Case Title: Roberts v. Mariner

Citation: 195 Or. 311, 245 P.2d 927

Docket Number: 

State: oregon

Court: Oregon Supreme Court

Date: 1952-06-18T00:00:00Z

Document:
Reversed and remanded June 18, 1952.
*312 Thomas H. Tongue, III, argued the cause for appellant. On the brief were Hicks, Davis & Tongue, of Portland, and Thomas Morris, of Corvallis.
Orval N. Thompson argued the cause for respondent. On the brief were Weatherford & Thompson, of Albany.
*313 Before BRAND, Chief Justice, and ROSSMAN, LATOURETTE, WARNER and TOOZE, Justices.
REVERSED.
TOOZE, J.
This is a suit for the dissolution of a partnership and for an accounting, brought by Harold L. Roberts, as plaintiff, against Claude E. Mariner, as defendant. On January 12, 1951, the trial court entered a decree effecting an accounting between the parties and dissolving the partnership. Defendant appeals.
Plaintiff, a resident of Corvallis, in Benton county, Oregon, since 1943, opened a real estate and insurance business in Corvallis in 1945, and thereafter continued in such business. His office was in rented premises, and he owned miscellaneous office furniture and equipment suitable to his occupation. At the time of the trial of this suit, defendant had been a continuous resident of the city of Corvallis for 11 years. Prior to December, 1948, he had been engaged in business in Corvallis as a salesman of refrigeration equipment and products. On December 1, 1948, plaintiff and defendant entered into a written agreement of partnership as follows:
Thereafter, the parties engaged as partners in the real estate and insurance business. For several months, both devoted their time and energy strictly to that business, plaintiff devoting his principal attention to the insurance business, and the defendant, to the sales of real estate, though this segregation of the work was not the result of any particular agreement between the partners, nor did either devote his exclusive attention to the branch of the business generally carried on by him. It developed that defendant was a good salesman of real estate, and, through the combined efforts of the partners, the business flourished.
The partnership maintained two bank accounts. One was their own partnership account in which were deposited all receipts of the business belonging to the firm. The other was an agent's account, in which were deposited all funds received by the partnership in trust, *317 such as earnest money paid down on sales of real estate. Insurance premiums paid to the firm were deposited in the partnership account, and not in the agent's account. These funds were not considered trust funds, as the insurance companies simply relied upon the responsibility of the partners for the payment thereof.
When real estate deals were so far completed that the earnest money deposited in the agent's account, or a part thereof, or other funds in said account, belonged to the partners, they were transferred from the agent's account to the partnership account.
As each partner needed funds for his own personal use, he withdrew the same from the firm's account, being charged on the books of the partnership for each withdrawal. At the time difficulties arose between the partners as hereafter mentioned, defendant had withdrawn from the partnership funds for his own personal use approximately $1,000 more than the plaintiff. The total withdrawals of defendant amounted to $2,500.83; those of plaintiff, to $1,515.86.
Expenses incurred by each partner in connection with carrying on the business were paid by the partnership. Also, of course, all expenses in connection with the operation of the business, such as office rental, clerk hire, telephone, etc., were paid out of the partnership funds. When a partner used his own automobile in connection with the business, he was allowed and paid 6¢ per mile therefor.
Real estate transactions were handled by the partnership in the following manner. Listings in writing by prospective sellers of real property were secured. When a purchaser was found who was ready and willing to purchase, a certain sum of money was agreed upon as earnest money to be paid down by the prospective *318 purchaser to bind the bargain. An earnest-money receipt in writing, prepared in triplicate, was executed, naming the purchaser, showing the amount of earnest money paid, describing the property, the purchase price and terms of sale, and signed first by Roberts & Mariner, by whichever partner was making the deal, as agent, and then signed by the prospective purchaser who agreed to buy, and then by the owner of the property, who agreed to sell. The original of the earnest-money receipt was retained by the partnership, and a duplicate was delivered to the purchaser and the seller. The real estate broker's copy was then placed in a large envelope designated as "Real Estate Broker's Deal Envelope", and filed in the office of the partnership. Each real estate deal had its own number. On the outside of the "Deal Envelope" was written the number of the deal, the date as shown on the earnest-money receipt, the description of the property, the names of the seller and purchaser, the amount of earnest money paid by the purchaser, and the amount of the broker's commission on the sale.
