[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 615 By the articles of copartnership entered into between the testator and the defendant, all profits which might accrue to the partnership were to be divided equally, and "all losses happening to the firm, whether from bad debts, depreciation of goods, or any other cause or accident, and all expenses of the business" were to be borne by the parties equally. Under this provision of the agreement we think that no good reason is shown why the losses should not be thus divided without regard to the amount of capital contributed by each of the partners. We therefore concur with the opinion of the General Term, that the loss of capital should be equally distributed, and that if, upon the taking of the account, it appears that one party has lost more than the other, the proper way to make an equal distribution of loss is by charging the one who has lost the least with an amount which will make the loss equal. The authorities cited fully sustain this principle and the account should be stated accordingly. The clause in the agreement which provides, that at the expiration of the term, or earlier dissolution of the copartnership, if the parties or their legal representatives cannot agree as to the division of the stock on hand, the whole copartnership effects, except the debts due the firm, shall be sold at public auction at which both parties may bid and purchase, and the proceeds be equally divided, after paying the debts of the firm, in proportion to the capital invested, does not affect the provision first referred to and relates only to the sale of goods and not to the profits and losses. The latter constitute entirely a different matter and are in no way connected with the sale of the stock which is provided for. *Page 617
The losses of the copartnership accrued mainly from a depreciation of the old stock on hand at the time of its formation, a greater portion of which remained at the time of the death of the testator. It had been in the store for many years, had become shop-worn, faded, and much of it good for nothing but waste paper and actually of but little if of any value. At the time of the formation of the partnership each of the copartners agreed to and did contribute certain portions toward the same, consisting of stock, notes, accounts, etc., which were on hand on the first day of February, 1873.
The valuation at which the goods, etc., were estimated at this time cannot, we think, be regarded as the true basis upon which to determine the actual losses sustained, as they evidently were put down without regard to the actual value and with no intention of estimating the same at the time. It is very clear that neither party understood that the cost price of the stock was to be regarded as its true value, and the amount then fixed cannot be considered for the purpose of liquidating the copartnership affairs. There is, therefore, no ground for the assumption that it was correct and actually represents the interest of the several partners in ascertaining the losses. The real loss would be the amount of injury actually sustained, and if the stock of goods was estimated at twice or three times its value the loss would be proportionably less than the estimate. To allow the full amount of such estimate would be far beyond any loss sustained by depreciation of goods, and not within the intention or the spirit of the articles of copartnership. The estimate of the amount of stock, etc., was not, we think, an agreement as to its value, which should be binding upon an accounting in which the actual losses are to be ascertained, and was not obligatory upon the parties for any such purpose. The object was indemnity and this would be fully accomplished by an estimate of the stock at its true value. The finding of the referee shows that much of it was of no account and worthless, and there can be no difficulty upon the accounting which must be had in the Supreme Court, by proof to take the account and *Page 618 to ascertain what profits were realized and what losses were sustained on the basis indicated.
As the General Term were right in holding that each party should bear an equal share of the losses the order must be affirmed and judgment absolute upon defendant's stipulation should be ordered for the plaintiff, with costs.
All concur.
Order affirmed, and judgment accordingly. *Page 619