Equity Jurisdiction, Specific performance of oral trust agreement, Laches, Accounting. Fraud. Equity Pleading and Practice, Supplemental bill.
In a suit in equity against an individual and a corporation the plaintiff alleged that he, the individual defendant and a third person formerly had been in control of the defendant corporation and that, having been ousted from such control, they formed a competing corporation; that, to induce them to make an agreement to cease competition, the defendant corporation conveyed to the individual defendant certain securities and agreed with him in writing to pay to him a certain sum yearly for a number of years as a salary; that the individual defendant orally agreed with the plaintiff and their associate to divide such securities and salary with them in the proportion of three fifths to himself and one fifth to each of them, and that he did not carry out his agreement as to the division of the salary. The suit was heard by a single justice and a decree was entered among other things adjudging that by virtue of the oral agreement between the individual defendant and the plaintiff and their associate the defendant received the salary from the corporation in trust for the plaintiff and the other associate. Upon an appeal by the individual defendant, all the evidence being reported, it was held that the findings were warranted by the evidence, and that the appeal should be dismissed.
In a suit in equity for an accounting, if it appears that during certain years the plaintiff received from the defendant payments in settlement of the account for those years and that the payments were smaller than they should have been, but that he was induced to accept such settlements through fraud of the defendant, the account ordinarily will be reopened and the plaintiff will be given relief; but, if it appears that in the last two of these years the plaintiff accepted the decreased sums without protest when he could have asserted his rights, and that he assented to such reduced payments, not because he was misled but for unrevealed reasons, such delay or forbearance on his part will prevent the reopening of the account.
Where in a suit in equity the plaintiff seeks to have the defendant compelled to make periodical payments to him under an oral agreement as to a trust and a decree is entered adjudging that such agreement be enforced, there cannot be included in a final decree an order that the defendant also pay sums which have fallen due under the agreement during the pendency of the suit. To recover such sums the plaintiff must resort to a supplemental bill or to an amendment in the nature of a supplemental bill alleging that such additional sums have fallen due since the suit was begun.
BRALEY, J.
The questions presented by the cross appeals are, what amount, if any, is the plaintiff entitled to recover from the defendant Dillaway, and if relief should be given, whether the final decree is supported by the averments of the bill.
The plaintiff, the defendant and one Temple, who died before suit was commenced, organized a corporation to enter into competition with the defendant, the American Pneumatic Service Company, formerly in their control, but from which they had been displaced by changes in the corporate management. After nearly two years of competition with extensive litigation between the companies concerning alleged infringment of patents either owned or controlled by the defendant corporation, the new company ceased to do business under the agreements in writing appearing in the record. It is fairly to be inferred from the oral testimony of the defence, that by reason of the business ability and large experience of the personal defendant the procurement of his services or co-operation in the future, operated as an inducement for the contracts. But irrespective of the controlling purpose whatever it may have been, this defendant received the stock and bonds which formed the consideration under the second agreement, and by an oral arrangement among themselves the stock and bonds were divided in the proportion of three fifths to himself, and one fifth each to the plaintiff and Temple. By the terms of the first agreement executed on February 23, 1909, to which neither the plaintiff nor Temple were parties, the defendant was to receive as advisory counsel in various capacities a yearly salary from the purchasing company payable quarterly during the ensuing five years at the rate of $25,000 a year for the first two years, and $20,000 a year for the remainder of the period. It is contended by the plaintiff, whose testimony sustains his position, that the defendant agreed to make a similar division of the salary as the instalments were received. The first agreement contained a clause, that if the second agreement should be broken by either the plaintiff or Temple the salary should be reduced very appreciably, but upon a breach by both, the reduction should be doubled. It was greatly for the defendant's pecuniary advantage, that the second agreement should not be violated. The defendant's checks show that for the first two quarters he made payments to the plaintiff at a less rate, but in explanation of this difference the plaintiff testified, that deductions were made in payment of his promissory note which the defendant held, and if this indebtedness were included these payments corresponded in amount with the agreement for division. During the succeeding six quarters the payments were reduced, and the plaintiff asks that the defendant be ordered to pay the arrearage.
The dealings between the parties do not seem to have been inconsistent with the plaintiff's claim, that his right to share in the money received as salary as well as in the stock and bonds had been recognized and conceded. Despite the defendant's positive denial of the plaintiff's statements, and his explanation of the checks as being merely gratuities, the finding of the single justice shown by his memorandum of decision, that the oral agreement relied on by the plaintiff had been proved, should not be set aside. Revere Water Co. v. Winthrop, 192 Mass. 455, 459.
Ordinarily it would have followed, that the defendant should account for the amount withheld. If the quarterly share had been computed on the amount actually received by the defendant the payments to the plaintiff for the six succeeding quarters should have been $1,250 for each quarter instead of $1,215, and the plaintiff's appeal is grounded on the refusal of the justice to order the defendant to pay the arrearage. The explanation of the defendant proffered to the plaintiff, that he had paid the difference to one Maston to whom he was under obligations for assistance in the accomplishment of some of his commercial projects, is unsatisfactory when viewed with his admission at the trial, that the money withheld had not been paid to any one, and there is much force in the plaintiff's argument, that he had been deliberately misled when consenting to the reduction. It has been often decided, that where fraud appears even although not directly averred in the bill, a settled account will be reopened, and the plaintiff given relief. Farnam v. Brooks, 9 Pick. 212. Barrow v. Rhinelander, 1 Johns. Ch. 550. Rehill v. McTague, 114 Penn. St. 82. Branger v. Chevalier, 9 Cal. 353. Perkins v. Hart, 11 Wheat. 237. Williamson v. Barbour, 9 Ch. D. 529. But the plaintiff accepted the decreased sum for two years without protest when he could have asserted his rights, and upon a review of his general conduct and subsequent course of dealing with the defendant the impression is not removed, that for some undisclosed purpose he preferred to make no further inquiry, and did not care to insist on a strict performance. The further finding of the single justice, that the plaintiff assented to the reduced payments not because he had been misled, but for unrevealed reasons, not having been unwarranted, he properly held, that owing to the plaintiff's delay or forbearance to press the claim it would be inequitable to reopen the account. Foster v. Hodgson, 19 Ves. 180, 185.
It is elementary as the defendant contends, that the decree should follow the pleadings, and the stating part of the bill cannot be enlarged under a prayer for general relief. Bushnell v. Avery, 121 Mass. 148. The plaintiff, however, asked for an accounting not only of the whole consideration whenever it accrued and became payable, but of the instalments the defendant had received. And although upon the evidence the relief specifically sought was too broad, yet the relief granted having been coextensive with the allegations of the bill the decree should be affirmed. Franklin v. Greene, 2 Allen, 519.
If as the plaintiff suggests further instalments have accrued since filing the bill, he must resort to a supplemental bill, or to an amendment in the nature of a supplemental bill to recover the arrears. McMurtrie v. Guiler, 183 Mass. 451, 454, 455.
Decree affirmed with costs.