Vail v. Pacific Fish Products Co. (76 Cal. App. 58, 1925)

STURTEVANT, J.

The plaintiffs commenced an action against the defendants and alleged their claims in three common counts, each being for moneys laid out and expended for the defendants. The defendants answered, and in their answer first they denied each of the allegations contained in each count in the plaintiffs’ complaint; second, to each count they interposed a separate defense to the effect that the subject matter of that particular count in plaintiffs’ complaint was a part of a larger transaction, to wit, a copartnership enterprise between the plaintiffs and the defendants as copartners; third, the defendants pleaded a defense to the effect that the subject matter of all the counts contained in the plaintiffs’ complaint was a part of the subject matter of a larger transaction, to wit, said copartnership, and pleaded the facts constituting the copartnership and the business transactions had thereunder down to the twenty-fourth day of December, 1918, at which time the copartnership was dissolved ; that during the existence of said copartnership the plaintiffs received large sums of money for the account of the defendants and have refused to apply them as provided in the partnership agreement; and that an accounting should be had; fourth, defendants then pleaded seven counts against the plaintiffs, each being for a different claim for moneys alleged.to be due and owing to the defendants by reason of transactions had between the parties under the alleged co-partnership agreement. The defendants closed their answer with a prayer that an accounting be had, etc. The plaintiffs, answered the cross-complaint and thereafter the cause came on for trial before the court sitting with a jury. The jury returned a general verdict and many special verdicts. The verdicts were incorporated in a judgment in favor of the plaintiffs and against the defendants in the sum of $16,086.30, from that judgment the defendants have appealed and have brought up a bill of exceptions.

From the same judgment the plaintiffs have appealed and have joined in bringing up the same record to support their appeal.

When the cause was called for trial it was stipulated between counsel that the special defense, to the effect that the plaintiffs and the defendants were copartners and that no accounting had ever been had, and that, therefore, no action could be maintained by one copartner against the other until such an accounting had first been had, should be tried by the trial court sitting without a jury and before calling a jury to try the other issues. Thereupon, the following documents, parts of which we have italicized, were offered and received in evidence:

“Defendants’ Exhibit No. 1.

“This agreement made this 17th day of March, 1917, by and between the Pacific Fish Products Company, a corporation organized and existing under and by virtue of the laws of the state of California, party of the first part, and N. R. Yail and W. D. Coberly, parties of the second part, witnesseth:

“ That, whereas, the party of the first part is the owner of the floating cannery John G. North, owning the same free and clear of all encumbrances; and

“Whereas, the party of the first part agrees to furnish to-the parties of the second part a good and sufficient surety bond in the sum of $10,000.00 for the faithful performance of this agreement; and

“Whereas, said ship has been fully equipped with all of the machinery and appliances necessary for canning the products to be obtained in the enterprise hereinafter provided for, which said equipment is owned by the party of the first part and is all fully paid for; and

■ “Whereas, the party of the first part is free of debt to any person or corporation; and

“Whereas, the parties of the second part control the power schooner Vaquero ;

“Now, therefore, it is understood and agreed that:

“1st. Said floating cannery shall be towed to a point in Mexican waters to be selected by the parties hereto by the schooner Yaquero and there placed in operation and continued in operation at said point or at such other points as the parties hereto may agree upon, for the period of ten years from the date hereof, unless the enterprise be abandoned as hereinafter provided.

“ 2nd. The parties of the second part hereby agree to ’ deliver to the party of the first part sums up to ten thousand dollars ($10,000), said sums to be hereinafter designated as the Vail fund. Said fund shall he paid to the party of the first part as needed for said enterprise such portions thereof as may be required for payroll and local expenses at the point of operation of the cannery, in cash, such portions thereof as may be required by furnishing transportation in and towage by said schooner Vaquero at the rates hereinafter provided, and also such portion thereof as may be required by the expenditure thereof, in the purchase of cans, labels, shook, supplies required in the operation of the cannery, and also a stock of merchandise and supplies to be used for trading purposes. All of said merchandise and supplies and those thereafter purchased for the party of the first part shall be billed to it at cost to the parties of the second part.

