Stephens v. Stephens
| Decision Date | 24 November 1944 |
| Parties | Stephens v. Stephens. |
| Court | United States State Supreme Court — District of Kentucky |
1. Appeal and Error. — Where Court of Appeals is not convinced that chancellor's finding based on contradictory testimony is erroneous, decision will not be disturbed.
2. Mines and Minerals. — Where it was agreed that one member of partnership or joint adventure should furnish drilling rig without compensation for use of rig, it was proper to charge the firm with ordinary repairs and replacement of parts broken or worn out in the operation.
3. Mines and Minerals. — Where agreement required partner to furnish drilling rig without compensation for use of rig and such partner entered into drilling contract with another and then bought the other's interest in the drilling tools and employed him to work for partnership, in settlement of account between partners the partner's drilling contract with the other was properly disregarded.
4. Partnership. — The relationship of partners is a close one and imposes on each the obligation of loyalty, integrity and utmost good faith and fairness with respect to partnership affairs, and the obligation begins with preliminary negotiations and continues throughout life of the relationship.
5. Partnership. — An equity court will grant relief to partner who has suffered from a breach of partnership obligation and no undue advantage of one over another by misrepresentation or concealment will receive approval of law.
6. Partnership. — One partner will not be permitted to obtain secretly any right that should belong to partnership and put it to his own individual profit.
7. Partnership. — In determining whether partner has received secret profits from which he must make an accounting, the criterion is not actual evil motive, since court looks to the result of any secret action regardless of the intent and if action results in profit or advantage, accounting will be required.
8. Partnership. — Partner who conducted affairs and kept accounts had burden of showing the correctness and fairness of charges and claims he made, in accounting proceeding.
9. Appeal and Error. — In proceeding for partnership accounting, where accounts regarding money borrowed were confusing and a competent commissioner and painstaking judge had arrived at a result which Court of Appeals was not able to say was erroneous, judgment would be accepted as correct.
10. Partnership. — In partnership accounting, evidence did not warrant credit to defendant on account of 8-inch casing used temporarily in two wells of partnership.
11. Partnership. — Where keeping partnership records was part of duties of appellee-partner's bookkeeper, appellee was entitled to make charge against the firm for part of services of bookkeeper, as against appellant's contention that credit should not be allowed because there was no added expense because of partnership affairs.
Appeal from Floyd Circuit Court.
J.W. Howard for appellant.
Joe Hobson for appellee.
Before J.B. Hannah, Special Judge.
Reversing.
The suit is to settle the accounts of a partnership or joint adventure, the parties not agreeing upon the classification. The distinction in this particular case is not important, as it involves only the adjustment of accounts between the two parties. See Jones v. Nickell, 297 Ky. 81, 179 S.W. 2d 195.
In the summer of 1937, the appellant, Claude P. Stephens, a lawyer, joined with his cousin, the appellee, D.C. Stephens, for the purpose of acquiring and developing oil and gas leases. The appellee had had experience in that field, but it was not his principal business. It was understood that the appellant should procure the leases and contracts for the sale of the production and furnish half the money. The appellee owned, ostensibly or actually, a drilling rig and was the active and operating partner. Three wells were drilled, two of them yielding production, but the venture proved unprofitable. The operations and accounts were so indefinitely and incompletely handled by D.C. Stephens that there was indeed a tangled web to be unwound when settlement was undertaken. Much of this appears to be due to failure of the appellee to keep accurate records and to some intermingling of operations. It is not surprising under the rather free and loose way in which the joint affairs were entered upon and conducted that differences should arise and that the evidence should be unsatisfactory and uncertain. A record of over 1000 pages was built up, and upon it a Special Commissioner made a full detailed report. His net finding was that the appellant, Claude P. Stephens, was indebted to the appellee, D.C. Stephens, in the sum of $3,583.37. Honorable J.B. Hannah served as a Special Judge. Upon the trial of exceptions filed by both parties to the Commissioner's report he sustained his findings except that he held that D.C. Stephens should be allowed credit for $1718.57, which we shall describe.
The court found that D.C. Stephens had contributed $5,404.56 more than C.P. Stephens, and that one-half of that sum was chargeable against the latter, namely, $2,702.28, for which a judgment rendered. The court construed the relationship as a partnership and ordered its dissolution and the sale of its property, which consisted of an oil and gas lease. C.P. Stephens prosecutes an appeal from the judgment against him, and D.C. Stephens has been granted a cross-appeal, in which he insists that he is entitled to a judgment for $4,459.22 against the appellant.
To give even a summary of the evidence and the arguments would extend the opinion beyond reasonable bounds and be of no value as a precedent. Notwithstanding the two-fold sifting of the respective claims there are many items still in dispute. We have considered all of them. Except as we shall discuss, they rest upon contradictory testimony and we are not convinced that the findings of fact by the chancellor are erroneous in respect to them. In such situation, this court will not disturb the decisions. Campbell v. Snyder, 287 Ky. 596, 154 S.W. 2d 724.
The engagement between the parties was oral. D.C. Stephens had bought a drilling rig, but the title to it was in his brother, Jerry Stephens. Claude P. Stephens, the appellant, knew this. He maintains and the trial court found in effect, that it was agreed that the appellee should not receive any compensation for the use of the rig. That was part of his contribution to the partnership or venture. But it was held proper to charge the firm with ordinary repairs and replacement of parts broken or worn out in the operation. The allowance and disallowance of a number of items of account rest upon this finding. We concur in that conclusion and in the decisions of the Commissioner and the Judge with respect to those items.
About the time the drilling of the first well began, the appellee submitted to the appellant the draft of a contract between the firm and Jerry Stephens calling for the drilling by him as a contractor at the price of $2.25 per lineal foot, and also the payment of $25 for each 12 hours of additional or extra work. The testimony is conflicting as to how carefully the appellant examined this contract, but he did inquire if that was about the right price, and when told that it was the usual one he signed the instrument. The appellant testifies that he considered it a matter of form and in line with the partnership agreement. He was impressed with the fact that it did not provide for any payment to D.C. Stephens for the use of the rig, which he knew did not belong to Jerry. He relied upon the appellee to make a proper accounting and adjustment. At any rate, it cannot be denied that as a matter of law the appellant is bound by the terms of this contract unless back of it there was some deceit or something else that would relieve him, or unless afterward his rights were changed by some act on the part of D.C. Stephens which was in violation of his duty as a partner. The fact is that the...
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Mishkin v. Willoner
...the formation of the partnership. See also Knapp v. First National Bank and Trust Co. (10th Cir.), 154 F.2d 395, 398; Stephens v. Stephens, 298 Ky. 638, 183 S.W.2d 822, 824. Managing partners particularly owe a fiduciary Judge Digges, specially assigned, speaking for this Court in Green v. ......