Opinion
40889.
DECIDED SEPTEMBER 23, 1964.
Action on contract. Bibb Superior Court. Before Judge Long.
Sell Comer, E. S. Sell, Jr., for plaintiff in error.
Adams, O'Neal, Steele, Thornton Hemingway, H. T. O'Neal, Jr., George L. Jackson, contra.
Stipulations in a contract as to rights of the partners upon termination of the agreement are ordinarily, after the exercise by one of the partners of his option to terminate the partnership, enforced according to the terms of the original contract. The trial court correctly construed the contract after purchase by the plaintiff of all partnership assets as providing for the proration of surplus funds over and above the debts and capital investment of the partnership stated in the termination clause, rather than by applying the formula stated in another part of the partnership agreement which concerned itself with the monthly division of net profits of the going concern.
DECIDED SEPTEMBER 23, 1964.
G. C. Walker filed a petition in the Superior Court of Bibb County alleging that he and the defendant, Joel R. C. Wilkinson had entered into a partnership agreement on July 1, 1948 for the establishment of a loan business. Plaintiff's obligation was to finance the business, into which he put $21,750, and the defendant's obligation was to furnish the labor and service necessary to carry on the enterprise. The partnership continued until July 1, 1963, when Wilkinson notified Walker, acting under contract provisions, of his intention to terminate the partnership within three months. The original petition prayed for the appointment of an auditor and receiver to ascertain the proper division of partnership assets. Thereafter the judge of the superior court issued an order consented to by both litigants under which Walker agreed to purchase Bell Finance Co. for $45,000, said purchase to be consummated by payment of the purchase price into the registry of the court on September 30, 1963. Wilkinson agreed to vacate the premises upon payment into court of the purchase price and to relinquish all partnership property and assets. It was further agreed that Walker, being entitled to a return of his original capital investment in the amount of $21,798.91, need not pay this part of the purchase price into court but should take credit for it against his advancement. This order left for further determination the division of the remaining funds in the custody of the court. A final order was later entered giving 80% of this sum to Walker, and 20% to Wilkinson after payment of certain expenses, from which judgment the defendant appeals on the ground that the proper division should have been 60% to Walker and 40% to himself.
The plaintiff relies on paragraph 13 of the partnership agreement: "13. Upon the termination of this agreement or the liquidation of the business, the proceeds shall go first to the liquidation of any and all outstanding obligations of the loan offices or brokerage offices; second to the liquidation of the money loaned or advanced, or made available through credit by the First Party to the partnership; then any moneys left shall be divided twenty (20%) percent to Second Party and eighty (80%) percent to First Party."
The defendant relies on Paragraphs 5, 9, and 14 of the contract as modified by a later agreement entered into in March 1955. Paragraph 5 of the original agreement reads in part: "5. After all expenses and losses of operation of said loan or brokerage offices are paid, the profits from each and all offices shall be divided on a basis of twenty (20%) percent to party of the Second Part and eighty (80%) percent to party of the First Part, unless the commission or percentage has been changed by paragraph 14 . . ." Following this, certain expenses of operation were specifically listed.
Paragraph 9 of the contract stated: "9. The profits of the business that have been remitted to the Second Party from the offices shall be distributed twenty (20%) percent to Second Party and eighty (80%) percent to First Party not less than thirty (30) days from date of remittance. Any remittances from the offices will be applied first to the commission or percentage due party of the Second Part, and if there are any funds left they are to be remitted to party of the First Part. This is figured on the basis of net earnings from all the offices regardless of the remittances. On the first day of each month all cash on hand in each office exceeding one thousand ($1,000.00) dollars shall be remitted as surplus cash."
Paragraph 14 related to a modification of the distribution of profit in the event new businesses were established. The supplemental contract reads in part as follows: "14. The increase of percentage going to Second Party will be based on a five (5%) percent overall increase for each additional office opened or established up to and including fifty (50%) percent of the net profits, but under no circumstances is the percentage of Second Party to exceed fifty (50%) percent. When an increase of percentage going to Second Party a supplement will be drawn and added here to change only paragraph 14."
In March, 1955, a supplemental instrument designated as a modification and continuation of the first contract was entered into and contained the following language: "In Pursuance of the intention of the parties as expressed in paragraph number 9 of said contract of July 1, 1948, and in consideration of the mutual covenants of the parties, this supplement to said contract, as provided therein, expresses the intention of the parties effective March 28, 1955.
"Supplements shall be as follows:
"The division of the net profits, after all expenses of every kind have been paid, shall be upon the following basis:
"The division of net profits shall be made monthly in accordance with the terms of this contract.
