Summary
stating that "[s]ince-partnership rests on the intention of the parties each case must be determined upon its own particular facts"
Summary of this case from Ingram v. DeereOpinion
No. 39403.
December 3, 1945. Rehearing Denied, January 7, 1946.
1. PARTNERSHIP: Evidence Establishes Partnership: Consideration Sufficient. While greater proof is required to establish the fact of partnership in an action between the parties themselves than in one by a third party, the evidence was sufficient. It included a receipt and credit statements signed by the deceased partner reciting the partnership and the respective interests, and also a division of partnership profits in several years. Acceptance of the partnership interest and active participation in the business afforded sufficient consideration even though the interest was a gift.
2. WITNESSES: Evidence: Contract With Person Since Deceased: Witness Competent. A person who makes a contract for the benefit of a third party is not incompetent to testify in an action by the beneficiary against the estate of the deceased party to the contract.
3. ACTIONS: Partnership: Declaratory Judgment Act: Written Contract Not Required: Jurisdiction to Declare Partnership. The broad general power under the first section of the Declaratory Judgment Act to declare a status is not limited by a succeeding section dealing with written contracts so as to prevent the declaration of a partnership unless based upon a partnership agreement in writing.
Appeal from Circuit Court of St. Louis County. — Hon. Raymond E. LaDriere, Judge.
AFFIRMED.
Edward W. Tobin and Edward A. Haid for appellants.
(1) An action can be maintained under the declaratory judgment statute only where it seeks the construction of "a deed, will, written contract or other writings constituting a contract". Sec. 1127, R.S. 1939; Transport Oil Co. v. Bush, 114 Cal.App. 152, 1 P.2d 1060. (2) The burden was on respondent to prove the fact of partnership by the clearest and most positive evidence. Chapin v. Cherry, 243 Mo. 375, 147 S.W. 1084; Smith v. Shotliff, 169 Mo. App. 66, 154 S.W. 177; Prasse v. Prasse, 77 S.W.2d 1001. (3) A partnership is formed by contract. Diamond Creek Cons. G. S.M. Co. v. Swope, 204 Mo. 48, 102 S.W. 561; Chapin v. Cherry, 243 Mo. 375, 147 S.W. 1084; 47 C.J., sec. 1, p. 640, sec. 37, p. 648. (4) Respondent's Exhibit A, reading "Received of Edward B. Temm $11,000.00; to be used as part of the capital of the partnership of Robert Temm Company, with the understanding that the profits of Robert Temm Company are to be divided according to the amount of capital each partner has invested," does not constitute a partnership agreement. (5) A contract of partnership must be founded on some legal consideration. Respondent having admitted that he did not contribute $11,000 or any other sum to the capital of the business, or agree to do anything in connection with said business, the contract, if it be such, was without consideration. 47 C.J., sec. 46, p. 654; 17 C.J., sec. 91. p. 438; Jenkins v. Jenkins, 303 Mo. 318, 260 S.W. 111. (6) The fact that respondent was to share in the profits of the business is no evidence that it was a partnership. Thompson v. Holden, 117 Mo. 118, 22 S.W. 905; Mackie v. Mott, 146 Mo. 230, 47 S.W. 897; A. Graf Dist. Co. v. Wilson, 172 Mo. App. 612, 156 S.W. 23. (7) The fact that respondent or deceased may have referred to the business as a partnership is no evidence that it is such. Hazel v. Clark, 89 Mo. App. 78; Wittling v. Schreiber, 202 S.W. 418. (8) Until a prima facie case is made out that a partnership exists, deceased's references to it as a partnership are not admissible. Willoughby v. Hildreth, 182 Mo. App. 80, 167 S.W. 639; Denny v. Brown, 193 S.W. 552; Scott v. Scott, 265 S.W. 864. (9) A gift, by deceased to respondent, of an interest in deceased's business, must be proven by forceful, clear and conclusive testimony which convinces the court beyond a reasonable doubt of its truthfulness. McCune v. Daniels, 225 S.W. 1020; Gosney v. Costigan, 326 Mo. 1215, 33 S.W.2d 947; Cartall v. St. Louis Union Trust Co., 153 S.W.2d 370; Mississippi Valley Trust Co. v. Weber, 148 S.W.2d 579; Leude v. Eiben, 89 S.W.2d 160. (10) No sufficient delivery of the alleged gift has been established. 38 C.J.S., sec. 16, p. 793, sec. 18, pp. 796, 797. (11) James M. Byrne, who, respondent contends, entered into a contract with deceased for the benefit of respondent, was not a competent witness to prove said alleged contract and the court erred in admitting his deposition in evidence. Sec. 1887, R.S. 1939; Asbury v. Hicklin, 181 Mo. 658, 81 S.W. 390; McMorrow v. Dowell, 116 Mo. App. 299, 90 S.W. 728. (12) A partnership in profits does not carry with it a partnership in capital and assets. Dycrle Porter v. Hunt Hunt, 50 Mo. App. 541; McHuley's Admr. v. Cleveland, 21 Mo. 438. (13) If a partnership existed in the capital and profits, on dissolution the estate of of Robert W. Temm, deceased, is entitled to recover first the full amount of the capital contributions of Robert W. Temm to said business before a division of the remaining assets can be made to the partners. Chapin's Estate v. Lang, 205 Mo. App. 414, 224 S.W. 1012; Adams v. Lester's Estate, 215 Mo. App. 606, 257 S.W. 142.
