Account begins, Ridgely’s Notebook I, 181
Court of Chancery of Delaware, New Castle County.
1816-1829
Bill in equity, filed in Court of Chancery, New Castle, March 16, 1816. The bill states that on April 21, 1801, Articles of Association for the establishment of a gun powder plant in the United States were executed in Paris by Bauduy, Du Pont and others. These Articles were written in French and are translated by the plaintiff in his complaint. According to the agreement Bauduy subscribed to four shares of stock in the company; fourteen other shares being subscribed for by other individuals including the Du Ponts. Article 11 stated, “The director of the factory shall keep his accounts in the same manner as are kept in France the accounts of the Administration of Powder and Saltpetre.” Article 17 provided for arbitration in the event of dispute over the renewal of the stock subscription.[1] On August 25, 1802, at Wilmington, Bauduy and Du Pont executed an agreement, pursuant to the terms of Article 12 of the original agreement, whereby Bauduy was to assume the status of a partner. By this agreement Bauduy was to receive three shares of profit out of a total of thirty. In addition he was to receive “a commission of 2½% on the proceeds of sale of the powder manufactured by the said manufactory,” and all travelling expenses were to be assumed by the company.
In the present bill in equity, Bauduy alleges that there was gross mismanagement of the affairs of the company, and that as a result two partners resigned in 1802. When additional capital was required in 1805, after a dispute over the sharing of profits, Bauduy invested further and was to receive an increased share of the profits under an agreement executed on July 1, 1805, at New York, which also purported to clarify the terms of the agreement of 1802. Bauduy asserts that while other partners were in Europe enjoying the fruits of his work, he was risking his life in the powder factory “without a proper indemnity.” The partnership expired in 1809 by a term of the original agreement, and Bauduy admits that on December 31,
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1809, at Wilmington he executed an agreement continuing the partnership until 1819. He alleges that even though he remained a partner after 1809, he was in that year aware of specific acts of mismanagement viz:
(a) The private accounts of the superintendent (E. I. du Pont) were mingled and kept with those of the company.
(b) Unnecessary buildings were erected.
(c) Workmen were “improperly employed.”
(d) The books were kept irregularly, and were “unintelligible to one not skilled in the secret mode of keeper.”
Bauduy anticipates the answer, and states that he continued in partnership after these acts of mismanagement had become known to him because “a great proportion of the profits had been invested in real estate and permanent improvements which were valued at a low rate, and if concern closed at that time would have been sacrificed.”
The War of 1812 brought a boom to the powder business. New capital was added, and mills and powder plants were built hurriedly. With this growth, arose a personal feud between Bauduy and the Du Ponts, after E. I. du Pont had brought a son-in-law into the firm. The relationship became intolerable and Bauduy withdrew from the firm after agreeing to certain terms, under a memorandum executed February 15, 1815. In return for his interest in the company, Bauduy was to receive “the sum of $60,000 in addition to his commission of 2½% on sales which is to be credited to him up to January 1, 1815.” The firm was also to pay Bauduy “$15,000 yearly, for four years, the first payment to be made on January 1, 1816, and the last on January 1, 1819, but said payments to cease in case said manufactories or either of them be burned, or destroyed by the enemy in the course of the four years above mentioned.”
Bauduy alleges that the books were withheld from him, and that the balance finally issued was incorrect. He further alleges that the defendants defaulted upon their $15,000 payment due January 1, 1816. He contends specifically that the commission was to be computed from gross proceeds not from net proceeds. Bauduy therefore makes a prayer for discovery, which asks for an order compelling the defendants to produce all books, entries and other relevant data for Bauduy’s examination; and further that defendants explain how the profits and commissions were determined and disposed of.
In their answer, the defendants deny all allegations of Bauduy as to fraud and the withholding of the records. Defendants state they were ready and willing at all times to produce the books and records, and would now bring them into court. Defendants further specifically deny all allegations of mismanagement, waste, and extravagance. Further, defendants assert that the accounts were kept by Bauduy himself who had complete control over them. Defendants
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admit that they kept their personal and business accounts together, but assert that this in no way amounted to fraud or mismanagement. Defendants point out that Bauduy stayed with the firm after acts of alleged mismanagement had occurred, by renewing his agreement on December 31, 1809. Appended to the answer are detailed accounts wherein each building, item and expense is clearly indicated. Also appended is a copy of correspondence between Bauduy and the Du Ponts, translated from French into English for the Court.
Complainant’s (Bauduy’s) counsel then attacks several of the entries in the accounts as being incomplete and erroneous, and alleges that the commission was not computed on the agreed basis. Defendants take issue upon all these allegations, and contest the complainant’s statement that the agreement was mistranslated from the French.
THE CHANCELLOR
interposes that there was never any settlement among all the members of the partnership. He states that “even on January 1, 1810, there was no such liquidation of the accounts of each individual member, as to reduce to certainty the true state of their interests”; he finds that the annual inventory and valuation required by the sixth article of the original agreement was never made before December 31, 1809. He finds that there was no ascertainment of profits between December, 1810, and December, 1813; hence there was no way in which the parties could have determined how much was owed to Bauduy. Therefore THE CHANCELLOR c defendants’ pleas.
Petition by Bauduy, April 14, 1818, to have a deed of conveyance from him to Du Pont brought into court. Bauduy alleges that the conveyance was never recorded, and that hence if Du Pont should die, Bauduy would be compelled to file a bill in Chancery. Du Pont argues that he gave valuable consideration for the paper, that it is his property, and that there is no special reason for bringing this paper into this court. THE CHANCELLOR refuses Bauduy’s petition.
A review of the schedules and accounts follows, August 31, 1818. Depositions of several witnesses are inserted in the record. Complainant’s (Bauduy’s) counsel objects to one witness, a Mr. Duplanty, on the ground that he is an interested party, having become bookkeeper of the firm in 1810, immediately following Bauduy in that position. THE CHANCELLOR rules that Duplanty has no such interest as to disqualify him.
Thereafter the complainant (Bauduy) notes exceptions to the accounts filed by the defendant.
THE CHANCELLOR states that the plaintiff cannot make these exceptions, because his complaint in no way alleged the claim that he now argues was wrongfully left out of the accounts; he further limits plaintiff to his allegations in reference to the profits
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from the manufacture of gun powder, and excludes consideration of profits from manufacture of other material. The exceptions as to the method of computation of commissions are retracted by the plaintiff. Then follows argument upon the validity of the method of computation.
THE CHANCELLOR rules, April 14, 1819, that the question of commission is governed exclusively by the wording of the agreement. He construes the “2½%” provision to mean that plaintiff was to get 2½% on gross sales and not on net proceeds. His basis is the general language of the agreement which indicated that gross sales were to be used.
Then counsel for defendants argues that in some transactions involving the United States government, the company was supplied with the materials by the United States government; and hence that these items should not be included in computation of the commissions for Bauduy. THE CHANCELLOR, rules that according to the spirit of the agreement Bauduy should be allowed “commissions for work in which the purchase of materials does not enter,” and that “the equity of the case will be to allow as for materials not purchased by the company.”
THE CHANCELLOR rules on all the exceptions separately.
An appeal is prayed but is not prosecuted.
The case is continued by consent April 18, 1820 after both parties have filed their exceptions. Complainant excepts to all the rulings of THE CHANCELLOR, which, he argues, are not in conformity with standard accounting and legal principles. Then, August 29, 1821, follows argument again on the proper method of computation, with further rulings of THE CHANCELLOR.