Summary
Appeal from the Court of Common Pleas, No. 1, of Allegheny county: Inequity: Of October and November Term 1875, No. 127.
The bill was filed April 17th 1868, by Charles Arbuckle, Margaret Arbuckle, Christiana Arbuckle, Robert Jamieson and Catharine his wife, in her right against Nathaniel Holmes, John Arbuckle, Richard Edwards, William Holmes, executor of George Jackson, deceased, William M. Shinn and William P. Beck, executors of Thomas R. Holmes, deceased, and Margaret Arbuckle, widow and administratrix of Thomas Arbuckle, deceased.
The circumstances which gave rise to this controversy were as follows:—
On the 28th of January 1850, Thomas Arbuckle, John Ar-buckle, George W. Jackson, Richard Edwards, Thomas R. Holmes, and Nathaniel Holmes entered into articles of partnership under the firm name of Thomas Arbuckle & Co., in the business of cotton manufacturing, and dealing in goods of that kind, in the cotton mills in Allegheny city, then lately occupied by Blackstock, Bell & Co.; the ca.pital stock, at the commencement, to be $100,000, in four equal shares : John and Thomas Arbuckle together to contribute one-fourth, each paying one-eighth, George W. Jackson one-fourth, Richard Edwards one-fourth, and Thomas R. and Nathaniel Holmes one-fourth, each contributing one-eighth; the business of the firm to be conducted under the general supervision and control' of Thomas Arbuckle, who was to be the managing partner, and to receive for his services, so long as he should act in that capacity, a salary of $1000 per annum, above his share of the profits. William Bell was to be manager under the control of Thomas Arbuckle, and to receive an annual salary of $1000, and, in the absence of Richard Edwards, to represent his interest as a partner. . Either Thomas Arbuckle or Bell might be discharged as a manager upon a vote of partners holding two-thirds of the capital of the firm. An account of stock was to be taken on the first days of January and July in each year, and a statement in writing of the condition of the firm to be made. The. partnership to be taken to have commenced on the 26th of November 1849, to continue for five years from the 1st of January 1850, and for such further term as the partners might agree upon. In case of the death of a partner, his interest to be taken by the survivors at a valuation to be ascertained by the last balance-sheet rendered previously to his death, without reckoning any profits or losses after that time. But in case any share should be held by two jointly, on the death of one of them, the survivor, if he so elected, might take the interest of the deceased owner; but if he did not so elect, such joint interest might be taken by the firm. Thomas and Nathaniel Holmes further agreed to cause to be conveyed to the firm, by the heirs of N. Holmes, Sen., deceased, a lot of ground in Allegheny city, described in the agreement, with cotton mill, &c., on it, in consideration of which the firm covenanted with Thomas and Nathaniel Holmes to “ pay the debts of the late firm of Blackstock, Bell & Co., of which N. Holmes, Sen., deceased, was a member, the sum of $85,000, and also to pay the said Holmes the sum of $15,000 in cash; the said sum of $15,000 to be paid by the said Thomas and John Arbuckle, and to form part of their share of the capital stock of said co-partnership, of which payment the receipt of said Holmes therefor shall be sufficient evidence and voucher for them, the said Thomas and John, that they have paid said sum as part of their capital stock.”
On the 28th of January 1850, each partner was credited by the amount of his share of the capital, each of them having paid his share in cash, except Thomas Arbuckle, whose share was paid by a charge of $15,000 in his favor against the administra-' tors, &c., of N. Holmes, deceased, and showing at that date a balance of $2500 to his credit on the books of.the firm. The firm continued in operation under this arrangement, and without a change of its members, until April 8th 1851, when Thomas Arbuckle died intestate, leaving a widow, Margaret Arbuckle, and five children, viz.: Charles, aged 18 years; Margaret, 16 years; Catharine, 14 years; John, 12 years, and Christiana, 10 years. Administration of Thomas’s estate was granted to his widow. Under the provisions of the articles of partnership, John Arbuckle, who was the father of Thomas, elected to take his share in the firm in trust for the widow and children.
On the 27th of June 1851, Thomas Arbuckle’s account was charged on the books of the firm with $10,000, and each of the other shares, including John Arbuckle’s, credited by $2500. Each entry of such credit was accompanied by this statement:—
“For the one-fourth of $10,000 (being part of the $15,000 given to Thomas Arbuckle when the company was first formed in consideration of his future services for five years), relinquished or given up by the administratrix of Thomas Arbuckle, deceased, as per agreement of all the parties. John Arbuckle, Sen., representing the one-eighth interest of the estate of Thomas Arbuckle, deceased, as well as his own interest of one-eighth. See agreement.”
“ These entries all take effect from 1st of April 1851, from which time the interest will date.”
