Opinion
Argued February 15th, 1933.
Decided April 28th, 1933.
Where a signed copy of a business agreement was delivered to complainant and he subsequently executed three supplemental agreements and worked for ten years under the original agreement, he cannot maintain now that he is not bound by its terms.
On appeal from a decree advised by Vice-Chancellor Davis, who filed the following conclusions:
"The complainant, an employe of Christian Johnson, under a written contract of employment, seeks in this suit an accounting to determine how much is due him from the defendant Edna Johnson, executrix of Christian Johnson, deceased, and Edna Johnson, individually.
"The defendant admits that there is due to the complainant the sum of $8,470.91, being one-third of the net annual profits of the business for the year 1930, which amount was tendered to complainant by defendant and refused by him.
"The agreement which was entered into between the complainant and Christian Johnson, dated February 9th, 1920, provides among other things as follows:
"`2. The said Christian Johnson, in consideration of the said performance by the said Elmer E. Tarburton of his duties aforesaid, will pay to him as compensation for such services one-third of the net annual profits of the said business, as such net profits shall be determined by the "loss and gain" account kept in the books of the business aforesaid, and as and when the same shall be ascertained at the close of each calendar year, that is, December 31st of each year.
"`4. In the event of the death of the said Christian Johnson, his legal representatives may cancel this agreement, if they deem best, by giving notice in writing at any time during the interval between December 31st and the beginning of the spring planting season in Delaware Bay, and upon payment to the said Elmer E. Tarburton of his compensation to which he shall be entitled under the terms hereof.'
"Christian Johnson died on April 11th, 1930, and on April 9th, 1931, the defendant gave complainant a notice in writing of the cancellation of the agreement and sent to him with the notice a check for $8,470.91, together with a statement showing that such check represented one-third of the net annual profits of the business for the year 1930 as determined by the loss and gain account in accordance with the provisions of the agreement.
"The complainant contends that the loss and gain account in the books kept by Christian Johnson and after his death by his executrix, the defendant, did not properly show the net annual profits of the business during the period from 1930 until the termination of the agreement by such notice, and further that the complainant was entitled to certain profits to accrue after the year 1930.
"A reference was made to a master and testimony was taken before the master on behalf of the parties. The master has reported his findings and conclusions in which he determines that the complainant has been paid all that is due to him under the agreement dated February 9th, 1920, and the three supplemental agreements attached to the bill of complaint, being one-third of the net annual profits of the business as such net profits are determined by the loss and gain account excepting for the year 1930, and that there is due to the complainant the sum of $8,470.19 being one-third of the net annual profits of the business for the year 1930.
"The complainant has filed seventeen exceptions to this report. These exceptions generally dispute the construction given by the master of the agreement dated February 9th, 1920, and the supplemental agreements entered into between the complainant and Christian Johnson, and the method of accounting adopted by Christian Johnson and the defendant under these agreements, and in order to give these exceptions proper consideration without referring to each of them specifically, attention must be directed to the terms of these agreements and the method of accounting used by the parties under the agreements.
"The agreement dated February 9th, 1920, is, by its terms, an agreement of employment by Christian Johnson of the complainant, by which Christian Johnson agreed to pay to the complainant as compensation for the services to be rendered under the terms of this agreement, one-third of the net annual profits of the business of planting and shipping oysters and clams conducted by Christian Johnson.
"The three supplemental agreements were entered into between the same parties, one dated February 17th, 1922, another dated January 23d 1926, and another dated February 28th, 1930, all of which have reference to fixing the amount of the capital invested by Christian Johnson and providing for the payment of interest; the supplemental agreement dated February 17th, 1922, further providing that the profits of the complainant shall be not less than one-fourth of the amount of the profits that would show were no interest deducted on the capital, and that in any year that the business shows no profits, no charge for interest shall be made for that year, but if the year shows a loss, one-third of the said loss shall be charged to the complainant and two-thirds to the said Christian Johnson.
"Both the original agreement and the first supplemental agreement refer to the `loss and gain account,' and it would appear from these agreements that the loss and gain account was the account which determined the method of ascertaining the share of the profits to which the complainant would be entitled and the share of loss to which the complainant might become responsible in any year.
