Scott v. Thompson

• Decision Date: 10 April 1920
• Docket Number: No. 20159.,No. 20160.,20159.,20160.
• Citation: 222 S.W. 115
• Parties: SCOTT et al. v. THOMPSON.
• Court: Missouri Supreme Court

222 S.W. 115

SCOTT et al. v. THOMPSON.

No. 20159.

No. 20160.

Supreme Court of Missouri, Division No. 1.

April 10, 1920.

Rehearing Denied June 2, 1920.

Appeal from St. Louis Circuit Court; Wm. M. Kinsey, Judge.

Suit by John R. Scott and another against John W. Thompson for an accounting. From a judgment, both parties appeal. Reversed and remanded with directions.

Kinealy & Kinealy, of St. Louis, for plaintiffs.

Marshall & Henderson and Jourdan, Rassieur & Pierce, all of St. Louis, for defendant.

BLAIR, P. J.

This is a suit in equity for an accounting between partners. The cause was referred. The referee recommended judgment for plaintiffs in the sum of $36,823.73, with interest from the dissolution of the partnership, September 23, 1913. Both plaintiffs and defendant excepted to the report. The court disallowed one $2,500 item included in the account against defendant, and overruled all other exceptions. Plaintiffs and defendant appealed. Separate abstracts and briefs are filed on the appeal and cross-appeal.

The parties were residents of St. Louis. Both long had been engaged in railroad construction, plaintiffs under the name of John Scott & Sons, and defendant under his own name. They were on friendly terms, and previously had worked together. Plaintiffs were more experienced in grading, track construction, etc., and defendant had given more attention to erecting depots, terminals, and the like. Defendant was a man of large means, and plaintiffs, according to defendant, were but very modestly, indeed, supplied with worldly goods. The first contracts for work under the partnership arrangement involved in this suit were made in May, 1910. There were five separate projects undertaken by the parties. The facts relevant to the several questions require separate statement and consideration.

I. Defendant challenges the allowance to plaintiffs of a share of the profits in one transaction involving the use of $112,420.13 in connection with the construction of the Stephensville North & South Texas Railway Company. He contends the money was loaned by him, and that this loan had nothing to do with the construction contract under which he and plaintiffs, as partners, were building the line of that road.

In April, 1010, defendant learned that certain railroad construction work was in contemplation, advised John R. Scott thereof, and suggested that they undertake the work. In advance of a consultation with the railroad officials, defendant and John R.. Scott agreed together to submit a bid on a unit basis, on the theory that the work would be paid for as it progressed, and agreed they would advance equal shares of the relatively small capital which, on such a basis, would be required to carry the work. They were later advised that the railroad was unable to finance the undertaking in this way, and desired the contractors to do so and carry the expense until bonds of the proposed line could be marketed. This required a new arrangement between defendant and Scott. It was agreed between them, so far as concerns four of their joint ventures, that defendant "was to finance the work and attend to all matters relating thereto that could be attended to in St. Louis, including making purchases, hiring the men, furnishing the money, settling with the railroad, etc.. and that plaintiffs were to furnish no money or capital, but were to look after and superintend the work." (This quoted statement is taken from defendant's brief.) With this understanding of the matter between themselves, and of the railroad's desire that the contractors were to finance the work, plaintiffs and defendant, under the name of Thompson & Scott, on May 12, 1910, entered into a contract with the Stephensville North & South Texas Railroad Company, as follows:

                                     "St. Louis, May 12, 1910
                

"Stephensville North & South Texas Railway. We, the undersigned, hereby propose to do all the clearing, grubbing, earth excavation and embankment, loose and solid rock excavation, necessary in connection with the construction of a line of railroad from Gatesville, Texas, to Hamilton, Texas (and if decided to be built, a line from Hamilton to Comanche), and will frame and place in position all timber trestles, mix and place all concrete work, place all drains (wood, tile, or cast iron pipe as may be necessary), and will furnish all labor and erect all depots, station buildings and outhouses, water tanks and turntables, and will furnish labor and construct all right of way fences; and, if required, will purchase all or any part of right of way lands required for depots, station buildings, outhouses and other necessary facilities, and will do any or all other work and furnish any or all material that may be necessary to complete the proposed line of railroad between the points above mentioned; all of such work to be done in accordance with the specifications heretofore agreed upon, and in compliance with plans furnished by your company, to the full and complete satisfaction and acceptance of your chief engineer; or, in the case of station buildings and work other than that properly classed as engineering, to the satisfaction and acceptance of such representatives as you may designate; such work to be completed within six (6) months from the date hereof, it being understood that your company is to furnish all bridge timbers, lumber, piling and other articles required in connection with the trestles to be constructed, right of way fences, as well as necessary rail, fastenings, switch material and other fixtures required in laying the track between the points hereinabove mentioned.