After all the entries is the following:—
“ The administrators of N. Holmes, deceased, agreed to furnish the company with the services of Thomas Arbuckle for five years from the date of the original article of agreement, for which they agreed to pay him $15,000, and for which he has credit on the books of the company. But the company being deprived of his services, by his death, before any considerable portion of the time transpired, it was and is hereby agreed by and between Margaret Arbuckle, administratrix of Thomas Arbuckle, deceased, and the surviving members comprising the firm of Thomas Arbuckle & Co. * * * and the administrators of N. Holmes, deceased, to charge back to the account of Thomas Arbuckle, deceased, $10,000 of the above sum, and credit the members now composing the firm in proportion to the interest each holds in said company, viz.: John Arbuckle, &c. * * * The said John Arbuckle agrees to give back to the estate of Thomas Arbuckle, deceased, the one-fourth part of the above $10,000 credited to him, and he does authorize the credit of the above-named $2500 to the account of the said Thomas Arbuckle, deceased, which we accordingly do, and charge, him. Thomas Arbuckle agreed with T. R. and N. Holmes that they should receive credit for his salary of $1000 per annum, for five years, in consideration in part of the above arrangement, but the company agreed to credit the account of the said Thomas Arbuckle, deceased, with the whole of his salary for the time his services were rendered. This arrangement is agreed to by all the parties in said firm, and Margaret Arbuckle, and administrators of N. Holmes, deceased. W. Neille, Bookkeeper (copy).”
Thomas Arbuckle’s account is further credited, of the same-date, by his share, one-eighth of the profits up to January 1st 1851; also, by his salary for fifteen months, including the amount theretofore credited to T. & R. Holmes.
Following the credit of the salary is this entry
“ Thomas Arbuclde and the administrators of N. Holmes, deceased, had a verbal agreement that they should receive credit for his services for five years, at the rate of $1000 per annum; but the administratrix of Thomas Arbuekle, deceased, not being aware of this arrangement, is not willing to relinquish the salary, the company agreed to credit Thomas Arbuekle $1250, and also T. R. & N. Holmes $1250.”
Thomas Arbuclde was also credited on the books by the $2500, the proportion of the $10,000 assigned to T. & J. Arbuekle, “ according to his (John’s) written instructions.”
On the — day of July 1851, an agreement under seal was entered into “between Margaret Arbuclde, widow and administratrix of Thomas Arbuekle, deceased, of the first part, and John Arbuekle, George W. Jackson, Richard Edwards, Nathaniel Holmes and Thomas R. Holmes, who survived the said Thomas Arbuekle as partners, &c., under the late firm of Thomas Ar-buckle & Co., of the second part.”
The agreement recited that at the organization of the firm Nathaniel Holmes being seised, under an agreement with William Bell and William Blackstock, of the real estate, &c., “now belonging to said firm and occupied by them as a cotton factory,” with a view to enlist other co-partners agreed, “in order to secure the services, skill, &c.,” of Thomas Arbuclde for five years, “ to bestow on him by way of bonus, premium or compensation therefor, the sum of $15,000;” and that Thomas Arbuclde was credited with that sum in full of his share of the capital of the fi'rm,- leaving a surplus in his favor of $-2500; that by a verbal agreement with Thomas Arbuekle, “in consideration of the promises,” his salary was to be carried to the credit of T. R. & N. Holmes, and $500, part thereof, had been carried to their credit; that by Thomas Arbuckle’s death, before the lapse of any considerable portion of the five years, the firm had been deprived of the advantages, &c., expectant from his skill and services, and thus defeating, to a great extent, the consideration on which the credit was given to him; that John Arbuekle had elected to take the interest of Thomas in the firm, leaving, with assent of the other parties, the credits and profits to be adjusted with his personal representatives. It was then agreed by the administratrix, that in consideration of the premises she would release and transfer to the surviving partners the sum of $10,000, theretofore credited to Thomas Arbuekle, and that the same should be charged back to his account and credited to the surviving partners in proportion to their respective interests, John Arbuckle representing one-fourth, and John’s share to be credited to Thomas’s account on the partnership books, “ to which the said John has and does hereby fully consent and agree.” It was further agreed that the $500 credited to T. R. & N. Holmes, on account of the salary of T. Arbuckle, should be re-transferred to the account of Thomas Arbuckle, and he be credited by the whole amount of the salary; it was further agreed that upon the account so adjusted the whole amount due Thomas Arbuekle above his share of the partnership stock was $6045.79, which was to be satisfied by the notes of the survivors, with interest, which notes “ are hereby acknowledged by the said Margaret Arbuckle, administratrix, as aforesaid, to have been received by her in full satisfaction of the balance owing to the said Thomas upon the books of the partnership aforesaid.” It was further agreed that corresponding entries should be made on the books of the partnership, and so far as any such entries had been made in conformity with the agreement, they were “mutually ratified and confirmed, and “shall stand and be considered as having been made with the full assent and knowledge of the parties, and with the intent that the same should be binding and conclusive upon them respectively, and so that the same shall not, at any time hereafter, or upon any pretence whatever, be overhauled, disturbed or disannulled.” The agreement was executed by all the persons above named as parties to it.
