Spalding v. Mason

Bill by George Mason against Harvey Spalding and others. From a decree of the general term against defendant Spalding and the sureties on his bond for appeal from the special term they appeal.

Mason filed his bill in equity in the supreme court of the District of Columbia for a discovery and an accounting by Harvey Spalding as to certain fees collected by the defendant, in which Mason claimed a one-fourth interest. The persons joined with Spalding in this court are the sureties upon an appeal bond given by Spalding; the general term, upon the affirmance of a judgment in favor of Mason, having entered judgment against all the parties who executed the appeal bond.

The interest in question was acquired by Mason under an agreement between himself and Spalding, executed June 3, 1880, which recited that Spalding had on hand about 1,700 claims (and expected to receive enough more to make up 4,000 claims) for moneys which it was believed would be due from the government to postmasters and late postmasters upon a readjustment of salaries under the provisions of an act approved June 12, 1866, and was in need of funds to prosecute said claims, and to urge the passage of bills then pending in congress looking to their settlement. By the agreement Spalding sold to Mason for the consideration of $2,500, payable in installments, a one-fourth interest in the fees to collected from said claims, 'free from charges for expenses in prosecuting said claims to collection,' and Spalding agreed to obtain as many claims as he could secure in addition to those referred to in the contract as on hand or expected to be acquired.

The congressional bills alluded to in the agreement failed of passage, but at the next congress an act was passed, and was approved March 3, 1883, which was similar to one of said bills which had failed of passage at the preceding congress, 'except two unimportant verbal alterations, with a proviso added as to the manner of application for readjustment of salaries thereunder and the manner of payment thereof.'

The bill averred that defendant had collected a large sum of money as fees upon the claims in question, and was largely indebted to complainant on account thereof, but that he had failed and refused to render a statement of the amount of the fees collected; and, in substance, the bill also averred that the defendant Spalding was liable to account to complainant not only for fees received by him from the 4,000 claims referred to in the agreement as on hand and expected to be obtained, but for all fees received by him from claimants whose rights depended upon the act of 1866 and the act of 1883.

In his answer Spalding averred that at the time of the negotiation for the sale to Mason of an interest in his business he had in his possession, and so informed Mason, lists of the names of some 7,500 postmasters, who he was satisfied were embraced by the provisions of the bills then pending in the respective houses of congress. He alleged, in substance, that upon the defeat of the house bill on January 17, 1881, the rights of Mason under the contract of June 3, 1880, ceased, and a new and oral contract was entered into between them, by which, in consideration of his (Spalding's) agreement to make renewed efforts to procure favorable legislation and secure the collection of the claims in question, and the retention by complainant of an interest in the claims covered by the prior contract, complainant agreed to share in future expenses, and make advances of money for such purposes; and it was averred that in consequence of such renewed efforts an defendant's part the act of March 3, 1883, became law. He alleged that Mason failed to keep his agreement in respect to advances, and for that reason, in September, 1882, he (Spalding) terminated the contract between them by notice to him, but that, in consideration of the $2,500 paid under the first contract, he promised to pay Mason, in case of eventual success, $10,000, and it was averred that since said date he had conducted his business upon that footing.

The answer also alleged: 'That besides the 1,700 claims in defendant's hands on the 3d of June, 1880, he had received by the 17th of January, 1881, some 500; and also between the latter date and March 3, 1883, he had procured enough more of these to make in all 4,208, all of these being included in the list of 7,500 first above mentioned.' It was charged that in administering the act of March 3, 1883, the postmaster general adopted a construction of that act and of the act of 1866 which was entirely different from the construction of the act of 1866 assumed by complainant and defendant when entering into the contract of June 3, 1880, and from that entertained by defendant when making up said list of 7,500 persons who it was supposed would be entitled to claim relief. He averred that the effect of the construction given to the act of 1883 by the postmaster-general was not only to defeat claims mentioned in said list, but to create a class of new claims not contemplated at the time he made his original contract with Mason.