"Under the agreement dated February 9th, 1920, it was mutually agreed that all previous agreements between the parties were revoked and made null and void and the complainant released and surrendered all claims for interest of whatever kind which he might have acquired to the business by way of compensation or otherwise under any previous agreement, so that I do not think that consideration need be given to any business relations or transactions which took place between the said parties prior to the taking effect of the agreement of February 9th, 1920, and so far as this matter is concerned, I feel that the matters in dispute should be determined with relation to that agreement.
"The complainant, in his testimony, says that he executed this agreement without reading it. However, he had delivered to him a signed copy of the agreement and subsequently executed three supplemental agreements. Under all the circumstances and taking into consideration the fact that the complainant worked under this original agreement for ten years after its execution, in the meantime executing three supplemental agreements, I do not feel that he can very well say that he cannot be bound by its terms.
"During the period from 1920 to 1929, inclusive, the share of the complainant, representing one-third of the profits of the business, shown to be due him by the loss and gain account kept by Christian Johnson, aggregated the sum of $89,729.50 after deducting the loss shown in 1929. The complainant accepted his share of the profits so shown year by year and without objection so far as the testimony discloses during the lifetime of Christian Johnson.
"The complainant largely relies, in order to establish his contention that there is a large sum of money due him in addition to the amount of money paid to him as his share of profits during such year, upon the method of accounting adopted by the witness, William A. Milligan, of the firm of William A. Milligan and Company, certified public accountants, shown in the report of said accountants and marked Exhibit C-1, in evidence. This report disregards the method of accounting provided under the original agreement, that the annual net profits were to be determined by the `loss and gain account kept in the books of the business,' and sets up as capital expenditures moneys which were expended for certain things which were shown in the loss and gain account as expenses of operating the business. One of the principal items treated by the Milligan report as capital expenditures is that of planting oysters and the expenses incident thereto, the hiring of boats, wages, grub, c. In addition to the planting expense this report treats the upkeep of the boats, c., as a capital expenditure.
"I have given careful consideration to this report and to the testimony given by Mr. Milligan and the other witnesses with regard to these items which are contended in this report to be capital expenditures, and under the terms of the original agreement and the nature of the business, I am unable to agree with this method of accounting by which the complainant claims the sum of $119,797.38 as additional profits covering the period from 1920 to 1930, inclusive.
"The master has, in his report, adopted the method of accounting shown in the report of Oscar F. Anderson, an accountant, whose testimony was produced on behalf of the defendants, and whose report is marked Exhibit D-1. In my opinion this method of accounting is the correct one under the terms of the agreement entered into between the parties and is in accordance with the nature of the business conducted by Christian Johnson.
"The complainant, in addition to making claim for the large sum of money contended to be due him, insists that he is entitled to a share of the profit to accrue or which has accrued for the sale of oysters after the termination of this agreement, on the theory that oysters planted during the time during which this agreement was in force, when sold should be accounted for by the defendant.
"I do not agree with this contention. The agreement under which he was working recited specifically that in the event of the death of Christian Johnson, his legal representatives might cancel the agreement by giving notice in writing at any time during the interval between December 31st and the beginning of the spring planting season in Delaware Bay, and upon payment to the said Elmer E. Tarburton of his compensation to which he should be entitled under the terms of the agreement. As I have indicated, this notice was given prior to the spring planting, thus terminating his right to further compensation.
"The complainant cites the case of Morehouse v. John M. Kelly Contracting Co., 95 N.J. Eq. 280, as being a case analogous to this case. While in that case Morehouse was to receive in addition to a salary a certain percentage of the net profits of the business, the nature of the business was entirely different and there was no such provision as in this case for a determination of the profits and for the termination of the employment, and I do not feel that the decision in that case is applicable to the present case.
"All of the exceptions filed are more or less general in their terms and have relation to the general result of the findings of the master. I do not think it necessary to take up each one of these exceptions separately in view of the conclusions which I have reached, as herein set forth.
"All of the exceptions are overruled and I will advise a decree pursuant to the master's report.'
Messrs. French, Richards Bradley, for the appellant.
Mr. Frank R. Bacon and Mr. LeRoy W. Loder, for the respondents.
The decree under review will be affirmed, for the reasons set forth in the opinion of Vice-Chancellor Davis as above.
For affirmance — THE CHIEF-JUSTICE, TRENCHARD, PARKER, CASE, BODINE, DONGES, HEHER, PERSKIE, VAN BUSKIRK, KAYS, DEAR, WELLS, JJ. 12.
For reversal — None.