Lay v. Emery

• Decision Date: 01 July 1899
• Docket Number: 6731
• Citation: 79 N.W. 1053,8 N.D. 515
• Court: North Dakota Supreme Court

79 N.W. 1053

8 N.D. 515

GEORGE D. LAY v. LEWIS EMERY, JR

No. 6731

Supreme Court of North Dakota

July 1, 1899

Appeal from District Court, Grand Forks County; Templeton, J.

Suit by George D. Lay against Lewis Emery, Jr. Judgment for plaintiff. Defendant appeals.

Modified.

Judgment reversed, and judgment entered in favor of the defendant and against the plaintiff for the amount due.

Bosard & Bosard, (Cochrane & Corliss, of counsel) for appellant.

Under the contract between the parties, Lay had exclusive management of the business, Emery being engaged with large interests in the East, was unable to give any personal attention to the farm. Lay bound himself by contract to keep accurate accounts and to make yearly reports, he to have $ 1,200 as compensation for his services, to be considered and accounted for as part of the operating expense of the farm all profits, in each year, up to $ 6,000 were to be paid to the defendant; profits in excess of $ 6,000 to be equally divided. The trial court found that this contract created a partnership. Galveston Ry. Co. v. Davis, 23 S.W 301. The plaintiff contracted to give his entire time to the farm, but the uncontradicted proofs show that for five years he did not give it to exceed one-half his time. One-half of the salary collected by him should be restored. A court of equity will decree such compensation in form, kind or amount as shall be needed to make good any losses arising from violation of partnership duties. Parsons on Partnership, 223. Where the managing partner keeps the books so imperfectly and badly that the true state of accounts and transactions of the firm can not be ascertained from them, every presumption should be applied against the person in fault. Dimond v Henderson, 2 N.W. 73; 2 Lindley on Partnership, 808; Van Ness v. Van Ness, 32 N.J.Eq. 669; Harvey v. Varney, 104 Mass. 436, 444; Story on Partnership (6th Ed.) § 181; Gray v. Haig, 20 Beav. 219; 1 Story, Eq. Jur. § 468; Walmsley v. Walmsley, 3 Jones & Lat. 556; Kelley v. Greenleaf, 14 Fed. Cas. 238; Pomeroy v. Benton, 57 Mo. 531, 546; Kirwan v. Henry, 16 S.W. 828; White v. Lady Lincoln, 8 Ves. 363, 15 Ves. 441. The plaintiff covenanted to conduct the farm in a good and husbandlike manner, using his best skill and judgment at all times. In violation of his contract he permitted it to grow to mustard, damaging the land, under the evidence, to the amount of $ 5,000. This damage is chargeable to plaintiff. Carlin v. Donegan, 15 Kan. 495; Parsons on Partnership, 223; 2 Lindley on Partnership, 783; Murphy v. Croft, 71 Am. Dec. 519; Story on Partnership, § 173; Haller v. Owiez, 23 Ark. 566; Yorks v. Fozer, 60 N.W. 846; Lefer v. Underwood, 41 Pa. 505. The plaintiff during the period he managed this farm deposited firm moneys in different banks with his personal deposits, blending all of such deposits together in one account, and checked therefrom indiscriminately for firm and personal uses--even his wife drawing checks against this common account. Plaintiff admits his inability to determine how much of these deposits were from the farm and how much were individual, or what sums were drawn out of this common account for his own use and for the use of the partnership, respectively. In such case the whole deposit should be treated in equity as belonging to the partnership, so far as it is incapable of being distinguished. 1 Story, Eq. Jur. § § 623, 468; Pomeroy v. Benton, 57 Mo. 545; Kelley v. Greenleaf, 14 Fed. Cas. 238; Hart v. Ten Eyck, 2 Johns. Ch. 62 & 108, and note at end of case; Brackenridge v. Holland, 20 Am. Dec. 128; Jewett v. Dinger, 30 N.J.Eq. 308; Brakley v. Tuttle, 3 W.Va. 126; Railroad Co. v. Hutchins, 37 Ohio St. 298; Kreuger v. Cooney, 45 Md. 592; Weatherby v. Green, 22 Mich. 318; Moore v. Bowman, 47 N.H. 501; Diversey v. Johnson, 93 Ill. 547, 569. This rule holding the party accountable for the entire mass, except in so far as he can clearly show what is his own property, is applied in all cases where a trust relation exists. The relation between copartners is fiduciary. 1 Beach on Trusts, § 91; Parsons on Partnership, § 231; 16 Am. & Eng. Enc. Law, 1054; Pomeroy v. Benton, 57 Mo. 538; Brooks v. Martin, 2 Wall 70; Kelley v. Greenleaf, 14 Fed. Cas. 238. It was error to permit the plaintiff in an action to settle partnership accounts to recover for tort against the defendant for the conversion of plaintiff's grain. Bates v. Lane, 28 N.W. 753.

