Shelley v. Smith

• Decision Date: 31 March 1930
• Citation: 271 Mass. 106,170 N.E. 826
• Parties: SHELLEY et al. v. SMITH et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

271 Mass. 106

170 N.E. 826

SHELLEY et al.

v.SMITH et al.

Supreme Judicial Court of Massachusetts, Suffolk.

March 31, 1930.

Appeal from Superior Court, Suffolk County; William A. Burns, Judge.

Suit by Robert C. Shelley and others against Almond H. Smith and others, to have a partnership dissolution agreement rescinded, and the defendants compelled to render an account of certain transactions. From interlocutory decrees and a final decree, defendants appeal.

Affirmed.

R. G. Dodge, L. D. Jennings, and H. S. Davis, all of Boston, for appellants.

F. P. Garland, O. W. Taylor, and J. L. Hurley, all of Boston, for appellees.

CROSBY, J.

This is a suit in equity arising out of the dissolution of ‘The Shelley Company,’ a partnership engaged in the business of tax consultants and consisting of the four plaintiffs and the two defendants. The bill seeks to have the dissolution agreement rescinded, and the defendants compelled to render an account of certain transactions alleged to have been undertaken by them in behalf of the partnership.

The case was referred to a master. He found that all the parties to the suit were tax consultants, who, previous to the formation of the partnership, had been internal revenue agents of large experience in tax matters gained in the service of the federal government. On January 2, 1919, Miller, Smith and Plumb began business as partners, and shortly thereafter Peckham and Shelley joined the partnership which adopted the name of ‘The Shelley Company.’ There were no partnership articles, and no definite term was agreed upon for its duration. It was understood that the partners were to share the profits and expenses equally. Each of them was to give his time, energy and ability to the business, and to assist his associates in their work. The defendants, Peckham and Smith, were to devote themselves more particularly to securing business, while Shelley and Miller were to prepare claims and briefs and take charge of the managementof the office. On January 1, 1920, the plaintiff Harrigan was admitted into the firm as a partner. The firm maintained offices in Boston, Springfield and Fall River. The business was highly successful and large profits were received and divided among the partners. The defendants were very active in securing business and had charge of a large part of the total business. Smith became dissatisfied with his connection with the firm, and, on December 12, 1922, told Plumb that he intended to withdraw from the partnership. Thereupon Peckham said that in the event of Smith's retirement he also would withdraw.

At the request of Smith a meeting of the Shelley Company was held in Boston at which all the partners were present except Plumb. At this meeting Smith stated that his reason for calling them together was that he had decided to withdraw from the firm. Peckham then announced that if Smith withdrew he would do likewise. A discussion followed respecting the disposition of the pending business. It was agreed that each member should be entitled to take over the retainer clients he had brought into the firm, and that each member who was handling contingent fee cases should continue to prosecute those cases to a conclusion for the benefit of the partnership. It was understood that the firm should have no interest in any new business secured or negotiated after January 8, 1923. Smith suggested that the dissolution should take effect as of January 1, 1923. Shelley stated that he would agree if there was no new business since that date. In answer to a question of Shelley, each partner present said that he had not secured any new business since that date. It was then agreed by all present that the dissolution should date as of January 1, and that each member should have the fees from his retainer clients after that date. The meeting was adjourned to the following week when it was expected that Plumb would be present.

On January 17, a second meeting was held at which all the partners were present. Plumb was informed of all that occurred at the meeting on January 8, and assented to the arrangements then made.

