Rodgers v. Clement
| Decision Date | 06 April 1900 |
| Citation | 56 N.E. 901,162 N.Y. 422 |
| Parties | RODGERS v. CLEMENT. |
| Court | New York Court of Appeals Court of Appeals |
Appeal from supreme court, appellate division, Second department.
Action by John C. Rodgers against Frank N. Clement. From a judgment of the appellate division (44 N. Y. Supp. 516) conditionally affirming a judgment in defendant's favor, plaintiff appeals. Reversed.
David B. Hill, for appellant.
F. R. Minrath, for respondent.
This was an action for an accounting between partners. In the year 1887 the plaintiff and defendant formed a partnership by agreement, without writing, the purpose of which was to obtain and execute contracts for the construction of public works, as might be mutually agreed upon from time fo time; the partnership to continue until the contracts procured or taken by the firm had been completed or performed. The profits and losses of the business were to be equally divided between the parties. Under this arrangement the firm procured contracts to construct various public works in this and in other states, which contracts were executed and performed prior to the commencement of this action. This suit was made necessary on account of differences which had arisen with respect to the division of the firm assets and the settlement of the partnership affairs. The cause was tried before a referee, who, after stating the account, found a balancedue to the defendant, including interest to April 20, 1896, the date of the report, amounting in the aggregate to $4,928.66, and judgment was entered accordingly. On appeal by the plaintiff the appellate division held that the judgment in defendant's favor was excessive in the sum of $897.52, and ordered a new trial unless the defendant should stipulate to reduce the judgment by that amount. The stipulation was given, the judgment so modified, and the plaintiff appeals to this court
The appeal presents but a single question and that is the right of the plaintiff to be credited with an item of $5.997.66, which represents the interest upon certain moneys advanced by him for the use of the firm while it was engaged in the execution of a contract for the construction of a railroad. The referee refused to allow this item, and was sustained in this ruling by the court below on appeal. The counsel seem to be in substantial accord with respect to the principles of law applicable to such a question. If the moneys advanced by the plaintiff to the firm were contributions of capital, or additions to plaintiff's capital, then he was not entitled to interest on the same, since he must rely upon the profits of the business to compensate him for the investment, unless there was a special agreement between the partners that interest should be allowed. Johnson v. Hartshorne, 52 N. Y. 173; Jackson v. Johnson, 11 Hun, 509, affirmed in 74 N. Y. 607;Sanford v. Barney, 50 Hun, 108, 4 N. Y. Supp. 500;In re James, 146 N. Y. 106,46 N. E. 876; Cheever v. Lamar, 19 Hun, 130; Stoughton v. Lynch, 2 Johns. Ch. 209; Colly. Partn. § 318; Lindl. Partn. 389. But, on the other hand, if the moneys so paid or advanced by the plaintiff for the use of the firm were in fact loans, and the plaintiff as to such advances was a creditor of the firm, he stands upon the same footing as any other creditor, with respect to the right to be allowed interest upon the accounting. A partner may loan money to the firm of which he is a member, and, when he does, his right to interest is to be determined in the same way as that of any other creditor. In such cases the general rule is to allow interest upon the advances, although there was no express agreement by the firm to pay it, in the absence of some agreement to the contrary, express or implied. The right to interest, or an agreement to pay or allow it, is to be implied in such cases without any express promise, as in like transactions between parties holding no partnership relations to each other. Reid v. Factory, 3 Cow. 399, 436, 437, affirmed in 5 Cow. 587;Liotard v. Graves, 3 Caines, 243;Gillet v. Van Rensselaer, 15 N. Y. 397;Foley v. Foley, 15 App. Div. 276,44 N. Y. Supp. 588;Chester v. Jumel, 125 N. Y. 237, 26 N. E. 297; Lloyd v. Carrier, 2 Lans. 364; Beach v. Colles, 85 N. Y. 515;Collender v. Phelan, 79 N. Y. 366;Morris v. Allen, 14 N. J. Eq. 44;Baker v. Mayo, 129 Mass. 517; In re German Min. Co., 4 De Gex, M. & G. 19, 35; 1 Lindl. Partn. 390; In re Norwich Yarn Co., 22 Beav. 143, 169; Troup's Case, 29 Beav. 353; In re Beulah Park Estate, L. R. 15 Eq. 43; Hodges v. Parker, 17 Vt. 242;Ligare v. Peacock, 109 Ill. 94;Matthews v. Adams, 84 Md. 143, 35 Atl. 60;Woerz v. Schumacher, 161 N. Y. 530, 56 N. E. 72.
When the money has been paid in as capital, or where there is an express agreement between the parties that interest is not to be allowed or charged, this rule, of course, has no application. So the plaintiff's right to the item of interest must depend upon the fact that the money was a loan to the firm, and not a contribution to capital, and we must resort to the findings of the referee for the fact. The only finding in the report that bears upon the question is in the following words: ‘The claim made by plaintiff for interest on his advances of money to and for the use of the firm is disallowed, for the reason that, as a matter of fact, there was no agreement, either express or implied, that such interest should be paid or allowed; and, under the circumstances of the case, the right to interest does not exist, as matter of law, in the absence of such an agreement.’ It is not quite clear whether this language was used by the learned referee to express the idea of a loan or a contribution to capital, although the words ‘advances of money to and for the use of the firm’ are more appropriate to describe a loan than a payment of capital. Snyder v. Lindsey, 157 N. Y. 616, 52 N. E. 592. While the language is open to construction, it would be quite unreasonable to hold that it imports a finding that the money advanced was capital, and not a loan to the firm. It is claimed by the learned counsel for the defendant that the decision upon the appeal below conclusively establishes the fact, so far as this court is concerned, that the money advanced was capital, and not a loan. The court upon appeal could not settle that fact unless it had been found by the trial court, and the referee did not, in terms, at least, make any such finding. the order of the learned court below is in the following words: ‘It is hereby ordered and adjudged that the judgment so appealed from be, and the same is hereby, reversed and a new trial granted, costs to abide the event, unless within twenty days defendant stipulates to...
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