Burke Corbet, for respondent, filed a printed argument without citation of cases.

OPINION

YOUNG, J.

This is an action for an accounting between partners. It comes to us for trial anew upon defendant's appeal from a judgment rendered against him in the court below. The case calls for a final adjustment of accounts, arising out of the operation by them of a large wheat farm, and covering a period of five years. In the latter part of 1889 the defendant, Emery, who was then the owner of a tract of farming land situated in Grand Forks county, consisting of about 3,250 acres, which was fully equipped with horses, mules, cattle machinery, feed, and provisions, including seed grain, necessary for its operation, entered into a contract with the plaintiff, Lay, relative thereto, the material parts of which are as follows: "This agreement, made and entered into this twenty-third day of December, A. D. 1889, by and between Lewis Emery, Jr., of Bradford, in the State of Pennsylvania, party of the first part, and George D. Lay, of Grand Forks, in the State of North Dakota, party of the second part, witnesseth: That the said party of the first part, for and in consideration of one dollar, the receipt whereof is hereby acknowledged, and for the further covenants and agreements hereinafter mentioned to be performed by the party of the second part, does lease and farm let unto the said second party the following described lands [omitting description]. Also all of the equipment to the foregoing premises, including horses, mules, cattle, hogs, turkeys, chickens, farm implements, house-furnishing goods, provisions, and feed, as are now upon said premises; all of which property is shown by an inventory hereto attached. * * * This said lease is to commence on the first day of January, A. D. 1890, and continue for the period of three years, and end on the 31st day of December, A. D. 1892. In consideration of the said leasing the said party of the second part agrees to give his entire time to the management and operation of said farm, and to conduct the same in a good and husbandmanlike manner, using his best skill and judgment at all times; to keep correct books of accounts of all receipts and disbursements, and all transactions regarding the management of the said farm; to keep a correct and complete list of all increase and decrease in live stock, and at the end of each year make a correct and complete report of his doings during the past year. * * * That said books of account shall be open to inspection at all times to the said party of the first part, his agent or attorney. * * * That the said party of the second part is to have full management, control, and operation of said farm, and all business transactions are to be carried on in his name, and he is to be wholly responsible for the full management of the same. * * * That there shall be allowed the sum of twelve hundred dollars as salary for the said party of the second part, as his compensation as superintendent of the said farm, and the same shall be reckoned as a part of the operating expense of the same. That, after all expenses are paid for the operating of said farm, then the said party of the first part shall draw and be paid the sum of six thousand dollars ($ 6,000.00) from the profits of said business. Then, if there shall be a balance of profits in the hands of the said party of the second part, the same shall be divided in equal portions, and each of the parties hereto shall take one-half. Then, at the expiration of this lease, the said premises shall be left in the same condition as when entered upon. That there shall be as many acres of ground plowed at the expiration as are now plowed. That there shall be an equal number of stock of all kinds left upon the said premises to be equal in value and condition. There shall be an equal amount of feed and grain left upon the said premises, including hay, straw, or millet; also an equal amount of provision and fuel. In all cases natural wear and tear and destruction by the elements are excepted. At the expiration of this lease, should there be a greater number of stock of any kind or class, or a greater amount of provisions or feed for stock, or grain of any kind, or any article or thing or lands than is now upon said farm, the same shall be divided in equal portions, each of the parties hereto taking one-half. * * * Should there be at any time any expenses growing out of the running of said premises, and there should be no funds from the products to pay the same, then each of said parties hereto shall pay one-half, and each shall be given credit for the same." At the expiration of the three-year period this contract was extended by written indorsement thereon for two years more,--that is, until January 1, 1895,--without change, except that the salary of Lay was increased to $ 2,200 per year, and he, in consideration of such increase, relinquished an option, which he had secured in the original contract, for the purchase of one-half of the entire farming plant at a fixed price for such half of $ 50,000, divided into several annual payments at 6 per cent. interest. This is contained in the portion of the contract which we have omitted. Both parties have treated the contract as one of partnership, and it is so treated by them in this Court. By its terms the defendant parted...