During the latter part of April and the forepart of May, 1949, plaintiff and defendant discussed the matter of constructing some dwellings on certain lots owned by plaintiff and his wife as tenants by the entirety, for sale to World War Veterans, under the plan of financing provided by Act of Congress. The parties are in substantial agreement as to the substance of those conversations and as to what transpired thereafter, but they are in direct disagreement as to what their final understanding and agreement was. It is this disagreement that brought about the difficulties late in September, 1949, which led to the instant litigation.
A determination as to the relationship existing *319 between the parties in connection with the construction and sale of the houses in question, and the legal effects thereof, will largely solve the problem now before this court for solution. It will, therefore, become necessary to discuss the facts in considerable detail.
1, 2. At the outset, it might be well to state that the evidence is conclusive that the partnership should be dissolved. As a practical matter, it was, to all intents and purposes, dissolved on April 24, 1950, though the decree of dissolution was not entered until January 12, 1951. It was on April 24, 1950, that the Real Estate Commissioner of the state of Oregon, pursuant to the authority vested in him by statute, cancelled the Real Estate Broker's License of the partnership. Thereafter, the parties acted individually, and the evidence warrants the conclusion that both, in effect, abandoned the partnership relation as of that date. In his brief filed in this court, defendant expresses a willingness to accept that date as the date of final dissolution, and the date up to which an accounting should be had, and plaintiff does not contend for a later date. Under all the facts and circumstances of this case, it would be inequitable to fix a date later than April 24, 1950, although ordinarily the date of the decree would be considered the date of final dissolution.
3. In passing, we make note of the fact that the evidence in this case is wholly insufficient to justify a dissolution of the partnership upon any or all of the grounds alleged therefor in plaintiff's complaint, or at the suit of plaintiff. A court of equity will not decree dissolution of a partnership because of temporary or trifling disputes among the partners, or for animosity between partners which does not injuriously affect the partnership business, or because of technical opposition of a partner to the spirit of the articles *320 of copartnership, where nothing dishonest or extravagant is shown and the conduct of the business is profitable. 68 CJS, Partnership, 858, § 349b(4).
The first ground assigned by plaintiff for dissolution of the partnership is that defendant never contributed the sum of $900 to the capital as required by the copartnership agreement. The evidence shows that, when the agreement was made, defendant executed and delivered to plaintiff his promissory note in the sum of $900, due in one year, and the same was accepted by plaintiff, in settlement of defendant's obligation respecting the capital stock contribution. At the time the complaint was filed, the note was not yet due. Furthermore, if defendant's contention respecting the matter is correct, he had a perfect defense to the note when it was due. We observe that plaintiff has commenced action on this note, and that that case was pending at the time of the trial of the instant litigation.
As a second ground for dissolution, plaintiff alleged that defendant refused to reserve ten per cent from the net earnings of the partnership for the purpose of establishing a reserve of invested capital in the sum of $1,000. The evidence establishes that both parties ignored this provision of the contract. At no time did either insist upon its fulfillment. If either is guilty of wrong in that respect, both are guilty.
Third, plaintiff alleged that defendant had wrongfully made "at least one improper withdrawal of money" from the agent's account. The evidence discloses that, at one time, defendant did withdraw $200 from the agent's account and immediately deposited it in the partnership account, and then withdrew $200 from the partnership account for his own use. Later, according to plaintiff, he returned the $200 to the agent's account. However, the evidence does not show *321 that at the time defendant made the withdrawal there were no funds in the agent's account belonging to the partnership. But even if the withdrawal was technically wrong, it was more or less an isolated act, and not such a serious one as to justify the dissolution of the partnership. Moreover, in the light of the entire record, it is clear that this objection is purely an afterthought on the part of plaintiff; one of the straws he grasped at when, for his own purposes, he determined to get rid of defendant.