“3rd. The parties of the second part agree during the term of this contract to transport upon said schooner Vaquero the cans, shook, supplies and merchandise required in the enterprise, and the canned product, and the party of the first part agrees to deliver the same to said schooner for transportation upon the following basis:

“(a) While the operations of the cannery are conducted at a point no further distant from Port Los Angeles than Magdalena Bay, the said Vaquero shall, if such service is required by the cannery, visit the cannery at least once every two weeks, andi for the freight carried the party of the first part shall pay to the parties of the second part transportation charges as follows:

“I. For all northbound freight, at the rate of $10.00 per ton weight or measure (i. e., on the basis of weight of 2,000 pounds to the ton or on the basis of measurement treating 40 cubic feet as equivalent to a ton), the weight or measure basis as applied to the various classes of freight in each cargo shall be applied at the option of the parties of the second part.

“II. For all southbound freight, at the rate of $9.00 per ton weight or measure defined and applied as aforesaid, provided, however, that the measure basis shall not apply to empty cans or shook which are to be carried on a straight weight basis of $9.00 per ton.

“III. If operations are carried on at a point further distant from Port Los Angeles than Magdalena Bay, the calls shall be made less frequently and the transportation charges shall be raised, all raises to be based upon the charges hereinbefore provided for, upon a fair pro rata increase.

“IV. A charge of $1.00 per nautical mile shall be paid by the party of the first part to the parties of the second part for the towage of the cannery. . .

“ (b) The title to all merchandise, supplies, canned product and freight delivered to said schooner Taquero shall pass to parties of the second part as soon as it is so delivered, whether it be the canned product to be carried on the northbound voyage, or whether it be the supplies, merchandise, etc., to be carried on the southbound voyage, but it is understood that the parties of the second part may from time to time waive the benefit of such arrangement for any definite period or periods, provided, however, it is understood and agreed that the parties of the second part are to be under no liabilities if loss or damage to any of said property results from fire, piracy, theft, riot, insurrection, the acts of God or the public enemy, or the perils of the sea.

“ (c) It is understood and agreed by and between the parties hereto that the parties of the second part will cause all freights, both southbound and northbound, to be insured against marine loss and the premium on said insurance to be charged to operating costs of the enterprise.

“(d) The parties of the second part shall have the right to divert, from time to time, or permanently, from the enterprise the schooner Vaquero, if they provide during the period of diversion adequate means of transportation in lieu of the Vaquero.

“4th. The cammed product which the party of the first part agrees in every case to deliver to the parties of the second part for transportation northward, as aforesaid, shall after its delivery into the United States, he sold by the parties of the second part, using all reasonable diligence to obtain the highest market price and best advantage, and selling directly to brokers, or at the option of the parties of the second part, it may be delivered to Frank Van Camp of Los Angeles, to be sold by him, and the money as received by the parties of the second part or the said Prank Van Camp, as the case may be, shall after the deduction of transportation charges due parties of the second part and subject to the provisions hereinafter made for certain cases, be paid over to the treasury of the party of the first part.

“It is further agreed that all bills, invoices and vouchers and records of all parties are to be subject to the inspection of other parties hereto.

“5th. After the delivery of the first pack to the parties of the second part and the transportation thereof to Port Los Angeles, the parties of the second part agree to loan and advance such further sums as may be required for the use of the enterprise up to the amount of $15,000, provided the value of the pack so delivered at Los Angeles is $15,000 or more; but if the value be less than $15,000 then the advances shall be only made up to the value thereof. All returns derived from the sale of said pack and of all future packs shall be collected by and retained by the parties of the second part until such additional advance has been repaid with interest at the rate of 6% per annum. The arrangement provided for in this paragraph may be renewed from time to time if the proper financing of the enterprise requires renewals.

