Opinion
10-12-1903
RICHARDSON v. HATCH.
H. F. Carr and D. J. Pancoast, for exceptant. P. V. Voorhees and H. M. Cooper, for respondent.
Action by Joseph K. Richardson, as administrator of the estate of Joseph Hatch, deceased, against Hugh Hatch. On exceptions to the report of a master. Overruled.
The bill in this cause is filed by Joseph K. Richardson, as administrator with the will annexed of Joseph Hatch, deceased, and makes as sole defendant Hugh Hatch. The bill alleges that in 1809 Joseph Hatch, in his lifetime, and his brother, the defendant, Hugh Hatch, entered into a partnership for the manufacture of bricks, etc. No written articles of copartnership were made between the parties, and they had no special agreement except that the profits of the concern were to be equally divided between them. The copartnership continued until the 3d day of June, 1898, when Joseph died, leaving a last will, which the complainant in this cause has undertaken to execute as administrator with the will annexed. The bill further alleges that the defendant, Hugh Hatch, the surviving partner, claimed the right to settle up the copartnership business; that he has neglected to present such an account as fully settles the same; that moneys are owing to the estate of Joseph—a settlement which the complainant is unable to recover without an accounting. He prays that the defendant, Hugh Hatch, may answer without oath, and that he may render an account of the said partnership, so that it may be ascertained what balance, if any, is due to each of the said partners. The answer of the defendant, Hugh Hatch, admits the equal partnership between Joseph and Hugh, states that the real estate owned by the firm has been divided and settled, and that the defendant, subsequent to the death of Joseph, has paid to the complainant, as Joseph's representative, the sum of $8,265 on account of his interest in the business of the firm, and that by that settlement the interest of Joseph was overpaid $424.79 by mistake, and that by a true and accurate account between the partners there is a balance due to the defendant from the estate of Joseph to the amount of $424.27. To the answer as originally filed the defendant has appended a tabular statement of account, giving the amounts placed to the credit of Joseph and of Hugh in the conduct of the partnership business, showing that previous to March 2, 1885, Joseph had considerably overdrawn his account. For this overdraft a summary annexed to the answer charges interest against Joseph's estate. Upon this basis the account filed with the answer exhibits a summary claiming that the final balance in favor of Hugh Hatch is $424.79. Subsequently the defendant, Hugh Hatch, filed a supplement to his answer, exhibiting additional statements of his transactions as surviving partner since the death of Joseph. It appearing that a statement of account was necessary between the parties, an order of reference was, by consent of parties, made to Richard T. Miller, Esq., one of the special masters of this court, to state an account of the partnership dealings between Joseph Hatch in his lifetime. and the defendant, Hugh Hatch, and the transactions of Hugh Hatch as surviving partner since the death of Joseph. Under this consented reference the master has taken some testimony and stated an account, the result of which is that he finds that there is due from the defendant, Hugh Hatch, to the complainant, representing the estate of Joseph Hatch, a final sum of $6,156.53. Upon the coming in of the master's report the defendant excepted to the master's report by a number of exceptions challenging the master's account between the parties. At the hearing the criticism by the defendant of the account as stated by the master was addressed solely to the matters referred to in the third, fourth, fifth, and sixth exceptions, which are as follows: "Third. Because the master failed to inquire into the accounts between the parties as partners prior and up to March 2. 