Bower v. Walker , 220 Pa. 294 ( 1908 )

Opinion by

Mr. Justice Potter,

The controversy in this case is as to the proper method of computing interest, under the terms of an article of agreement, entered into upon May 28, 1896, between the firm of Powers & Weightman and the firm of Henry Bower & Son. When the agreement was made Henry Bower had died, and his surviving partner, his heirs and the administrator of his estate, were made parties to the contract. After reciting an indebtedness of Bower & Son to Weightman, and the purchase by him (manifestly for the benefit of Bower & Son) of certain stocks in the Ammonia Company of Philadelphia, and the Kali on Chemical Company, which indebtedness, together with the amounts paid for the purchase of the stocks, reached an aggregate of $597,412.75, the agreement provided that, as received by Weightman, the dividends upon the stocks should be applied to the discharge of the indebtedness, and the repayment of the sums advanced by him for the purchase of the stocks; and that when the dividends so received by Weight-man on such stocks, should equal in amount the indebtedness and the moneys advanced, “ together with interest on all at 6% per annum,” the stocks should be handed over and transferred to Bower’s estate, or to such person as his legal representatives might direct. It further provided that if such dividends should not within five years equal the amount of the indebtedness and advances, with interest, Weightman should have the right to sell the stocks, and reimburse himself. It was also provided that Bower’s estate and William H. Bower might at any time during the continuance of the agreement, by paying the balance of indebtedness then due, with interest, become entitled to a transfer of the stocks to them. By subsequent agreements of the parties, the terms of the contract were extended for three years to May 28, 1904, and again for three years to May 28, 1907.

After the execution of the agreement, statements were rendered annually by Powers & Weightman to George B. Bower, who was a son and administrator of Henry Bower, showing the status of the account. The statements of 1899,1900,1901, 1902 and 1903 were in evidence. On May 22,1901, George R. Bower wrote to the representative of Mr. Weightman, requesting an extension of the agreement, and stating the balance due January 1, 1901, in an amount which corresponded with the statement rendered by Powers & Weightman for the year 1900. When the statement for 1901 was rendered, George R. Bower, upon January 2,1902, acknowledged its receipt, saying “ I find all correct and agreeing with my figures.” During all these years in which statements were rendered, no objection was at any time made to the method of calculation by which the balance shown to be due by the Powers & Weightman statements, was ascertained.

On December 21, 1904, George R. Bower on behalf of all the parties interested with him, tendered to Anne E. Walker, surviving partner of the firm of Powers & Weightman, and executrix of William Weightman, the sum of $76,722.09, in full payment of the balance due by them, and demanded the transfer of the stocks under the terms of the agreement. The tender was not accepted, and Mrs. Walker declined to transfer the stocks, claiming that a much larger balance ($213,668.21) was due. Thereupon appellants, as children and next of kin of Henry Bower, and his administrator, filed this bill in equity to compel Mrs. Walker to transfer the stocks upon payment by them of the sum of $76,722.09. After hearing, the court below dismissed the bill on the ground that the amount due under the agreement was in excess of the sum tendered.

Upon the trial complainants offered in evidence, for the purpose of showing the method of accounting then pursued, a copy of a settlement made in 1889, between Powers & Weight-man and the Ammonia Company of Philadelphia. This was objected to as being long prior to the date of the agreement which was the basis of the suit. The objection was sustained, and the offer excluded. The exclusion of this paper is the ground of the first assignment of error. That assignment is in plain disregard of our Rule 31, in that it fails to set out either the offer, or the objection, and does not contain a copy of the paper excluded.

We think, however, the paper purporting to contain the settlement was properly rejected, not only upon the ground stated in the objection, but because the alleged reference to it in the agreement cannot properly be regarded as an adoption, for use under the present agreement, of the method of computing interest used in the former settlement. It was rather an acknowledgment of the fact that to a certain extent the arrangement contemplated had been completed.

The remaining specifications of error may all be considered under the twentieth assignment, which alleges error in the decree dismissing the bill.

According to the method of computation adopted by the defendant, as shown by the accounts rendered, when dividends upon the stocks were received, the interest which had accrued to that date upon the entire sum, was deducted, and the balance was applied in reduction of the principal. Complainants, on the other hand, claimed that, in making up the statement, interest should be calculated and charged on the indebtedness up to the time of final settlement, and that interest should be allowed upon each dividend, from the date when it was paid up to the same time, and credited to the plaintiffs; and that the difference between the respective totals thus made up would show the correct balance then due. The court below held that defendant’s method was the proper and legal one, under the terms of the agreement, and further suggested that this “seems to have been the understanding of the parties, acted upon by them for nearly nine years.”

