Koelz v. Brinkman.1

• Decision Date: 23 November 1901
• Parties: KOELZ v. BRINKMAN.1
• Court: West Virginia Supreme Court

40 S.E. 578

50 W.Va. 270

KOELZ

v.BRINKMAN.¹

Supreme Court of Appeals of West Virginia.

Nov. 23, 1901.

PARTNERSHIP—SETTLEMENT OF ACCOUNTS— PROFITS.

1. In the settlement of the accounts of a solvent copartnership on dissolution, the commissioner, before undertaking to ascertain the net assets and profits and distribute the same, should find the true state of the accounts between the firm and each of its members as separate and distinct settlements, after which sums due the firm from its individual members, however incurred, are to be treated as assets, and sums due from the firm to its members as liabilities.

2. In such case, having so settled the accounts between the firm and its members, the net assets should then be ascertained by deducting from the total assets the total liabilities, after which the total capital contributed by the members of the firm should be deducted, and the remainder divided as profits, according to the agreement of the parties.

3. In ascertaining the state of the accounts between the partners, where the firm is composed of but two members, and one has taken all the assets and assumed the payment of all the debts, each should be credited with what the firm owes him, if anything, with what he has assumed to pay for the firm, if anything, with his capital contributed, and with his share of the profits, and then charged with what he owes the firm, if anything, and with whatever assets of the firm he has taken by the dissolution agreement, if any. The balance then struck will show what is due to and from the copartners, respectively.

(Syllabus by the Court.)

Appeal from circuit court, Taylor county; John H. Holt, Judge.

Action by Ernest W. Koelz against George Brinkman. Decree for plaintiff, and defendant appeals. Reversed.

William R. D. Dent, John Hechmer, and Campbell, Holt & Campbell, for appellant.

Davis & Davis and B. F. Bailey, for appellee.

