Case Title: Meads v. Stott

Citation: 193 Or. 509, 239 P.2d 594

Docket Number: 

State: oregon

Court: Oregon Supreme Court

Date: 1951-12-05T00:00:00Z

Document:
Reversed with directions December 5, 1951.
Petition for rehearing denied January 9, 1952.
*511 U.S. Balentine, of Klamath Falls, argued the cause for appellant. With him on the brief was Mark Simons, of Klamath Falls.
*512 R.B. Maxwell argued the cause for respondent. On the brief were Farrens & Maxwell, and W.J. Moshofsky, all of Klamath Falls.
Before BRAND, Chief Justice, and HAY, ROSSMAN, LUSK and TOOZE, Justices.
REVERSED WITH DIRECTIONS.
TOOZE, J.
This is a suit by Frank R. Meads, as plaintiff, against Manning C. Stott, as defendant, for the dissolution of an alleged partnership and for an accounting.
Plaintiff, by his complaint, alleges that during the months of November and December, 1944, he and defendant entered into a copartnership agreement for the conduct of a general outdoor advertising business, to begin January 2, 1945; that said business was conducted under the assumed name of "United Outdoor Advertising Company"; that during the entire existence of the copartnership, all books, records, papers and other documents relating to the business were under defendant's exclusive custody and control; that defendant, over plaintiff's protest, had withdrawn large sums of money from the partnership account and credited the same to his own personal account; that plaintiff had demanded an accounting and permission to examine the books of the copartnership, which requests were denied by defendant. Plaintiff prays for a dissolution of the partnership, for an accounting, for the sale of the partnership assets, and, after liabilities are paid, for a division of the proceeds between the partners, and for the appointment of a receiver.
Defendant, by his answer, generally denies all the allegations of the complaint. Affirmatively, he pleads that the relationship between himself and plaintiff was *513 that of employer and employe, and that he terminated plaintiff's employment on February 10, 1950. By way of cross-complaint, defendant alleges that, since plaintiff's discharge from employment, he, the plaintiff, has continued to act as "an employee, or partner or other interested party in defendant's business being conducted as United Outdoor Advertising Company, and has interferred [sic] with the conduct of such business by defendant," to defendant's injury. Defendant prays for a restraining order against plaintiff. Plaintiff replied to defendant's affirmative defense and answered the cross-complaint, denying all allegations thereof inconsistent with or contradictory to the allegations of his complaint.
The trial court found that the relationship between plaintiff and defendant was that of employe and employer, and not of partnership; that plaintiff had been discharged from his employment, but had continued to claim an interest in the business as a partner, and had interfered with defendant in the conduct of such business, to defendant's injury. The court entered a decree dismissing plaintiff's complaint with prejudice and granting to defendant a restraining order as prayed for in his answer. Plaintiff appeals.
The problem presented to us for solution is largely a factual one. There is but little dispute between the parties regarding the principles of law that are applicable. The whole case necessarily turns upon a determination of the question whether plaintiff and defendant were partners in the conduct of the business in question. If they were, then the trial court erred in denying plaintiff the relief prayed for in his complaint.
1. At the outset, it should be stated that there is a sharp dispute in the testimony as to whether or not *514 the parties entered into a copartnership agreement. It ensues, therefore, that in considering the record before us, we have kept in mind the well-established rule that, where the facts are disputed, the final determination of the trial judge in reference thereto is entitled to great weight. In all such cases this court is reluctant to disturb the trial court's finding in the absence of a showing that there has been a manifest abuse of discretion.
Aside from the fact of the existence or nonexistence of a partnership relation, there is little dispute in the evidence regarding the acts and conduct of the parties.
Plaintiff and defendant first became acquainted in 1935 or 1936, when both were employed by the Electric Products Company in Portland. About 1940, defendant opened an outdoor advertising business at Klamath Falls. He also engaged in photographic work, maintaining studios at Klamath Falls and Medford. During the war the outdoor advertising business did not prove successful, and in early 1945 its monthly income did not exceed $70. For approximately six months prior to January, 1945, plaintiff was employed by the Foster & Kleiser company at Medford. During 1944 plaintiff and defendant frequently visited each other, both in Medford and Klamath Falls.