The bill, as amended, in substance alleges that by reason of the representations made to them by the defendants, the plaintiffs consented to the dissolution as of January 1, upon the following terms and conditions among others: ‘(1) That each member should report, and advise the other members fully, as to all unfinished cases and business in his charge * * * on January 1, 1923; (2) that each member should advise the other members fully as to all cases and business, if any, secured * * * or under negotiation by him between January 1, 1923, and January 8, and/or January 17, 1923; (3) that all unfinished cases on hand * * * January 1, 1923, and all cases contracted for, secured or under negotiation up to the time of the said meeting on January 8, 1923, and /or January 17, should be treated as co-partnership business, and should be prosecuted and completed by the respective members thereof * * * and the profits thereof distributed in equal shares among all of the said * * * partners.’ The bill further alleges that the defendants ‘wilfully and fraudulently concealed from the plaintiffs certain large and lucrative cases which they * * * as members of * * * the co-partnership, had contracted * * * or negotiated for prior to January 8, 1923’; that at the meeting held on January 8, the defendants falsely represented ‘that they had not secured any business or contracted for or negotiated for any cases, or done any new business * * * between January 1, 1923, and January 8, 1923’; that the defendants did at this meeting held on January 8, ‘submit a false, incomplete and untrue report of the unfinished co-partnership business. * * *’ The bill further alleges that the cases of the Hathaway Manufacturing Company of New Bedford, the Acushnet Mills of New Bedford and Stoughton Mills were fraudulently concealed from the plaintiffs by the defendants. These were tax refund or abatement cases. It is further alleged that the defendants, having obtained the dissolution agreement by fraud, thereafter prosecuted for their sole benefit the above cases secured or negotiated between January 1 and January 8, and have refused to account to the plaintiffs for the proceeds. The bill includes a prayer that the agreement of January 8 be set aside and that the defendants be ordered to render a true account of all partnership business done by them and pay over the proceeds thereof.

The answers deny that the dissolution agreement was to be effective January 1, 1923, because of any representations made by the defendants or that the dissolution was upon the terms stated in the bill, or that the defendants fraudulently concealed from the plaintiffs cases or business belonging to the partnership, or that they have failed to account for the proceeds of partnership cases. The answers also aver that the defendants have been guilty of laches in bringing the bill. As counsel for the plaintiffs admitted at the hearing in the superior court that the partnership was not entitled to an accounting with reference to services rendered the Stoughton Mills, that case need not be considered.

The trial judge in his ‘Rulings and Order for Decree’ allowed the plaintiffs' motions to amend the bill; overruled the defendants' objections to the master's report; ruled as matter of law that the partnership was not legally dissolved until January 17, 1923; denied the defendants' requests for rulings so far as inconsistent with ‘the facts found and rulings' made by the master and by the judge; and confirmed the master's report. In accordance with these rulings interlocutory decrees were entered from which the defendants appealed. A final decree was entered ordering the defendants to account to the partnership for the sum of $80,057.47 with interest from August 24, 1927, to October 31, 1929. amounting to $10,497.85, making a total sum of $90,555.32, and that the defendants within thirty days from the date of the decree pay to the plaintiffs four-sixths of said sum. The decree also ordered the defendant Peckham to account to the partnership for the total sum of $14,154.94, which included interest, and that Peckham within thirty days from the date of the decree pay over to the plaintiffs four-sixths of that amount. The defendants appealed from the final decree.

The allowance of the plaintiffs' motions to amend the bill was a matter within the sound judicial discretion of the judge. No abuse of such discretion appears. Reno v. Cotter, 239 Mass. 581, 583, 132 N. E. 271;Adams v. Grundy & Co., Inc., 256 Mass. 246, 249, 152 N. E. 379;A. T. Stearns Lumber Co. v. Howlett, 264 Mass. 511, 515, 163 N. E. 193. By the second motion to amend the plaintiffs sought to add to the cases, for which it was alleged the defendants were required to account, that of the Massasoit Manufacturing Company. Although this case was not specifically mentioned in the original bill, testimony relating to it was received at the hearings before the master, and apparently a full hearing was had on that issue. The amendment was properly allowed so that the pleadings would conform to the proof. Narragansett Amusement Co. v. Riverside Park Amusement Co., 260 Mass. 265, 276, 277, 157 N. E. 532.

The defendants contend that they are not accountable for fees received from the Hathaway Manufacturing Company and the Acushnet Mills Corporation for the reason that they were not cases ‘on hand’ belonging to the partnership on January 1 or on January 8, 1923. The evidence is not reported; the master's findings relating to these cases must stand as it does not appear that they were inconsistent, contradictory or plainly wrong. Coolidge v. Old Colony Trust Co., 259 Mass. 515, 517, 156 N. E. 701. The master found that on December 18, 1922, one Stanton, the treasurer of both these companies, wrote a letter to the Shelley Company requesting an interview with Peckham for the...