The precise question here involved does not seem to have occurred to the parties when the agreement was drawn, for its terms throw no light upon the exact point in dispute. Admittedly, interest was to be paid at the rate of six per cent per annum upon the entire sum advanced for the benefit of Bower & Son, but as to the method by which the interest was to be computed, in view of the partial payments, the agreement is silent. A large sum of money was involved, upon which frequent partial payments were made. The interest did not of course bear interest, while the principal sum did. If the plaintiffs had the right to insist upon the entire amount of the payments being applied in reduction of the principal, ignoring altogether the accruing interest, until the date of the final payment, it would make a very great difference in the final result. This right they claimed in the court below, and insist upon here. It is, they admit, not the usual method of accounting, but they seek to justify its adoption, on the ground that it was the method pursued between the same parties upon a prior occasion, to which reference is made in the agreement, and for the further reason that as they contend, the account may be regarded as a mutual running account between the parties, and, therefore, is to be considered as an exception to the general rule. It is somewhat startling to find that between the two methods of application of the payments, such a large difference will result. It will be noted, upon an examination of the agreement, that the transaction did not constitute a loan for any fixed period. It was not a loan for five years, but an engagement by Mr. 'Weightman that, during that time, all dividends received by him upon the stocks should be appropriated to the payment of the indebtedness and the amounts advanced for Bower & Son. Payment was to be made by the application thereto of the dividends as received. If the dividends had been large enough to pay off everything due to Mr. Weight-man within two years, or three years, they would, under the agreement, have been so applied, and both debt and interest extinguished. The term of five years was inserted as a limitation only upon the time daring which this arrangement was to stand. In addition, the right of Bower & Son to make full payment of the entire amount of the advances at any time was preserved. So that, had they been so disposed, the entire sum due and owing to Mr. Weightman might have been paid off within the first year. Under any such termination of the arrangement, interest of course, would have been calculated only until the time of payment of principal, and must have been then paid. It is apparent, therefore, that the loan was to be for such time only as would permit of payment of the amount loaned, from the dividends, not exceeding five years, and that each dividend was to be regarded as an extinguishment of that much of the debt and interest. To be sure, this is not conclusive as to the right to deduct the interest due upon the whole debt from the amount of any payment, before applying the balance upon the principal sum, but it does, we think, sustain the right to deduct at least the amount due upon the proportion canceled. Admitting, however, that under the terms of the agreement, the method of application of the payments, whether entirely to reduction of principal or first to interest then due, and then the balance to principal, was left uncertain, we are strongly impressed by the construction which was manifestly placed upon the agreement in this respect by the conduct of the parties in the course of their dealings with each other. As has already been stated accounts were rendered at regular intervals by the defendant to the plaintiffs, showing the balance which it was claimed was due, and the amounts thus stated were ascertained in the calculation by the usual rule for partial payments, under which the payments are applied in the first place to the discharge of the interest then due, and the surplus goes to the reduction of the principal. ISTo objection to this method seems to have been made by the plaintiffs, although it was continued through a series of years. Indeed, the definite balance as stated to be due was, it seems, upon each occasion accepted as correct, and thus may fairly be regarded as constituting an account stated at each interval. Of course, the mere rendering of an account did not make it an account stated, but the fact that it was received without objection and that no correction or impeachment of it in any way was suggested within a reasonable time goes far to sustain it as such. If a mistake in the figures, or a clerical error, were here alleged, we do not say but that it might very properly be corrected.- But the effort now is to repudiate entirely the method of accounting and the manner of the application of the payments which was adopted and followed by the defendant for years, and which was seemingly accepted without question by the plaintiff as proper, and acquiesced in during all that time. Whatever may be said as to the uncertainty in which the plan of computing interest was originally left by the terms of the agreement, we are convinced that the method followed unquestioningly by the parties for so long a period should not now be disturbed. The law is well settled that the construction placed upon a contract by the parties will be followed by the courts. “ If a contract is ambiguous in meaning the practical construction put upon it by the parties thereto is of great weight, even though the contract is in writing, and ordinarily is controlling : ” 2 Page on Contracts, sec. 1126. And in People’s Natural Gas Co. v. Wire Co., 155 Pa. 22, this court said : “ When we are asked to say what the parties meant or intended by their contract, it is entirely safe to point to their own construction of it, as evidenced by their course of dealing under it.” And in Sherman v. Consolidated Dental Mfg. Co., 202 Pa. 446, the present chief justice said: “ The parties themselves thus gave a practical demonstration of their mutual understanding of the agreement, which neither one can now be allowed successfully to dispute.” This language applies most appropriately to the transactions of the parties in the present instance.

It is suggested, however, by counsel for appellants that the acts or omissions of George R. Bower, in accepting the statements of the accounts and in approving them, would not bind the other plaintiffs. But in answer to this we think it is sufficient to say, that in the fifth and sixth paragraphs of the bill filed it is admitted that plaintiffs had notice of the accounts rendered, and that George E. Bower acted for them in receiving notice, and in making the tender for them of the amount admitted to be due to Mrs. Walker, and in making the demand upon her for the return of the stocks. Furthermore, they seem to have ratified the letter of May 22, 1901, written by George E. Bower, asking for an extension of the agreement. This letter contains an express admission of the correctness of the account, as rendered up until that time. And when in response to that letter the time was extended for their accommodation, they all signed the extension agreement. If the method of accounting adopted and set forth by the defendant during all these years, when the statements were being frequently rendered, was not acceptable to the plaintiffs or their representatives, the time to make the objection known was upon the rendition of some one or more of the accounts.

Flor do we see any sufficient ground for the contention that the account, as rendered in this case, can be properly termed a mutual running account. To make it such, there must have been mutual indebtedness, giving rise to mutual demands, with a right of action to each party against the other. Here the indebtedness was all upon one side. Powers & Weightman were creditors, and Bower & Son were debtors, and that is the only relation ever shown to have been established between the parties. The fact that credits were entered upon the account from time to time because of payments, did not render the account mutual; that only tended to reduce the amount of the indebtedness. Therefore wé can see no merit in the suggestion that this account should be considered a mutual running account, with the effect, as is contended, of making it an exception to the general rule, that where money is to be paid upon a debt it is to be applied first to the interest, if any, in arrears, and then to the extinguishment of the principal.

The assignments of error are overruled, the decree of the court below is affirmed, and this appeal is dismissed at the cost of the appellants.