It was also averred that, in consequence of the new claimants whose rights arose solely from this new construction, defendant, subsequent to July, 1883, adapted his business thereto, and secured 20,000 cases of postmasters other than those who were upon the list of 7,500 cases, or who had been thought of as having claims under the act aforesaid at any time before the month of May, 1883.

The answer concluded with a statement as to the fees collected from the 4,208 claims (out of the list of 7,500,) etc., and averred that he (Spalding) had been put to an expense of about 10 per cent. in collecting said fees by reason of a proviso in the act of 1883 requiring payments to be made directly to the claimants, and denied 'that, excepting what may be due to the complainant upon the above statement, after deducting therefrom what he has already received thereabouts, any debt is or will at any time be due to the said complainant by this defendant because of the contract of June 3, 1880, and subsequent dealing between the parties thereto.'

An additional answer was subsequently filed, giving a more detailed account of the receipts, etc., in connection with all the claims. Various sums were also set out, claimed to have been expended after January 17, 1881,-the date of the alleged new and oral contract,-for clerk hire, printing, office rent, postage, discounts, interest, etc., in prosecuting the business. It was specifically stated that 'this statement does not include the 10 per cent. expended, as in the original answer stated, to collect fees that had been received.'

Issue was joined by the replication of complainant, and evidence was taken in the cause. Upon the hearing, the court, on March 23, 1888, entered a decree which substantially rejected the complainant's demand for a right to share in any other fees than those resulting from such claims as were included in the list of 7,500 cases referred to in the answer, and contemplated and considered by the parties at the time the contract was made.

It is adjudged in favor of the complainant that he was entitled to one-fourth of each and every fee which had been collected or might thereafter be collected upon claims included in the list aforesaid, and that he was not chargeable with any part of the expenses of the business of securing and prosecuting such claims. The cause was referred to an auditor to state an account upon this basis. From this decree an appeal was taken by the complainant to the general term, and, on January 23, 1889, that tribunal affirmed the decree of the special term, and remanded the cause for further proceedings in accordance therewith. The opinion of the general term is reported in 18 D. C. 115.

The hearing before the auditor was then proceeded with. He reported that Mason was entitled to share in the fees received by Spalding, as well from claims which had been forwarded to him by attorneys as in claims that had been received directly from claimants.

He also held that certain claims designated by half numbers, that were entered in a book which purported to contain the list of the 7,500 cases heretofore referred to, constituted part of the said list of 7,500 cases, and that complainant was entitled to share in the fees derived from said claims. He allowed deductions made by Spalding for bank discounts on collections of drafts for fees, as also sums paid attorneys for collecting fees, upon the theory that such charges were not expenses for securing and prosecuting the claims, which latter claim had been rejected by the court; but he declined to allow a claim made by defendant for a deduction of 20 per cent. from complainant's share for alleged expenses in collecting fees, on the ground that the same had not been sufficiently proven. Other matters included in the report are not in controversy in this court.

Exceptions were filed to the auditor's report on behalf of both parties.

Upon the amount found due by the auditor as Mason's share of fees collected in accordance with the decree of reference the auditor allowed interest as follows: He took the sum total of fees collected in each month, and awarded interest to run from the beginning of the succeeding month, and on the payments made by Spalding to Mason on account of fees he allowed interest from the date of payment.

The court, at the special term, overruled all of the exceptions, and approved and confirmed the report of the auditor, and entered judgment in favor of complainant for the sum of $16,304.82 (being the principal sum of $13,669.11, and interest to date of decree). The court also reserved the right to complainant to apply thereafter in this suit for an accounting as to fees which might subsequently be collected from claims embraced in the list of 7,500, these being the only claims in which Mason was adjudged to have an interest.

On appeal the general term modified the judgment as to interest by providing that the interest on the principal sum should commence from August 9, 1887, the date of the demand by Mason for an accounting, set aside the reservation of a right in favor of complainant to apply in this action for a further accounting, and entered a decree for the amount found due against the defendant Spalding and the sureties on his bond for appeal. The cause was then brought here by appeal.

W. Willoughby, for appellants.

W. L. Cole, for appellee.

Mr. Justice WHITE, after stating the case, delivered the opinion of the court.