Opinion
No. 24080
Decided June 14, 1933.
Contracts — Third person, not named in agreement, may maintain action, when — Third person's rights limited by agreement — Mortgages — Joint tenancy in joint adventure — Real estate purchased, in one party's name, for resale for all — Each party to be liable for one-fourth of mortgages assumed — Shareholders liable only for one-fourth deficiency judgment on foreclosure.
1. Where a party to an agreement, upon a sufficient consideration makes a promise to another party or parties to the agreement for the benefit of a third, such third person may maintain an action at law upon the promise, even though he be not named especially as the person benefited; but such third person acquires no greater rights than are set forth in the agreement.
2. Where an agreement provides that one of the parties has purchased for the purpose of re-sale certain real estate, assuming the payment of the mortgages thereon, and also provides that such purchase was with other parties representing a one-fourth interest for each share, and such agreement further provides that such shareholders are "to share in all the expenditures and as well in the profits and to be liable for their one-fourth interest in the above stated mortgages which is now on said premises," the mortgagees on foreclosure seeking to hold such shareholders as partners for a deficiency judgment are limited to the one-fourth interest held by such shareholders, the relation being in the nature of a joint tenancy in a joint adventure rather than that of a partnership; and the extent of the right of the mortgagees against such shareholders is limited and determined by the terms of the agreement.
CERTIFIED by the Court of Appeals of Allen county.
This case comes to this court upon certificate of conflict by the Court of Appeals of Allen county. In order to understand the averments of the pleadings it is necessary to set forth certain facts relative to the situation of the parties.
Prior to October 1, 1925, one Everett C. Furnas, and Susan R. Furnas, his wife, were the owners of Inlot No. 24 in the original plat of the city of Lima, Allen county, Ohio, and were indebted to plaintiff in error the Union Savings Loan Company as successors to the Allen County Savings Loan Company, in the sum of $18,000. They were also indebted to the Lima First American Trust Company as successor to the First American Bank Trust Company of Lima, Ohio, in the sum of $16,000. The indebtedness was evidenced by promissory notes, which were secured by mortgages upon such real estate.
Everett C. Furnas and Susan R. Furnas conveyed the premises hereinbefore described to one Frank Komminsk by deed of general warranty on October 1, 1925, and by the terms of this conveyance Komminsk, as grantee in such deed, assumed the mortgages hereinbefore mentioned, as part of the purchase price.
It appears that Komminsk, apparently after the execution of the deed above noted, but upon the same day, together with one Theodore Harris and the defendants in error herein, executed the following agreement:
"This agreement witnessed and whereas on the first day or October 1925, the undersigned Frank Komminsk took title to the premises in the city of Lima, Ohio, being:
"Inlot number twenty-four (24) in the original plat of the town, now city of Lima, Allen county, Ohio.
"Having purchased same by warranty deed from Everett C. Furnas, the consideration therefore being the sum of forty thousand ($40,000) dollars, payable as follows:
"Six thousand ($6000) dollars cash and assuming a mortgage of eighteen thousand ($18,000) dollars held by The Allen County Savings Loan Company and sixteen thousand ($16,000) dollars held by The First American Bank and Trust Company.
"And whereas Frank Komminsk has purchased the above described property with Fred Cook representing a one-fourth (1/4) interest; Theodore Harris representing a one-forth (1/4) interest; and Sam Michael and Simon S. Fishel representing a one-fourth (1/4) interest; all in the above described property and to share in all the expenditures and as well as in the profits and to be liable for their one-fourth interest in the above stated mortgages which is now on said premises.
"This property was purchased with the understanding that it was to be sold and the reason for one holder to take title was to make it more easier for the transfer of deed when the sale was made.
"Flossie Komminsk, wife of the said Frank Komminsk, is signing this contract covering her dower interest in the above described property.
"In witness whereof we have hereto set our hands this first day of October, 1925.
"Frank Komminsk, "Flossie Komminsk, "F.W. Cook, "Theodore Harris, "Sam Michael, "Simeon S. Fishel."