Walter N. Davis, Richard F. Ralph and Frank E. Morris for respondent.
(1) The Missouri Declaratory Judgment Act, practically identical with the Uniform Declaratory Judgment Act, permits the courts to construe and act upon parol contracts. Secs. 1126 et seq., R.S. 1939; Borchard on Declaratory Judgments (2 Ed. 1941), p. 504; Zimmer v. Gorelnik, 42 Cal.App.2d 440, 109 P.2d 34; Trinity, etc., Ins. Co. v. Willrich, 124 P.2d 950. (2) A partnership is a status. Schneider v. Schneider, 347 Mo. 102, 146 S.W.2d 584. (3) The Declaratory Judgment Act pertains to and determines a partnership status and partnership agreements. Borchard on Declaratory Judgments (2d Ed. 1941), pp. 696-7; Brady v. Brady, 48 Ariz. 308, 61 P.2d 390; Grimes v. Toensing, 201 Minn. 541, 277 N.W. 236; Borchard, Declaratory Judgments (2d Ed. 1941), pp. 240, 696. (4) The real test of a partnership is the intention of the parties. As a community of losses is a necessary corollary to a participation in the profits, a partnership may well be predicated on an agreement to share profits as an agreement to share profits and losses and the same rule applies. Hence, a participation in the profits of a business raises the presumption of the existence of a partnership. When a prima facie case is made, and such case is not rebutted by credible evidence showing that the partners were not to share in the losses, or that there was no partnership, then it becomes conclusive or strongly and cogently convincing, and on such facts a court properly declares that a partnership obtained. Fourth Natl. Bank v. Altheimer, 91 Mo. 190, 3 S.W. 858; Torbert v. Jeffrey, 161 Mo. 645, 61 S.W. 863; Lengle v. Smith, 48 Mo. 276; Schneider v. Schneider, 347 Mo. 102, 146 S.W.2d 584; State ex rel. v. Daues, 321 Mo. 910, 13 S.W.2d 537; Goodyear T. R. Co. v. Ward, 197 Mo. App. 286, 195 S.W. 75. (5) Until there is competent proof of a change of status or of a dissolution, a presumption obtains that a partnership, once shown to exist, continues as such. 47 C.J., p. 1121; Anslyn v. Franke, 11 Mo. App. 598. (6) Persons who have admitted, expressly or by conduct, that they are partners will be held to that admission. Under the evidence in this case, Robert W. Temm, when living, would have been estopped to deny that a partnership existed. Appellants, claiming under and through him, are also estopped. 47 C.J., p. 686; Pierce v. Whitley, 39 Ala. 172; Cobb v. Martin, 32 Okla. 588, 123 P. 422; Bush v. Bush, 89 Mo. 360, 14 S.W. 560; Creath v. Nelson, 70 Mo. App. 296. (7) Where an agreement or understanding is silent on the subject of profits, the partners share equally in the profits. Goodyear T. R. Co. v. Ward, 197 Mo. App. 286, 195 S.W. 75. (8) Ordinarily one partner cannot be allowed or recover compensation for services rendered, but it is the well settled rule of law that he may be allowed or recover compensation for services rendered where an agreement or contract, express or implied, for such compensation obtains. Gaston v. Kellogg, 91 Mo. 104, 3 S.W. 589; Cramer v. Bachman, 68 Mo. 310; Morris v. Griffin, 83 Iowa 327, 49 N.W. 846; Lassiter v. Jackson, 88 Ind. 118; Levi v. Karrick, 13 Iowa 344. (9) Salaries, if authorized or paid, with the consent of all the partners, are an expense of the partnership, and are to be deducted as an