1885. Fourth. Because the master assumed, found, and reported that the accounts between the parties were settled and balanced at that date. Fifth. Because the master found and reported as follows: 'That themanne.' of closing the two accounts of Hugh Hatch and Joseph J. Hatch on March 2, 1885, in the ledger, Exhibit No. 1, of the firm of Hatch & Bro., cannot now be questioned, nor the accounts be opened, by the surviving partner, Hugh Hatch, and that he is liable to the complainant for the one-half of the sum of eight thousand three hundred and twenty-three dollars and fifty-five cents ($8,323.55), drawn by him from the firm account on January 30, 1890, to balance accounts, in the words of the ledger entry.' Sixth. Because the said master found and reported that there was nothing due from the estate of Joseph J. Hatch to the defendant, and that the defendant is liable to the complainant for one-half of the sum of eight thousand three hundred and twenty-three dollars and fifty-five cents ($8,323.55), with interest thereon." The master, in stating the account, decided that on March 2, 1885, the decedent, Joseph Hatch, and his brother, Hugh Hatch, who is now the surviving partner, had come to a settlement touching the moneys which the several partners had theretofore drawn from the partnership; that by this agreed settlement previous inequalities of the amounts drawn from the partnership by the several partners were adjusted, and thereafter the amounts severally drawn by them were equal. The master therefore started the statement of account between the parties from the second day of March, 1885. It is undisputed that several months after Joseph's death, Hugh Hatch, the surviving partner, drew from the firm business the sum of $S,323.55, as he claimed, to balance accounts as between him and Joseph. He arrived at this sum by going behind the settlement recognized by the master to have been made between the parties on March 2, 1885, and charging interest from that date against Joseph's estate on his alleged overdrafts before that date. This claim of the defendant is disallowed by the master, and the disallowance is the ground of several of the exceptions.
The defendant's counsel argues that there is no sufficient evidence of any settlement between the parties on the 2d day of March, 1885, and insists that previous to that time Joseph had drawn from the partnership sums greatly in excess of those drawn by Hugh, and that the effect of the master's account in determining that there was a settlement between the parties on the 2d day of March, 1885, was to deprive Hugh of his right to retain the $8,323.55 to compensate himself for Joseph's overdrafts precedently to March 2, 1885. It is admitted that the partnership began in 1869 between these brothers. For the first four years no books or accounts are produced to show what amounts were drawn by the several partners from the firm. From 1873 up to the time of Joseph's death, in 1898, a book of accounts is produced, beginning the accounts of the partners in 1873, and showing the several items debited and credited to them. Neither side challenges either the accuracy of the bookkeeping in this book or the correctness of the entries therein in any particular, save two several Items, both entered on the 2d day of March, 1885, one in the account of Joseph Hatch of that date and the other in the account of Hugh Hatch of the same date. These entries are both in the same words and figures and in the same handwriting, and are as follows: "At a meeting of the heirs of J. J. & M. L. Hatch held at No. 206 North 6th St. on March 2/1885 this account was settled by agreement." The master accepted these entries as settlements of the several accounts of the respective parties, Joseph Hatch and Hugh Hatch. The master started at that date to ascertain the amounts thereafter severally due the parties from the partnership, and, having found a balance due Joseph's estate as above indicated, the defendant, Hugh, filed his exceptions. The exceptions were argued by the counsel of the respective parties upon the master's report and account, the evidence returned therewith, and the exhibits produced.
