Court Opinion

ID: 7134672
Source: CourtListenerOpinion
Date Created: 2022-07-24 15:22:40.247653+00
Date Added: 2024-06-11T16:14:35.101121
License: Public Domain

Opinion op the court by
JUDGE BURN AM
Reversing.
The appellant, Joseph Muir, and the appellees, L. B. Samuels and Charles Edelen, entered into a partnership to erect and operate a steam laundry at Bard'stown, Ky., under the style of the “Nelson Steam Laundry.” The cost of the laundry was about $2,000. $1,400 of this sum was borrowed from the People’s Bank of Bardstown, Ky., and a note dated May 30th of 1898, due on the 30th of September thereafter, wa s executed to the bank, signed by the Nelson Steam Laundry, by Joseph Muir, treasurer, and by each of the partners. The balance of the capital nec*610essary to pay for the .plant was advanced to the firm by .appellant, and a note executed to him, which was signed in the same way. On the 15th day of August •thereafter appellees sold their interest in the laundry plant to appellant, and assigned and transferred to him all their right, title, and interest in the accounts and bills receivable due the firm. In consideration of this sale, appellant assumed to pay the debts and liabilities of the laundry firm, including the note for $1,400 due to the Peo. pie’s Bank. It was further stipulated and agreed .as part of the condition of the sale that appellees should sign a renewal of the $1,400 note as sureties for appellant in the event' he was not ready to pay same at the maturity thereof. The firm was, by reason of the contract and agreement, dissolved. On the succeeding day, August 16th, the appellant, Muir, sold and conveyed one-half interest in the property to John J. Cannon, a practical laundryman, and they continued to operate the plant until December, 1898. On the 16th of December, appellees paid off the $1,400 note to the bank, and had it assigned to them by a written indorsement on the back thereof, and on the following day instituted this suit in equity against appellant to recover the amount so paid by them in accordance with the terms of the contract of dissolution, and at the same time sued out an attachment against appellant and Cannon upon the ground that 'they did not have property-in the State subject to execution sufficient to satisfy their demand, and that the collection of same would be endangered by delay in obtaining judgment and return •of no property found. To this petition Muir filed an answer containing six paragraphs setting up various grounds of defenses. A demurrer was sustained to the first, second, and third paragraphs, and to all of the fourth and *611fifth except so much as controverted the grounds of the attachment; and judgment was given plaintiffs for the amount of the $1,400 note, and their attachment sustained. Certain laborers employed by the laundry company also filed an answer setting up the amounts due them for1 labor, and pleaded that under section 2487 of the Kentucky Statutes they were prior liens.
We will first consider the propriety of the court’s ruling upon the demurier of' appellee to the various paragraphs of appellant’s .answer. In the first paragraph it is substantially alleged that the plaintiffs knew the amount of indebtedness of the firm, and that appellant did not;, and that they falsely represented to him that the laundry company only owed $1-50 in addition to the $1,400 note executed to the bank, while as a matter of fact this outside indebtedness amounted to $840; and that this fraudulent representation was made to induce appellant to buy the interest of appellees. It will be admitted that, as a general rule, the law requires prudence and vigilance on the part of persons ,in their business transactions', and will not relieve one who blindly closes his eyes to the facts. And where the means of knowledge are equally available to both parties to a transaction, and one of them does not avail himself of these means and opportunities, he will not be heard to say that he has been deceived by the other’s misrepresentations. But this rule is not universal, and does not apply where the parties occupy a relation of trust o.r confidence, — as, where a trustee makes a false representation to his cestui que trust nr an agent makes such representation to his principal, and thereby obtains -an advantage, or lan attorney to his client; nor does the general rule .apply where the -panties occupy the relation of partners. See Pomeroy v. Benton, 57 Mo., 531, *612and Davenport v. Buchanan, 6 S. D., 376 (61 N. W., 47). The law imposes upon partners the duty of fair and open dealing with each other, and each has a right to rely explicitly upon the statements of the other concerning matters pertaining to their business relations. Each member of a partnership is authorized' to incur debts and make contracts within the scope of the partnership, which would be binding upon them all. In this way one partner might have knowledge of a liability due by the firm which would not be known to all the members thereof; and if, a.s alleged in the first paragraph of appellant’s answer, appellees actually knew of the existence of more than $606 of outstanding, indebtedness against the firm which was fraudulently concealed from appellant for the purpose of inducing him to buy their interest, they would be guilty of a fraud upon him which a court of equity will relieve either by the cancellation of the contract of dissolution o.r by requiring them to account for the amount of debts so fraudulently concealed. We think the court erred in sustaining the demurrer to the first paragraph of the answer
The s'econd paragraph is not good for the reason that appellant does not allege that he ever requested appellees to renew the $1,400 note after the maturity thereof, and the demurrer to this paragraph was properly sustained.
