Court Opinion

ID: 9730478
Source: CourtListenerOpinion
Date Created: 2023-08-26 15:13:44.163624+00
Date Added: 2024-06-11T18:26:06.819728
License: Public Domain

HERTZ, Acting Justice
(dissenting).
I dissent.
Insurance Agents (Insurance Agents) commenced this action to recover insurance premiums due on a contract of insurance commencing on June 6, 1980, and effective through February 27, 1981. The insurance was provided by Insurance Agents to a business known as RY Land U.S.A. The issue is whether Sam Zimmerman (Sam) or Joyce Zimmerman (Joyce) or both of them are responsible for the debts of RV Land U.S.A. Joyce filed an answer denying responsibility for the insurance premium; however, Sam filed no answer and defaulted in the lawsuit. Joyce appeals from that portion of the judgment which holds her jointly and severally liable to Insurance Agents for the premiums due.
In order for the proper resolution of the issue raised by this appeal, it is necessary to set out in greater detail the pertinent facts of this case.
Sam and Joyce were married in 1964 and they had three children. They were divorced on October 28,1983. They also separated a number of times during their marriage. The major separations occurred from January through July of 1980, October through December of 1981, and August through October of 1983. Sam and Joyce lived in Ponca, Nebraska, from 1970 through 1980. While living in Ponca, Sam was involved in a gas station and trailer rental business known as Sam’s Sales and Rentals. During that time, Joyce taught school in the South Sioux City School system.. Also during this time Joyce helped out at Sam’s business periodically, but received no pay or specific share of the profits.
In January of 1980 Sam left Joyce and moved to Vermillion, while she continued to live in Ponca, Nebraska. From January of 1980 until July of 1980 when the parties reconciled there was only one contact between Sam and Joyce. It was during this separation period that Sam established a business known as RV Land U.S.A. at the intersection of Highway 50 and 1-29 in Union County, South Dakota. It was also during this time when Sam applied for some insurance from Insurance Agents. The insurance policy was for fire, automobile and workmen’s compensation for the RV Land U.S.A. business venture. No part of the insurance was for Sam or Joyce individually, and the insurance specifically would not cover any vehicles owned by or registered in their individual names.
The application for insurance was signed by Sam only, and Insurance Agents acknowledge they didn’t know why Joyce’s name was never placed on the billing doc*222uments. The application for insurance was never entered into evidence at the trial court level.
Sometime in July of 1980 after this business insurance had been purchased, Sam and Joyce reconciled. Joyce continued teaching in Sioux City and she also began helping Sam at his business as a result of advice given by a marriage counselor. In the fall of 1980 Joyce purchased a personal automobile and requested Insurance Agents to provide insurance on the auto. This insurance coverage was never provided by Insurance Agents and she subsequently obtained insurance from another carrier. None of the vehicles that she had driven were ever owned by Sam or by RV Land U.S.A. In September of 1981 Sam entered into an agreement between himself as sole proprietor of RV Land U.S.A., and the Union County State’s Attorney for the liquidation of RV Land, with the proceeds going to the various creditors of RV Land U.S.A. See: In the Matter of the Voluntary Liquidation of R-V Land, USA, 340 N.W.2d 458 (S.D.1983). Joyce was not a party to this agreement; however, she did help the State’s Attorney in locating titles to the various vehicles involved in the sale.
In order for Insurance Agents to recover the unpaid insurance premium, it was necessary to show by a preponderance of the evidence that Joyce either directly or impliedly authorized Sam to incur this particular debt, and thereby acknowledging responsibility for the debt, or that an actual partnership or a partnership by estoppel existed under the facts of the case.
There was no evidence that Joyce ever requested this insurance or agreed to pay for it at the time Sam contracted with Insurance Agents. Insurance Agents admitted that the application for insurance was filed solely by Sam and that they never had any conversations with Joyce concerning the insurance, not to mention the consent to assume liability for the premium. Further, Sam admitted that he had no authorization from Joyce to purchase this insurance.