"We propose to furnish all labor required to complete the work as above outlined, and such material as may not be furnished by your company, at actual cost, to which shall be added fifteen per cent. (15%).

"Your company to furnish us by the fifteenth (15) of each months, estimates to cover the work done during the preceding calendar month.

"We agree to carry estimates, if desired by your company, until final completion of the work as hereinabove set forth, until the completion thereof, said estimates to bear interest at rate of five and one-half per cent (5½%) from the fifteenth day of the month following that for which they are made to cover, your company to agree that you will not delay the work of securing right of way, engineering features, or delivery of material to be furnished by you, but will have all such items looked after, right of way secured, grade stakes, etc., furnished and material delivered at such time as will not cause us delay in the completion of the work.

"It is further understood that all payments to be made under this proposal are to be guaranteed by the St. Louis Southwestern Railway Company of Missouri. [Signed] Thompson & Scott, by J. W. Thompson.

"Accepted for Stephensville North & South Tex. Ry. Co. by B. C. Cage, President."

On the same day a contract identical in legal effect was entered into with the Central Arkansas & Eastern Railroad for construction for it. The Stephensville North & South Texas Railway Company (hereafter referred to as the Stephensville Company) was a Texas corporation, and its line was wholly within that state. The Central Arkansas & Eastern Railroad (hereafter referred to as the. Central Arkansas) was an Arkansas corporation, and its line was wholly within that state. The guarantor company, the St. Louis & Southwestern Railway Company of Missouri, was a Missouri corporation and owned lines in Missouri and Arkansas. It will hereafter be referred to as the Missouri Company. The St. Louis & Southwestern Railway Company of Texas (hereafter referred to as the Texas Company) was a Texas corporation, and owned lines in that state. On May 12, 1910, F. H. Britton was vice president and general manager of the Missouri Company and president of the Texas Company. These two companies were jointly known as the "Cotton Belt." The Stephensville road was designed to be a sort of subsidiary of the Texas Company, and was subsequently operated under a lease to it. There is evidence the latter road was owned by the Missouri Company. The Central Arkansas was designed to be a subsidiary to the Missouri Company. All these corporations were separate and distinct entities.

Concerning the major part of the work under the Stephensville contract, there is no controversy. Defendant concedes partnership profits aggregating over $102,000. The principal item in dispute in this connection is the sum of $16,864.37, which plaintiffs contend are partnership profits arising from the purchase, under the contract, of rail, fastenings, switch material and switch ties, in the sum of $112,429.13, which were used in the construction of the line under the Stephensville contract. Defendant contends he loaned the $112,429.13 either to the Missouri Company or the Texas Company for use by it to purchase new steel rail for its own purposes.

On August 18, 1910, defendant wrote John It. Scott (then on the Stephensville line), among other things, that Britton "mentioned that he might want us to buy some rail." About March, 1911, the arrangement was made which is drawn in question by this assignment of error. The documentary evidence will be stated first. On March 15, 1911, the Texas Company made out its bill against Thompson & Scott for rail, rail fastenings switch material, and switch ties in the sum of $112,429.13. This bill is itemized, and shows the various materials, the prices charged, and the total amount. On April 11, 1911, defendant made out his check for $112,429.13, payable to the Missouri Company. This check was, by the payee, indorsed to the Texas Company, and deposited to the latter's account. The testimony of the vice president of the Missouri Company is that this check should have been made payable to the Texas Company in the first place, but was, by mistake, drawn payable to the Missouri Company. Its proceeds went into the general account of...