17 Ky.L.Rptr. 716
Court of Appeals of Kentucky.
Oct. 17, 1895.
ACTION: Reversed.

Appeal from court of common pleas, Knox county.
"Not to be officially reported."
Action by N. A. Chamberlain against W. W. Sawyers for a partnership accounting.
From a judgment for plaintiff for $765.10, he appeals.

This suit grows out of a partnership formed in the fall of 1881 between appellant and appellee, for the purpose of building and operating a flouring mill. The terms of the partnership are conceded to be that each party was to contribute an equal portion of the capital, and to share equally in the profits or loss of the enterprise. The mill was erected and put in operation in February (say 18 to 20), 1882, and operated by the partners as such until the 18th of August, 1882, when, disagreeing about their affairs, they separated; plaintiff, Chamberlain, claiming that they dissolved by mutual consent; defendant, Sawyers, claiming that the partnership was dissolved, not by mutual consent, but by the voluntary withdrawal of plaintiff, against his consent. There was no time fixed by the terms of the partnership during which it should continue, and, such being the case, appellant well says that in either event, whether by mutual consent or by the voluntary withdrawal of appellant, it was at that time in fact and by operation of law dissolved. Appellant files his petition below, setting up the amount of advances he had made over and above what he had withdrawn, claiming a balance due him on this item of some $1,200, and, in addition, claiming one-half of the alleged profits for the six months the mill had been operated, estimating these profits at some $1,700, and also for his services in operating same; making his total claim some $1,980, and claiming a lien on the mill property, and asking that it be sold to pay same. In the answer, defendant denies the material allegations of the petition, and says that the mill had been under the control of plaintiff principally while in operation, and that plaintiff had received nearly the whole of the profits of the mill, exceeding materially the amount admitted by plaintiff, and claiming that his own advances up to the time of dissolution had been $2,700 or more, and that plaintiff had abandoned the enterprise, keeping all the receipts to himself, refusing to settle, and had left defendant to assume and pay off the outstanding debts of the partnership, amounting to some $2,500 or more, all of which defendant says he was ill able to do, and to his great damage. In addition, defendant claimed that plaintiff had wrongfully and in bad faith proceeded at once, when he abandoned the firm, to build another flouring mill in the immediate vicinity of this mill, greatly to the damage of the value and annual earning capacity, in the way of tolls, of their partnership property; and that plaintiff was thus seeking to compel defendant to take the old mill as his individual property, and pay off the debts, which he was unwilling and unable to do. Defendant asserted his own claim for advances and liabilities for outstanding debts at some $5,500, and he likewise prayed for the appointment of a receiver to take charge of the property, and, finally, that same be sold to pay his advances, etc. To this answer, reply was filed, controverting most of the material allegations. Finally, the matter went to a commissioner, to take proof and report on all these matters. A first report being filed and excepted to, another commissioner was appointed, and a second report made. In the meantime, in December, 1888, the mill was sold by order of the court, and bought by defendant for $2,000, both partners bidding on it. After long and tedious preparation, and a volume of testimony was taken, the court, summing up all these disputed questions of fact, rendered judgment (January 16, 1891) between these parties, fixing the amounts paid in and drawn out by each partner, showing the net balances due to each, treating the mill up to the sale in 1888 as partnership property, and charging defendant with $1,100 rent, after deducting $75 per year for repairs, and deducting taxes paid. By that judgment, which followed closely the commissioner's report finally made, the court rendered judgment in favor of Chamberlain against Sawyers for $765.10 on their partnership transactions, as a final settlement of same, deducting, however, $89.55 for an individual account due by Chamberlain to Sawyers. Both parties excepted, and both finally appealed.

We may say on these questions of fact, as found by the court, as to the state of accounts between the parties, that it corresponds nearly with the allegations finally made by the parties in their own testimony, supported by other evidence, and same will be taken and accepted by the court as correct.

Chamberlain complains of the judgment, first, that defendant should have been charged $6,000 for the mill at the time of the dissolution. It was not set up or claimed by plaintiff in his petition that on the dissolution there had been any contract or agreement between himself and Sawyers by which Sawyers agreed to take the mill at that or any other price, and pay the debts of the firm; neither is it stated that Sawyers had wrongfully converted the mill to his own use. It is only when plaintiff comes to reply that he says, in stating over again the attempted settlement and his claim as in his original petition: "It being understood that Sawyers was to take the property and pay the debts." In another place he says: "It was agreed, at least so understood," etc. These allegations are deemed insufficient, and when connected with the other and material fact,-that Chamberlain, at once on the dissolution of the partnership, proceeded to erect a competing mill in the same vicinity, greatly to impair the value of the partnership property,-we think the court ruled correctly that there had been neither a sale by one to the other, nor any conversion of the property by Sawyers, and that same continued to remain partnership property until sold, in 1888.