expense of the partnership before profits are estimated and found. The book entries in this case, under the heading "Expense," authorize the deduction of salaries to both Robert and Edward Temm, before profits are divided, as an expense of the partnership. Winchester v. Glaser, 152 Mass. 316, 25 N.E. 728, 9 L.R.A. 424; Godfrey v. Templeton, 86 Tenn. 161, 6 S.W. 47; Ashe v. Webb, 217 S.W. 654; Maynard v. Maynard, 147 Ga. 178, 93 S.E. 289; Hoag v. Alderson, 68 N.E. 199; Detweiler v. Hanson, 54 Idaho, 46, 28 P.2d 210; Morrow v. Mo. Pac. R. Co., 140 Mo. App. 200, 123 S.W. 1034; 49 C.J., pp. 787-788. (10) The burden of the fact that a deed or instrument, found in the possession of the grantee, was never delivered is upon the grantor, his assigns, or those in privity with him. Clear and convincing evidence must be shown to overcome the presumption obtaining. 10 R.C.L., p. 898; Dickson v. Maddox, 330 Mo. 51, 48 S.W.2d 873; Smith v. Noble, 174 Ky. 15, 191 S.W. 641; Midkiff v. Colton, 252 F. 420; Maloney v. Cameron, 98 Kan. 620, 159 P. 19. (11) The admissions or declarations found in Exhibit A and the numerous statements filed with the bank, signed by Robert Temm, showing that Robert Temm and Edward Temm were general partners, were declarations and admissions against interest, and estopped defendants herein to deny the partnership and the respective interests of Robert Temm and Edward Temm in the assets and profits of the partnership. Bunker v. Fidelity, etc., Co., 335 Mo. 305, 73 S.W.2d 242. (12) It is the well settled doctrine that the subsequent declarations of the donor in the nature of admissions against interest are admissible in evidence to show that he had given the property in question to the donee. Townsend v. Schaden, 275 Mo. 227, 204 S.W. 1076; Cashaw v. Otey, 222 S.W. 804; Bunker v. Fidelity, etc., Co., 335 Mo. 305, 73 S.W.2d 242; Foster v. Nowlin, 4 Mo. 18; McDonald v. McDonald, 86 Mo. App. 122; Mumford v. Mumford, 194 S.W. 898; McCune v. Daniels, 225 S.W. 1020; Schwalbert v. Konert, 230 Mo. App. 811, 76 S.W.2d 445. (13) Where a person gives a joint interest to another with himself in property, no delivery to the donee is required, for the possession of the donor includes possession by the donee. Bunker v. Fidelity, etc., Co., 335 Mo. 305, 73 S.W.2d 242. (14) There was a delivery of a written instrument by which the gift was evidenced; but actually, under the evidence, the delivery to Robert Temm by Joseph Byrne of the fixtures and $40,000 in cash, on condition that Edward Temm was to have a third interest in the property, constitutes Robert Temm the trustee of an express trust, which Byrne said he accepted and told him that he had carried it out. Napier v. Eigel, 164 S.W.2d 908; Ham v. Van Orden, 84 N.Y. 257; Bancroft v. Hambly, 94 F. 975; Bunker v. Fidelity, etc., Co., 335 Mo. 305, 73 S.W.2d 242. (15) The delivery by Robert to Edward of Exhibit A, and its acceptance by Edward constituted a symbolical or constructive delivery, if one was needed after the partnership was created, of an $11,000 interest in the assets of the partnership formed by Robert and Edward Temm as of November 1, 1918. The delivery may be either actual, symbolical or constructive and the one is as effective to pass the title as the other. The delivery and acceptance