Case Name: WARREN et al. v. HOWELL
Court: Oklahoma Supreme Court
Jurisdiction: Oklahoma
Decision Date: 1951-03-13
Citations: 204 Okla. 674
Docket Number: No. 33900
Parties: WARREN et al. v. HOWELL.
Judges: WELCH, CORN, GIBSON, and DAV-ISON, JJ., concur. LUTTRELL, V.C.J., and JOHNSON and O’NEAL, JJ., dissent.
Reporter: Oklahoma Reports
Volume: 204
Pages: 674–680

Head Matter:
WARREN et al. v. HOWELL.
No. 33900.
March 13, 1951.
Rehearing Denied July 3, 1951.
232 P. 2d 934.
C. F. Gordon and R. M. Mountcastle, Muskogee, for plaintiffs in error.
Phil K. Oldham, Alex I. Moses, and Kelly Brown, Muskogee, for defendant in error.

Opinion:
HALLEY, J.
C. R. Howell instituted this action against Thomas E. Warren, John Rooney, Larry Rooney, and L. F. Rooney, as guardian and agent of John and Larry Rooney, and alleged that about September 1, 1942, he and the defendants entered into a partnership agreement under the firm name of Warren Equipment Company, whereby he and the three defendants were each to have a one-fourth interest in the partnership business of handling automotive equipment.
Plaintiff further alleged that substantial profits had accrued from the operation of the business, but that defendants had failed and refused to account to him for his share of the profits, and prayed for a dissolution of the partnership and an accounting and judgment for the amount found to be due him.
Defendants denied any partnership agreement with the plaintiff, and denied that he had ever been a partner in the Warren Equipment Company, and alleged that they had been the sole members of the firm since its beginning, and that plaintiff was an employee of the Warren Equipment Company and, as such, had received the full amount due him as an employee and bookkeeper of the firm. A copy of the articles of partnership forming the Warren Equipment Company was attached, naming the three defendants as partners and making no mention of the plaintiff. It was further alleged that copies of this agreement were placed in the records of the firm, which were in the possession and under the control of the plaintiff; that plaintiff, as an employee, had drawn a monthly salary for keeping the books, and had drawn checks to himself as an employee and deducted therefrom withholding and Social Security taxes deductible from salaries paid to employees; that during the years he had been an employee, the plaintiff had kept the records from which income tax returns were prepared for each year from 1942 to 1946, and had, as a notary public, taken the oath of a partner to such returns, all of which showed the names of the partners as the three defendants. The existence of a partnership between plaintiff and defendants was made an issue by the pleadings.
The court empaneled a jury and submitted to them the question of whether or not the plaintiff was a member of the partnership from its formation to the date this action was filed, and entitled to a one-fourth interest therein. The jury answered this interrogatory in the affirmative, and the court entered an order approving the finding of the jury, which was acting merely in an advisory capacity, as provided in equity actions.
On July 13, 1948, the defendants moved for judgment non obstante, and this motion was denied. Defendants filed a motion for new trial, which was overruled. Notice of appeal was given by the defendants. On July 2, 1948, defendants had filed an amendment to their answer, in which they alleged that if a partnership agreement was made, as alleged by the plaintiff, it was for the purpose of evading the income tax laws and hence illegal and unenforceable, and invoked the equitable doctrine of "clean hands". This argument was made when a hearing was had on the motion of the defendants for judgment.
On July 13, 1948, plaintiff moved that the court fix a date for an accounting, which was denied. Plaintiff moved to dismiss the appeal to this court, which was denied without prejudice to represent such motion when the case was submitted on its merits. Plaintiff has renewed his motion to dismiss upon the ground that the order appealed from is not a final order and hence not ap-pealable. We have concluded that while the order of the trial court finding the existence of a partnership between plaintiff and defendants is not a "final order" in the generally accepted meaning of that term, it is an ap-pealable order under subdivision 3 of sec. 952, 12 O. S. 1941, which provides that this court has appellate jurisdiction, among other things, of "an order that involves the merits of an action, or some part thereof." The question of whether or not plaintiff was a member of the partnership and entitled to a share in the Warren Equipment Company certainly involved an important part of plaintiff's action, after that question was put in issue by the pleadings. A negative answer to that quesr tion would have settled the case adversely to the plaintiff. No further action would have been required, and plaintiff's only remedy would have been to appeal from such order.
Defendants first contend that the order appealed from is not supported by the evidence, but is clearly against the weight of the evidence. The evidence offered by the plaintiff to support his claim that he was a partner and entitled to share the profits arising from the operations of the Warren Equipment Company consists largely of his own testimony. He testified that in 1942 he talked with Mr. L. F. (Francis) Rooney, father-in-law of defendant Thomas E. Warren and father of John and Larry Rooney, the three defendants herein, in regard to recapturing certain automotive equipment leased by the L. F. Rooney interests for the construction of Camp Gruber. The term "recapture" appears to have been used to describe the exercise of the option to purchase contained in , the lease agreement. That Mr. Rooney agreed to finance the venture under the firm name of Warren Equipment Co., and that the profits should be divided four ways between the plaintiff and the three defendants named; that Thomas E. Warren later advised him that Mr. Rooney did not want plaintiff's name to appear as a partner, but that he could draw $100 per month as an employee for keeping the books and performing other duties, and that any balance due plaintiff at the end of any fiscal year should be drawn as a bonus; that he agreed to this arrangement; and that early in 1943 Mr. Gordon, attorney for Mr. Rooney, drew up a partnership agreement, with the assistance of Thomas E. Warren, naming Thomas E. Warren, John Rooney, and Larry Rooney as partners. When asked if naming the three partners was in accordance with his agreement with Mr. L. F. Rooney, the plaintiff answered:
"That's in accordance with my conversation with Mr. Warren relating to what Mr. Rooney wanted to do; yes, sir, that's right."