On April 15, 1930, said Frank Komminsk conveyed said premises, by warranty deed, to States Realty Incorporated, another of the defendants in the court of common pleas in this action, and by the terms of said conveyanee the grantee, States Realty Incorporated, assumed the mortgages above mentioned.
On July 13, 1931, the Union Savings Loan Company, plaintiff in error, commenced this action in the court of common pleas of Allen county, for judgment on said note and foreclosure of its mortgage, and sought judgment thereon against the said Frank Komminsk, Fred W. Cook, Sam Michael, Simon S. Fishel and Theodore Harris for the full amount of the note and for foreclosure of its mortgage.
In this proceeding the Lima First American Trust Company was made a party defendant, and by cross-petition in the same action set up its note and mortgage, alleged the successive transfers from Furnas and wife to Komminsk and from Komminsk to the States Realty Incorporated, set forth the foregoing agreement between Komminsk and the others, and prayed personal judgment against all of said defendants, Everett C. Furnas, Susan Furnas, Frank Komminsk, Fred W. Cook, Sam Michael, Simon S. Fishel, Theodore Harris and States Realty Incorporated, for the full amount of said note and for foreclosure of its mortgage.
Both the plaintiffs in error, the Union Savings Loan Company and the Lima First American Trust Company, sought to recover personal judgments against each of the defendants, Cook, Michael, Fishel and Harris, for the full amount due on the respective notes of the plaintiffs in error, on the theory that said defendants were partners.
Defendants by answer admitted the execution of the notes and mortgages by Everett C. Furnas and his wife, the conveyance from Furnas and wife to Komminsk, the assumption of said mortgages by Komminsk, the conveyance by Komminsk to States Realty Incorporated, and the assumption of the mortgages by States Realty Incorporated, the execution of the agreement hereinbefore set forth, and admitted that the defendants were severally liable for one-fourth only and no more of said indebtedness.
No service of summons was had on the petition or cross-petition of the plaintiffs in error upon the defendant Theodore Harris or upon the defendants Everett C. Furnas and Susan R. Furnas.
In proceedings had in the court of common pleas, personal judgment was entered by the court in favor of both plaintiffs in error in the full amount of their notes against each of the defendants, Komminsk, Cook, Michael, Fishel and States Realty Incorporated, and foreclosure and sale of the mortgaged premises was ordered. The court of common pleas held that personal judgment for the full amount could be entered before the sale of the mortgaged premises.
Thereafter proceedings in error were prosecuted to the Court of Appeals of Allen county by three of the defendants in the court below, the present defendants in error, and upon the hearing thereof in the Court of Appeals such court found that there was error apparent upon the record of the proceedings of the court of common Pleas, in that the personal judgments entered by the court of common pleas against these defendants in error and in favor of the plaintiffs in error were contrary to law, because the liability of these defendants in error is only in proportion to one-forth each regardless of whether or not the contract between Komminsk, Cook and others be or be not one of partnership. The Court of Appeals thereupon modified the judgment of the court of common pleas, by entering judgment against each of the defendant in error, who were plaintiff's in error in the Court of Appeals, for one-fourth only of the indebtedness due the plaintiffs in error, and as so modified affirmed the judgment of the court of common pleas.
The Court of Appeals in the instant case found that its decision on the point that personal judgment could be entered before a sale of the mortgaged premises, and before ascertainment of any deficiency, was in conflict with a judgment pronounced upon the same question by the Court of Appeals of the Fifth Appellate District, in the case of Marion Development Co. v. Bruce, 39 Ohio App. 253, 177 N.E. 471, and thereupon certified this case to this court for review and final determination.
Mr. John W. Roby and Mr. Clarence H. Klinger, for plaintiffs in error. Messrs. Mackenzie, Weadock Landis and Mr. Sylvan, H. Wise, for defendants in error.