of Exhibit A was actual and that constructively and symbolically conveyed to Edward Temm a $11,000 interest in the assets of the partnership, the facts later evolving that his interest in the assets and profits of Robert Temm Co. was and is 23¾%. Thornton on Gifts and Advancements, p. 114; Napier v. Eigel, 164 S.W.2d 908; Ham v. Van Orden, 84 N.Y. 257; Bancroft v. Hambly, 94 F. 975; 24 Am. Jur., pp. 725-753. Exhibit A. supplemented by Exhibits B to T, inclusive, showing Edward Temm's interest in the assets and profits, show documents that operated immediately on execution, delivery and acceptance (as distinguished from executory instruments) and no consideration was necessary to support even a gift. 2 Blackstone Comm. 441; Ham v. Van Orden, 84 N.Y. 257; Dartmouth College v. Woodward, 4 Wheat. 518; Bunn v. Winthrop, 1 Johns. Ch. 329; Richardson v. Mead, 27 Barb. 178; Robertson v. Gardner, 11 Pick. 146; Loverlye v. Arden. 1 Johns. Ch. 240; Cruger v. Cruger, 5 Barb. 225. (17) Joseph Byrne gave the fixtures, furniture and fur equipment, together with $40,000, to Robert Temm on the understanding or condition that he would give an interest in the business and assets to Edward Temm. Byrne's gift and his instructions to Robert Temm regarding Edward Temm's interest in the property and money, even though Edward Temm knew nothing regarding them, so far as Edward Temm's interest was concerned, was supported by a valuable consideration. There is no doubt that Edward Temm is entitled to enforce a contract made by Joseph Byrne for his benefit. Howard v. Hardy, 128 Mo. App. 349, 107 S.W. 446. (18) Byrne was a competent witness in this case. He disclaims any interest in the controversy and case, in the partnership or partnership assets or the cause of action on trial; nor is he a party in or to the record. Darnell v. Darnell, 174 S.W.2d 814; Signaigo v. Signaigo, 205 S.W. 23; Kidd v. St. Louis U. Trust Co., 335 Mo. 1029, 74 S.W.2d 827; Craddock v. Jackson, 223 S.W. 924; Taylor v. Coberly, 327 Mo. 940, 38 S.W.2d 1055; Atkinson v. Hardy, 128 Mo. App. 349, 107 S.W. 466; Thompson v. Brown, 121 Mo. App. 524, 97 S.W. 242. (19) Byrne, in his deposition, disclaims any interest in the firm, and testified that he had no claim against either Robert or Edward by reason of any of these transactions. Byrne had no interest in the result of the litigation in issue and on trial, which, in this case, is the right of Edward Temm to have his status as a partner in Robert Temm Co., and his interest therein, declared by the Court's judgment. Signaigo v. Signaigo, 205 S.W. 23; Atkinson v. Hardy, 128 Mo. App. 349, 107 S.W. 466; Thompson v. Brown, 121 Mo. App. 524, 97 S.W. 242; Bradley v. West, 68 Mo. 69. (20) Byrne, in voluntarily making a contract for the benefit of Edward Temm, even unknown to Edward Temm, acting as the agent of Edward Temm in dealing with Robert Temm. An agent is a competent witness for his principal, even though the other party to the contract is dead. Wagner v. Binder, 187 S.W. 1128; Bernblum v. Travelers Ins. Co., 105 S.W.2d 941.
Edward Temm brings this action against the widow of his deceased brother Robert, who is also her husband's executrix, to declare a partnership between him and his brother from November 1, 1918, to May 26, 1940, the date of Robert's death.