“6th. The net profits of the enterprise shall be divided between the parties hereto, the party of the first part receiving two-thirds thereof and the parties of the second part receiving one-third thereof. The net profits shall be arrived at by ascertaining the gross receipts which shall consist of all money collected from all products sold, including the proceeds of the sales of merchandise from the cannery store, and from such total shall be deducted the cost of operation, which shall be made up of a salary of $250 per month paid to J. E. Heston while he acts as the manager of the cannery in the place of operation, a salary of $150 per month to be paid to the said W. D. Goberly while he is working for the enterprise, all wages paid to laborers and mechanics in the cannery and to fishermen, the sums paid for sea products, for merchandise, supplies and transportation and the cost of ordinary repairs to the appliances of the cannery, to be paid to local officials or authorities or to holders of fishing concessions in Mexico and for dockage and premiums if any paid for insurance on the cannery, pack and supplies shipped, or any of them, and sums paid out in selling the pack, including payments to agents, jobbers or brokers as commissions if required.

“7th. Before any net profits, however, are divided between the parties hereto, there shall be accumulated a fund of $10,000 hereinafter referred to as the ‘working capital,’ which said fund, together with said Vail fund, shall be kept in the enterprise undistributed until the final liquidation of the enterprise. It is understood and agreed between the parties hereto that the $10,000 working capital provided for in this paragraph shall be held in reserve for the purpose of purchasing additional equipment in the way of boats, barges, fishing equipment and gear that may be needed in the further development of this enterprise to increase its output, it being understood that the title -to such equipment shall be taken by the parties hereto as tenants in common, the one-third in the parties of the second part and the two-thirds in the party of the first part.

“8'th. If at any time prior to the full term of this contract said enterprise proves a failure or it is demonstrated that a continued operation of the enterprise will result in a loss, either party hereto may require a liquidation of the enterprise and a termination of. this agreement; and upon such liquidation the ship cannery, together with the equipment with which it is now equipped, shall be withdrawn from the enterprise by the party of the first part, and all of the other assets of the enterprise including the Vail fund, the working capital, the pack unsold, outstanding accounts, supplies, merchandise and extra equipment aside from the present equipment of the floating cannery, shall be divided between the parties hereto, the one-third thereof to the parties of the second part and the two-thirds to the party of the first part. In the event, however, that if when the time arrives for said division, the parties of the second part shall not have received by way of division of net profits a sum equal to the advancements made to said Vail fund, and have not received out of collections the further advances made against a pack, as provided for in paragraph 5 hereof, then in that event, before any division of assets is made, said additional advancements shall be fully repaid, and the difference between the amount of said Vail fund and the amount, if any, received by the parties of the second part by way of net profits, shall be paid to the parties of the second part; and in any of such cases the parties of the second part shall have a lien upon all said assets and the right of possession thereof to convert said assets into money and apply the same to the satisfaction of such sums to which the parties of the second part are first entitled.

“9th. In the event that through the failure of the enterprise said Vail fund cannot be restored to the parties of the second part, either by way of net profits or as provided in the foregoing paragraph, there shall be no 'liability on the party of the first part to repay the same.

“10th. The party of the first part shall strictly comply with all pure food laws of the United States and with the various states of the Union in the canning and labeling of all sea food packed.

“11th. It is understood cmd agreed that this arrangement shall not constitv,te the parties heréto partners in the said enterprise, or in any branch thereof.

“12th. In the event that either party hereto is prevented or delayed in the performance of any condition, covenant or agreement herein contained by reason of strikes, boycott, fire, piracy, theft, riot, insurrection, the acts of God or the public enemy, or the perils of the sea, then such delay or prevention shall be excused.

