Sayre v. Peck

The only question in this case is, what effect shall be given to the fifth clause in the agreement of the 23d of January, 1843, which provides that, after the plaintiff shall have discharged all the debts and liabilities of the partnership, “ the accounts of the partners shall be made equal by said Sayre selecting and taking to his own account, from the assets or effects of the firm, an amount sufficient to equalize the accounts of said partners, with interest.” The defendant insists that, by this agreement, he was discharged from all personal liability to the plaintiff for any deficiency of partnership effects to pay the debts and equalize the accounts of the partners. On the contrary, the plaintiff insists that the agreement only related to the administration of the affairs of the partnership, and was not intended to change or affect the rights of the parties upon a final settlement of their partnership business. What, then, is the construction to be given to this clause of the agreement 1 It is stipulated in the articles of copartnership, that the profits of the business shall be equally divided, and the losses equally borne, by the parties respectively. The final settlement was to be upon the basis of equality; the same rule which this court would have prescribed, in the absence of any *468agreement of .the parties on the subject. This rule must still prevail, unless it is made satisfactorily to appear that the parties themselves have agreed upon different terms of settlement. In giving a construction to the terms which the parties have employed to express their agreement, it is proper to look at the state qf things existing with reference to the subject matter of the agreement, at the time it was made. If we do so, we find that the effects of the partnership exceeded, by more than $26,000, its debts and liabilities. And there is nothing to show that the parties contemplated that under any circumstances, there could be a deficiency of assets to pay the debts and equalize the partnership accounts. It seems very clear that the agreement was based upon the assumption of a sufficiency of partnership effects to carry its provisions into effect. There certainly is nothing in the language of the agreement which furnishes any evidence that the plaintiff intended to release the defendant from his liability to contribute his share towards the losses of the partnership; or that the defendant was stipulating for an indemnity against his liability to pay any balance which might justly be due from him to his copartner, after a full administration of the partnership effects. Nor is there any thing to show that either party intended, or expected, the plaintiff would “ take to his own account,” in payment of any portion of the amount due him from the partnership, doubtful or uncollectible debts, at their nominal value. A state of things is now shown to exist, which was not anticipated by the parties when they executed the agreement, and to which, therefore, the agreement cannot, upon well settled principles, be made applicable. ■ It is a case of mutual mistake, or misapprehension, as to the value of the partnership effects to be disposed of under the provisions of the agreement. The sufficiency of those effects to pay and discharge the partnership debts and liabilities, and then to pay the plaintiff the amount which should be due to him from the firm, is assumed as the basis of the agreement. And now, when it appears that the parties were mistaken in this assumption, it would be doing violence to their intention. *469to make the agreement applicable to the existing state of things. (1 Story's Eq. Juris. §§ 142, 143, 144.)

The parol evidence which has been produced by the parties to show what was their understanding when the agreement was executed, is clearly inadmissible. The wisdom of the rule which confines parties to their written contracts, in exclusion of all anterior verbal communications, is strongly illustrated in this very case. Mr. Havens, one of the counsel for the parties, who prepared the agreement of the 23d of January, and who is the subscribing witness thereto, understood from the parties, at the time, that the assets or effects to be taken by Sayre to his own account, were to be so taken, not at their nominal or par value, but at their actual value. While, on the other hand, Mr. Griffin, the partner of Mr. Havens, with whom the parties also consulted in relation to the transaction, understood that Sayre was to take his pay in assets of the partnership, without recourse to the defendant in any event. All the witnesses who have spoken on the subject agree, however, that the partnership effects were supposed to be sufficient to pay the debts, and make up the amount of the defendant’s deficiency. This fact will assist in accounting for the witnesses differing so widely in their understanding of the intention of the parties. It cannot be necessary to refer to authorities to show, that where a written contract is capable of a sensible construction, and there has been no fraud or imposition in obtaining it, such construction must be determined by the language found in the instrument itself, and cannot be affected by parol evidence of what was said by the parties at or before the time of execution. ' The law considers the written instrument, solemnly sanctioned by the signatures of the parties, as much safer evidence of the real intention of the parties, than any account given of the transaction by those who happened to be present, whose memories may be frail and fallible, whose minds may be influenced by prejudice and partiality, and who may have incorrectly apprehended the •intention of the parties.

It was sought by the counsel for the defendant to take this case out of the general rule in relation to the effect of parol ev*470idence, by referring to the particular frame of the pleadings. It is true, that the intention of the parties in respect to the matters contained in the fifth clause of the agreement of the 23d of January, is put at issue by the bill and answer; but I cannot see how this fact can render competent, testimony which would otherwise be inadmissible. The rule must still be applied, that where there is a writing expressing the contract of the parties, that alone shall be proof of their intention. The case of Coutts’ Trustees v. Craig, (2 Hen. & Munf. 618,) which was relied upon by the defendant’s counsel, does not, I think, sustain his position. In that case, a bill was filed for the specific performance of a contract for the sale of land. The defendant denied that the contract embraced as much ground as was contended for by the plaintiff; and upon such an issue it was held that parol evidence might be resorted to, not to vary the effect of the contract itself, but to supply the facts necessary to give effect to the intention of the parties as it appeared upon the face of the contract.

But even if parol evidence were admissible to show what was the actual understanding of the parties, I do not think the defendant has succeeded in showing satisfactorily that the construction of the writing is in accordance with the actual agreement of the parties at the time the writing was made. The most, I think, that can be made of the testimony is, that it leaves the question as to the real agreement of the parties extremely doubtful; and then the fair inference would be, that the writing expressed such agreement exactly as the parties understood it to be.

I have purposely omittéd any reference to the statement contained in exhibit No. 4, which purports to show the condition of the partnership affairs on the first of July; 1844, and in which the plaintiff is charged with the debts then estimated to be good. I have no intention to express any opinion with reference tci the effect of that paper, further than to say, that I think it has no proper bearing upon the construction to be given to that clause of the agreement of the 23d of January, under consideration.

*471If upon a reference, it shall appear that the plaintiff intended, when this statement was made, “ to take to his own account” the good debts mentioned in that statement, amounting to $14,410,62, it might perhaps properly be regarded as an execution of the agreement, to that extent.

There must be the usual decree for an account. And for that purpose, J. Newland Cushman, or any other suitable person, to be agreed on by the parties, may be appointed a referee. The pleadings and proofs may be used by either party on the reference. The question of costs, and all further directions, are to be reserved until the coming in of the report.