POFFENBARGER, J. Prior to May 1, 1874, George Brinkman had been engaged in the mercantile business in the town of Grafton, in this state, and E. W. Koelz had for some years been employed as clerk in his store. On said date, Brinkman and Koelz formed a copartnership, which, under the name of George Brinkman & Co., continued the business until March 1, 1894. At the time of the formation of this copartnership the stock of goods owned by Brinkman invoiced $5,959.18. At that time Brinkman owed Koelz about $950 on account of his wages, which, together with cash amounting to $267.99, Koelz put into the business as his contribution to the capital of the firm. That is all Koelz ever advanced or put into the business. In addition to the stock ofgoods, Brinkman turned over to the firm as an advancement at the time of the formation of the copartnership accounts due him amounting to about $2,200, which appear to have been collected and used by the firm. The building in which the business was carried on belonged to Brinkman, and he charged the firm rent, which, starting at $300 a year, was increased, from time to time, as the business grew, and more room was needed, until at the time of the dissolution it stood at $720. Brinkman also boarded two of the clerks for a considerable portion of the time at the rate of $15 each per month. He also had some of his sons working in the store as clerks, and he, being entitled to their earnings, charged the firm with their wages. He seems to have had a great deal of individual business and property. Many of his collections due to him privately were deposited in the bank to the credit of the firm. Such deposits were also made of his rents for real estate owned by him, dividends on bank stock, and various other accounts. These funds, while so deposited to the credit of the firm, were used in the copartnership business. At the same time Brinkman drew upon these funds for his individual purposes as he needed money. Counting the clerk hire and boarding of clerks and the rent of his building and money in various amounts from various sources which went into the hands of the firm as advancements, he fixes the amount so advanced, in a statement filed with his answer, at the sum of $79,902.17, and the amount withdrawn by him for various purposes, including his account on the books of the firm, at $59,703.17. Koelz received from the firm in various ways during the existence of the copartnership $13,069.50. The firm was dissolved by mutual consent on the 1st day of March, 1894, Brinkman taking all the assets and assuming the payment of the bills, and, after several unsuccessful efforts to settle, Koelz, in the year of 1894, filed his bill in equity in the circuit court of Taylor county praying a settlement of the copartnership business. Brinkman promptly appeared, and filed his answer, admitting the copartnership and dissolution thereof, and that by the contract, which was verbal, they were to share equally in the profits and losses of the business, and likewise praying a settlement of the partnership business. The cause was referred to J. G. St. Clair, commissioner, to audit, state, and settle the partnership accounts. The commissioner, after examining the books and taking the testimony of Brinkman, made up his report, based largely upon the receipts and expenditures of tbe firm during the existence of the copartnership, and found that there was due the plaintiff on account of profit and stock the sum of $2,987.45. He found the total receipts to be $716,307.55 and the expenditures $672,253, and struck a balance of $44,054.55. He then found that Brinkman had put into the business in all the ways herein before noted $79,962.17, and had taken out $59,694.17, leaving the firm indebted to him $20,268. This he deducted from the balance struck by him of $44,054.55, leaving $23,-786.55 to the credit of the firm. From this he deducted the $13,068.08 which had been taken out of the firm by Koelz, leaving a balance in favor of the firm of $10,717.45. The stock on hand at the time of the dissolution invoiced $7,348.52, which was taken by Brinkman, who continued the business after the retirement of Koelz, and this sum the commissioner deducted from said sum of $10,717.47, leaving $3,368.95 to be divided into two equal parts, giving to Koelz $1,684.47. To this he added $1,214.98, the amount Koelz had originally put into the business, and $88, one-half of the excess of stock, making $2,997.45 as the amount of profits and stock due Koelz. He then found that at the time of the dissolution the firm had good accounts amounting to $3,050.90, and owed $2,599.20. Finding the (inference between these amounts to be $451.70, he gave Koelz credit for one-half of that difference, $225.85, which he added to the $2,987.41, and reported that there was due to Koelz from Brinkman $3,213.26 upon a final settlement of the partnership business. He also found that the firm held worthless accounts amounting to $5,510.52 at the time of the dissolution. Brinkman, in his deposition returned with said report, says said firm also had $706 in cash at the time of the dissolution. Brinkman filed several exceptions to the report, and it was recommitted to the same commissioner, who, in December, 1895, made his second report, in which he shows that no new evidence had been taken, and that he saw no reason for changing his original report, and at November rules, 1895, the plaintiff filed an amended bill, a motion to dismiss which was overruled, and the cause was again referred to the same commissioner. The amended bill charges that Brink-man controlled the financial interests of the firm; had failed and refused to make any settlement with the plaintiff; had caused an inventory of the stock to be made and a notice of the dissolution to be published without the co-operation of the plaintiff therein; had withdrawn wrongfully and improperly $75,000 or $100,000 of partnership funds in excess of his rightful share, and appropriated them to his own use; had, without the knowledge of the plaintiff, withdrawn $18,000 or $20,000 of partnership funds, and invested it in real estate, which had increased in value until worth $40,000, taking the conveyance in his own name; had kept the plaintiff in ignorance of his rights and of the financial condition of the firm; and had been guilty of other transactions which were in fraud of the plaintiff's rights. Other allegations of the bill denied some and admitted others of the facts hereinbefore set out. Brinkman filed an answer to the amended bill denying all fraudulent and improper con-duct on his part, and alleging his title to the credits and method of adjustment and settlement contended for by him. In his third report the commissioner found, the same excess of receipts over disbursements, $44,050.55. He found two errors in the account of $17,140.88 against Brinkman on the books of the firm. One of these was $1,140.82 and the other $833.06, thus reducing this account to $15,396.97. He found the assets of the firm to be $44,375.09, composed of the account against Brinkman, $15,390.97, the account against Koelz, $13,009.08, the stock they owned, $7,348.52, the good accounts, $3,050, and the uncollectible accounts, $5,510.52. He found the liabilities of the firm to be $9,803, composed of its indebtedness, $2,599.20, Koelz's original contribution, $1,244.94, and Brinkman's original contribution, $5,959.18. Then combining the original stock, $7,204.12, the uncollectible accounts, $5.510.52, and the firm's indebtedness, $2,599.20, he had a total Indebtedness of $15,313.84, which he deducted from what he calls the "assets, " $44,375.09, leaving a remainder of $29,061.25, which he divided as profits, assigning to Koelz and Brinkman each $14,530.62 on that account. Adding to this Koelz's original contribution of $1,244.94, the amount to which he was entitled was found to be $15,775.56, less the $13,0(59.08 he had received, making the amount due him from Brinkman $2,706.49. Adding to the $14,530.62 Brinkman's original contribution of $5,959.18, making...