As will hereafter be pointed out in more detail by quoting the testimony of plaintiff and defendant, plaintiff claimed that in November and December, 1944, he and defendant entered into an oral agreement of partnership for the conduct of the outdoor advertising business at Klamath Falls, each partner to own an undivided one-half interest therein. Defendant, to the contrary, contends that no partnership agreement ever was entered into. He maintains that what plaintiff insists constituted an agreement between the *515 parties was, in truth, merely a continuing offer to buy into the business, which he made to plaintiff, an offer which he asserts was never accepted by plaintiff. Defendant testified that he kept this offer open for plaintiff's acceptance at any time from January 2, 1945, until it was withdrawn on or about November 1, 1949. Based upon this contention, it is defendant's position that at all times between January 2, 1945, and February 10, 1950, the relationship existing between himself and plaintiff was simply that of employer and employe.
The undisputed evidence in the record discloses the following facts:
Plaintiff terminated his employment with the Foster & Kleiser company at Medford in late December, 1944, and on or about January 2, 1945, went to Klamath Falls, where he immediately assumed the active management of the business of United Outdoor Advertising Company, which company is hereafter referred to as "United." Plaintiff moved his family to Klamath Falls in April, 1945.
Plaintiff continued to manage the business of United from January 2, 1945, until this litigation was commenced on February 9, 1950, and claimed the right to the management thereof after suit was commenced. Under plaintiff's management, the business proved to be a success. From a gross income of less than $70 per month on January 2, 1945, the operations of United showed substantial increases in gross income each year thereafter; for example, in 1946 the gross income was $9,936; in 1947 it was $17,608.72; in 1948, $20,834.69 was received.
During the entire period in which plaintiff was associated with United, the defendant kept the books, records, and other documents pertaining to the business *516 and handled all finances. At first, defendant received a nominal salary of $20 per month for these services. This later was increased. Initially, plaintiff, as manager, received a monthly salary of $250, which also was increased later.
During the year 1945 the business of United was carried upon the books of defendant's studio, known as Bell Studio. In January, 1946, separate books were opened for the United, and, thereafter, all records were kept and business was conducted in the name of such company. In January, 1946, defendant opened a bank account for United in the Klamath Falls branch of the United States National Bank of Portland (Oregon), with directions to the bank to honor no checks other than those bearing the signatures of both plaintiff and defendant; these signatures were filed with the bank at the same time. This account was continued until November 1, 1949. Over the years and in order to facilitate the handling of the financial affairs of United by defendant, it was the practice of plaintiff from time to time to sign his name to a number of blank checks for use by defendant. The record is conclusive that until trouble developed between plaintiff and defendant in the fall of 1949, plaintiff reposed the utmost faith and confidence in defendant.
On December 20, 1945, just before the set of books was opened for United, defendant caused to be filed in the public records of Klamath county a certificate of assumed name for United Outdoor Advertising Company, with plaintiff named therein as sole owner. Defendant explained that he filed this certificate in plaintiff's name only, because of some financial difficulties he was having with creditors of Bell Studio and to make certain that the business of United would not be held for Bell Studio debts; he said that he did *517 this not only for his own protection, but also for plaintiff's.
Partnership income tax returns were filed with both the state and federal governments, showing plaintiff and defendant to be partners in the business of United. All of these income tax returns, including individual returns of the parties, were prepared by one William J. Owsley, a public accountant, upon information furnished him by defendant. Defendant told Owsley that plaintiff was his partner in the business.
Many income tax withholding statements were prepared upon information furnished by defendant and filed with the treasury department of the United States pursuant to law, showing amounts withheld from wages of employes of United. In all these statements United is designated as a partnership composed of M.C. Stott and Frank Meads. In none of them does the name of Frank Meads appear as an employe.
Defendant prepared and delivered to plaintiff annual reports in writing, showing in detail receipts and disbursements of the business of United and, in general, its financial condition. On these reports appear the interest charges of defendant on monies loaned by him for the benefit of the company.
Upon innumerable occasions over the years both plaintiff and defendant introduced each other to strangers as partners. At no time or place did either ever deny the existence of a partnership after January 2, 1945. Defendant never informed plaintiff that he did not consider him a partner in the business until on or about November 1, 1949. It was on November 1, 1949, that defendant, making use of one of the blank checks signed by plaintiff, withdrew from the bank all the funds of United and redeposited the same in *518 his own account. This was over plaintiff's protest. At that time, as plaintiff testified, the defendant said, "Well, he told me if I thought I had any interest in this business I could go to court, and get me an attorney, and get it if I was big enough." Plaintiff also testified to a later conversation with defendant as follows: "In the month of January, at the usual time I would normally have received a financial statement, I asked Mr. Stott where my financial statement was. He told me I did not get any. * * * He said I had been an employe all during the period and that if I was not happy I could quit. I told him I was not quitting, and that was not the original agreement, and he said: `If you have any idea that it is anything otherwise you can secure for yourself the services of an attorney and get it if you can.'"
