Branch v. Cooper

Bleckley, Chief Justice.

1. Under the evidence, there is no possible doubt that upon taking an account of stock of the partnership on June 30th, 1886, entries were made in the partnership books showing that Branch had an interest in the partnership assets to the amount of $17,721.71, and that Cooper had a like interest to the amount of $10,542.68. It is equally certain that in consequence of a mistake in computing the assets, resulting from entering and counting certain stocks, bonds, etc. twice, these sums did not correctly measure the interest of’ either partner, the amount to the credit of each being too large by five thousand dollars or upwards. Both partners were ignorant of the mistake, and so far as appears, neither of them had cause to suspect that the books were not absolutely correct. Inasmuch as the difference between their individual accounts rendered their clear net interest in the assets unequal, there was no measure of the interest of each, at least as to the bulk of the assets, except the books. The books constituted the partnership register by which the interest of each partner in the regular course of business would be measured; and it is clear, therefore, that either or both partners had a right to look to the books, and may have been expected to do so, as a basis for computing the value of the interest of either when offered for sale. As there was no reason to suspect any error in the books, we can see no cause for attributing to Branch laches or neglect in not looking outside or beyond them, or in accepting them as correct without a special examination to verify them. Whether Cooper negotiated on the basis of the books or not, he must have known that Branch, as a rational man, would resort to them as a basis, and it is deas from the evidence that Branch did so; that in making his contract for the purchase of Cooper’s interest, he was influenced by the books, treating them as correct. As they were not correct, but contained a material mistake of which both parties were ignorant, and that mistake influenced Branch in making the contract, it was a mutual mistake, whether it influenced Cooper or not. He himself testifies that he thought the books correct, had no doubt of it, and was astonished afterwards up to the point of incredulity when he heard that the error had been discovered. He was so startled that he became ill. One fact testified to by him is decisive upon the intention of both parties to consummate their bargain, as finally closed between them, upon the basis of the business as it stood on June 30th, 1886. The contract for the sale of Cooper’s interest was made about the middle of the following July, and the dissolution was to take place on the 31st of July. Cooper testifies that in the final contract it was agreed that he should remain until the end of the month, and should receive as his compensation for the business of July $400. This shows that his interest as it existed on the 30th of June, when the books were made up, was the real subject-matter of the sale, and that there was a separate and distinct stipulation covering the firm operations for the whole of July, by which his income for that month was fixed definitely at $400, about the twelfth part of his half of the profits made by the firm in the preceding year, ending June 30th.

The result of the mistake being to cause Branch to contract for the purchase of Cooper’s interest, and to pay for it at a price several thousand dollars in excess of its real value, and in excess of the value which would have been shown by the books had they been correct, there can be no doubt that apart from the mere form and shell of contract, Cooper received more for his interest than in equity and good conscience he was entitled to. Had the facts been as both parties thought them to be, Branch would have had value received for all he paid out, but the mistake of fact as to the quantum of Cooper’s interest in the bulk of the assets caused Branch to promise and to pay several thousand dollars for which he got nothing. If the consequences of the mistake can be repaired by the resources of a court of equity, they certainly ought to be. Not to be able to afford some remedy in such a case would, to use the language of Chancellor Kent after Lord Eldon, be “a great defect in the moral jurisdiction of the court.”

2. It is obvious that the mistake was discovered too late to admit of a rescission of the contract, the discovery not being made until the books were closed for the next year, which was done May 31st, 1887, a month earlier than had been customary whilst the firm existed and transacted business. The discovery was confirmed and made certain by the services of an expert employed for the purpose, whose examination was completed early in August. Before any one had knowledge or intimation of the mistake, the whole purchase price had been paid in full, and Cooper had .’incurrred expenses in founding another business of like kind, and was engaged in carrying it on. The situation of the parties had so changed that to restore the status quo between them was .altogether impossible. The only means, therefore, of repairing the consequences of the mistake, would be to allow Branch to recover back from Cooper so much of the price paid as had nothing to represent it in the value of Cooper’s interest, the subject-matter of the sale.

It is said that to allow this would be to make a new contract for the parties, especially as Cooper would not have sold for a less price had he known of the mistake. Undoubtedly there is much force in this suggestion, but we think the sounder view of the law is that in all business dealings, there is, if neither party be in laches, an implied agreement to correct mutual mistakes and repair their consequences when the same can be done without injustice; and we can see no injustice whatever to Mr. Cooper in requiring him to refund so much of the price as resulted from the mistake and for which he gave no value. In ascertaining the amount which he ought to refund, he should be allowed the benefit not only of the value of his interest as exhibited by the books when purged of the mistake, but any additional value which his interest really had at the time of the sale. Though Mr. Branch made the purchase at the book valuation, yet he should account for all he got at its real value, not merely at the value shown by the books after correction; for certain assets, such as the lease of the store, etc., were not shown by the books at all, and it would not be just to correct in his favor the mistake without making him account for every dollar in valué which he received, whether entered on the books or not. Thus if the true value was as found by the jury, $7,868, rather than $5,182.60 as shown by the books purged of the error, the difference between the former sum and what he paid, to wit, $10,000, should be the measure of his recovery. So it seems to us; but whether there would be injustice under all the circumstances of the case in requiring Mr. Cooper to refund,, as well as how much ought to be refunded, may well be treated as a question' of fact for a jury. The rule of law on the subject seems to us to be the rule of natural justice only. There is no obstacle in the law to requiring Cooper to refund so much as in natural justice he ought to refund ; and he can be required to refund that much but no more.

We distinguished this case from Steadwell vs. Morris, 61 Ga. 97, in several particulars. In that case there was no measure by the partnership books, of the interest bought and sold. There was nothing showing that the mistake was mutual, or that the party aggrieved by it was not in laches, and there was no attempt to repair the consequences until after the lapse of several years. Here books of the firm treated alike by both partners as correct, by mistake measured values erroneously. There is no ground for imputing a want of diligence to either. The mistake was discovered and verified within a reasonable time, and this bill for redress was filed within about six months after the verification.

3. The several questions of practice made in the record need not be specifically dealt with, as they are not likely again to arise. We have preferred to confine our examination to the substantial merits of the controversy ; and what we have ruled will serve, we think, as a sufficient guide on another trial. The case should be tried over; and as it involves in so large a degree principles of natural equity, we would suggest that it be submitted to the jury in its totality, with instructions from the court as to the law conformable to the views announced in this opinion. Should the parties or either of them not acquiesce in the suggestion, but claim the right given by code, §4206, it would be well for the court to submit as special questions of fact, with others, the two which we have-indicated, namely, whether according to natural justice anything, under all the circumstances, ought to be refunded, and if anything, how much ?

Judgment reversed.