Case Name: RUNNELLS v. LEFFEL
Court: Oregon Supreme Court
Jurisdiction: Oregon
Decision Date: 1919-12-24
Citations: 93 Or. 342
Docket Number: 
Parties: RUNNELLS v. LEFFEL.
Judges: Harris, J., absent.
Reporter: Oregon Reports
Volume: 93
Pages: 342–370

Head Matter:
Argued at Pendleton October 29,
affirmed and modified December 24,
1918. Argued on rehearing at Pendleton May 5, former opinion adhered to September 9, 1919.
RUNNELLS v. LEFFEL.
(176 Pac. 802.)
Partnership — Duty of Partners — Good Faith.
1. One partner owes a duty to the other partner of fair dealing, and this relationship continues even after the dissolution of the partnership, as to the items or contracts or assets remaining unsettled.
[As to agreement to share losses as essential to existence of partnership relation, see note in Ann. Cas. 1913B, 1335.]
Partnership — Dissolution—Action for Accounting — Pleading—Fraud —Neglect.
2. In suit against a former partner for an accounting, any fraud, neglect or misfeasance must be alleged in order to be available.
Partnership — Contracts—Accounting-b-Dissolution.
3. A contract with a partnership for the handling of real and personal property and the payment of commission for the sale thereof dies with the dissolution of the partnership, and where after dissolution one partner allows a contract of salé to be canceled, and a new contract is entered into whereby the seller transfers the property to a third person, another partner is not entitled to participate in a commission paid in connection with the second transfer.
Costs — Equity.
4. In a suit in equity for an accounting, the taxing of costs is a matter within the discretion of the trial court as between the accounting parties, but third persons made defendants for the sole purpose of attaching property in their hands should be allowed costs on dismissal of the complaint: Section 567, L. O. h.
ON REHEARING.
Partnership — Accounting—Fraud—Necessity of Pleading.
5. In suit between partners for an accounting of commissions earned on a sale, which sale was not consummated by the buyer, but rescinded, and the property resold to the buyer’s wife, to be available as a ground of recovery, fraud, collusive or otherwise, in that such second sale to the wife was a subterfuge to prevent plaintiff from receiving his share of the commission earned on the original sale, must be pleaded.
Bean, Bennett and Johns, JJ., Dissenting.
From Wallowa: John W. Knowles, Judge.
In Banc.
This is a suit for an accounting between A. M. Bunnells, plaintiff, and W. E. Leffel, defendant. ■ The other defendants are brought in the case for the purpose of attaching funds placed in their hands by the defendant, W. É. Leffel.
In 1915 and up to the latter part of the year 1916 plaintiff and defendant W. E. Leffel were partners in the real estate business under the firm name and style of Leffel & Bunnells, each having an undivided one-half interest in the business. Some time shortly before the 1st of January, 1917, the partnership was dissolved. In the fall of 1915 the partnership had a contract with one C. B. Mays for the sale of twenty-four hundred (2400) acres of land near North Powder, Oregon, together with personal property used in connection with the same. In November, 1915, a sale was negotiated by said partnership of the farm and personal property of C. B. Mays to G. P. Higinbotham, the real property being sold for $45,000 and the personal property i for several thousand, the exact amount not appearing in the evidence. At the time of making this sale Higinbotham paid $3,000 to Mays in cash, and within a few months made a further payment of $6,000. The partnership was to receive the sum of $6,000 commission, and $500 thereof was paid in cash und an allowance for expense, at the time of making the sale. At such time G. P. Higinbotham executed certain notes covering the balance of the purchase price to C. B. Mays, and on December 11,1915, $20,000 of said notes were placed in the hands of J. E. Len-hart of North Powder to hold and collect the same. At the time of snch delivery a contract was entered into between the partnership and C. B. Mays, wherein said partnership was given, to secure the balance of their commission amounting to $5,500, an interest in said notes, and the agreement with the escrow-holder provided for the payment of their interest as the amount of the notes should be collected, and attached thereto was another memorandum stating in effect that the interest of said partnership in said notes would cease and determine in the event they were not paid. During the following year C. B. Mays had some difficulty with Gr. P. Higinbotham about the payment for the personal property sold, and in the fall of 1916 one of the notes due in connection with the contract of sale was not paid by Gr. P. Higinbotham, and from that date on until in July, 1917, efforts were made on , the part of C. B. Mays to obtain payments on his contract, and ejectment proceedings against Gr. P. Higinbotham were threatened by C. B. Mays. In the purchase of this land from C. B. Mays, Maggie Higinbotham, the wife of Gr. P. Higinbotham, refused to join but continued to1 operate her own ranch near Echo, Oregon. On the sixth day of July, 1917, Gr. P. Higinbotham and C. B. Mays in the presence of the defendant W. E. Leffel canceled the contract of sale and purchase between Mays and Higinbotham, and the notes executed by Gr. P. Higinbotham were surrendered to him. On the same day C. B. Mays agreed to sell the real estate theretofore contracted to be sold to Gr. P. Higinbotham to his wife, Maggie Higinbotham, for $39,000, $17,000 to be paid in cash and the balance in notes. For making this sale W. E. Leffel received $4,400 in cash, and a note of Maggie Higinhotham for $1,500 as commission. This sale was consummated about the sixth day of August, 1917, by the execution of a deed to Maggie Higinbotham of the property of the Mays ranch. On August 31, 1917, plaintiff filed his suit for an accounting, setting forth therein the creation of the partnership between plaintiff and defendant Leffel, the sale of the Mays ranch to Higinbotham, and the amount of commission earned thereby by the partnership, the execution of the notes by Gr. P. Higinbotham to O. B. Mays, and of the contract between said partnership and Mays for an interest in said notes to secure the payment of the commission, and then makes the following allegations:
“That on or about the- day of -, 1917, at the request of the said Higinbotham and said defendant, W. E. Leffel, the said C. B. Mays and-Mays, his wife, conveyed said lands to Maggie Higinbotham; and at all times herein mentioned the said Maggie Higinbotham has been, and now is, the wife of the said Gr. P. Higinbotham.
