Case ID: ohio-st_44/html/0069-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Johnson, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Davis v. Gelhaus.
    
      Partnership — Conversion of township funds by partner — Liability of firm — Accounting between partners.
    
    Davis and Gelhaus were partners in business for a series of years. Durii the same time Davis was township treasurer, and was in the receipt of the public funds of the township. With the knowledge, consent and approval of Gelhaus, Davis deposited the greater portion of these funds in bank, to the firm’s credit, in common with the private funds of the partnership, and from time to time debts of the firm, as well as debts due upon orders drawn on the treasury, were indiscriminately paid by the firm’s check on this deposit. In 18T9 the partnership was dissolved, and by mutual consent Davis purchased the stock of goods on hand, and took the notes and accounts receivable to be collected, and out of assets arising from such purchase, and out of collections, he was to pay all partnership liabilities. In a schedule of such liabilities there was over $6,000 due the township which Davis paid before the hearing in the court below. The books of the firm showed that no attempt was made to treat this deposit of public moneys otherwise than as partnership moneys, and they were used as a common fund, subject only to partnership check. Held:
    
    1. That such deposit and use of the public moneys by Davis, as treasurer, was in violation of section 15 of “ an act to establish the independent treasury of the State of Ohio” (2 S. & C. 1606), it being a conversion of the public moneys to the use of the partnership of which he was a member.
    2. That Gelhaus having, with full knowledge, consented and approved of this mode of doing business, and having participated in such acts, is, in law, alike guilty with Davis in such unlawful conversion of public money.
    3. That the partnership was liable to the public authorities for the money thus converted.
    That they areparliceps criminis in this transaction, and the law will aid neither as against the other, but will leave them where it finds them. Neither is entitled to relief as against the other, by contribution or otherwise. Upon a dissolution of the partnership, under an agreement that Davis should take all the assets and pay all the partnership liabilities, and account to Gelhaus for one-half the surplus, he paid this liability to the township partly out of partnership assets and partly out of his own individual means which he advanced, leaving a large balance in his favor, the assets being insufficient for that purpose. This consummated the illegal transaction, and he has no right of contribution from V Gelhaus for the money so advanced.
    5. That Gelhaus being liable as a partner to the township for the illegal conversion of the money, and having parted with all his interest in the partnership by the contract of dissolution, reserving only a right to one-half the surplus, is not entitled to an account which rejects the payments made by Davis. The law leaves him where it finds him, with the right only to an account for surplus remaining after crediting Davis with amounts paid on this illegal transaction.
    Error to the District Court of Hardin county.
    August 5, 1880, Gelhaus, who was plaintiff below, filed a petition, stating that about May 1, 1865, he and Davis entered into a partnership and engaged in the grocery business during such period as they might thereafter agree on, and so continued by mutual consent as such partners until February 9, 1880, when, by like consent, said firm was dissolved. Davis was to take the stock then on hand, collect the assets due the firm, and pay its debts, and from time to time render accounts of his proceedings, and on final adjustment should pay over to Gelhaus one-half (they being equal partners) of what was left after satisfying all partnership liabilities.
    In pursuance of this agreement Davis became the sole owner of the stock then on hand as per invoice, together with all other assets, for the purpose of winding up the partnership. He charges that no statements have ever been made, either before or since the dissolution, of the condition of the firm, and that Davis refuses to make a settlement with him of said partnership business Also that the business during fifteen years was largely profitable. He prays that an account bo taken, and that on final hearing Davis bo compelled to pay over to the plaintiff whatever may be found due him.
    On September 29, 1880, Davis answered, denying that the business had been largely profitable, and denying that ho had refused to render statements to his co-partner.
    He sets out the agreement of dissolution by which he was to take the stock on hand at the invoice, the notes and accounts due, and convert the same into money and pay off the partnership liabilities as far as they would go.
    He attaches several exhibits, showing the condition of things at the time of the dissolution, and also notes and accounts collected on firm account, and the liabilities of the firm paid since February 9,1880.
    Among these is Exhibit “0,” which he avers contains a true statement of the liabilities of the firm at the date of dissolution, amounting to $9,830.24; of this amount $6,-893.22 are alleged to be liabilities of the firm as public moneys belonging to Pleasant township, Hardin county.
    Between the time of dissolution, February 9th, Davis had paid of these public moneys sufficient to leave a balanee of $5,424.70 at the date of filing his answer, to wit, September 29, 1880. G-elhaus died October 4,-1880, and Curtis Wilkin was appointed his administrator, and on the 6th of January, 1881, filed a reply stating that he has no knowledge of the matter set up in the answer, and therefore denies each allegation thereof, except as to the existence of the firm and the agreement for dissolution. He repeats the prayer for an account and for other and further relief.