As his fourth ground for dissolution, plaintiff complained that defendant had withdrawn more funds from the partnership account than he had withdrawn. He alleged that defendant had withdrawn $975.77 in excess of what he was entitled to up to the time complaint was filed in this suit. The evidence does not disclose that plaintiff ever objected to these withdrawals by defendant until after the difficulties arose between the parties as hereafter discussed. Neither does the evidence reveal that there were not sufficient funds in the partnership account from which plaintiff could have, at any time, made withdrawals to equal those of defendant, and, in fact, there were enough such funds when suit was instituted. From the record, we conclude that this also was an afterthought on the part of plaintiff.
As a further ground for dissolution, plaintiff claimed that defendant had violated certain regulations respecting real estate advertising. He alleged that this improper advertising had brought a reprimand to the partnership from the Real Estate Commissioner of the state of Oregon. It appears that prior to Thanksgiving Day, 1949, the partnership had advertised in a Corvallis newspaper that the firm would give a turkey and "all the trimmin's" to each purchaser of *322 real property who purchased through them prior to Thanksgiving. Following the Thanksgiving holiday, the partnership further advertised in part as follows: "A Turkey and All the Trimmin's with every home we sell between now and Christmas day. Our Thanksgiving special was so successful, we have decided to continue it until Christmas day", etc. Complaint about this method of advertising was made to the Real Estate Commissioner by the Corvallis Realty Board. Under date of November 23, 1949, the Commissioner wrote the partnership, calling attention to the rules and regulations respecting advertising, requesting that the particular advertising in question be discontinued, and suggesting that a retraction be run in the same newspaper in which the advertisement had been appearing. Defendant replied to this communication immediately, agreeing to discontinue the advertising, and forthwith caused to be printed a retraction in the newspaper under the title "We are Sorry". Although, as a witness, plaintiff endeavored to show that he knew nothing about this advertising, nevertheless, we are convinced that he did know about it, and made no objections thereto until after the Real Estate Commissioner had acted. His testimony with respect to this matter offers a glowing example of the art of hedging, dodging, and evasion. It is unworthy of serious consideration.
Finally, plaintiff alleged that "the disagreements and dissention existing between the partners preclude any chance of the enterprise being successful." In part, that might be true, but whatever dissention there might have been between the partners was of plaintiff's own making, and not because of any misconduct on the part of defendant, as will readily appear as we discuss the other facts of the case.
We are not at all impressed with plaintiff's *323 testimony respecting the grounds claimed by him for dissolution of the partnership; nor, as will later become evident, are we impressed with his version of the transaction between the parties regarding the house construction and sale project. As a witness on cross-examination, and when being examined as to vital issues in the case, plaintiff was extremely evasive; so much so, in fact, that the trial judge made note of it at one point. The court said: "What is your answer to this question? You're evading it, it seems to me." Further, the record is replete with instances where plaintiff answered "I don't know" or "I don't remember" when, under all the facts and circumstances of the case, it is manifest that he should have known and should have remembered. This was particularly true when he was being examined with reference to certain alterations of the partnership records which are hereafter to be discussed.
4-8. It appears that during the latter part of April, 1949, the attention of the partners was called to the fact that the Veterans Administration, in conjunction with the Federal Housing Administration, was insuring loans for the purchase of homes by War Veterans, in amounts up to 100 per cent of the appraised values of the properties. Plaintiff and defendant discussed the matter and decided that, if satisfactory arrangements could be made regarding the loans, it might be a profitable venture for the firm to construct a group of dwelling houses for sale to veterans. Plaintiff suggested that he had a group of lots in Corvallis upon which the houses might be constructed. This land was owned by plaintiff and his wife as tenants by the entirety.
