Simpson v. Richmond Worsted Spinning Co.

• Decision Date: 11 March 1929
• Citation: 145 A. 250
• Parties: SIMPSON et al. v. RICHMOND WORSTED SPINNING CO. et al.
• Court: Maine Supreme Court

145 A. 250

SIMPSON et al.

v. RICHMOND WORSTED SPINNING CO. et al.

Supreme Judicial Court of Maine.

March 11, 1929.

Appeal from Supreme Judicial Court, Sagadahoc County, in Equity.

Suit by James A. Simpson against the Richmond Worsted Spinning Company, in which Harry L. Pond intervened as defendant. From an adverse decree, intervening defendant appeals. Appeal sustained, decree reversed, and case remanded.

Argued before WILSON, C. J., and PHILBROOK, DUNN, BARNES, BASSETT, and PATTANGABL, JJ.

James A. Pulsifer, of Auburn, and J. E. Reagan, of Boston, Mass., for appellant.

Geo. W. Heselton, of Gardiner, and Fred F. Lawrence, of Portland, for appellees.

BASSETT, J. On appeal by an intervener in proceedings in equity from the final decree of the sitting justice denying his right to relief.

The original bill was brought by James Simpson against Alexander H. Haddon and Edward L. Smeeton, who are nonresidents and have never submitted themselves to the jurisdiction of this court, and the Richmond Worsted Spinning Company, a Maine corporation formed in December, 1923, by Haddon and Smeeton and located at Richmond.

Haddon and Smeeton had conveyed to the corporation mill property which Simpson claimed had been assets of a partnership to carry on a yarn spinning business and which had been formed in August, 1921, by Haddon, Smeeton, and himself and terminated by the first two in November, 1923. The controversy between them as to whether Simpson was a partner and as to the amount to which he was entitled had been conditionally settled by an agreement in writing dated November 20, 1923, by which Haddon and Smeeton agreed to pay Simpson in settlement $43,000 payable in three promissory notes of varying maturity. The last note of $16,500 due January 20, 1924, not having been paid, and the agreement for adjustment having been broken, Simpson on March 30, 1925, brought this bill asking that Haddon and Smeeton and the corporation be adjudged liable for the unpaid note and the interest and, if not paid, that he be adjudged a partner in the business and an equitable owner of one-sixth interest in it, that Haddon and Smeeton be ordered to account to him, and that the property of the corporation be charged with an equitable lien for the amount which should be found due him.

Pending these proceedings, Harry L. Pond on June 10, 1925, petitioned to intervene as plaintiff, alleging that he and Simpson on June 11, 1921, became equal co-owners of a 60-day option to purchase the mill property in Richmond, which had been conveyed to Haddon and Smeeton and by them to the corporation, under an oral agreement between him and Simpson that each would endeavor to sell the property and the option on it and divide the proceeds equally; that the claims which Simpson sought to enforce in the bill arose out of the sale of the option by Simpson; and that he was entitled to an accounting by Simpson.

Pond was permitted to intervene as a party defendant and answer.

It appears from the final decree that the liability of the defendant corporation had been fixed in a former decree, in accordance with which $18,760.50 and $97.39 costs of suit had been paid into court by the corporation in discharge of its obligation. The parties assented to it, have acted upon it, and the sitting justice in his final decree recognized it as settling all controversies, excepting those between Pond and Simpson, and with the acquiescence of all parties within the jurisdiction of this court and affected by its decree.

Hearing was held on the issues raised by Pond's answer.

