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Pusey v. Lynch

Court of Chancery of Delaware, Sussex County

October 27, 1953

PUSEY et al.
v.
LYNCH.

Action for an accounting in connection with a timber cutting operation. The Court of Chancery held that evidence established that under oral agreement whereunder defendant paid for purchase of land and standing timber which plaintiffs agreed to cut at fixed rate and use excess money to reimburse defendant with net profits thereafter to be evenly divided, both parties owned land and timber subject to defendant's priority as to reimbursement, and plaintiffs by discontinuing cutting before all timber was cut did not forfeit property interest in timber, and were entitled to one half of difference between price paid and net price received when defendant sold remaining standing timber, less costs occasioned by abandonment, plus an undivided one half interest in realty.

Order in accordance with opinion.

Robert W. Tunnell (of Tunnell & Tunnell), Georgetown, for plaintiffs.

Frederick P. Whitney, Georgetown, for defendant.

SEITZ, Chancellor.

Plaintiffs seek an accounting from defendant in connection with a certain timber cutting operation in Sussex County, Delaware.

[34 Del.Ch. 156] A chronological narration of the dealings between the parties will help to point up the issues in this most interesting and difficult case.

In the fall of 1949 the defendant paid for a certain tract of standing timber. He and plaintiffs[1] (reference to ‘ plaintiff’ will mean Clifford Pusey) entered into the following oral arrangement with respect to that tract: plaintiffs would cut the timber and remove it for sale to the Long Lumber Company which would pay plaintiffs therefor. Plaintiffs would first take $30 per thousand board feet from these

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payments to cover their expenses in connection with the cutting and removal. Plaintiffs would pay the balance to defendant until defendant was fully reimbused for the money paid by him for the standing timber. Thereafter the profits over and above the cutting charges would be divided evenly between plaintiffs and defendant. I need not resolve the conflict in the testimony as to whether plaintiffs agreed to share losses because both sides now agree that the transaction involved was a joint adventure and no question of loss is otherwise involved.

Over a period from 1949 until some time in 1952 the plaintiffs and defendant entered into six such agreements, the only difference being that the cutting charge per thousand board feet was constantly increasing due to the increase in labor charges and insurance rates. In none of these six cases was the land itself purchased.

Part of the cutting charge made by plaintiffs was used to pay their own small salaries as well as the wages of the other help. However, it is fair to say that plaintiffs' real profit came from the division of the proceeds after paying all expenses and reimbursing defendant for the purchase price of the timber. Plaintiffs supplied all the tractors, trucks and sawmill to do these various jobs. They collected all the money from the Long Lumber Company, kept the accounts and made payments and distributions from time to time. The only thing defendant did was advance the purchase price.

[34 Del.Ch. 157] Plaintiffs and defendant completed the work in connection with the six tracts of timber without any difficulty and reference to these prior transactions is made in order to understand the controversy here involved which surrounds the seventh transaction-the so-called ‘ Hitch Tract’.

Some time in 1951 one of the plaintiffs ‘ discovered’ a tract of timber for sale known as the Hitch Tract, covering well over 200 acres. Defendant testified that ‘ he’ bought the land and timber. Plaintiff says ‘ they’ bought it. Defendant was out of town when action to seal the purchase became a matter of necessity and plaintiffs gave a down payment to bind the purchase. Thereafter defendant paid the $15,000 purchase price and the deed was made out in his name alone.

Plaintiffs and defendant made the same arrangement, financial and otherwise, with respect to the Hitch Tract as had been made on the previous tracts, except that plaintiffs and defendant agreed that the cutting charge for the Hitch Tract would be $37.50 per thousand board feet. It was also ...


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