It should also be borne in mind that the -plaintiff was drawing salaries for other positions he held in other Rooney companies, from which he had a substantial monthly income.
Mr. L. F. Rooney advanced to Warren Equipment Company the sum of $25,000 and took a demand note for that amount. Plaintiff became the bookkeeper for Warren Equipment Company, and sometimes signed as its "manager". He drew checks on its bank account and had full custody of its records, but claims that he did not see the written partnership agreement until 1943, despite the fact that it was shown that two copies of this agreement were deposited with the records under his control. It named only the three defendants as partners.
On February 18, 1943, plaintiff drew a check on Warren Equipment Company account payable to himself for $400, less Social Security and withholding taxes, and bearing the notation "Salary for Nov. Dec. Jan. and Feb." On April 3, 1943, he wrote and forwarded the following letter to the Treasury Department of the Federal government at Oklahoma City:
"The Warren Equipment Co. has formed a partnership composed of Thomas E. Warren, Larry Rooney and John Rooney, and we would appreciate your giving us an identification number for Social Security purposes. Also send us employer's tax return for the first quarter of 1943. (Signed) Warren Equipment Co., by Cecil E. Howell, Manager."
The plaintiff furnished the data for income tax returns of the partnership from 1942 to 1946. Each return showed the three defendants as partners; each return showed the salary drawn by the plaintiff as an employee, under the heading "Salaries and Wages", and as a notary public the plaintiff administered the oath of one of the named partners as to the correctness of the return. The plaintiff drew practically all checks drawn on the partnership account, including numerous checks to the three defendants in similar amounts in distributing accrued profits of the business; he deducted from salary checks to himself Social Security and withholding taxes. The end of the fiscal year of the partnership was September 30, and at no time until 1945 did plaintiff make any claim for a bonus at the end of any fiscal year, to make up his alleged one-fourth share of the profits he distributed to the three partners named in the partnership agreement. Plaintiff admitted that he made out Employer's Tax Returns which were sworn to by one of the partners named in the written agreement, and signed them as manager of Warren Equipment Company.
Mr. John S. Daniels testified that he dealt almost exclusively with plaintiff in transferring the automotive equipment formerly leased by Manhattan Construction Company, but his testimony has little bearing upon the question of whether or not the plaintiff was a partner in Warren Equipment Company. Mr. Gordon, attorney for Mr. L. F. Rooney, appears to have understood that at one time Mr. Rooney considered making plaintiff a partner, but when he drew the partnership agreement only the three defendants were named as partners. The plaintiff further testified relative to the manner of the Warren Equipment Company in keeping its records and transacting business as follows:
" . I'd like to admit that all official papers was signed by the three partners. That's according to our agreement. There was nothing officially done that showed more than three partners. Everything after that date was showed that way;, that's the way we handled it."
Plaintiff claims that in 1945 he drew three checks for $5,000 each to the three defendants from accrued profits, and at that time mentioned to Thomas E. Warren that he had not received his share, and did not receive it, but made no further mention of the matter until 1947 when he mentioned it to L. F. Rooney, after the latter requested that they divide equally between them the profits from a real estate venture in which they had agreed to share equally. The plaintiff's oral testimony is that it was agreed that he was a fourth partner in Warren Equipment Company, but that his name be omitted from the partnership agreement and all official acts. He did not allege in his petition that the partnership agreement was reduced to writing. The defendants attached a copy of the written agreement to their answer. That written agreement made no mention of plaintiff as a partner, and in explanation thereof plaintiff testified that Thomas E. Warren had advised him that Mr. L. F. Rooney desired it that way to reduce taxes.
Defendants' testimony flatly denies that it was ever agreed that plaintiff be a partner. The actions of the plaintiff in failing to demand his share as a partner at the close of each fiscal < year, when he himself distributed the profits to the named partners, and his representations in writing that the three defendants were the partners, and that he was their employee; his withdrawal of more than $4,000 as salary, together with the testimony of the defendants flatly denying that plaintiff was to be a partner, make it difficult to support plaintiff's contention that he was a partner. We have carefully reviewed all of the evidence and conclude that the findings and judgment of the court are clearly against the weight of the evidence. Having so con- eluded, we do not find it necessary to consider the further contentions of the plaintiff.
The judgment of the trial court is reversed, with directions to enter judgment for the defendants.
WELCH, CORN, GIBSON, and DAV-ISON, JJ., concur. LUTTRELL, V.C.J., and JOHNSON and O'NEAL, JJ., dissent.