    The case was then referred to a master to hear the evidence and to report his findings of law and fact to the court. The real and only matter in controversy, as shown by the proceedings, is as to whether the debt due Pleasant township was a partnership liability or the individual liability of Davis. At the time the case was heard in the common pleas, Davis had paid all liabilities, amounting to $9,709.30, which included the amount due to the treasurer of Pleasant township. The common pleas found that this liability to Pleasant township was a partnership liability, and that its payment by Davis came within the terms of the agreement of dissolution, which authorized him to pay all partnership liabilities of the firm, and that, as such liability had been paid by him, he was entitled to a credit therefor the same as for any other liability of the firm.
    Wilkin, as administrator, took an appeal to the district court, where the judgment of the common pleas was reversed, holding that as to these public moneys owing to Pleasant township, they were not partnership liabilities, and the court refused to give him credit for the amount paid in satisfaction of them after dissolution, and struck from his credits numerous orders paid on account of the firm before his answer, and refused to allow him credit for the residue owiug to the township, which he had paid before the hearing in the common pleas.
    As to the amount of “firm liabilities as set out in second defense of answer of defendant, $5,424.70, alleged to be due the defendant as treasurer of Pleasant township of said county, the court do find that during the entire period of said partnership, Archibald M. Davis was the treasurer of Pleasant township, in said couutjr, and of the incorporated village of Kenton, during the greater part of said time. That during said partnership, and from September, 1865, to the dissolution thereof in 1880, said Archibald M. Davis, as treasurer as aforesaid, did receive of said public money the sum of $171,178.56, and during said period did disburse thereof $164,752.57, leaving a balance due said corporation and township, at the date of dissolution of said firm, of $6,415.99.
    “ That from February 17, 1869, to the dissolution of said firm in 1880, said Archibald M. Davis did deposit of said public moneys received as aforesaid, in bank, to the credit of the firm of Davis & Gelhaus, the sum of $155,285.05. That no separate accouut was kept in bank of the public moneys so deposited, but the same was carried into and made a part of the bank account of the firm of Davis & Gelhaus. That it was the custom of the said Archibald M. Davis to pay corporation and township orders, the amount not being shown by the evidence, from the money he drew and received as aforesaid; and, after such payment, to deposit the balance remaining in bank to the credit of Davis & Gelhaus.
    “ That no partnership account was kept with Archibald M. Davis showing the amount of moneys which the firm received from the said Archibald M. Davis as treasurer, except as the same appeared in the hank pass-books.
    “ That August Gelhaus knew that said Archibald M. Davis was depositing the public moneys aforesaid to the credit of the firm of Davis & Gelhaus in bank, and made no objection to the same, but on the contrary was a party to and approved the same.
    “ That, at the time of the dissolution of said firm, state, ments were made of the liabilities of said firm of Davis & Gelhaus, and said statements contained, among other liabilities, the balance due from Archibald M. Davis as treasurer as aforesaid, to said corporation and township at date of the dissolution of said firm, Exhibit ‘ 0/ in defendant’s answer, being a copy thereof; and that said statements were furnished to each of the members of said firm, and no objection made thereto until the bringing of this suit. That at the dissolution of said firm there was a balance in bank to the credit of said firm (being the bank where said public moneys were deposited as aforesaid) of $760.08, all except said sum being checked out.
    “That the proof fails to show what was done with said sum of $155,285.05 of public moneys so deposited as aforesaid, except that the same, as well as all firm deposits, had been checked out of bank (except said balance of $760.08) at the date of the dissolution of said firm. That the conclusion from the foregoing is, that in the absence of proof as to what was done with the said $155,285.05 of public moneys deposited as aforesaid, that the said Archibald M. Davis, as treasurer as aforesaid, performed his duty, and paid the same out according to law; and that no part of the said, moneys were used by said firm, and that no firm liability has been established as to said public moneys above specified.
    “That since the commencement of this action the said defendant, Archibald M. Davis, has paid the amount due said township of Pleasant, and said incorporated village of Kenton. And thereupon came the said defendant, Archibald M. Davis, and excepted to the findings of the court and filed his motion herein to set aside said findings and grant a new trial herein; and the court, having heard said motion for a new trial, do overrule the same, to which ruling the said defendant then and there excepted.”
    Judgment was accordingly rendered against Davis for the amount of public moneys so paid by him, on the theory that this liability to the township was not a partnership liability, and that he alone was liable to the township, etc.
    