Plaintiff had no fixed time for reporting to work in the morning or for quitting at night. He worked long hours, sometimes, in excess of 14 hours in a single day. He also worked on some holidays. In fact, he came and went as he wished, being guided in that respect only by what he deemed to be the necessities of the business.
The record discloses other indicia of a partnership relation, but the foregoing statement is sufficient for the purposes of this opinion.
Defendant concedes that the acts and conduct of the parties were such that he could be and was bound to a partnership liability as to third persons, but he denies that the same established the existence of a partnership inter se.
As before observed, plaintiff claims that the partnership agreement upon which he acted grew out of a series of conferences between himself and defendant *519 during the months of November and December, 1944. As to the alleged agreement, plaintiff testified:
Defendant's version of the transaction appears from his testimony as follows:
It is noteworthy that there is only slight disagreement between the parties as to what should constitute the terms of a partnership agreement between them. It was no part of their oral understanding that a formal written contract should be entered into. This is a condition *526 that defendant later and alone imposed upon the transaction. At most, plaintiff simply requested that defendants offer be reduced to writing. It is reasonable to assume that plaintiff made such a request so that in the future, if a dispute arose, there would be some written memorandum respecting the matter. From an examination of the entire record we are satisfied that this requirement that defendant's written offer be signed by plaintiff before a partnership relationship would be deemed created was wholly an afterthought on the part of defendant. We shall later point out why we deem this conclusion completely justified.
Defendant's offer was accepted by plaintiff when, acting pursuant thereto, he went to Klamath Falls and assumed the active management of the business of United. Everything done thereafter by the parties is explainable only upon the theory that a partnership actually existed between them. Plaintiff fully and faithfully performed the oral agreement on his part to be performed. Defendant also performed in accordance with its terms.
We are not at all impressed with defendant's contention that no partnership existed because plaintiff never signed the typewritten memorandum that he prepared. Neither do we consider as satisfactory his attempted explanation of the innumerable acts of partnership to which we have heretofore directed attention. He testified that these acts were performed and continuously carried on because plaintiff had the right at any time to sign the memorandum, and, if signed, the agreement would be retroactive to January 2, 1945. Defendant testified that he expected plaintiff to sign, but admitted that over a period of nearly four years he never once suggested to plaintiff that he do so. If such a state of affairs as defendant testifies to had *527 existed for a few weeks or months only, his explanation might reasonably be accepted, but not as regards actions continuing without interruption over a duration of five years. The memorandum truly expressed the terms of the oral agreement between the parties, except for the disagreement about plaintiff's salary, the amount plaintiff was to pay for his one-half interest, and the rate of interest to be charged by defendant. However, plaintiff accepted the salary of $250 per month, and the amount he was to pay for his one-half interest out of the profits was set up on the books as $2,750, with interest at 7 per cent. Plaintiff knew of these modifications of the agreement as he related it, because annual statements were furnished to him by defendant. As before observed, during the entire period from January 2, 1945, to November 1, 1949, both parties performed in accordance with the terms of the written memorandum. True, some changes were agreed upon during the time in question, but all alterations were such as partners might reasonably be expected to agree upon to meet changed conditions.
2. Having operated under this memorandum for approximately five years without objection, accepting its benefits and obligations, both parties must be deemed to have acquiesced in and ratified it as a true expression of their actual agreement, and by their silence when it was their duty to speak if not satisfied, both are estopped now to take a position inconsistent with their conduct. Young v. Neill et al., 190 Or 161, 220 P2d 89, 225 P2d 66.
Defendant further testified:
We have emphasized a part of defendant's answer above, because, throughout his testimony and upon every possible occasion, he volunteered a similar statement. It is quite evident that he sought to impress the court by this unnecessary repetition. Paraphrasing the queen in Hamlet, "The witness protests too much, methinks."
The typewritten memorandum that defendant prepared at the request of plaintiff is in words and figures as follows:
The foregoing is written on a single sheet of lettersize paper. No provision is made at the bottom for date or signatures. This omission indicates quite clearly that the writing was intended simply as a memorandum of the oral agreement, and not as the basis for a formal written contract.
We now invite attention to some additional evidence in the record which has led us to conclude that the signing of this memorandum as a prerequisite to the formation of a partnership was an afterthought on the part of defendant. Before doing so, however, we wish to invite attention to the emphasized portion of defendant's testimony above relating to certain alleged delinquent personal accounts owed by plaintiff. This testimony was offered by defendant as a reason for plaintiff's demand that his salary be increased. We *531 believe this testimony also represents an afterthought of defendant.
