MASTERS ET AL.
Appeal from Judgment on Report of Referee.
Action by Joseph W. Masters and another against Frederick W. Brooks. From a judgment for plaintiffs, both parties appeal. Modified and affirmed.
[117 N.Y.S. 586] Jacob Fromme, for plaintiffs.
James Russell Soley, for defendant.
Argued before INGRAHAM, McLAUGHLIN, HOUGHTON, CLARKE, and SCOTT, JJ.
These are cross-appeals from a decree entered upon the report of a referee in an action for a partnership accounting. The plaintiffs in the year 1897 were custom house brokers. The defendant had been employed for a number of years in the custom house and in the office of the United States attorney for this district, and had acquired an especial knowledge of custom house business, of the revenue laws, and of the treasury practice and regulations affecting importations and the levying and imposition of duties. A new tariff bill was enacted in 1897, and in contemplation of its passage, and of the many difficult and disputed questions which would probably arise under it, plaintiffs and defendant, on April 23d, 1897, entered into a copartnership agreement. It was agreed that the partnership should be for five years, and should be conducted under the firm name of Frederick W. Brooks. The firm was to-
" carry on the business of what is commonly known as revenue attorneys; that is to say, acting for merchants who claim or for whom it is claimed that the government of the United States, or those representing it, illegally exact duties from merchants or importers who are overcharged by the government or those representing it for alleged duties on imports."
The plaintiffs are designated in the articles as parties of the first part, and defendant is designated as party of the second part. The work for which the partnership was formed was quasi professional in its nature, involving, on the part of the person carrying it on, not only personal labor, but especial skill and technical knowledge, which, from the nature of his training and experience, it was supposed that defendant possessed. The business of custom house broker, in which plaintiffs were engaged, was of an entirely different nature, and called for none of the above-mentioned qualifications. It was agreed that defendant should devote his whole time and attention to the business of the partnership. No such obligation was imposed upon plaintiffs, who were left free to devote their time and attention to their business of custom house brokers, but they agreed to procure for the firm all the business they could. They also agreed to furnish all the financial assistance the firm might require, including the guaranty of a fixed income to defendant. After the payment of all expenses the net profits were to be divided equally; plaintiffs being entitled to one-half and defendant to one-half. It was agreed that all contracts entered into by the firm with merchants, importers, and others in the firm name should belong to the copartnership; plaintiffs having an-
" individual one-half interest in said contracts as soon as the same are respectively executed in the same manner and form as if one-half interest in said contracts, when made, are and each of them is assigned to said parties of the first part."
The firm at once entered upon an active and profitable business. That business consisted of attempting to obtain from the government refunds of duties which were claimed to have been illegally exacted. This involved a consideration of the tariff law, of the proper classification and appraisement of imported articles, the effect of treaty obligations [117 N.Y.S. 587] between this country and other countries, and the like. The fees paid to revenue attorneys are contingent upon success, consisting of an agreed percentage, usually 50 per cent., of the amount of the refund secured. Cases were brought to the partnership either by the merchant or importer himself or by his agent or custom house broker. In each case the plaintiffs received a record of the preliminary facts, which were entered upon a slip called a " protest slip," which contained, so far as the data were available, the name of the importer, the entry number, the bond number, a description of the goods, the marks and numbers, the name of the vessel, whence imported, the date of the invoice, the date of entry, the date of payment of the duty, the rate of duty charged, the amounts claimed to be excessive, the kind of entry, the time liquidated, and the date of the protest slip itself. Upon the receipt of a request, with the necessary data, the partnership filed a protest, which served as the commencement of a proceeding to obtain a refund of the duties. In due course such protest was sent by the collector of customs to the Board of Appraisers, which thereupon proceeded to hear and determine the case. It was the defendant's duty to present to this board such testimony and evidence as he deemed necessary to sustain the claim of his client, together with an oral argument, and as a rule a written brief giving the law applicable to the case, as he considered, with a reference to decisions of the courts. The proceedings before the board consisted of the examination and cross-examination of witnesses, including experts, and oral and written arguments, precisely as cases are tried in courts of law. From the decision of the Board of General Appraisers appeals were frequently taken to the federal courts, even to the Supreme Court of the United States, so that a final decision and actual refund were often delayed for years after the filing of the protest. The defendant was not admitted to the bar until after the termination of the partnership; but he attended to all the partnership cases before the Board of General Appraisers, consulted with clients and their brokers, prepared papers on appeal when necessary, and on such appeals prepared briefs. He did not appear as counsel or attorney of record in the federal courts, but did the work of preparation connected with the cases.
The partnership expired by limitation on April 30, 1902, and was not renewed or extended. At this time there were pending a considerable number of unfinished cases, in which protests had been filed during the lifetime of the partnership. A new agreement was then entered into between the firm of J. W. Masters & Co., composed of plaintiffs and one George W. Masters, and defendant, whereby it was agreed that said J. W. Masters & Co.-
" shall be entitled to 40 per centum of the net profits of the business of Frederick W. Brooks which shall be derived from protests filed during that period against the actions of officers of the customs."
The firm of J. W. Masters & Co. agreed to procure for defendant-
" all the business they can influence, both from the customers of their firm and from others as well."
At the same time defendant agreed to give to J. W. Masters personally, during the lifetime of this last agreement, 10 per cent. of his net [117 N.Y.S. 588] profits. This agreement lasted only until May 21, 1903, when it was terminated in accordance with its terms by a notice from defendant. The defendant removed to other offices from those which he had previously occupied and which had been contiguous to plaintiffs' offices. He continued to prosecute to a termination pending cases commenced by the filing of protests during the lifetime of the firm and during the continuance of the subsequent agreement, except a comparatively few cases, which plaintiffs prosecuted. Defendant continued to pursue the calling of a revenue attorney, accepting such cases as were brought to him, whether by those who had been clients of the partnership or by new clients, who had never had dealings with the partnership. Plaintiffs also sought and procured such cases as they could and prosecuted them.
There can be no doubt that the partnership between the plaintiffs and defendant came to an end on April 30, 1902. Not only do the articles of copartnership expressly so provide, but the subsequent agreement entered into between the parties is entirely inconsistent with any idea that the partnership was to be renewed or continued. That agreement was distinctly not a copartnership agreement, but was merely an agreement to pay plaintiffs' then firm a percentage of the net profits which defendant might earn in an individual business. The referee, however, has held the defendant liable to account to plaintiffs for all fees realized by him from the date of the expiration of the partnership to the date of his report, whether resulting from protests filed before or after the expiration of the partnership, and whether coming from those who were clients of the firm or those who never had any business relations with ...