The bill, after various allegations, including many of the circumstances as above stated, charged that soon after the death of Thomas Arbuckle the surviving partners, Gr. W. Jackson, N. Holmes, T. R. Holmes, R. Edwards and W. M. Bell, “ combining and confederating together, and contriving to diminish, reduce and injure the interest of the said Thomas in the firm of Thomas Arbuckle & Co., appropriated to themselves, respectively, $7500 of the amount standing as aforesaid upon the books of the said firm to the credit of the said Thomas by debiting his account to that extent, and taking credit to themselves in the following proportions,” &c.; that they further debited the account of Thomas with $2500, and credited that amount to the account of John Arbuckle without his consent, but when it came to John’s “ knowledge he protested against it as being iniquitous and unjust to the estate of Thomas,” and caused the said $2500 to be again credited to his estate; that Margaret Arbuckle protested against such spoliation of her husband’s interest in the firm, but finally submitted and acquiesced, under threats that if she did not do so the same parties would commit further spoliation of the interest of Thomas in the firm; that at the time the plaintiffs were minors and had no guardians; that none of them were consulted in relation to these transactions, and they had no knowledge of them until a few years before filing the bill.
There were other charges in the bill in relation to the general interest of Thomas Arbuckle in the firm, which it is not necessary to specify.
One of the prayers was that the defendants should be decreed to transfer to the credit of the estate of Thomas Arbuckle, deceased, on the books of the company, “ the amount of money and credits standing upon the books of the firm at the death of said Thomas so wrongfully and unjustly distributed and divided to and amongst the said George W. Jackson,” &c.
The defendants, N. Holmes, Richard Edwards, W. M. Bell and W. Holmes, answered, amongst other things, denying that they combined to diminish Thomas Arbuckle’s interest in the firm, but that they charged back and credited the money mentioned in the bill in accordance with the reasons set forth in the article of agreement of the — day of July 1851; that Charles Arbuckle, one of the plaintiffs, then eighteen years of age, knew of the article of agreement and its intents and purposes; that the $2500 credited to John Arbuckle was in accordance with the agreement of July 1851; it was done with the consent of John Arbuckle, who after-wards relinquished his right to the $2500, and by his direction it was credited to the estate of Thomas Arbuckle; they averred that Margaret Arbuckle did not object to the transfer, but consented to what was done without any threats by the defendants, or any coercion by them or on their behalf.
On the 12th of September 1863, James M. Gallagher, Esq., was appointed examiner and master. He having died, W. G. Hawkins, Esq., was, on the 27th of February 1866, appointed examiner and master in his place.
The testimony was taken by the master on the 19th of December 1873, and the 29th of January and 13th of February 1874. W. Neille, bookkeeper of the firm, testified that he knew of the arrangement as to the $15,000 at the formation of the firm; it was as stated in the articles of partnership, and was given to Thomas as a bonus as stated in the agreement with Mrs. Arbuckle; the other members went in on account of his reputation as a great cotton spinner; Charles Arbuckle was present at the execution of the agreement of July 1851. The entries in the books were made by witness with the consent of all the surviving partners, including John Arbuckle; when Thomas Arbuckle spoke of the entry in the books crediting T. R. & N. Holmes with his salary, he said, “give it to the boys,” meaning those two. All the notes given to Mrs. Arbuckle as administratrix, in connection with the settlement, were paid ; the agreement was read to her in the presence of her son Charles before she signed. Thomas contributed nothing to the capital except through the credit he received for the $15,000 as a bonus.
The master, September 16th 1874, reported the facts substantially as above stated.