With the knowledge of plaintiff, defendant telephoned to Mr. E.E. Tate, Loan Guarantee Officer for *324 the Loan Guarantee Division of the Veterans Administration, at Portland, and made an appointment to discuss the proposed loans. Defendant went to Portland alone and interviewed Tate. Tate explained the details of the procedure for securing such loans, and suggested four lending agencies in Portland which might be contacted concerning them. The actual loans were made by private lending agencies, the Veterans Administration and FHA insuring them up to the full amount thereof, on the basis of 20 per cent by the Veterans Administration and 80 per cent by FHA.
Among others, defendant interviewed Commonwealth, Inc., and Dean Vincent, Inc., two lending agencies located in Portland, both of which expressed interest. Upon his return to Corvallis, defendant made a full report to plaintiff, and the parties further discussed the project in the light of this report. Plaintiff then made a trip to Portland and interviewed officials of Commonwealth, Inc., and Dean Vincent, Inc. Upon his return to Corvallis, he reported to defendant that the outlook for securing financing by Dean Vincent, Inc., was favorable.
A short time later, both plaintiff and defendant, accompanied by three contractors, again went to Portland to confer with Veterans Administration officials and with Mr. Campbell, loan officer of the Dean Vincent company, and also to inspect houses in and near Portland which the Veterans Administration had theretofore approved for insured loans, and where its commitments had already been issued. A "commitment" is a written document issued by the Veterans Administration in which is stated the maximum amount of loan on the property that it will insure. The parties inspected several of such housing projects.
*325 Within a few days thereafter, the chief appraiser for the Veterans Administration, together with Mr. Tate, made a trip to Corvallis and inspected the property owned by plaintiff and his wife. The Veterans Administration makes use of designated appraisers, but these appraisers are not regular employes of the federal government. This also is true of FHA. Each agency makes its own appraisal before making a commitment. Both make a charge of $20 for each lot appraised as the appraisal fee. The Veterans Administration appraised nine of the fourteen lots at $1,150 each, and five at $1,050 each.
The parties, after many discussions, finally decided to proceed with the project. They agreed to bear equally the expenses incident to carrying out the program, and each was to have one-half the net profits arising from the selling of the houses. As to this part of the agreement, there is no dispute between the parties. The dispute arises as to the price to be paid plaintiff and his wife for each lot, such price to be deducted from the sales price of the completed house, along with other expenses, before the net profit on the sale was determined. Defendant contends, and so testified, that it was agreed between the parties that plaintiff should be allowed a price of $1,150 for each lot, free and clear of encumbrance, regardless of whether the lot had been appraised at that amount, or at the lesser amount of $1,050. On the other hand, plaintiff maintained that it was agreed he should receive $500 net for each lot, and that all encumbrances against the same were to be paid off by the partners, share and share alike. It appears that there were city sewer assessments aggregating approximately $3,000 against the property, and with prospects of some further city assessments. Plaintiff contends that the *326 matter of the sewer assessments was fully discussed by the parties before the agreement between them was finally made. Defendant denied this.
As will later appear, the overwhelming weight of the evidence and all the circumstances of the case, support defendant's position relative to the agreement between the parties.
Shortly after the property had been appraised by the Veterans Administration, the partnership caused blueprints to be made for some of the proposed houses. Bids for the construction of the houses were called for in the name of the firm, and were addressed to, received and accepted by, the partnership. Final arrangements for financing the project were made with Dean Vincent, Inc. There was some delay in the commitments from FHA, but eventually all financial arrangements were completed.
All expenses for appraisals, blueprints, traveling, etc., in connection with the project were paid out of partnership funds. Both parties devoted much of their time to the venture, and, commencing the latter part of September, 1949, plaintiff devoted practically all of his time to it.