“13th. It is further understood and agreed by and between the parties hereto that the party of the first part shall enjoy all privileges, rights and freedom of operation necessary or convenient in said enterprise under any concessions, licenses, privileges or grants from the Mexican government or authorities, or from the Cia Industrial Mexicana S. A. (a Mexican corporation), granted to the parties of the second part, or their agents, paying to the parties of the second part, however, the cost to the parties of the second part of said rights and the royalty accruing by reason of its operations to the grantor thereof, if any. In the event that the parties of the second part operate or authorize others to opérate other enterprises under such rights a fair pro rata charge based upon relative productions shall be made to the party of the first part.

“(Corporate Seal) Pacific Fish Products Co.

“By John E. Heston, Prest.

“Stanley P. Allen, Secretary.

“N. B. Vail.

“W. B. Coberly.

“Defendants’ Exhibit No. 2.

“This agreement, made this seventeenth day of March, 1917, by and between the Pacific Fish Products Company, a corporation organized and existing under and by virtue of the laws of the state of California, party of the first part, and N. B. Vail and W. B. Coberly, parties of the second part, witnesseth:

“That whereas the parties hereto are this day entering into a contract with respect to Mexican fishing, etc., now therefore, as part of the same transaction, it is understood and agreed:

“1st. Parties of the second part shall have the right to withhold the schooner Vaquero, or any other vessel which they put into service for the transportation and towage provided in said contract, when they deem the political conditions locally in Mexico or international to be such as to make the voyage to Mexican waters dangerous or hazardous to the vessel in use or to be such as to lead the parties of the second part to believe that the voyage might result in the destruction, detention or confiscation of the vessel.

“2nd. That the agreement of the parties of the second part contained in said contract to furnish transportation and towage is subject to the right of the parties of the second part to be relieved therefrom in case of the commandeering of the vessel in service by the government.

“3rd. That all towage shall be done at the risk of the party of the first part.

“4th. That the party of the first part is indebted to the Van Camp Sea Food Company in the sum of nine hundred thirty ($930.00) dollars.

“5th. That instead of selling directly to brokers as provided in paragraph 4 of said contract, the parties of the second part may sell directly to the trade or through brokers,. The brokerage (including any selling charge made by Frank Van Camp or his corporation) shall be paid out o£ the proceeds of the sale.

“(Corporate Seal) Pacific Fish Products Company.

“By John E. Heston, Prest.

“Stanley P. Allen, Sec’ty.

“N. R. Vail.

“W. B. Coberly.

“Defendants’ Exhibit No. 3.

“This agreement made this 11th day of May, 1917, by and between the Pacific Fish Products Company, a corporation, party of the first part, and N. R. Vail and W. B. Coberly, parties of the second part.

“Witnesseth, that whereas on the 17th day of March, 1917, the parties hereto entered into a contract with respect to fishing operations.

“And whereas the parties of the second part claim to have loaned and delivered to the party of the first part sums in the form of money delivered, drafts paid, and supplies and equipment purchased and furnished all in addition to the $10,000 fund provided for in said contract, and the $3,000 note given to the parties of the second part on March 21st, 1917, which said excess is hereafter referred to as the ‘Disputed fund,’ which said disputed fund the parties of the second part claim is an obligation due and owing them from the party of the first part, but whereas the party of the first part claims that there is no obligation on which to repay said disputed fund, and the parties hereto desire to compromise their differences with respect to said disputed fund.

“And whereas funds are required to further prosecute the fishing and canning operations and it is desired to obtain more funds for said purpose.

“Now therefore it is agreed that the parties of the second part shall and do hereby extend to the party of the first part a credit of seven thousand dollars ($7,000) to be disbursed as hereinbefore provided and in consideration thereof the party of the first part delivers to the parties of the second part its promissory note bearing interest at the rate of six per cent per annum, payable at maturity, the principal of said note being payable at four months from this date; said credit shall be paid out by the parties of the second part, firstly in liquidation of outstanding accounts not yet paid but incurred by the parties of the second part in the purchase of supplies for the cannery, and next to the payment of the now outstanding drafts drawn for the expenses of the cannery and then upon written orders or O. K. of any officer or director of the party of the first part in purchasing the supplies or equipment, furnishing transportation, obtaining boats and fishermen and in furnishing cash to J. E. Heston for the operation of the cannery and in purchasing equipment. All of said expenditures, payments and purchases, however, to be first subject to the approval of the parties of the second part or the approval of either of them.