The trial court concluded that a partnership in fact existed, thereby rendering Joyce liable for the unpaid insurance premiums.
The separate property of a wife is not liable for the debts of her husband. SDCL 25-2-6. A husband has no original or inherent power to act as his wife’s agent and to bind her to his acts unless she has authorized him to act as her agent or ratified his actions as her agent. Bauer v. Graner, 266 N.W.2d 88 (N.D.1978). It can never be presumed that a husband is his wife’s agent and authorized to bind her by his actions. Proof of the existence of the marital relation does not establish the husband’s agency for his wife. The agency of the husband is a question of fact which may be proved by either direct or circumstantial evidence. 41 C.J.S. Husband and Wife § 70 (1944).
The fact that Insurance Agents put Joyce’s name on the policy does not make her responsible for the premiums unless there is further evidence that Joyce consented, authorized or ratified that act. There is some indication that the trial court concluded Joyce ratified the contract of insurance by Sam by her failure to object. However, silence after acquiring knowledge does not amount to ratification. 41 C.J.S. Husband and Wife § 69 (1944). Furthermore, the evidence was uncontra-dicted that no copy of the application was left with Sam; that Joyce never saw the billings for the insurance premiums; and that as a matter of fact, Joyce was not aware of the insurance purchased by Sam until she received a phone call at school, at which time she advised Insurance Agents that she had absolutely nothing to do with the RV Land U.S.A. business.
It is apparent from the Findings of Fact and Conclusions of Law entered by the trial court that Joyce’s liability was predicated on the theory that a partnership, either actual or by estoppel, was proven by the evidence.
South Dakota has defined partnerships by statute: A partnership is an association of two or more persons to carry on as *223co-owners a business for profit. SDCL 48-1-2. In determining whether a partnership exists, the rules contained in SDCL 48-1-5 to 48-1-8 shall apply. SDCL 48-1-4. Except as provided by SDCL 48-2-13 and 48-2-14, persons who are not partners as to each other are not partners as to third persons. Common ownership does not by itself establish a partnership. SDCL 48-1-6. Sharing gross returns does not of itself establish a partnership. SDCL 48-1-7. However, sharing profits is prima facia evidence of partnership. SDCL 48-1-8.
This state has adopted the rule that strong evidence is required to prove a business partnership between a husband and wife because it is not uncommon for a wife to help her husband in his business. Snell v. Watts, 77 S.D. 534, 95 N.W.2d 453 (1959). In Snell we held that a wife’s activities in helping her husband in his business will not constitute a partnership unless there are further indications that the parties intended a partnership or, as it was in Snell, there are admissions that they were business partners. It is important to note here that there was never any admission on the part of Joyce or any testimony by any other person that Sam and Joyce were business partners. In fact, Insurance Agents, in their one contact with Joyce, were advised by Joyce that she had nothing to do with the RV Land U.S.A. insurance, and that they had better talk to Sam. Snell obviously is no help to Insurance Agents because of the distinct factual difference, that being the admission in Snell that the spouse was a partner.
The trial court found as a fact that Sam and Joyce jointly operated Sam’s Sales and Rentals in Ponca, Nebraska. There appears to be no evidence to support this finding. Both Sam and Joyce testified that this was not true, and this was the only evidence offered on the subject. Insurance Agents failed to introduce any evidence of joint operation to support this finding by the court. The trial court found that Sam and Joyce moved to Vermillion in 1979 when the uneontradicted fact is that Joyce moved to Vermillion in July of 1980, which was the time of the reconciliation of the parties after one of their separations. The trial court found that Joyce received consideration from the liquidation of RV Liquidators, which came into existence two years after the contract of insurance entered into by Sam. The evidence again supports the conclusion that Joyce did not receive any such consideration. The court also held that RV Liquidators was “born out” of RV Land U.S.A. and conducted jointly by Joyce and Sam. Again there is no evidence in the trial record to support this finding, and one which was specifically denied by both Joyce and Sam.
