Opinion
(June Term, 1841.)
Where a bill is filed for the settlement of co-partnership accounts, and a reference is made to the master to state accounts, he has a right to examine into and report the existence and the terms of the co-partnership, for otherwise he cannot correctly state the accounts.
When, on such a bill, the defendant admits an advance of capital on each side, an agreement for its management, for the payment of the charges out of the joint funds, and for a dividend of the profits, this is an admission of a co-partnership.
When, in a co-partnership, there is no specific agreement as to the division of losses and profits they are to be divided equally.
Where there is no allegation or interrogatory in the bill to which the defendant's answer is directly responsive, as when the defendant alleges a payment about which nothing is alleged or asked in the bill, the defendant's answer is not evidence for him.
It seems that, without some express stipulation to that effect (untainted by usury), a partner cannot charge interest on his advances when he is to participate in the profits.
THIS was a bill transferred from JOHNSTON Court of Equity to the Supreme Court at Spring Term, 1841. The facts as appearing on the pleadings, proof and exceptions to the master's report are fully stated in the opinion of this Court.
C. Manly for the plaintiff.
W. H. Haywood, Jr., for the defendant.
The bill alleges that in September, 1836, the plaintiff's intestate and the defendant formed a co-partnership to purchase and sell slaves on speculation on the following terms: Hardy Jones was to advance the sum of $3,350 and the defendant one-third part as much as capital; and the defendant was to invest the same and carry the slaves to the southwest for sale, pay all expenses out of his own pocket and divide (333) the profits equally between the parties; that accordingly Hardy Jones advanced the said sum, and that the defendant purchased slaves on the joint account and sold them in Alabama and made great profits, and that Hardy died in August, 1837, before receiving any part of his capital or profits or any settlement having been made between the parties. The bill is brought by the plaintiff as administrator of Hardy Jones, for an account of the partnership and payment of the sum found due from the defendant.
The answer denies the agreement to have been such as that stated in the bill. But it admits that Hardy Jones did advance the sum of $3,350, for which the defendant gave him a note; and that it was agreed between them that with that sum and the sum of $1,377 (which the defendant had) slaves should be purchased and sold by the defendant, and that after defraying all the expenses of the business out of the joint funds and reimbursing to each of the parties the sum advanced by him the surplus should, as profits, be divided. The answer then states that the defendant made a purchase and sale of negroes, and about May or June, 1837, paid to the intestate the sum of $2,200 in part of the capital sum of $3,350, for which the defendant gave his note, and which he says he considered was loaned to him, and that the defendant then paid the further sum of $1,000 as Hardy's one-half of the profits, after deducting the expenses, with which Hardy expressed himself satisfied, and upon the receipt of which each party considered the accounts of the partnership settled, and that the defendant remained indebted only on his note for the balance due thereon. The answer further states that the expenses were $501.65, but that in the settlement the defendant had credit only for the sum of $149 on that account as he did not insist on more against the said Hardy, who was his uncle and friend, and that therefore he had overpaid the intestate. And the answer then states that for these reasons and because there was no written agreement of co-partnership between the parties the settlement was not reduced to writing nor any receipt taken for the said sum of $1,000, the payment of which, however, the answer positively avers.
By consent the parties made a reference to the master (334) to state the account between them, but without prejudice. The master made his report and the defendant took exceptions thereunto, and the cause was then removed to this Court. It is now brought on upon the report and exceptions.