After the bids of contractors had been received for the construction of the houses, and the parties knew exactly what the cost of each house would be, including all incidental expenses, they together figured out the sales price at which they would sell each house, and the net profit to be derived from such sale. At that time, and as a part of their calculations in this regard, defendant wrote out the figures on a slip of paper, which slip of paper was placed in the files of the firm, and was admitted into evidence on the trial. That exhibit is as follows:
From the foregoing it is apparent the parties figured on a net profit of $3,925 on five of the houses, $4,340 on four, and $4,925 on the remaining five. It is significant to note that each lot was listed at the price of $1,150. This is the only writing that directly indites the understanding between the parties. It supports defendant's contention.
On the face of this writing there appear some additional figures. Plaintiff admits that he placed those figures on the paper, but he does not remember when he did so. They are as follows:
*328 This is but one of the instances of the alteration of records by plaintiff. The figure "7000" was intended by plaintiff to represent the price of 14 lots at $500 each. It is manifest that he was endeavoring to provide evidence to support his theory, but, in doing so, he apparently stubbed his toe. It is quite evident that he overlooked the $1,150 already set forth in the principal writing as the price of the lot. The figures he wrote on the paper are not explainable under any theory of the case.
Plaintiff, as a witness on his direct examination, testified as follows with reference to these figures:
On cross-examination, he further testified:
Inasmuch as the record title to the lots stood in the names of plaintiff and Hulda M. Roberts, his wife, it was required that they sign all the contracts for construction of the houses, as well as the original notes and mortgages to Dean Vincent, Inc. Immediately upon completion of a deal for a house, the note and mortgage given by plaintiff and his wife were cancelled, and the note and mortgage of the purchaser were accepted in lieu thereof.
In his brief filed in this court, plaintiff presents the following argument:
It is true, as plaintiff argues, that Mrs. Roberts was not directly a party to the agreement between plaintiff and defendant regarding the house construction and sale project. It also is true that her signature to the notes, mortgages, deeds, and contracts was necessary *331 in order to carry out the program. But all this is beside the issue here. She is not a party to this litigation, nor is any relief sought against her. She did not even testify on the trial. Under the agreement between plaintiff and defendant, plaintiff was obligated to furnish the necessary lots at the agreed price of $1,150 each. It was wholly immaterial to defendant how plaintiff might accomplish that end. It is evident that plaintiff was able to secure his wife's cooperation, but her cooperation was primarily for the purpose of enabling plaintiff to fulfill his own obligation. Her acts are wholly immaterial insofar as the right to a division of the profits from the sales between plaintiff and defendant are concerned. She may have some recourse against plaintiff for a part of his share of the profits, but that question is not involved in this suit. Of course, she could have refused to participate in the venture in any way, in which case the whole program would have failed, but that was a chance plaintiff and defendant took when they entered into the undertaking. It is unnecessary for us to consider what the situation might have been as to any liability to defendant on the part of plaintiff had plaintiff been unable to perform his part of the agreement.
We observe, however, that plaintiff and Mrs. Roberts evidently enjoyed a good bargain in the sale of their lots. This may account for the willingness of Mrs. Roberts to cooperate. It appears that a short time before this house construction program was instituted, plaintiff and his wife sold two lots located in the same block of Roberts Addition as were the fourteen lots, and adjoining, for the sum of $1,375, free and clear of all encumbrances. They also sold other lots in the same addition, the highest price received for any one of them being $850, free of encumbrance. Similar sewer *332 assessments existed against those lots as existed against the 14, and had to be paid by the sellers at the times of the sales.
After the bids of the contractors for the construction of houses had been received and accepted, and financing had been assured, defendant immediately embarked upon a sales campaign for and on behalf of the partnership. During July and August, 1949, defendant negotiated several sales to veterans, and also some during the month of September. He made others later. We shall list the July, August, and September sales, as shown by earnest-money receipts, setting forth the date, the name of the purchaser, the sales price agreed upon, the amount of earnest money paid down, a brief description of the property, and some additional data, in each case:
It will be observed that in all but two of the earnest money receipts involved in the above-mentioned sales, Roberts & Mariner were named as the seller, and in the two, no signature whatever appeared for the seller.