      John McCauley, Henry W. Seney, and George E. Seney, for plaintiff in error.
    
      A. Blackford, and Stillings ft Allen, for defendant in error.
   Johnson, J.

The sole question in the case is, whether, upon the facts found by the district court, Davis was entitled to credit for the payment in full of the amount of public money which the firm books showed was then due the corporation and township, to wit, $6,415.99, or whether that amount so paid should be eliminated from the partnership liabilities. It is found that from February 17,1869, said Davis, as treasurer, did deposit said public moneys in bank, to the credit of the firm, the sum of $155,285.05; that no separate account was kept in bank or by the firm of the public moneys so deposited, and that no partnership account was kept with Davis as treasurer of the amount, which the firm received from him as treasurer, except as the same appeared in the bank pass-books. It is a significant fact, found by the court, that while Davis was depositing these public moneys to the credit of the firm, Gelhaus made no objection to such deposit, but on the contrary, was a party to and approved the same. This made both members of the firm personally liable in the transaction. The public moneys so deposited, as well as the partnership moneys, were by the act of the parties mixed together and the findings show that the bank account of the firm was subject to check to pay private or public demands. It is further found that, at the time of dissolution, a statement was made of firm liabilities which, among other liabilities, showed the balance which the firm owed to Davis as treasurer at the date of such dissolution, and that such statement, of which Exhibit “C” is a copy, was furnished to Gelhaus, who made no objections thereto until the bringing of this suit. I may add that, in the petition filed in this ease, no objection was made to the assets of the firm being used to satisfy the demands due the township and corporation, nor does it appear that any objection was ever made, to this mode of doing business, but that it was approved by Gelhaus. Both parties concurred in depositing the public moneys in bank to the credit of the firm.

It was thereby converted to its use. It was mixed with deposits of the firm. It was subject only to check in the firm name. In all respects it was treated by the parties as partnership moneys, out of which the partnership paid orders drawn upon Davis as treasurer. This credit to the firm on the books of the bank, became the common credit of the firm and the township. All this was with the knowledge, consent and approval of Gelhaus. The presumption held by the district court to exist, that no part of said funds were used by the firm, and that no firm liability existed, is at variance with the facts found, and the law of the case. These facts made the partnership liable to the township for money had and received.

This was a loan by the treasurer to his firm, approved bj^ Gelhaus.

It does not appear that Davis was using these moneys for his individual gain, but with the consent of his co-partner they were loaned to the firm. For- a long series of years these moneys had thus been at the disposal of the firm. Davis received no credit for them on the partnership books. Gelhaus seems to have regarded these public moneys as partnership liabilities, during the many years they were so deposited to the credit of the firm. He certainly so regarded them at the time of dissolution. He stipulated that Davis should take all the assets and pay all the partnership liabilities. At the same time he received a copy of the schedule of such liabilities, which included the amount due the corporation and township.

That each of these partners were equally guilty in the eye of the law for embezzling the public money is clear. See section 15 of an act, “ To establish the independent treasury of the State of Ohio” (2 S. & C, 1610).

This section, which was in force at the time of this transaction, provides; “that if any officer or othei person, charged with the collection ... or disbursement of the public money . . . belongingto the state, orto any county or toionship, or organized city or village in this state, shall convert to his own use, or to the use of any other person or persons ... or party whatever, in any way whatever, or shall use by way of investment . . . or in any other manner or form whatever, or shall loan, with or without interest to any company ... or individual . . . any portion of the public money ... or in any other way or manner, or for any other purpose; or if any person shall advise, aid, or in any. manner participate in such act, every such act shall be deemed and held in law tó be an embezzlement of so much of the said moneys or other property, as aforesaid, as shall be thus converted, used, invested, loaned, deposited or paid out as aforesaid; which is hereby declared to be a high crime and misdemeanor, ’’etc.

The penalty upon conviction, subjects the person or persons to imprisonment in the penitentiary from one to twenty-one years, and to a fine equal to double the amount of money so embezzled, for the benefit of the parties in interest.