It will be remembered that defendant opened and kept all books and records of United. Among the books of the company is the ledger. We first turn to a page of that ledger where the following entries appear:
We now turn to the next sheet of the ledger where we find the following:
Examining this sheet of the ledger carefully, we find that the statement "as per typed contract of Jan 1945" is written with darker ink than the other matters set forth immediately preceding. We also find that all that portion appearing under the heading of "Frank R. Meads" and referring to personal bills is written with the same dark ink. It is obvious that the statement "as per typed contract of Jan 1945" and the other matters written under the special heading "Frank R. Meads" were written at one and the same time.
This conclusion is further demonstrated as being correct by another sheet of the ledger which refers to defendant. There the following appears:
The above statement "as per typewritten agreement in vault of U S Nat Bk," together with all detailed items respecting credits, except that referring to 1948, were written with darker ink than the first statements appearing on that page, dark ink of the same type as that appearing in the Meads account as above pointed out. It is significant that no such changes in the use of ink appear upon any other of the large number of ledger entries relating to the personal accounts of the parties or to accounts of third persons.
It is manifest that defendant made the additional entries after difficulties arose between himself and plaintiff in the fall of 1949, and when litigation was imminent. There is no doubt that the first entries were made when the books were opened in January, 1946. It is evident defendant mistakenly thought that, in this manner, he was bolstering up his case. From this a well-warranted doubt naturally arises regarding the truth of all of defendant's contentions respecting questions of fact in dispute. When the ledger was admitted in evidence, the trial court's attention was not directed to these supplemental entries in the record. Neither was our attention called to them in the briefs nor upon the oral arguments of the parties. We are firmly of the opinion that, had the able trial judge been advised of this situation, his reaction thereto would *534 have been the same as ours. Where there is a sharp conflict in the testimony, as there is in this case, "a straw will show which way the wind blows."
In tinkering with the books as noted, defendant apparently has been caught in a trap of his own making. The statements which he added to the record, viz., "as per typed contract of Jan 1945" and "as per typewritten agreement in vault of U S Nat Bk," indicate that he considered the typewritten memorandum as constituting the contract of partnership between himself and plaintiff; it is an admission against interest on his part that there was such a contract; it is a practical construction which he himself placed on the writing; and, as before stated, the parties, throughout the years, acted pursuant to its terms. Defendant is estopped, therefore, to now question it. Young v. Neill et al., supra.
3. It is well established by the authorities that the existence of a partnership inter se depends on the intention of the parties. Powell v. Powell, 181 Or 675, 693, 184 P2d 373, Willis v. Crawford, 38 Or 522, 532, 63 P 985, 64 P 866, 53 LRA 904; 68 CJS, Partnership, 414, § 10.
4, 5. In determining the intent of the parties, a variety of facts and circumstances may and should be taken into consideration. There is no exclusive or arbitrary test or general rule which will determine the question of partnership in every case, and each depends on, and must be governed by, its own particular facts and surrounding circumstances. 68 CJS, Partnership, 432, § 20 a.
In 68 CJS, Partnership, 433, § 20 a. (1), it is stated:
See Flower v. Barnekoff, 20 Or 132, 25 P 370, 11 LRA 149.
6-9. The clear preponderance of the evidence in this case shows that plaintiff agreed to and did combine his labor, skill, and experience with the property and financial assistance of defendant to carry on the business of United as a partnership. True, plaintiff paid no money to defendant directly for the one-half interest in the property of the firm, but under their agreement he was not required to. This was to be paid out of the profits of the venture. Though nothing was said in the agreement about sharing the losses, nevertheless, that is implied. As was stated by this court in Lee v. Ellis, 121 Or. 259, 267, 253 P 873:
In his brief defendant makes the following contention:
Defendant, in support of his claims, invites attention to § 2-909, OCLA, which in part reads as follows:
Defendant did not affirmatively plead the statute of frauds as a defense, but irrespective of the question of pleading, this defense is not available to him under the facts and circumstances of this case.
10. Plaintiff contends that the case was taken out of the statute of frauds because of part performance on his part. In Young v. Neill et al., supra, at page 166, Mr. Justice LATOURETTE, speaking for this court, said:
*537 11. Where one party to an oral agreement performs acts pursuant to the terms thereof and directly referable thereto, such as materially changing his position to his disadvantage or otherwise doing something that he would not have done but for the agreement and which would result in substantial injury to himself if the other party were permitted to hide behind the statute of frauds and disavow the same, and when the other party has received and enjoyed the benefits of the oral contract, equity will prevent the other party from setting up the statute as a defense.