For each of these transactions a deal envelope was prepared, into which the earnest money receipt was placed, both the original and the seller's duplicate copy. Data appears on the outside of each deal envelope as indicated above in our description of the use of the deal envelope in connection with all sales of real property by the partnership. These deal envelopes, with their contents, were duly filed in the firm's records.
*334 It appears from the evidence that during the latter part of September, 1949, the city of Corvallis demanded immediate payment of the sewer assessments against the properties involved. At that time plaintiff demanded of defendant that he pay one-half due on the assessments. Defendant refused, contending that payment of the assessments was included in the agreed price of $1,150 for each lot, which was to be deducted from the total sales price of each house. In this connection, plaintiff, on direct examination, testified:
On October 29, 1949, plaintiff addressed a communication to defendant reading as follows:
On cross-examination, plaintiff testified as follows:
The testimony indicates that plaintiff did sell one of the houses for $9,700 in cash, and deposited the money in his own personal bank account. Later, it appears that he drew a check in favor of defendant for one-half of a five per cent real estate commission on that sale, which check defendant refused to accept, claiming he was entitled to one-half the profits.
As to these matters, defendant, on direct examination, testified:
The controversy of the parties respecting payment of the sewer assessments marked the commencement of their difficulties, which finally terminated in this litigation. However, immediately following these discussions between them in September, 1949, plaintiff started, and continued, a course of conduct that cannot be approved nor condoned by a court of equity. We shall mention some of his acts, all of which were unquestionably prompted by a desire and intent to bolster his case against defendant.
We have previously mentioned his alteration of the exhibit containing defendant's figures regarding the potential profits of the venture.
Above we noted the fact that all expenses incident to launching the housing project, including the personal expenses of the partners, had been paid out of partnership funds, and had been charged on the books as expenses of the partnership. After the trouble arose between the parties, and not before, plaintiff caused the firm records to be altered so that what he believed to be all of such expenses were charged to him individually. However, in so charging himself upon the books of the partnership, plaintiff wholly failed to *340 include any portion of the running expenses of the office, though the office and all of its facilities were used to further the construction and sales program.
Plaintiff further caused very material changes to be made in connection with the earnest-money receipts prepared and used by defendant in the several sales negotiated by him, and also caused erasures to be made on the deal envelopes and new data entered thereon. As to the earnest-money receipts in question, plaintiff, without defendant's knowledge or consent, surreptitiously removed them, or caused them to be removed, from the deal envelopes, and them threw them into a waste-paper basket, where they were later found by defendant. He then prevailed upon the purchasers to execute new earnest-money receipts in lieu of the originals, in which receipts the seller was designated as Harold L. and Hulda M. Roberts, instead of Roberts & Mariner, and were so signed. He sought to explain this by claiming that Mr. Campbell of Dean Vincent, Inc., insisted upon that course of action. It is significant to note, however, that Campbell was not called as a witness to corroborate this claim. Moreover, from the several deal envelopes there was erased the name of the seller as originally written thereon, and the names of Harold L. and Hulda M. Roberts were substituted. We think that a great deal of light might be thrown upon this whole case by quoting somewhat extensively from the cross-examination of plaintiff regarding these alterations of the records. He testified:
Obviously, the excuse plaintiff offered about the necessity of the earnest-money receipts being signed by himself and wife is absurd. It was only necessary that they sign the building contracts, notes, mortgages, and deeds, and, plainly, that is all the Dean Vincent company could possibly be interested in. It is manifest that plaintiff's real reason was to get rid of the signature of "Roberts & Mariner" as the seller, and thereby destroy some very potent evidence that so definitely corroborated defendant's version of the agreement between them.