The defense relied on in the third rand fourth paragraphs of the original and amended answer is based upon the idea that this is a suit upon the $1,400 note, and that when it was paid by plaintiffs it was extinguished. We do not so understand the pleadings. On the contrary, we think it was plainly the purpose of the pleader to sue upon the contract of sale, and to allege that the failure of appeb lant to pay the $1,400 note was a breach of the contract *613of sale. The demurrer to both the third and fourth paragraphs was properly sustained.
In the fifth paragraph it is alleged that all the property of the laundry company was personalty, and that shortly-before the institution of this suit and the suing out of tbe attachment it was agreed by appellant, at the instance of appellees, that Samuels should take possession of all the ^property of the laundry company, and sell same, and ap- ' propriate the proceeds thereof to the payment -of the debts of the concern in accordance with the rights of their respective creditors; and that he did take charge -of the property under this agreement; and that at the time of the institution of this suit he was in full possession thereof for this purpose, and held the property of the laundry company in trust for the benefit of all their creditors; that appellant was deterred from making a general assignment for the benefit of all of his creditors by the persuasions and representations of appellees that this was not necessary and 'the same resuits could be accomplished without it. To constitute a valid assignment of personal property, no particular form of words or instrument is required. Any language or act which makes an appropriation of this character of property amounts to an equitable assignment. For instance, in Gram. v. Cadwell, 5 Cow., 489, it was held that an agreement between partners on dissolution that one should have the settlement of their affairs, he continuing the business and assuming all debts and accounts outstanding and due with which the firm had any connection, until they should be settled; and that all moneys contributed by tbe outgoing partner except those which had been drawn out by him should be paid back by the other within a limited time, — operated as an assignment to the remaining partner of the debts due the firm. *614In the case of Brown v. Chamberlain, 9 Fla., 464, where a debtor, without any writing whatever, but verbally, and by word of mouth only, assigned and transferred and delivered to three of his creditors, composing a firm, a package containing notes, drafts, etc., for nearly $80,000 in trust to collect and distribute the proceeds so far as they would go pro rata between assignees and his other creditors, was held to be a good, voluntary assignment In Newby v. Hill, 59 Ky., 530, it was held that a parol appropriation of a fund in payment of debts to the assignee was valid. A verbal assignment and transfer of personal property to another in trust for the benefit of all his creditors is good when the assignee actually takes possession thereof under the agreement. There was nothing in the agreement as alleged which prevented the appellees from seeking a personal judgment on their debt, but, having^ accepted and taken possession of the laundry property under the agreement to sell it, and appropriate the proceeds to the payment of all the creditors of the firm, they could not, in violation of this agreement, seize by attachment and appropriate this entire trust property' to the payment of their debt; and, taking as true this averment of the answer in so far as the attachment was levied upon the property of the laundry, which had been actually turned over to the appellees the attachment should be discharged, and the proceeds of the property applied to the creditors of the laundry company in accordance with the terms of the transfer to Samuels.
Another question is raised by Fee Gilkey and others, laborers employed by the laundry company. It is ' contended for them that under section 2487 of the Kentucky Statutes the laundry was a manufacturing establishment, and that they are entitled to a prior lien, by virtue of the *615stattite, upon the money and property arising from the sale oí the laundry. The section referred to is as follows: ‘‘When the property or effects of any mine, railroad, turnpike, canal, or other public improvement company, or any owner or operator of any rolling mill, foundry or other manufacturing establishment, shall come into the hands of any executor, administrator, commissioner, receiver of a court, trustee or assignee for the benefit of creditors, or shall in any wise come to be distributed among creditors, whether by operation of law or by the act of such company, owner or operator, the employes of such company, owner or operator in such business, and the persons who shall have furnished materials or supplies for the carrying on of such business, shall have a lien upon so much of such property and effects as may have been involved in such business, and all the accessories connected therewith, including the interest of such company, owner or operator in real estate used in carrying on such business.” The validity of this claim depends upon the question as to whether the laundry is a manufacturing establishment under the statute. The only business of a laundry is to transform soiled into clean linen. It is true that this is done largely by means of machinery, and requires the use of an engine and boilers, and other appliances ordinarily used in manufacturing establishments; but, after all, nothing new is produced. In Hittinger v. Inhabitants of Westford, 135 Mass., 258, if was held that cutting ice on a pond and storing it in a building is not a manufacturing establishment, and so it has been held that an ice-cream confectioner is not a manufacturer, within the meaning of a law exempting manufacturing establishents from taxation. See City of New Orleans v. Mannessier, 32 La. Ann., 1075. We are therefore1 inclined *616to the opinion that a laundry can not be considered a* manufacturing establishment in contemplation of the statute, aupra. For the reasons indicated, the judgment appealed from is reversed, and the cause remanded for proceeding® consistent with this opinion.