He stated as his opinion that the bonus of $15,000 should not be apportioned, and in support of his opinion said:—
■ a When the offer of a bonus was made to Thomas Arbuckle, he had already acquired a reputation and a fortune as a cotton spinner, and retired, as he intended, permanently, from business to seek and enjoy that rest to which every thoughtful man looks forward. It was therefore natural that fie should hesitate, and that it should require strong inducements to persuade him to re-embark in business and risk both fortune and reputation. The Holmes understood and áppreciated the value of a name, and therefore made tfie.acceptance of their offer by Mr. A.rbuekle the condition precedent to the formation of the proposed partnership. By his acceptance, his name and reputation became identified with the new firm, and whatever benefit or advantage they might bring with them, was secured for the whole term for which it was formed. The name was the consideration for the bonus. They took the risk of his living the whole term. Compensation for services was provided for in another way. The articles provided that he should receive for his services, as general manager of the business of the firm, at the rate of $1000 per annum. This was exclusive of the bonus. In providing for tfie payment of the bonus, nothing is said about services; but the articles expressly provide that the salary of $1000 per annum shall be for services as general manager; the presumption is that the-bonus was intended for another purpose. The entries in the books of the firm lead to the same conclusion. Thomas Arbuckle is there credited with the bonus of $15,000, absolutely and unconditionally as for so much cash paid. It was credited as, and became part of, the assets of the firm. * * * So far as the articles show, it was not intended that Thomas Arbuckle should devote his whole attention to the business of the firm. They provide for substitution in case of inability to attend, &c. Whereas, in the case of William M. Bell, he was required to devote his whole attention to the business of the firm. It will thus be seen that from all the circumstances of the case, from the articles and the books of the firm, the consideration of the bonus given Thomas Arbuckle by N. and Thomas R. Holmes, was his accession to the firm, that his name and reputation had that value and were as to them equivalent to capital stock. What equity, then, have the defendants to overcome this view of the case ? The Holmes secured what they sought — the benefit of the name and reputation of Thomas Arbuckle. The firm was announced to the world, and continued for the whole term of the partnership, under the name and style of ‘ Thomas Arbuckle & Company.’ What the actual value of the name was it is not necessary to say, but the value which they put upon it is shown by the fact that without it the partnership would not have been formed. The Holmes secured more than was contemplated in the original arrangement. They were credited on the books of the firm with two instalments of salary to Thomas Arbuckle, as general manager. So far as the evidence shows, this was a pure gratuity. Nor have the other defendants an equity. They paid no part of the bonus.
“ Had it been the arrangement of the parties, that the bonus should be for the services of Thomas Arbuckle as general manager during the whole term of the partnership, it should and would have been expressed in the articles. There is the utmost particularity shown therein on every other subject, but in this there is nothing to sustain the contention of defendants, and every implication in favor of that of plaintiffs.
“ The master therefore finds that at the date of the death of Thomas Arbuckle, he had to his credit on the books of the firm, inter alia, the sum of $10,000, as bonus, paid by N. and Thomas R. Holmes; that such credit was nof>subject to abatement for or on account of the death of said Thomas Arbuckle; but as to this, was entire and indivisible, and said firm was accountable for the whole amount thereof to the estate of said decedent.
“ If the foregoing finding of the master is right, the agreement of Margaret Arbuckle, as administratrix, and the surviving partners of the firm of Thomas Arbuckle & Co., was collusive and fraudulent, and therefore voicf as to plaintiffs, as being without sufficient consideration. It cannot be sustained on the ground of a compromise, because the subject-matter was not a doubtful right. We have shown that the estate was entitled to the whole amount of the bonus; the partnership was solvent and the claim not in jeopardy, the administratrix therefore could not accept less than the whole amount, because there could be no consideration for the acceptance of less.
“ The master, therefore, further finds that the debt to the estate of Thomas Arbuckle, deceased, of the sum of $10,000, and the credit thereof to the surviving partners of the firm of Thomas Arbuckle & Co., individually, on the books of said firm, was as between defendants collusive, and as against plaintiffs void, and that defendants' by their said action have become trustees, ex maleficio, for plaintiffs.” * * *
He recommended that it should be decreed that the defendants, other than Margaret Arbuckle, were indebted to Thomas Ar-buckle’s estate in the sum of $7500, with interest from January 1st 1852, and that they pay that sum to Margaret Arbuckle as administratrix of Thomas Arbuckle, deceased.
Exceptions were filed to the master’s report, which were overruled by the Orphans’ Court, and the report was confirmed April 15th 1875.
The court further decreed:—
“ That said defendants, other than said Margaret Arbuckle, are indebted to the estate of Thomas Arbuckle, deceased, in the sum of seven thousand five hundred dollars, with interest thereon from the first day of April 1851, being the amount wrongfully appropriated by said George W. Jackson, Thomas It. Holmes, Nathaniel Holmes and Richard Edwards, surviving partners of the late firm of Thomas Arbuckle & Co., to themselves out of the assets of the estate of said Thomas, amounting, principal' and interest, to the sum of seventeen thousand and ninety-seven dollars and fifty cents.
“That said defendants, other than said Margaret Arbuckle, forthwith .do pay said Margaret Arbuckle, administratrix of said Thomas Arbuckle, deceased, said sum of seventeen thousand and ninety-seven dollars and fifty cents and interest thereon from the date of this decree until the same is fully paid.
“ That said defendants, other than the said Margaret Arbuckle, do pay the costs of this suit,.” &c.
The defendants appealed to the Supreme Court, and assigned the decree for error. •
Syllabus and headnotes are prepared by the reporter or publisher, not the court, and are not part of the opinion.