On cross-examination, plaintiff further testified respecting the earnest-money receipts issued by defendant in July, August, and September, and hereinabove described, as follows:
We have not heretofore mentioned the sale of one of the houses to one Wilbur M. Douglass. On October *346 31, 1949, defendant sold lot 6, block 4, of Roberts Addition to Wilbur M. Douglass for the agreed price of $8,250. Earnest money of $300 was paid by Douglass. The earnest-money receipt was signed "Roberts & Mariner, by C.E. Mariner", as seller. Mr. and Mrs. Douglass signed as purchaser. This receipt was also placed in a deal envelope and filed in the partnership records. It appears that a new receipt was also substituted for the original, the original discarded, and the deal envelope changed. The new receipt presumably contained the signatures of Douglass and his wife as they appeared upon the original. However, investigation developed the fact that neither Douglass nor his wife signed the substituted receipt. Both, as witnesses, denied their purported signatures. Careful examination of the genuine signatures of Douglass and his wife upon the original receipt issued by defendant leaves no doubt that they had been traced and thereby reproduced upon another document. It is a just inference to be derived from all the evidence that plaintiff placed, or caused to be placed, the alleged signatures of Douglass and his wife upon the substituted earnest-money receipt.
In Meads v. Stott, 193 Or 509, 238 P2d 256, 266, we had occasion to notice certain alterations made in the records of the partnership involved in that case. As to this, we said:
In passing upon the relationship existing between plaintiff and defendant in connection with the housing project, the trial court ruled as follows:
*348 In view of its ruling, the court refused an accounting as to the net profits derived from the sales of the fourteen houses, and allowed an accounting for a five per cent real-estate-sale commission on the sales of twelve of the houses, all of which sales were negotiated by defendant. The court denied an accounting for a commission upon the remaining two houses, the same having been sold by plaintiff in January, 1950. We are of the opinion that the court erred in its conclusions upon the facts and the law. Its error permeates the entire accounting that it effected. We recognize the often-announced rule that, in equity proceedings, this court will give great weight to the findings of the trial court upon disputed questions of fact, but, as we have also often said, such findings are not binding upon us, and the rule itself is one of expediency only. We have a responsibility in every case such as this to make our own independent study of the record and to arrive at our own conclusions respecting it.
For the purposes of this case, it is immaterial whether the house construction and sale project came within the terms of the original partnership agreement and was a part of the real estate business contemplated thereby, or whether it was the subject matter of an independent agreement between the parties. The results must be the same in either case.
However, in view of the fact that the partnership, as a partnership, inaugurated the program, paid all of the initial expenses incident to its launching, called for bids and accepted them, negotiated sales, and the members of the firm devoted most of their time thereto, it might well be concluded that, as a matter of law, the whole project was a part of the real estate business covered by the provisions of the original partnership agreement.
*349 The partnership agreement provides for the conduct of a real estate and insurance business. The partnership was duly licensed under the laws of this state as a "real estate broker". Section 59-102, OCLA, as amended by ch 289, Oregon Laws 1941, in part, defines "real estate broker" as follows:
Section 59-301, OCLA, requires a license for real estate brokers, and § 59-302, OCLA, prescribes the qualifications of persons to whom licenses may be issued and "who will actively engage in the real estate business."
By virtue of the provisions of § 59-102, OCLA, as amended, supra, when a broker duly obtains a license, he is authorized to "sell" and to "purchase" real estate, and such purchase and sale constitutes "real estate business".
In Kirtland v. Corbett, 144 Tenn 100, 230 SW 27, the court held that a person engaged in buying unimproved *350 lots, improving them, and then selling them, is engaged in the "real estate business".
In 68 CJS, Partnership, 518, § 78, it is stated:
Under the partnership agreement, each partner agreed to devote all his time and attention to the business of the partnership. The time of a partner is an asset of the partnership. That asset, insofar as plaintiff's time is concerned, was used largely in the promotion of the housing program. As before observed, additional assets of the partnership were used to further the project, including office help and other facilities. Wholly independent of the articles of copartnership, the use of partnership assets by plaintiff in furthering what he now claims to have been his own venture would require him to account to his copartner for the profits derived therefrom, because that operation, as before observed, was within the scope of the partnership business.