H. F. Carr and D. J. Pancoast, for exceptant.
P. V. Voorhees and H. M. Cooper, for respondent.
GREY, V. C. (after stating the facts). There is but one substantial question in controversy between these parties, and that is whether the defendant, Hugh Hatch, in accounting for the partnership assets of the firm of Hatch & Bro., is entitled to consider the accounts between the several partners and the firm for moneys received by them from the partnership preceding March 2, 1885, and to charge the decedent partner, Joseph Hatch, with interest from March 2, 1885, upon the amount alleged to have been by him overdrawn from his share precedently to that date. The whole controversy is conceded to turn upon the question whether, on March 2. 1885, there was in fact a settlement made between Joseph and Hugh, whereby their accounts were balanced at that date. Hugh Hatch claims that the evidence does not justify the master's conclusion that there was such a settlement. The complainant, representing Joseph Hatch, claims that the entries in the books above quoted in the accounts of Hugh Hatch and of Joseph Hatch, respectively, the conversation shown to have taken place at about the date of March 2, 1885, between Joseph and Hugh, and Hugh's own conduct since March 2, 1885, show that at that date the accounts between the partners as to their previous respective drawings from the partnership were balanced, and that thereafter for a period of 10 years they drew coincidently equal sums each years. In the management of the firm's business it is shown that Joseph Hatch was the bookkeeper from the beginning of the firm's business up to about the year 1896,when, because of his illness, he went to California, and that his brother Cooper B. Hatch was employed as bookkeeper during the two years of Joseph's absence. Hugh Hatch, in the arrangement of the business, does not appear to have kept any of the books. His attention having been called to the entries of March 2, 1885, balancing accounts, he declares that he does not know in whose handwriting those entries are, and that he did not authorize them to be made, did not think they had any relation to the partnership business, and did not know they had been made until after Joseph's death. The book in which the entries were made contains the accounts of Joseph and Hugh from the year 1873, as well as the general accounts of those dealing with the partnership. The challenged entries are plainly written on the face of page 127 of Joseph Hatch's account and on 129 of Hugh Hatch's account. Immediately following each entry is a double line, indicating a closing of each account in the same manner as they had been theretofore closed each year. Nothing suggests, nor has it been contended, that the entries were made at a different date from that stated in them, March 2, 1885. It is of little importance that Hugh Hatch did not authorize them to be made, if they do in fact express the truth. His statement that he did not think they had any relation to the partnership business is in direct contradiction of the obvious meaning and intent of the entries, and is entirely unexplained, for he does not suggest to what, other than the partnership business, they could possibly refer. This statement, and his claim that he did not know the entries had been made until after Joseph Hatch's death, must both be tested by all the proofs submitted. It is undented that the book in which these entries appear was kept from March, 1885, when they were made, until after Joseph's death, in 1898, in the office of the firm of which Hugh was an active member, and that it was at all times accessible to his observation. It appears to be the only book of its kind used in the firm's business. It contains accounts against all general customers as well as the partners. This was a period of thirteen years, during the last two of which Joseph was absent, and Hugh alone carried on the firm's business, and was the only person who could explain the entries in the books and the mode of doing business to Cooper B. Hatch, the new bookkeeper who took Joseph's place.
The defendant contends that the entries in the book are not such entries as are admissible to charge a partner with a settlement between himself and his copartner. The book was offered in evidence and admitted before the master, and marked as "Exhibit No. 1" on the part of the complainant, for the purpose of proving these entries, without any objection then taken on the part of the defendant to its admissibility. The defendant himself gives credit to all the book entries which favor him, for they furnish the basis on which he makes up his account to justify his withdrawal of the large sum he retained after Joseph's death. He challenges only these particular entries which indicate that a settlement was made between the partners on March 2, 1885. It is not claimed that they do not indicate a balancing of the accounts of the several partners at the date named, nor that in the mode of keeping the firm's books such an entry was not proper to express that fact if there was in truth a balancing of their accounts as therein stated. The defendant claims that in fact there never was such a settlement, and that he never knew that there were entries on the books stating that there was such a settlement, and that they are not, therefore, binding upon him. The proof is that there was a meeting of the Hatch heirs in March, 1885, as is named in the entries; that some seven of them were present; that at that meeting there was conversation between Joseph and Hugh touching the partnership business, and that Joseph stated that he had taken more money out of the firm's business than Hugh had, and that he thought that a great many things counterbalanced it by reason of Hugh's living on the farm and receiving the benefit of