As stated in Young v. Neill, supra, at page 179:
In 49 Am Jur, Statute of Frauds, 885, § 579, the following is stated:
*538 In 49 Am Jur, Statute of Frauds, 734, § 428, it is said:
See Howland v. Iron Fireman Mfg. Co., 188 Or 230, 213 P2d 177, 215 P2d 380; Tiggelbeck v. Russell et al., 187 Or 554, 213 P2d 156; Hunter v. Allen, 174 Or 261, 147 P2d 213, 148 P2d 936.
12. In this case everything done by the parties was directly referable to and induced by the agreement relied upon and proved. Plaintiff gave up his position with Foster & Kleiser in order to perform his part of the contract; for nearly five years he continuously performed all things required of him by the agreement. When he assumed his duties as manager of the business, he took actual possession of the personal property of United, an undivided one-half interest of which belonged to him, payment therefor only being deferred until it could be made out of the profits according to the agreement. Over the years he performed services far and beyond those usually performed by an ordinary employe or hired manager, and such as could be expected only of one having a financial interest in the enterprise. Under his management the income grew from almost nothing to a considerable sum; the inventoried value of the property was substantially increased by the addition of new equipment. As previously noted, all the acts of defendant were also *539 directly referable to and grew out of the contract. Defendant received and enjoyed the benefits of plaintiff's services, the increase in the property of the company, and its income.
To permit defendant to repudiate this agreement would result in gross injustice to plaintiff and be wholly inequitable and unconscionable. He is estopped to now take a position inconsistent with his acts and conduct.
The decree is reversed and this cause remanded with directions to enter a decree dissolving the partnership and winding up its affairs pursuant to the provisions of §§ 79-601 to 79-615, inclusive, OCLA.
Plaintiff is entitled to costs.
U.S. Balentine and Mark Simons, of Klamath Falls, attorneys for appellant.
Farrens & Maxwell, and W.J. Moshofsky, of Klamath Falls, for the petition.
Before BRAND, Chief Justice, and HAY, ROSSMAN, LUSK and TOOZE, Justices.
PETITION DENIED.
TOOZE, J.
Defendant has filed a petition for rehearing based upon several grounds, all of which are directed to alleged error on the part of this court in its determination of the facts. As typical of the grounds assigned for a rehearing, we quote assignment numbered I, reading as follows:
In our opinion, page 513, we said:
13. Defendant's contention is based upon the use of the words "a manifest abuse of discretion." He ignores the real gist of the opinion in the respects under discussion; viz., that the findings of the trial judge upon the facts in an equity proceeding are entitled to great weight. He also ignores the statement that this court "is reluctant" to override such determination. Being reluctant to do a thing in no sense means that this court will not do it in a proper case.
*541 14. This is a suit in equity, and it is tried de novo in this court. We have a responsibility to consider and weigh all facts in the case and to arrive at our own independent conclusion as to wherein lies the truth. Though the initial determination by the trial judge is entitled to great weight, largely because he has the advantage of observing the conduct and demeanor of the witnesses, whereas we are necessarily confined to a study of the cold, printed record, nevertheless, we are not bound by his findings, and the rule mentioned is one of expediency only.
We concede, however, that the use of the phrase, "a manifest abuse of discretion" is perhaps ill-advised, because, as is clearly apparent from the grounds urged upon us for a rehearing, it may lead to misunderstanding and confusion. No question of "abuse of discretion," as that term generally is interpreted by the profession, is involved. We certainly did not wish to be understood as using the word "discretion" in the broad sense of the term "judicial discretion." In fact, we did not, nor do we, intend to convey the idea that the findings of fact of the trial judge in an equity suit are entitled to more than great weight.
15. Defendant complains that this court erred in attaching some importance to apparent supplemental entries made in the ledger kept by him, because the attention of the trial judge had not been called to them. He overlooks the fact that this ledger was duly admitted in evidence and was a part of the record that not only we, but also the trial judge, were called upon to consider. Defendant kept this ledger and is presumed to know its contents. If he desired to explain any entries made therein, he had an opportunity to do so while on the witness stand. The tinkering with the books to which we invited attention is perfectly obvious. The *542 dates set forth respecting the items of charge under the special heading "Frank Meads" indicate quite clearly when the entries were made. Meads v. Stott. However, it should not be assumed that this matter alone led to our ultimate conclusions; in fact, it was among the less important considerations.
In reviewing the facts of this case, we gave careful attention to the entire record. We see no reason for changing our ultimate conclusions. The petition for rehearing is denied.