said parties; and to that end and purpose said Hannah M. Arms has this day paid in as capital stock six thousand dollars, and the said Peter L. Kimberly has paid in as capital stock six thousand dollars, which said twelve thousand dollars shall be used, laid out, and employed in common between them, for their mutual advantage. It is also agreed that all gains, profits, and increase as shall arise by reason of said joint business shall be divided equally, share and share alike, between said parties, and that all losses that shall happen to said joint business shall be shared and borne equally between said parties alike. That said business shall be carried on under the name and style of 'Arms & Kimberly, Charles D. Arms, Agent.' That Charles D. Arms shall act as agent for said firm, and receive in compensation for his services the sum of twenty-five hundred dollars per annum, or at that rate, while in their employ. That said business shall be carried on in the territories or states in the United States, or some of them.

'Witness our hands and seals the day and year aforesaid, at Youngstown, O.

'P. L. KIMBERLY. [Seal.]

'HANNAH M. ARMS. [Seal.]'

Hannah M. Arms was the wife of the defendant Charles D. Arms, and the instrument, though signed by her, was intended to express an agreement on his part, his name not being used, because at the time he was financially embarrassed. She was always treated as a mere nominal party, and he was treated as the real party. On the 10th of May following, Kimberly, having become embarrassed financially, assigned his interest in the partnership thus formed to Edwin M. Ohl. This assignment was made to prevent any interruption in the business of the part-nership, Arms having already gone to Arizona in its prosecution. Kimberly took at the time from Ohl a declaration showing that the latter had no personal interest in the partnership, or in the properties that had been or might be acquired by it, but held the interest assigned to him as the trustee of Kimberly. In all subsequent proceedings Kimberly and Charles D. Arms considered and treated each other as the real and sole parties in the partnership, and as solely interested in the properties which it acquired. Under this contract, and about the 1st of May following, Arms went to Arizona on the business of the firm, taking with him all its capital. viz., $12,000, to use in its business, and to pay his expenses and salary. While there he had his headquarters at Tucson, the capital of the territory, where he became acquainted with two persons by the name of Witherell and Gage, who were largely interested in property known as the 'Grand Central Mine,' which was reputed to be of great value, and was owned by the Grand Central Mining Company of Arizona, a corporation created under the laws of Missouri. From them Arms learned of the reputed value of the property, and very naturally became desirous of examining it, and, if found to be as valuable as reported, to acquire an interest in it. Accordingly, in November following, in company with Witherell and two other persons, by the names of Whiteside and Austin, who were also interested in the mine, he went to see the property, traveling a distance of about 200 miles, a portion of the way through the Apache territory, where they had an escort of soldiers. The expenses attending this visit were large, and were borne by Arms and Kimberly. Arms examined the property, and found good ore in it. He was informed by one of his companions, Whiteside, that he had in a crude way reduced four tons of ore, and obtained $900 in silver. Soon afterwards Arms returned to Ohio, met Kimberly, and reported that he had expended all the moneys of the firm, except three twenty-dollar gold pieces. It does not appear that any further account of his expenditure of the moneys was ever rendered.

On the 24th of March, 1879, Arms and Kimberly, after consultation, concluded that it was advisable to increase the capital of their firm to $25,000, and accordingly did so, indorsing upon the original articles an agreement to that effect, signed, 'H. M. ARMS, by C. D. ARMS,' and 'E. N. OHL.' and, pursuant to it, each party paid $6,500, Kimberly paying his share to Arms. With this increased capital Arms returned to Arizona, leaving about the 1st of April, and was there until some time in the following July. Other sums were advanced by Kimberly in the business of the firm as they were from time to time needed. While in the territory Arms again made a visit to the Grand Central mine in company with a mining expert whom he had employed. The expenses of the trip and for the services of the expert were charged to the firm and paid. It is not necessary to state here the different steps taken by Arms which resulted in his acquiring an interest in the Grand Central mine by the purchase of a large number of shares of the company owning it, with moneys borrowed of one N. K. Fairbank, of Chicago for the facts respecting this transaction are detailed in the findings of the master to whom the case was referred, which are hereafter given. The capital of the firm and other sums advanced by Kimberly were invested in various mining properties in Arizona and Colorado, the title of some of which was taken in his name, and of some in the name of Ohi, but all claims arising out of them have been adjusted and settled between the partners. The only remaining subject of controversy between them grows out of the interest which Arms acquired in the stock of the Grand Central Mining Company; Kimberly claiming that such interest belonged to the firm, and consequently that an undivided half thereof inured to him, and Arms claiming that the interest was acquired by him in his own right, and belonged to him individually. The present suit is brought to determine this disputed matter; the complainant, Kimberly, asking for an adjudication in his favor, and an accounting by Arms for the stock held by him in the Grand Central Mining Company, and for certain shares in the New York Grape Sugar Company, which he had acquired by a sale of some shares of the mining company. The bill contains all the averments necessary to present the claim of Kimberly, and the answer of Arms contains all the averments necessary to disclose his defense. The answers of the other defendants are not material upon the matters in controversy. Replications to the answers being filed, testimony was taken for some time, when, on the 16th of May, 1884, the parties consented that the case should be referred to a master 'to hear the evidence and decide all the issues' between them, and upon such agreement, and at the request of the parties, the court on that day entered the following order: 'By consent and request of all the parties herein, it is ordered by the court that Hon. Richard D. Harrison be, and is hereby, appointed a special master herein to hear the evidence, and decide all the issues between the parties, and make his report to this court, separately statings his finding of law and fact, together with all the evidence introduced before him, which evidence shall thereby become part of the report, which report shall be subject to like exceptions as other reports of masters. It is further ordered, by like consent and request, that said master shall proceed upon twenty days' notice from either party to hear and determine said issues, and with full power and authority to grant such adjournments, amendments, exceptions, and motions as might be granted by the court if the trial was by the court.'

Shortly after this order was made a hearing was commenced before the master, and two weeks were occupied in taking testimony, and in the arguments of counsel. After holding the case under consideration until Arpil 17, 1885, a period of 11 months, the master made his report, of which the following are the most important parts for the decision of the case, in addition to the facts stated above:

'The report of Richard A. Harrison, special master in chancery, to whom this cause stands referred for the purpose of hearing the evidence and determining all the issues between the parties, and making his report to said court, separately stating his findings of law and fact, together with all the evidence introduced before him, pursuant to an interlocutory decree, rendered at April term, A. D. 1884. Having heard the evidence in the presence of the parties and their counsel, and the arguments of counsel for the parties, in the city of Cleveland, my findings of fact, from such evidence, upon all the issues between the parties, are as follows: [The first six findings set forth substantially the facts as to the formation of the partnership between Arms and Kimberly, its object, the original capital put in, and its subsequent increase, the visit of Arms to Arizona on its business, and the purchase of mining properties there, which are narrated above.]

'(7) In the years 1878 and 1879, prior to October, 1879, said ...

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