Partnership. Construction of articles of co-partnership as they
related to the expenses of the co-partners.
The case as stated in the opinion of the Court was as
follows:
The bill filed by the appellee in the court below alleges that
on or about 7 March, 1815, the parties to this suit entered into
co-partnership, as merchants in trade, in the Town of Alexandria
under the firm and style of J. & R. Withers. That the
complainant, John Withers, was to furnish to the firm fifteen
thousand dollars, and to receive three-fourths of the profits of
the business, and the defendant, Reuben Withers, was to furnish
five thousand dollars, and receive one-fourth of the profits, and
in case of loss, it was to be borne in the same proportion, and
that each party was to pay his own individual expenses. That the
business was continued upon the same terms and conditions in all
respects (the name and style of the firm having been changed to
that of John Withers & Co), until 13 December, 1819, when it
was dissolved by mutual consent and upon certain terms which need
not be here stated. The bill then alleges that the complainant,
never having received a satisfactory account of the disbursements
and transactions of the defendant whilst in New York as a member of
the firm, they were excepted out of the settlement of the
partnership concerns, and the defendant agreed to render a true,
full, and just account of all his purchases and transactions in New
York as a member of the said firm, and that he should be
exclusively liable for all debts and engagements which he might
have contracted or made in the name of said firm and for which they
had not
Page 33 U. S. 356
received full benefit. And the bill charges that the defendant
had failed and neglected to render such account, and prays that an
account may be taken of such disbursements, dealings, and
transactions, and that the defendant may be decreed to pay over to
the complainant what, if anything, upon the taking of such account,
may be found due to him.
The defendant in his answer admits the partnership was entered
into upon the terms and conditions stated in the bill, and avers
that he regularly transmitted to the house at Alexandria invoices
of all goods purchased in New York, and that the same were entered
on the books of the firm, which are in the possession or under the
control of the complainant. The defendant admits that it was
stipulated in the articles of co-partnership that each party was to
pay his own individual expenses, which, as he alleges, was meant
and intended to apply when the parties were at home, and not
traveling on the business of the firm. And he expressly avers that
all the funds put into his hands were well and faithfully applied
to the objects for which they were remitted and received. The
defendant also admits that upon the dissolution of the partnership,
he did agree to render a full, true, and just account of all his
purchases and transactions in New York as a member of and on
account of said firm, and to be liable for all debts and
engagements which he may have entered into (if any) on account of
said firm and for which the said firm may not have received full
benefit and advantage. And avers that he has fully complied with
his engagement to render such account and submitted the same for
examination, and that the account, when examined and corrected, was
balanced, as he thinks, on the books of the company, which are in
the possession or under the control of the complainant. And that
there is no debt due in the City of New York or elsewhere from the
said firm contracted by him, the defendant, but that every such
debt, contract, or engagement, so far as he knows or believes, has
been paid off, satisfied, and discharged.
The cause afterwards being set down for hearing, was, on motion
of the complainant, referred to a commissioner to state and settle
the partnership accounts between the parties.
Upon the coming in of the report of the commissioner, sundry
exceptions were taken and argued by counsel, all of which
Page 33 U. S. 357
were overruled by the court except one, which related to the
defendant's charge for his expenses in New York, amounting to
$1,756. The exception to this charge was allowed, and the cause
referred back to the commissioner with directions to allow the
defendant his reasonable traveling expenses to and from New York
and the necessary difference between the expense of living at New
York and at Alexandria.
MR. JUSTICE THOMPSON delivered the opinion of the Court.
The question in relation to the expenses of the appellants in
New York being the only one now in controversy between the parties,
it is unnecessary to notice the proceedings in any other
respect.
Page 33 U. S. 358
The rule laid down by the court in its direction to the
commissioner we think was entirely correct. The articles of
co-partnership are not in the record. But the allegation in the
bill and the admission in the answer touching the agreement between
the parties in relation to their expenses do not materially differ.