For a number of years Joseph Byrne, an uncle of Robert and Edward, carried on a fur business in St. Louis in which he employed his nephews. In 1914 Byrne developed tuberculosis and moved to Denver. He continued his business in St. Louis with the help of his nephews. In 1917 Edward was called to the Army. Sometime before [631] November 1, 1918 Byrne withdrew from his fur business. He turned over the business, furniture and equipment to Robert and gave him $40,000 in cash for the purpose of enabling Robert and Edward to carry on the business for themselves. Byrne told Robert that the money was to be used in a firm which the boys should create and in which Edward was to have a one-third interest. Robert agreed to this and later told Byrne his directions had been carried out. Edward did not learn of the arrangement between Robert and his uncle until after Robert's death. Robert commenced business as of November 1, 1918 with capital assets amounting to $46,409.22 under the firm name of Robert Temm Company. After Edward came back from the Army and returned to the business Robert, in July or August, 1919, gave him a document which reads: "St. Louis, Mo., November 1, 1918. Received of Edward B. Temm $11,000.00; to be used as part of the capital of the partnership of Robert Temm Company, with the understanding that the profits of Robert Temm Company are to be divided according to the amount of capital each partner has invested. Robert Temm Co. Robert Temm, Pres."
Edward believed this interest in the firm was a gift from Robert "offered from the goodness of his heart." The sum of $11,000 was within $22 and some cents of being 23.75% of the capital with which the firm commenced business on November 1, 1918.
For the purpose of procuring credit the firm gave a financial statement to the bank on December 19, 1919 prepared apparently by Edward but signed by Robert which contained the statement "General Partners: Name Robert Temm, Edward Temm."
On November 1, 1920 the firm gave another financial statement signed by Robert which stated: "General Partners: Name Robert W. Temm (76¼%) Edward Temm 23¾%." The same was done in 1921, 2, 3 and 4. In 1925 the form was changed to show Robert W. Temm, "amount Contributed .7625" and Edward B. Temm. "Amount Contributed .2375." This form was also furnished the bank in 1926, 7, 8, 9, 1930, 1, 2, 3, 4, 5, 6, 7 and 8. All were signed by Robert.
In 1938 a signature card was given the bank containing over the signatures of Robert and Edward stating: "The firm of Robert Temm Company is composed exclusively of the undersigned. Checks in the withdrawal of funds from our account may be signed by either of us." In 1937 a resolution signed by both Robert and Edward was furnished the bank authorizing both Robert and Edward to borrow in behalf of the partnership. It stated in its preface: "We, the undersigned, do hereby certify that we constitute all the partners of Robert Temm Co., 116 North Main Street, an unlimited partnership, having its principal offices in the City of St. Louis, State of Missouri . . ."
There appears to have been a distribution of profits in addition to the monthly drawing account or salary each received in only five of the years the partnership existed namely 1922, 3, 5, 7 and 8. These distributions were divided 76¼% to Robert and 23¾% to Edward.
The trial court declared Robert and Edward entered into an agreement of partnership and carried on the business as partners commencing as of November 1, 1918 and that Edward's interest in the partnership estate is 23¾% and Robert's 76¼%. We hold the judgment is sustained by sufficient evidence which is direct and positive.
Generally greater proof is required to establish the fact of partnership in an action between the parties themselves or their representative than in one by a third party. As between the parties direct evidence of an agreement express or implied to form a partnership is ordinarily required.
In this case we have written evidence of the intent to operate as a partnership in the receipt given by Robert to Edward. This is, of course, no formal contract for the creation of a partnership, but is direct evidence of such an intention. While the evidence of the delivery of the receipt to Edward is disputed there was credible evidence that it was delivered and was accepted by Edward. Thus is shown the necessary mutual consent of Edward and Robert to be partners.
The receipt meets another fundamental test for determining whether a partnership exists. It establishes the community of interest between the parties in the business. It also provides for the sharing of profits which is cogent evidence of a partnership particularly in a suit between the parties. There is lacking from the receipt an express agreement to share losses. But such an agreement is not essential. [632] "As between the parties there need be no express agreement that each party shall bear a share of any losses which may occur in the business, since a partnership may be derived from tests other than an agreement to share losses; if such other tests indicate a partnership the partners are to share losses by operation of law as an incident of partnership, since as a legal consequence, one participating in the profits of a partnership is held liable for a share of the losses." 40 Am. Jur. "Partnership", sec. 39. Since partnership rests on the intention of the parties each case must be determined upon its own particular facts. But in Schneider v. Schneider, 347 Mo. 102, 146 S.W.2d 584 we found a partnership existed on evidence which appears not to be as direct and positive as we have here and where there was likewise no express agreement to share losses.