Another reason relied on by appellant, Chamberlain, in his appeal, is that the court should have charged Sawyers' rent at the rate of $500 per year for the entire time the mill remained in his possession, until the sale; and appellant relies upon this statement in the answer of Sawyers to establish this claim, quoting from Sawyers' answer: "He asks that said property be placed in the hands of a receiver, as he is not willing to keep same and account for more than five hundred dollars per year rent." This clause followed a statement by Sawyers of the claims he had on the mill, setting up his lien on same, and praying for its sale to pay same, accompanied by the fact that Chamberlain had in bad faith built a competing mill, greatly to the damage of the partnership property. The evidence taken showed a great preponderance that the mill was not worth annually more than the amount allowed by the court and commissioner. The statement, as made, was not a contract, nor did it bind Sawyers, by any possible construction, *477 for this amount-$500-annually during all the years of subsequent litigation. Plaintiff is entitled to no further relief on this ground.

Another complaint of Chamberlain is that he was not allowed anything for his services at the mill. It is not alleged by him that either at the time of the formation of the partnership, or at any other time, was there any contract or agreement that he should be paid anything for services; neither do the facts in the case authorize the presumption that such was contemplated by the parties. In the absence of these conditions, the law does not raise any presumption of a promise, nor any obligation, to pay. Whatever profits were made went into the hands of Chamberlain, and have been charged to him by the court in making up his account of advances and receipts.

Another ground claimed by appellant is that the court allowed Sawyers $500 for the value of two acres of land and right of way upon which this mill was located, instead of $150, as fixed by the commissioners; the court saying in its judgment that it is quite probable that the $150 allowed by the commissioner was the full value of the property, but holding that, under an imperfect denial in the reply, the allegation of value ($500) placed on this ground by Sawyers must be taken as true. In this ruling, we think, the court erred. Allegations of value, even in the sale and delivery of property, are not required to be denied, unless accompanied by a statement that the party charged with same promised and agreed to pay that amount, or unless facts are stated from which the law will imply such a promise. These statements were not made by Sawyers in reference to this value. Another reason is that, in suits for a settlement of partnership, the parties need not plead and set up item by item of the entire transaction. All these things properly go to a commissioner, to be determined by him from the evidence. So this item of $350 must be deducted from Sawyers' advances to the firm.

We notice other errors on the face of the judgment appealed from, in this: That the court, after fixing the net amount due to each partner for advances, made by each in excess of the receipts, and ascertaining that the assets of the partnership (which then consisted only of the $2,000, purchase price of the mill, and the $1,100, rents, both due by Sawyers) were insufficient to pay both partners in full, proceeded to divide the assets between them pro rata, in proportion to their respective advances. This we think error, the evidence showing in this case that each party was to make equal advances, and to share equally in the profits and losses. This being so, the court should, out of this $3,100, have first returned to Sawyers the excess of his advances over and above what Chamberlain had advanced, thus making them equal in capital remaining in the firm, and then divided the balance of the $3,100 equally between them. This would have left the losses to be borne equally by each. In that judgment the court found that Sawyers had advanced $3,699.17 over the amount he had withdrawn. This included, however, the item of $500 for the lot, which must be reduced by the sum of $350, making Sawyers' advances $3,349.17; Chamberlain's advances over his receipts, as fixed by the court, were $1,217.17,-net amount excess, $2,122, advance by Sawyers over Chamberlain. Taking this amount, $2,122, from the total assets on hand for distribution, $3,100, would leave $978. This should be equally divided between Chamberlain and Sawyers, giving to each $489. Thus, the capital of each member would be equalized, and the losses made equal. And this $489 is the amount of the partnership assets that should have been adjudged to Chamberlain, instead of $765.10, as fixed by the court below. And herein lies the merit of the cross appeal, which counsel for Sawyers said he felt was in this case somewhere, but which he could not point out to the court. From this $489, however, should be deducted $89.55, fixed by the court below for an individual account allowed Sawyers against Chamberlain, which will leave $399.45 as the net amount of the judgment to be rendered by the court below in favor of Chamberlain against Sawyers, with interest from December 12, 1888, until paid, instead of the sum of $667.26, as rendered. The cost below will be settled as provided in that judgment; and, inasmuch as this appeal was taken by Chamberlain, and the record filed by him at a cost of $127.90, while Sawyers gets the benefit of it on his cross appeal by reducing the judgment against himself, Sawyers is adjudged to pay one-half the cost of this record. In other respects each party will pay his own costs on this appeal.

Wherefore the judgment in the lower court will be set aside, and a judgment rendered in accordance with this opinion.

Ky.App. 1895.
32 S.W. 475, 17 Ky.L.Rptr. 716


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