From $1.00 to $249.00 -- 20% 1.00 to 499.00 -- 25% 1.00 to 749.00 -- 30% 1.00 to 999.00 -- 35% Over $1,000.00 _________ 40% on all net profits "The remaining net profits shall be paid to the Party of the First Part and in no instance shall the Party of the Second Part receive more than 40% of the net profits."It is agreed between the parties hereto that the First Party shall be paid a salary of $100.00 per calendar month as an administrative expense, same to be paid on the first day of each calendar month hereafter.
"The division of net profits hereinstated shall supplement net profits division as stated in paragraphs number 5 and number 14."
1. Paragraph 6 of the contract in question stated: "Either party shall have the right to require a three months advance notice from the other party in writing before terminating this agreement." The defendant contends that the division of the money in the registry of the court cannot be considered as money paid out "upon the termination of this agreement or the liquidation of the business" because the defendant notified the plaintiff on July 1, 1963, that he was dissolving the arrangement created by the contract; this would set a termination date of October 1, 1963, or later, but the money was actually paid in to the registry of the court on September 30, which he contends is prior to the termination of the agreement. The sum should therefore not be considered as "moneys left" after payment of outstanding obligations and return of the money advanced to the partnership by the plaintiff under paragraph 13, but rather as monthly income for September under paragraphs 5 and 14. This position is completely untenable. The notice provision was no more than a contract stipulation, which may always be waived by the parties by mutual consent. Bearden Mercantile Co. v. Madison Oil Co., 128 Ga. 695 (4) ( 58 S.E. 200). Both parties consented to the interlocutory order of September 27, 1963, which provided that the purchase by the plaintiff of the defendant's interest in the business should be "consummated by payment of the purchase price into the registry of the court on September 30, 1963" and that upon payment of said sum the defendant should vacate the premises. The money was in fact paid in to the court on September 30. This marked the complete termination of the agreement by purchase as of that date in accordance with the terms of the consent order. It is therefore obvious that the defendant, who gave the original notice to terminate, did not insist on October 1, as the termination date.
2. Paragraph 13 is complete and unambiguous as to the allocation of proceeds representing the value of the business upon termination of the contract. With the simplicity and forthrightness of a will, it deals with the estate upon the demise of the partnership. First, the just debts of the firm are to be paid. Second, the plaintiff is to receive back, penny for penny, exactly what he put into the partnership. Third, as a sort of residuary clause "any moneys left shall be divided 20% to the second party and 80% to the first party." We are not concerned with whether or not the "moneys left" represent capital gain, income, profit, or some other form of surplus. The stipulation is all inclusive. "`Stipulations in the contract as to the rights of the parties on termination will ordinarily be enforced according to their terms.'" J. R. Watkins Co. v. Brewer, 73 Ga. App. 331, 343 ( 36 S.E.2d 442). Only paragraph 13 deals with distribution upon termination, and its provisions are mandatory. It may well be observed, however, that this conclusion is strengthened by an examination of the contract as a whole. Paragraph 9 specifies that profits shall be distributed not less than 30 days from the date of remittance. Paragraph 14 provides for future modification of the distribution of profits, treating them as continuing earnings of a going business. The supplementary contract of March 26, 1955, specifically states that it is pursuant to the intention of the parties as expressed in paragraph 9 of the original agreement, provides that the division of net profits shall be made monthly, and then states that this supplements the net profits division stated in paragraphs 5 and 14. Paragraph 5 defines expenses, and indicates that the profits to be divided represent the sum remaining after deduction of expenses and losses. Thus, the "profits" of the going concern are the monthly cash receipts less losses and listed operating expenses, and are subject to a 60% — 40% division between the partners, while the surplus to be divided on termination of the partnership is subject to a different formula — the balance after repayment of all legal obligations and reimbursement of the plaintiff's investment — and it is to be prorated by an 80%-20% division. Paragraph 13 refers to one set of facts, paragraphs 5, 9 and 14 to another; they are in no way related to each other. Furthermore, the defendant acceded in principle to the proposition that he was dealing with a termination situation when he consented to the interlocutory order, one provision of which was that he acknowledged the plaintiff to be entitled to a return of his total capital investment in the business. This is of course not applicable to a situation involving distribution of net profits. The trial court did not err in finding that the plaintiff was entitled to 80% of the surplus remaining after payment of the partnership obligations and repayment of the sums advanced by him to the partnership.
Judgment affirmed. Nichols, P. J., and Hall, J., concur.