Section 79-404, OCLA, in part, provides:
In Chambers v. Johnston, 180 Ky 73, 201 SW 488, 493, the court said:
It is unnecessary for us to here point out the duties owed by a partner to his copartners, as that subject has been exhaustively and ably treated in a recent opinion by Mr. Justice WARNER in Fouchek et al. v. Janicek, 190 Or 251, 225 P2d 783, reference to which is made. See also Foley v. Bouvy, 158 Or 327, 337, 75 P2d 14; Dusenberry v. Horning, 56 Or 210, 216, 106 P 1019; Neilsen v. Holmes, 82 Cal App2d 315, 186 P2d 197, 203; 68 CJS, Partnership, 538, § 99; Shumaker, Law of Partnership 2d ed, 154, § 86.
*352 In Shumaker, Law of Partnership, supra, the rule is stated:
As we above observed, ordinarily the accounting between partners on dissolution of the partnership is to be had as of the date of dissolution, and where it is dissolved by decree of a court, as of the date of decree. Scheckter v. Rubin, 349 Pa 102, 36 A2d 315; 68 CJS, Partnership, 895, § 384. Detailed requirements for dissolution of a partnership and winding up its affairs are provided in the Uniform Partnership Law of this state: title 79, OCLA.
However, for the reasons heretofore stated, we have concluded that under all the facts and circumstances of this case, the date of dissolution of this partnership should be fixed as of April 24, 1950, and that the accounting between the partners should be up to and including that date, subject, of course, to the provisions of the Uniform Partnership Law respecting the winding up of the affairs of the firm. Duncan v. Bartle et al., 188 Or 451, 216 P2d 1005.
In effecting a final accounting between the parties, the trial court should take into consideration the following:
1. Net profits from the construction and sale of the 14 houses, allowing plaintiff a credit of $1,150 on each lot, as a part of the costs of construction;
2. All profits from the sales of insurance by either partner up to and including April 24, 1950;
3. All commissions from the sales of real estate, *353 or other deals in real estate, negotiated by or for either partner, up to and including April 24, 1950, excluding the sales of houses in connection with the house construction and sales project. Each partner should be credited with all necessary and reasonable personal expenses incurred in making any such sales, or real estate deals;
4. If subsequent to April 24, 1950, either party has made use of any assets of the partnership to the exclusion of the other, such party should account for the reasonable value of such use.
Upon such accounting, each partner shall be entitled to one-half of the net assets remaining after all partnership indebtedness has been paid.
9. The accounting plaintiff made was upon the basis of the payment of a five per cent real estate commission to the partnership upon the sale of each of the twelve houses that defendant sold. He did not account for receipts from the sales of insurance after the firm's agency had been cancelled by the insurance companies, and plaintiff himself was appointed agent. The conduct of an insurance business was one of the principal objectives of the partnership agreement. Until the firm was dissolved, plaintiff owed a duty to account for all sums he received on account of insurance sales, even though such sales were made by him personally. The accounting plaintiff made showed a sum of money due defendant that apparently is much less than he was actually entitled to under the facts and the law, and was, therefore, erroneous. For the reason that plaintiff made an erroneous accounting to defendant, defendant is entitled to interest at the legal rate of six per cent per annum upon the correct balance due him, if such balance is in excess of the amount shown by plaintiff's *354 account. Christian & Craft Grocery Co. v. Hill, 122 Ala 490, 26 So 149; 40 Am Jur, Partnership, 385, § 364.
Each party must bear one-half of all office expenses up to and including April 24, 1950, when plaintiff locked the defendant out.
The decree is reversed, and this cause is remanded for further proceedings consistent with this opinion.
Defendant is entitled to costs on appeal.