In determining whether a partnership exists there are three requirements that must be met: (1) an intent to form a partnership; (2) sharing in the profits; and (3) authority of each party to run the business. Rowley on Partnership § 7.6 (2d ed.) There was no finding by the trial court of intent of Sam and Joyce to establish a partnership; no finding of sharing of profits; and no finding of joint control over the business. Since there was no findings as to any of the indicia of partnership, there can be no conclusion of law entered that there was a partnership.
The testimony at the trial clearly shows that no actual partnership existed, nor was there partnership by estoppel. The following is an itemization of acts and conduct which belie the existence of a partnership:
(a) RV Land U.S.A. was established between January of 1980 and July of 1980, which coincidentally occurred during one of the extended separations of the parties.
(b) Sam obtained all of the necessary licenses for the business solely in his name.
(c) All of the business tax returns for the business were filed in Sam’s name as a sole proprietorship.
(d) During this period of separation Sam applied for the insurance which resulted in the premium claim by Insurance Agents.
(e) No part of the insurance was for Sam or Joyce individually so that it could *224not be said that Joyce personally benefited by the policy. .»
(f) Joyce was not present at the time -Sam applied for this insurance.
(g) Joyce never authorized Sam to act in her behalf.
(h) Sam testified that he had no authority to order insurance on Joyce’s behalf.
(i) Sam testified without contradiction that he never told anyone, let alone Insurance Agents, that he and Joyce were partners.
(j) That Insurance Agents at no time asked whether they were partners.
(k) The application for insurance was never signed by Joyce.
(l) When Joyce and Sam reconciled in July of 1980 Joyce continued her teaching duties in the Sioux City School system, albeit she did begin helping Sam in his business as time would permit as a result of advice given by a marriage counselor.
(m) Joyce was never paid for her help, nor did she ever give any indication to anyone that she was a partner.
(n) There was no written or oral partnership agreement or profit sharing agreement.
(o) Joyce never had any authority to sign checks on the RV Land account.
(p) Joyce, as a matter of fact, did .not receive any of the profits from RV Land U.S.A.
(q) At all times the income from RV Land and all the other businesses that Sam was involved in was reported on Schedule C of his income tax return as a sole proprietorship.
(r) There never were any partnership income tax returns filed by Sam or Joyce.
(s) The money generated from RV Land U.S.A., and even the other businesses later initiated by Sam, was withdrawn for business uses and not for personal benefit of Joyce.
(t)State and federal tax returns all showed that RV Land U.S.A. was a sole proprietorship in the name of Sam.
Joyce admitted she had a right to sign checks on the J.Z. account and did deposit money in that account and write checks on it. However, the evidence was also clear that she was never authorized to sign checks on the RV Land U.S.A. account. It has been held that a wife drawing checks on a bank account does not by itself establish a partnership. Skaar v. Wisconsin, 61 Wis.2d 93, 211 N.W.2d 642 (1973). The fact that Joyce did some bookkeeping and occasionally waited on customers when not involved in her teaching duties does not establish a partnership. Ogallala Fertilizer Co. v. Salsbery, 186 Neb. 537, 184 N.W.2d 729 (1971). Joyce assisted in the sale of the RV Land U.S.A. assets and received a consideration of $8,000.00 for the sale of the business assets, which she testified was paid over to Sam and Sam testified that he in fact received that money. RV Liquidators was in existence approximately two years after the insurance contract at issue herein. Even if it somehow can be presumed that Joyce was a partner in RV Liquidators, which she has denied, this certainly does not make her liable for the debts of RV Land U.S.A. which were incurred two years earlier.
In Munce v. Munce, 77 S.D. 594, 96 N.W.2d 661 (1959), where a relative worked in a business for 23 years, this court held that this did not make the relative a partner in the business. As mentioned herein, in order to establish a partnership there must be proof that the parties intended a partnership, that the profits were shared, and the parties shared control over the business. No sufficient evidence in any of these areas was ever presented for consideration by the trial court in the determination of the partnership status of the parties.