“Said W. B. Goherly shall forthwith proceed to the cannery and remain there and assist in the attempt to fill the cans which are now there, and if when the said $7,000 credit has been exhausted the said Heston and Coberly shall reach the conclusion that the results at the cannery justify a further expenditure up to $3,000, the parties of the second part agree to extend a further credit and advancement to the party of the first part up to $3,000 to be expended and disbursed in the same manner as is herein provided for the expenditure and disbursement of said $7,000. Provided, however, that there shdll he no obligation on the party of the first part to repay said further credit wp to said $3,000 except that the parties of the second part are hereby given a first claim and lien upon all packs from said cannery until said $3,000 has been repaid out of tlie proceeds of paclcs, and the parties of the second part are hereby authorized to apply the proceeds from the sale of packs as collected in liquidation of said further credit, together with interest thereon at the rate of six per cent per annum from dates of expenditure to date of payment.

“Similarly the parties of the second part may apply the proceeds of said sale to the payment of said $7,000 note or any portion or portions thereof.

“The date of maturity of said $3,000 note given March 21st, 1917, is hereby extended to date four months from the date of this agreement.

“In consideration of the premises said disputed account is hereby compromised upon the following basis:

“The parties of the second part waive all claims against the party of the first part for the repayment thereof except out of the proceeds of future packs and the party of the first part gives to the parties of the second part a lien and charge upon future packs for the repayment of said disputed fund together with the right to apply the proceeds of future packs to their satisfaction thereof.

“ (Corporate Seal Pacific Fish Products Company.)

“(Sgd.) Pacific Fish Products Company.

“Frank Van Camp, V. P.

“Stanley P. Allen, Secy.

“N. R Vail.

“W. B. Coberly.

“Defendants’ Exhibit No. 4.

“Dated December 20th, 1917.

“The Pacific Fish Products Company, party of the first part, and N. R. Vail and W. B. Coberly, parties of the second part, do hereby make the following amendments and additions to the contract between them dated March 17th, 1917, with respect to a fishing enterprise in Mexico:

“1 — It is agreed that the open account, with interest at six per cent (6%) per annum, of the party of the first part in favor of the parties of the second part, amounts to $4,631.76 over and above the $10,000.00’ Vail fund referred to in the main contract.

“ 2 — It is further agreed that the equipment account for money expended in Equipping the cannery, in favor of the parties of the second part amounts to $4,500.00 over and above the $10,000.00 Vail fund referred to in main contract, and open account above referred to.

“3 — The party of the first part agrees to execute and deliver to the parties of the second part, their promissory notes of $4,500.00 and, $4,631.76, above referred to dated December 20th, 1917, and payable July 1st, 1918, bearing interest at the rate of 6% per annum upon the surrender to them of two promissory notes for $3,000.00 and $7,000.00 respectively, executed by first party and dated March 17th and May 11th, 1917. It being understood and agreed that the exchange of notes as herein stated shall take place as soon as it is ascertained that the floating cannery is to return to Mexico under this agreement.

“4 — The operations in the preparation of the cannery for the next season’s pack are to be suspended until the parties have been notified that a Mexican concession for next season’s operation has been obtained. ■

“5 — The party of the first part agrees to finish the equipment of the floating cannery as soon as the concession above referred to is obtained, and the parties of the second part agree to advance the funds for same which is to be charged to the $20,000.00 account hereinafter provided for, and the salaries of Coberly and Heston sh