The master finds the partnership and that the capital of the plaintiff's intestate, to-wit, $3,350, has been paid, either before or pending the suit, and that the profits amounted to $2,800, after deducting all expenses, of which one-half belonged to the intestate and the other half to the defendant. In ascertaining the proofs the master did not go into a particular account of the cost and of the proceeds of the sales of the slaves, nor of the expenses, but charged the gross sum before mentioned upon the testimony of several witnesses of the declarations of the defendant that he made that amount of profit. The defendant's first exception is that the master has not allowed the defendant credit for the sum of $397.65 for necessary expenses. Upon looking into the depositions we find the master's report fully supported by the evidence on which the master acted. It is proved by three witnesses, and these witnesses of the defendant, that immediately after his return from the southward, in May, 1837, he stated to each of them distinctly that after deducting all expenses he made $2,800 clear. If the plaintiff was satisfied with this the defendant cannot complain that the master did not inquire further into the particulars on which the profits would appear; besides, the defendant gave no evidence to the contrary. The second exception is that it was not referred to the master to inquire into the existence and terms of the partnership, and therefore that he has exceeded his power in finding them; and that, moreover, he has so found without sufficient or proper evidence. No part of this exception, we think, can be sustained. If there be not a co-partnership the proper mode of contesting its existence would have been to bring the cause on for hearing, which might have been done as the reference was without prejudice. But it cannot be reached in the manner here attempted, by bringing on the case for further directions on the master's report and exceptions; for a reference to take the accounts in this case necessarily imports that the partnership is established, since that is the only account sought. And in (335) taking it the master must inquire into the terms, that is to say, the capital to be advanced and the services to be rendered by each, and the division of the profits, in order to ascertain the balance between the parties. Therefore the reference to the master obliged him to assume, for the purposes of reference, the existence of a co-partnership, and to enable him to state the account truly between the parties to ascertain the terms of it. But in reality the point is not disputed between the parties; and if the question were made upon a hearing of the cause it would be decided against the defendant upon the answer. That distinctly admits an advance of capital on each side, an agreement for its management, for the payment of the charges out of the joint funds, and for a division of the profits; and all this can amount to no less than a partnership. It is true in one part of the answer it is said that the defendant considered the sum advanced by Hardy Jones was lent to the defendant; but that is not stated as any part of the agreement between the parties, but only as an inference of the defendant from the fact that he gave his note for that sum. That, however, does not convert the transaction into a loan when it is seen from other parts of the answer that it was not in fact a loan of money on interest, but was an advance of capital for carrying on a joint business. It does not, indeed, appear in the proceedings when the note was payable; so that the transaction is open to the objection that the intestate was, by the forms under which the parties acted, getting both interest on his capital and profits on his investment. Certainly that would not be allowed. If the intestate resorted to this method, namely, the forming of an apparent partnership as a cover to evade the statute of usury, the Court could give his administrator no relief. But no such defense is even intimated in the answer. On the contrary we must take the case to have been that the parties meant no shift but a real partnership, and therefore there could be no usury in it. Gilpin v. Enderby, 5 Barn. Ald., 954. The only question then would be whether the intestate, receiving a part of the profits, could also claim interest on his advance, even if the note taken (336) for it would by its terms carry interest. And upon that we should clearly think not ( Brapley v. Holmes, 2 Molloy., 1) at least till the parties settled and a balance was found due to the intestate from the defendant, which was not paid, and for which the note was considered as standing as a security from that time. But there is no exception presenting the case to the Court in either of those aspects; and that under consideration merely draws into question the existence of the co-partnership, as to which the answer contains an explicit admission of what the Court must hold to be a co-partnership.
The third exception is that the master has divided the profits equally between the parties, without evidence how they were to be divided according to the agreement. The answer to this is, in the first place, that in the absence of a stipulation in the articles the law divides losses and profits equally between partners, upon the ground that equality is equity; and, in the next place, that the answer states that such was the agreement in this case.
The fourth exception is that the master has not given the defendant credit for the sum of $1,000 as having been paid to the intestate in full of or on account of his profits, as stated in the answer. Of such payment no evidence is given by the defendant unless the answer be evidence for him. But we think it is not. There is no allegation in the bill nor interrogatory upon the supposed payment under consideration to which that part of the answer can be deemed responsive. The plaintiff does not make the defendant his witness on that point, and therefore is not bound by his answer. But the defendant brings forward the fact as matter of avoidance and distinct discharge of an admitted liability, and in such a case the rule is settled that the answer by itself does not establish the discharge; but it must be proved aliunde.
The exceptions must therefore all be overruled and the report confirmed, and a decree accordingly for the plaintiff with costs.
PER CURIAM. Decree accordingly.
(337)