Prom the evidence, it appeared that Simpson, an experienced superintendent of textile manufacture, became in 1920 superintendent of a carpet mill in Roxbury, Mass., where Pond was employed as checker in the wool house at a weekly wage of $23. Hearing rumors of the mill shutting down, Simpson and Pond began to consider engaging in a yarn spinning business themselves if they could raise the money therefor. Pond, who had formerly worked in a broker's office, thought he could raise it. The project was discussed considerably, but their testimony differs as to what each had in mind for form of organization and their interests in it if established. The necessity of finding an available mill for any plan becoming manifest, Pond learned through mill brokers of a mill at Richmond, Me. He and Simpson went there to examine it. On the way home, it was agreed that Pond should try to get from the brokers an option, and he arranged for a 60-day option dated June 11, 1921, for the purchase price of $20,000, of which $500 was to be paid on the delivery of the option. Simpson and Pond went together to the broker's office. Simpson paid the $500, and the option, in which both were named as the optionees and payors of the consideration, was executed by both and delivered to them. Simpson made no objection to the form of the option. After the option was obtained, they discussed what would be their business relations if they succeeded in financing their project. Their versions differ. Simpson testified that he refused Pond's suggestion of "fifty-fifty," but agreed to allow him 20 per cent. if he raised the money. Pond testified to an unconditional agreement that he would have 50 per cent. of the profits of the mill. But there was undisputed testimony of a broker that during the option period, a tentative plan, which did not go through, was worked out by Simpson, Pond, and the broker for organizing a corporation, to be financed by the sale of preferred stock, with common stock as a bonus, and to be controlled by a majority of the common stock, which was to be issued in equal shares to Simpson and Pond and chiefly for the option.

Pond tried to effect the financing, but did not succeed. About two weeks before the option period expired, Simpson undertook to raise money.

On July 27, he met Haddon, whose possible interest in the plan Simpson had learned a few days before, and went with him to Richmond. Negotiations between Simpson, Haddon, and Smeeton followed and resulted in a written agreement dated August 8, hereafter considered.

During these negotiations, Pond was informed by Simpson that he had a prospective customer, but was not told any of the details, or asked to take any part, and did not take part.

On August 6, Simpson telephoned Pond that Haddon and Smeeton would not go through with any plan if another besides Simpson was a party and asked him to release his interest in the option. Their versions of what each said to the other differ. On August 8, before the written agreement was executed, both met Haddon and Smeeton. After Simpson had conferred alone with them, Pond was informed that Haddon and Smeeton would pay him $1,000 for a release and employ him. He agreed to sign the release, and on November 15, after he had begun to work in the mill for a weekly compensation, was given a check for $1,000 by Haddon and Smeeton. Pond signed the release, which was as follows:

"I, Harry L. Pond, of Natick, Massachusetts, hereby acknowledge receipt of one thousand dollars ($1,000) paid me by Richmond Worsted Spinning Co. in recognition of the fact that I have transferred to them any rights I may have had under a certain option by and between Bloomsburg Silk Mill, James Simpson and myself, dated June 11, 1921, and in consideration thereof I hereby release unto said Richmond Worsted Spinning Co. and the partners doing business under said name any and all claims and demands of any sort whatsoever which I now have or ever have had against said Richmond Worsted Spinning Co. or said partners, arising from any cause whatsoever up to the present time.

"In Witness Whereof I have hereto set my hand and seal this 15th day of November, 1921."

Pond never saw, and Simpson told him nothing about, the written agreement. The option and the property covered by it were conveyed to Haddon and Smeeton. They agreed to refund to Simpson the $500 paid by him. Pond continued in their employment until October, 1922. He first learned of the terms of the agreement in November, 1923, from Haddon when it was terminated and Simpson left Richmond. Pond made a demand on Simpson for an accounting in December, 1923. The decision of the sitting justice was as follows:

"Upon a careful examination of the evidence in this case I am of the opinion that the release * * * signed by Harry L. Pond, intervenor, bars him from any right to recover any part of the option or value thereof or any part of the receipts of the real estate or other property embraced within the terms of the option. However were it not for the legal bar effectuated by the said release, I think the evidence would fairly show that Pond was co-owner of the option with Simpson. A decree may be drawn in accordance with this finding."

The decree denied that Pond was equitably entitled to any part of the proceeds of the notes given to Simpson, or of the money paid into court, or to any accounting from Simpson. The case comes up on appeal from this decree.

First. Was Simpson a partner of the Richmond Worsted Spinning Company on November 15, 1921, when the release was given, and therefore within its express terms?

The written agreement of August 8th was between Haddon and Smeeton, copartners of a partnership to be conducted under the name of the Richmond Worsted Spinning Company, parties of the first part, and Simpson, party of the second part. It recited that Simpson desired to enter the employ of the partnership and "had sold to the partnership certain assets owned or controlled by him," and provided that he should be employed at a monthly salary and "as additional compensation over and above said monthly salary" be credited at the end of each calendar year with one-sixth of the net profits, or debited with one-sixth of the deficit, for the year before deducting his compensation. Upon the termination of the agreement by either party, there should be paid to Simpson "in payment of the...