In view of the stringent provisions of this section, and of the facts found by the court, Gelhaus was guilty of advising, aiding and participating in converting to partnership uses the public moneys belonging to the township, and therefore was a particeps criminis, equally guilty with Davis and equally benefited by the transaction. Brown v. The State, 18 Ohio St. 496; Commissioners v. Bank of Findley, 32 Ohio St. 194. This section applies to township treasurers, as well as to other public officers. State v. Morton, 21 Ohio St. 669. We are thus led up to the question, what were the rights of these parties in this transaction (each being guilty of embezzlement), as against each other? At the time of the trial in the common pleas, the public demand for the money had been satisfied by Davis paying the same. It thus became a consummated transaction.

If Davis were individually liable to the public for such repayment, and Gelhaus was not, then he could not recover from the latter, for there is no contribution among wrongdoers ; so, if as a partner, he paid the money out of his own means, no contribution could be had for a like reason. The same is true of Gelhaus, each being guilty of a high crime or misdemeanor, no contract obligations between them are enforcible at law. The law leaves them where it finds them. Where does it find them in this case?

For a series of years these specific public moneys were mingled with the partnership moneys, by deposit to the credit of the firm in bank, subject only to a partnership check, with the mutual consent of both partners. Out of this deposit both the firm liabilities and the public liabilities were paid indiscriminately. When they dissolved, in 1879, Gelhaus put into the possession of Davis all the assets of the partnership, the latter bought the stock of goods at an invoice price, he took the notes and- accounts due with sole authority to collect them, and out of the money so collected, and the amount to be paid for the stock of goods, he was to pay off all the partnership liabilities, and divide the surplus equally with Gelhaus. Upon the facts in this case, there was no surplus. Davis paid off all the liabilities including the amount due the township and corporation. To do this he advanced of his own moneys some $5,600, the assets being insufficient. lie now claims contribution from Gelhaus for one-half the money so advanced. If the conversion of this money had not been in violation of the law, he would be entitled to such contribution. But as it is, he is not so entitled. The law leaves him where it finds him. For a like reason Gelhaus is not entitled to the relief he asks.- He was personally liable, jointly with Davis, to the township and corporation to restore to them the money jointly converted to their own use. He recognized this as a partnership liability during the series of years they were partners, by allowing it to be deposited in the firm name in bank, and by allowing it to be drawn on from time to time to pay orders on his co-partner as treasurer. At the time of dissolution, it was stipulated that Davis should pay all partnership liabilities, and he then received a schedule of the same, the greater part of which embraced these public moneys owing to the township and corporation. The law will leave him where it finds him. He had delivered all the assets to Davis. The stock of goods Davis owned absolutely by purchase, the notes and accounts due, he had possession of by agreement of the parties. All that he was liable to Gelhaus for, was one-half of the surplus, after paying partnership liabilities. As there was no surplus, there is no liability of Davis. Gelhaus can not be relieved from the payment of his share of this liability to the public which Davis had actually paid out of the fii’m assets. If there had been a surplus, his right to one-half is clear, but as there was none, the law leaves him where it finds him, as well as it does Davis. It finds the illegal transaction consummated, and neither party can disturb it. It finds Davis to have advanced money to discharge the partnership obligations to the township and corporation, and a large amount of worthless assets in his possession. It will leave him there.

Therefore, the court of common pleas was in error in allowing Davis contribution from his co-partner. It finds Gelhaus with no right to question what has been done under this illegal transaction. Davis, in paying off his public liability, has consummated the illegal transaction, and Gelhaus can not obtain affirmative relief by now repudiating the arrangement on his part. The district court, therefore, erred in opening up this consummated illegal transaction by throwing out of the credits in favor of Davis the amount he paid to discharge this partnership liability, and in dividing the uncollected assets in specie. These assets were entrusted to him by contract, to be collected and accounted for. It does not appear that he has violated that trust. If, hereafter, enough is collected to reimburse him, and leave a surplus, he is liable to his copartner for his share thereof. Our conclusion is, that upon the present state of facts, neither partner lias a right to recover of the other any money judgment. And that Davis is entitled to these uncollected assets to be accounted for under their contract of dissolution, counting the payment by him of the balance due for money advanced to pay the public as a partnership liability for the purpose of ascertaining if there is a surplus to be divided. 1 Colyer on Partn., §§ 56 to 65, and notes.

Judgment reversed and cause remanded.