The conduct of the parties subsequent to the giving of the receipt, the admissions in the financial and other statements, the division and distribution of profits in accordance with the per cent of interest each party held in the business all tend to establish conclusively to our mind the partnership and the respective interests as set out in the receipt. The burden on plaintiff to prove the existence of a partnership has been met. Such evidence amply confirmed the gift of the interest in the business to Edward which the receipt evidences, and its acceptance by Edward. It shows that Edward took part in the active management of the business and assumed his share of the partnership liability. Under the circumstances this was sufficient consideration on Edward's part to support the partnership agreement.
Appellants question the competency of Byrne to testify under Section 1887, R.S. 1939, Mo. R.S.A. because Robert is dead. Such question was ruled in Signaigo v. Signaigo (Mo.), 205 S.W. 23 and Darnell v. Darnell (Mo.), 174 S.W.2d 812 contrary to appellants' position. The latter case was reported and annotated in 149 A.L.R. 1125 where the rule is announced that "the weight of authority holds that one entering into a contract for the benefit of a third person is not an incompetent witness (at least if he is not a real party in interest in the action) to testify in respect thereto in the beneficiary's action against the estate, personal representatives, heirs or other persons claiming under or through the deceased party to the contract, either on the theory that such person has no self-interest in the event or outcome of the litigation, or on the theory that he is not a person from, under, or through whom' the beneficiary (a party to the action) claims his title or interest in the action."
Appellants challenge the jurisdiction of the court to enter a declaratory judgment except where based on a formal written contract of partnership. They contend the broad power granted by Section 1126, R.S. 1939, Mo. R.S.A. of the Declaratory Judgment Act, "to declare . . . status" is limited by subsequent sections to the declaration of a status created by a written instrument only. They claim that Section 1130 which states that the enumeration in the preceding sections "does not limit or restrict the exercise of the general powers conferred in Section 1126" merely enlarges the relief which a court may grant in those instances which are enumerated.
We do not agree with such contention. Borchard [Declaratory Judgments, 2nd Ed., p. 2289] points out that it was not necessary to add specific powers to the broad power contained in Section 1 of the Uniform Act (Sec. 1126) since that section is broad enough to carry the complete power. "The enumeration of content and the procedural implementation of the general power in section 1 was designed to furnish to the courts a guide in the construction and application of the declaratory power." See also: Teal v. Mixon, 233 Ala. 23, 169 So. 477. On the issue of the declaration of rights under an oral contract Borchard says (p. 504): "Section 2 of the Uniform Act confers the power to pass upon the `construction or validity', inter alia, of a `written contract or other writings constituting a contract.' From this, the inference may be drawn that only a contract in writing may be construed or interpreted. But such an inference would, it is believed, be erroneous. Section 1 of the Uniform Act, which confers the general power to declare `rights, status and other legal relation', and section 5 which provides that the enumeration in sections 2, 3 and 4 does not limit or restrict the exercise of the general powers conferred in section 1, would seem to make it clear that oral contracts may be passed upon." See also Wollenberg v. Tonningsen, 8 Cal.App.2d 722, 48 P.2d 738; Zimmer v. Gorelnik, 42 Cal.App.2d 440, 109 P.2d 34; Miller v. Currie, [633] 208 Wis. 199, 242 N.W. 570; 1 C.J.S. "Actions", p. 1035. On the propriety of a declaratory judgment on disputed fact issues see: State ex rel. Clay County Bank v. Waltner, 346 Mo. 1138, 145 823 S.W.2d 152; Hyde, Declaratory Judgments, Washington Univ. Law Quarterly. June, 1941.
There is no doubt that the declaration of "rights, status, and other legal relations" authorized in Section 1126 is not limited to those arising under formal, legal written instruments only. Therefore, in this case the court properly exercised its jurisdiction under that section as "a partnership is said to be `a status resulting from contract.'" Baum v. Stephenson, 133 Mo. App. 187, 113 S.W. 225. And see: Schneider v. Schneider, 347 Mo. 102, 146 S.W.2d 584; 47 C.J. "Partnership", sec. 2.
In their brief appellants rely on thirteen points for reversal. In view of the conclusions we have reached it is unnecessary to discuss them separately and in detail. On the evidence before us and in deference to the action of the trial judge, the judgment was proper and should be affirmed.
Judgment affirmed. All concur.