that, and Joseph having nothing other than that which he had from the business. It is also proven that Hugh had lived on the farm for about 15 years prior to that time; that before he went there $800 rent was received for the farm each year, and that after he went there Hugh paid no rent, but said that he had laid it out in improvements. The foregoing account of the meeting was given by one of the sisters, who admitted that she was deaf, and did not hear all that took place. Cooper B. Hatch, one of the brothers, was present at the same meeting, and says that they were talking about the settlement, but does not remember just exactly what it was; that there was a statement made by Joseph about the amount of money which was taken out of the firm, to the effect that he thought that he ought to be entitled to a little larger share; and that to the best of his knowledge there was a settlement made there. No testimony was offered by the defendant in contradiction or explanation of any of these statements, although it is proven that several of his sisters, who were present at the family meeting, might have been, but were not, called as witnesses. There is no proof of any kind that the settlement was not in fact made as entered in the books. There is also evidence which justifies an inference that Hugh Hatch recognized the fact that he and Joseph had in March, 1885, balanced their several accounts with the firm, as stated in the challenged entries. That appears in this way: Before March, 1885, Joseph and Hugh had for years drawn money from the firm in varying sums at different times, and in such a manner that their several drawings ofcash from the business were plainly unrelated. After March, 1885 (when the witnesses testify there was a settlement), there was a radical change in their method of drawing money from the firm. Payments of cash to the several partners were thereafter substantially coincident as to both time and amount of money drawn. When Joseph drew any money, Hugh drew the same amount, thus making in fact a settlement with each other at each payment. This continued for 10 consecutive years after March 2, 1885. It is uncontradictedly proven that at the family meeting in 1885 Joseph's overdraft from the firm was brought to Hugh's attention by Joseph, with a claim that Hugh's advantageous position as occupant of the farm for years entitled Joseph to counterbalance this difference, and that there was a settlement between them. For 10 years thereafter Hugh and Joseph drew cash in equal portions from the firm's business, and nothing appears to indicate that Hugh claimed that he was still entitled to the large balance in his favor which he took from the firm after Joseph's death. With such opportunity to the defendant to see the entries now challenged that it is difficult to believe they were not known to him, and an acquiescence in the conduct of the business of the firm thereafter, which was in entire accord with their significance, and no assertion of his presently claimed right for some 13 years and more after it had accrued, and not until death had prevented all explanation from his copartner, and no showing by the defendant of any reason for his laches, it must be held that he is bound by the settlement which he has ignored.
It is claimed that the defendant is by the law excluded from testifying regarding transactions and dealings with Joseph, and that, if he could only explain, he could show that he was justified in retaining the large sum yet in his hands. In his explanation before the master the defendant was never brought so near to any attempted disclosure of his relations with the decedent that his testimony was challenged. The defendant is no worse hampered by the law than Joseph Hatch's estate is by his death. The defendant did not exhaust the possibility of throwing light on the making of an agreement for a settlement at the family meeting by calling as witnesses the other persons who were present.
Considering the whole case, the master appears to have been justified in finding that there was a settlement between the partners in March, 1885, balancing their accounts, and in holding that the circumstances of the case show that the defendant so acted as to recognize that settlement, and be bound by the entry thereof on the books of the firm.
In retaining the sum which he has kept, the defendant justifies himself as to part thereof by charging interest from March 2, 1885, against Joseph's estate, upon the balance which he claims was overdrawn by Joseph at and before that date. There is no proof of any contract between the parties for the payment of this Interest, nor of any practice between them in charging interest on overdrafts by either from the partnership funds. The master has disallowed this claim for interest. The circumstances proven justify his action.
There is in the testimony some proof regarding an item of $486.35 of firm assets collected since Joseph's death by the defendant from one Pfeiffer, a debtor to the firm. The testimony of the defendant attempts to show that an equal amount—$486.35—was paid to the complainant as Joseph's share of this debt. The proof is clear that the defendant did in fact receive in this way $480.35, and it is equally clear that no such equal amount was paid, either to the complainant or to anybody representing him. The result is that the defendant owes to the complainant one-half part of this collection. The same may be said of the $402.22 which appears the defendant had in bank as surviving partner. No specific exceptions appear to have been filed to the findings of the master upon these smaller items, and the master's report there on should be confirmed.
Upon the whole case, the exceptions taken by the defendant should be dismissed, and the master's report should be confirmed, with costs.