The bill alleges that each party was to pay his own individual
expenses. The answer to this allegation is that although it was
stipulated in the articles of co-partnership that each party was to
pay his own individual expenses, yet the same was meant and
intended to apply when the parties were at home, and not traveling
on the business of the concern. This was substantially the
construction adopted by the court below, and which we think is the
fair and reasonable interpretation of the argument, even standing
alone upon the complainant's own statement. It was manifestly
intended to apply to private or family expenses not connected with
the business of the partnership. But it would be an unjust and
forced construction of the stipulation to extend it to extra
expenses incurred when abroad on the business of the partnership.
The stipulation in the memorandum of 13 December, 1819, upon the
dissolution of the partnership, does not embrace this item of
expenses. The defendant, Reuben Withers, covenants to render a
full, true, and just account to the firm of all his purchases and
transactions in New York, as a member of or for and on account of
the said firm, and to be liable for all debts or engagements which
he may have entered into (if any) on account of said house and for
which the said firm may not have received full benefit and
advantage. The disbursements of the defendant for his personal
expenses cannot with any propriety be considered a debt or
engagement within the meaning of this stipulation. It was obviously
intended to protect the complainant from all liability for any
outstanding claims for goods purchased in New York and for which
the firm had not received the full benefit and advantage.
The cause was afterwards referred back to the commissioner to
reform his report touching these expenses according to the rule
laid down by the court,
viz., to allow the defendant his
reasonable traveling expenses to and from New York and the
necessary difference between the expense of living at New York and
at Alexandria. Upon the coming in of the commissioner's
Page 33 U. S. 359
report, an exception was filed, but overruled by the court, and
a final decree entered against the defendant.
The exception taken to the report was in these words:
"The defendant excepts to this report because it is contrary to
evidence, and for other reasons to be stated more particularly at
the hearing."
The record only states generally that the exception was
overruled. This does not warrant the conclusion that it was
overruled for defect or insufficiency in point of form. For if this
had been the ground of objection, it might have been and doubtless
would have been amended. The latter branch of the exception may be
objectionable. But the exception that the report was contrary to
evidence is good in point of form, and we must presume that the
court overruled it upon the merits, or in other words decided that
the report was not contrary to the evidence, and in this we think
the court erred.
The commissioner, in his first report, had allowed the
defendant, for his expenses in New York, $1,756, because the
charges were entered in the books of the company, of which entries
all the parties were considered by him as having full knowledge.
This undoubtedly is the
prima facie presumption, and if
the complainant knew of the entries and made no objection, his
assent to their allowance would fairly be presumed. But the
evidence in the cause is sufficient to rebut this presumption. John
Washington, who was a clerk employed by the firm, swears that he
was intimately acquainted with the concerns of the co-partnership
and with their mode of transacting business. That John Withers
attended mostly to what is called the outdoor business, and did not
attend to the books of the firm. That he has good reason to
believe, and does verily believe, that he was entirely ignorant of
the state of the books between himself and co-partner. That he
never attended to or examined the books. That on his showing him an
entry of $900 on account of those expenses, he said they were
incorrect and contrary to their agreement, and before the
dissolution of the partnership he objected to all the defendant's
charges for expenses. This, as far as negative evidence can go,
shows that the complainant was ignorant of the entries in the books
and ought not to be concluded by them.
Page 33 U. S. 360
The commissioner, in his last report, has estimated the
defendant's expenses in New York at one dollar per day, whereas the
positive proof, by the testimony of Gordon Miller, is not only that
the customary charge for board at the house where the defendant
boarded was $10.87, but that the defendant actually paid that sum,
exclusive of extra fire at fifty cents per day. But there is no
evidence showing the time he had an extra fire or what he paid
therefor. The report therefore cannot be said to be against
evidence as to this item. But with respect to the allowance for
board the report is clearly against the evidence.
The decree of the court below must accordingly be
Reversed and the cause sent back with directions to reform
the report of the commissioner so as to allow the defendant at the
rate of $10.87 a week for his expenses in New York, instead of $1
per day.
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the District of
Columbia holden in and for the County of Alexandria and was argued
by counsel, on consideration whereof it is considered, ordered, and
decreed by this Court that the decree of the said circuit court in
this cause be and the same is hereby reversed and that this cause
be and the same is hereby remanded to the said circuit court with
directions to the said court to reform the report of the
commissioner so as to allow the defendant at the rate of $10.87 per
week for his expenses in New York, instead of $1 per day.