“That said lands were so conveyed to the said Maggie Higinbotham under and by virtue of the terms and conditions of said contract between the said Mays and plaintiff and said defendant, W. E. Leffel, and under and by virtue of the terms and conditions of said contract between the said Mays and the said Gr. P. Higinbotham.
“That at the time of said conveyance, on or about said —:— day of ——, 1917, the balance of said purchase price was paid, with the exception of a part of the interest accrued thereon.
‘£ That on or about said —— day of-, 1917, said defendant, W. E. Leffel, collected and received from the said Mays a certain sum (or certain sums) of money in payment of the balance of said commission, and so received and collected the same as the-money of plaintiff and said defendant and as belonging to plaintiff and said defendant by reason of said sale of said lands and personal property as such partners; and the said Mays paid said certain sum (or certain sums) of money to said defendant, W. E. Leffel, as the balance of said commission. But plaintiff does not know what amount of money was so paid by the said Mays and collected and received by said .defendant, W. E. Leffel.
“That said defendant, W. E. Leif el, has failed and neglected to account to or with plaintiff for said money so collected and received by said defendant.”
The complaint further alleged the insolvency of Leffel and asked for a restraining order against the said defendants in regard to the funds in their possession, which, it was alleged, was the commission received on the sale to Maggie Higinbotham. The answer admits in effect the partnership that had existed between plaintiff and defendant W. E. Leffel, the sale of the C. B. Mays ranch to Gr. P. Higinbotham, and the commission earned thereby, the interest of the partnership in the notes given by Higinbotham, and then set forth that such interest in said notes would terminate in the event they were not paid, and that by reason of the failure of Gr. P. Higinbotham to carry out his contract of purchase, the contract had been canceled and surrendered up by Gf. P. Higinbotham, and the notes canceled and returned to him. That the partnership had no further interest in and to said notes or commission represented thereby, and set up as a counterclaim a request for an accounting of other partnership matters as against the plaintiff herein. A decree was entered dismissing the complaint and denying the relief sought by the defendant W. E. Leffel and dissolving the injunction and denying costs to either party. Plaintiff appeals generally, and defendants file a cross-appeal on tlae ground that their costs should have been allowed to them.
AfpiRjvied AND Modified.
For appellant there was a brief and an oral argument by Mr. A. 8. Cooley.
For respondent W. E. Leffel there was a brief over the names of Messrs. Cochrcm .<& Eberhard and Mr. A. W. Schaupp, with oral arguments by Mr. Colon B. Eberhard and Mr. Schaupp.
For respondents Alice Leffel, First National Bank of Joseph and First Bank of Joseph, as cross-appellants, there was a brief over the names of Messrs. Cochran & Eberhard and Mr. A. W. Schaupp, with oral arguments by Mr. Colon B. Eberhard and Mr. Schaupp.

Opinion:
OLSON, J.