Although Insurance Agents claim that Joyce financially profited because of the RV Land U.S.A. business, that is if it had been financially successful, that does not *225make the wife a partner in the business. If this was so, every wife would be a partner in the business venture of their respective husbands. South Sioux City Star v. Edwards, 218 Neb. 487, 357 N.W.2d 178 (1984).
In deciding that Joyce was a partner, the trial court ignored the fact that there is a great distinction between a partner and an employee. A partner shares in the profits and losses and has equal rights in the management and conduct of the business, whereas an employee is controlled in his performance of the work and does not share in the profits and losses. Annot., 137 A.L.R. 6, 11 (1942).
The evidence does show that Joyce had her full-time teaching job in Sioux City and Sam had his time involved with RV Land U.S.A. It seems unreasonable to assume therefrom that she could be a full-time partner with rights of management and control.
From all of the foregoing it is clear that Insurance Agents failed in their proof insofar as to whether or not an actual partnership existed between Sam and Joyce.
Neither is there any evidence of a partnership by estoppel.
SDCL 48-2-13 provides that one may be liable as a partner by estoppel if one holds himself out as a partner and another relies on that. There is simply no evidence in the record to support a conclusion that Joyce held herself out as a partner with Sam in the business conducted under the name of RV Land U.S.A.
Insurance Agents have presented testimony concerning events occurring between Sam and Joyce long before and long after the purchase of the insurance. However, there is simply no evidence that Insurance Agents were aware of those prior events at the time they extended credit to Sam or that they relied upon those events in any way. This being so, partnership by estop-pel simply has no application to the facts of this case.
The trial court apparently relied upon five business events in reaching its conclusion that an actual partnership or a partnership by estoppel existed. However, a reading of the record indicates that these incidents all occurred after June 6,1980, on which date Sam had purchased the insurance. It is difficult to visualize any reliance on behalf of Insurance Agents based on these after-the-fact occurrences. It is significant in this regard that the check written by Sam at that time to Insurance Agents indicated a corporation, RV Land U.S.A., Inc., and not a partnership. Certainly there was nothing in the issuance of this check that would permit the inference that Joyce was a partner. It is also worthy of note that an examination of the documents filled out by Insurance Agents on June 6, 1980, indicates that they were looking towards Sam and not to Joyce for the payment of the insurance premium. The company memo indicates that the insured is Sam Zimmerman, d/b/a RV Land U.S.A. It is obvious that the insurance was sold to Sam, not to Joyce.
South Dakota has enforced partnerships by estoppel, but only where the parties have held themselves out as partners and by so doing, induced others to deal with them as partners. Anderson v. Security Land Co., 55 S.D. 40, 224 N.W. 937 (1929), and IHC v. Graber, 59 S.D. 601, 241 N.W. 726 (1932).
In the view of this writer at least, Insurance Agents have failed to sustain their burden of proof to establish either an actual partnership or a partnership by estoppel. Joyce did nothing more than any wife would do who was trying to hold together a precarious marriage. She tried to help her husband out through her own labor when she was not required to be teaching. It would seem that if the amount of help that Joyce offered to her husband in his business ventures constituted a partnership, then many marriages would effect the same result. The majority decision makes a wife with but very minimal contacts in her husband’s business, a full-fledged partner liable for the debts incurred solely by her husband. This in spite of the fact that *226the evidence is almost overwhelming to the contrary.
It seems patently obvious to this writer that Insurance Agents initially looked to Sam only for the insurance premium payment. However, when Sam became insolvent Insurance Agents needed to look for someone better situated financially — who better than the luckless wife of Sam Zimmerman.
Accordingly, I am compelled to conclude that the trial court’s decision was clearly erroneous and therefore the decision should be reversed.