This is a suit for an accounting as to moneys received by one partner after a dissolution of a partnership on contracts and notes made before the partnership'was dissolved. The complaint alleges in substance that said commission had been earned by reason of the sale of real and personal property, and to secure this commission an interest in certain promissory notes executed by the purchaser of said property had been assigned to the partnership; that at the request of such purchaser and the defendant, W. E. Leffel, a deed to the property was made to the purchaser's wife, and that such conveyance was made under the terms and conditions of the original contract with the purchaser; that a commission was paid to the defendant W. E. Leffel, and that such commission was paid under and by virtue of the original con tract between the partnership and C. B. Mays, anclby virtue of the agreements subsequently made, giving an interest in the notes given by the purchaser of the land. o
We have read all of the evidence carefully but fail to find such contention supported. The evidence shows that the original contract between C. B. Mays •and GL P. Higinbotham was canceled and the notes surrendered and that a new contract was made with Maggie Higinbotham and consummated. The original contract with Gr. P. Higinbotham was for the sale of both real and personal property, the real property amounting to $45,000, and the personal property to several thousand dollars, the exact amount not appearing. The sale to Maggie Higinbotham was for the real property only, the consideration being $39,000. The original commissioñ to be paid to the partnership was $6,000, of which $500 was paid at the time of making the contract of sale. The commission collected by W. E. Leffel was $5,900. There is evidence in the record upon which the lower court could have found that defendant W. E. Leffel conspired with C. B. Mays to cancel the old contract and have the property transferred to Maggie Higinbotham- merely as a subterfuge in order to defraud his former partner out of his share of the commission, but nowhere in the complaint is there an allegation of fraud on the part of W. E. Leffel, nor of any conspiracy. There is evidence that would seem to show that W. E. Leffel'did tiot take his former partner into his confidence as to the exact situation in regard to the Mays-Higinbotham deal, nor give his former partner an opportunity to protect himself in saving his stare of the commission, but there are no allegations in the complaint as to these matters. The complaint seeks an accounting as to the proceeds of a certain, definite contract and the notes securing the same. The evidence of the plaintiff clearly shows that these notes were not paid, and that no proceeds were received under the terms of said contract. It is true that one partner owes a duty to the other of fair dealing, and that this relationship continues even after the dissolution of a partnership as to the items or contracts or assets remaining unsettled, hut the relation of partnership does not exist as to matters outside of the particular contracts, assets or items so remaining. It is also true that one partnér cannot willfully dissipate the remaining unset-' tied assets and avoid liability for such accounts, but in a complaint filed against him the fraud or neglect or misfeasance complained of must be set out. It has been held by this court that fraud must always be alleged in order to be available: Leavengood v. McGee, 50 Or. 233 (91 Pac. 453). All of the evidence in regard to the intention of defendant ~W. E. Leffel to defraud his former partner by securing the cancellation of the Gr. P. Higinbotham contract, by preventing a loan being made upon the property which might have prevented the cancellation of such contract, is clearly not responsive to any allegation of the complaint. The rule is clearly stated in Eastman v. Jennings-McRae Logging Co., 69 Or. 1, 7 (138 Pac. 216, 218, Ann. Cas. 1916A, 185), as follows:
"Section 725, L. O. L., states the cardinal rule of evidence in the following words: ' Evidence shall correspond with the substance of the material allegations, and be relevant to the questions in dispute.' Each party shall prove his own affirmative allegations (Section 726, L. O. L.) that are denied by the other party. A plaintiff can recover only upon the allegations of his complaint. The facts constituting his cause of action must be stated in his complaint, and these allega tions lie must prove, if they are denied. If lie fails to prove any material allegation of his complaint that has been put in issue by an answer, he must lose.
"In Union St. Ry. Co. v. First Nat. Bank, 42 Or. 611 (72 Pac. 588), the rule is stated thus: 'It has often' been held by this court that the plaintiff must prevail, if at all, upon the matters alleged in his complaint. # * '
Plaintiff contends strenuously that the moneys received from the sale of the property to Maggie Higinbotham, whether such deal was fraudulent or not, were nevertheless paid to W. E. Leffel under and by virtue of the old commission contract between A. M. Bunnells and W. E. Leffel and O. B. Mays. This contention is untenable for the reason that a contract with a partnership for the handling of real and personal property and payment of commission for the sale thereof, dies with the dissolution of the partnership. It is not an assignable contract. It has served its purpose in the sale originally made to Gr. P. Higinbotham, and the rights to a commission as to that sale had already accrued. Such commission contract was not alive for the benefit of the partnership for any sale made to third parties after the dissolution of such partnership.
The defendants have filed a cross-appeal on the ground that costs should have been allowed them in the lower court. The taxing of costs in equity cases is a matter within the discretion of the trial court. In view of the fact that defendant W. E. Leffel came into court seeking affirmative relief by way of an accounting, we cannot see there was any abuse of discretion in the trial court in refusing him costs, but as to the other defendants who were brought into court without being concerned in the proceedings, other than being in pos session of moneys sought to be impounded, they are in a different position and should be allowed their costs.
In Banc.
Mr. A. S. Cooley, for the petition.
Messrs. Cochran & Eberhard and Mr. A. W. Schaupp, contra.
Affirmed and modified as to costs.
AFFIRMED AND MODIFIED.
Harris, J., absent.