There are two questions presented by this record: First, may a judgment be taken by a mortgagee for the amount of the unpaid mortgage indebtedness against an assuming grantee before the sale of the mortgaged premises? Second, what is the liability of the defendants in error under the agreement of October 1, 1925, identified in the record as Exhibit A, the parties thereto being Frank Komminsk and his wife, Fred W. Cook, Theodore Harris, Sam Michael and Simon S. Fishel?
This court has recently passed on the point whether a deficiency judgment may be taken against those liable on a promissory note and mortgage, in an action upon such note and to foreclose the mortgage as shown by the fourth paragraph of the syllabus in the case of Simon v. Union Trust Co., 126 Ohio St. 346, 185 N.E. 425:
"Where an action for personal judgment on a note is joined with an action for foreclosure of a mortgage securing such note, judgment may be rendered for the full amount due upon the note, prior to the sale of the mortgaged premises, and need not be deferred until the result of the sale is ascertained and the deficiency determined."
This is the point upon which the certification of conflict was made, and the above-noted case is decisive and disposes of the first ground of plaintiffs in error's contention.
The second question for determination is, What rights have the plaintiffs in error under the agreement of October 1, 1925, Exhibit A, between Komminsk, Cook, Harris, Fishel and Michael?
It is to this instrument that the plaintiffs in error must look for any claim against those who assumed the liability under the mortgages in question at the time of the conveyance of the property to Komminsk. We are quite in accord with the contention that an action was maintainable thereon against defendants in error by the holders of the note and mortgage, but recovery on such agreement was entirely limited to the terms and provisions of the agreement. The same provided, among other things:
"And to be liable for their one-fourth interest in the above stated mortgages which is now on said promises."
This language clearly indicates that the parties to such agreement limited the liability of the holders of the various shares "to be liable for their one-fourth interest" in the mortgage indebtedness, and we are of opinion that such is the limit of the liability.
We cannot take the view that the agreement made the signers thereof partners, and that as such each is liable for the debts of all under the general partnership rule. True, there can be a partnership in the owning of and dealing in real estate, Heirs of Ludlow v. Devisees of Cooper, 4 Ohio St. 1, but such was not this agreement. On the other hand, a joint purchase of land and an agreement to share the profits and losses of selling it do not make a partnership. The parties are simply tenants in common. Clark v. Sidway, 142 U.S. 682, 12 S.Ct., 327, 35 L.Ed., 1157; Holton v. Guinn (C. C.), 76 F., 96; Dunham v. Loverock, 158 Pa. 197, 27 A. 990, 38 Am. St. Rep., 838; Taylor v. Fried, 161 Pa. 53, 28 A. 993; Millett v. Holt, 60 Me. 169; Sikes v. Work, 72 Mass. (6 Gray), 433; Howe v. Howe, 99 Mass. 71; Moody v. Rathburn, 7 Minn. 89.
We view the parties to this instrument as those taking part in a joint adventure, rather than as partners; that their relationship was in the nature of a joint tenancy, and not that of partnership.
To constitute a partnership the evidence must show that the persons shared profits as principals in a joint business, in which each had the express or implied authority to bind the other; and it is founded on the relation they sustain of being, each, principal and agent in the joint business. Harvey v. Childs Potter, 28 Ohio St. 319, 22 Am. Rep., 387.
Partnership generally is used to characterize a generally continuing joint adventure, while the term "joint adventure" refers to or designates a single transaction, such as in the instant case, which involves the purchase and sale of the single piece of real estate in question, to wit, Inlot 24 in the original plat of the town, now city, of Lima, Allen county, Ohio. The case of Harvey v. Childs Potter, supra, states the rule and is applicable in cases of true partnership, but in the opinion in that case, at page 323, it is pointed out, in discussing cases where money is advanced to be used in a trading business and returned in a year, with a share of the profits, that it may well be implied that the business was conducted on behalf of and by the authority of the person advancing the money and sharing the profits, for it is to the continuing trade in the ordinary way that he looks for his profits: "But such cases are plainly distinguishable from one where money is advanced, to be embarked in a single transaction, where no credit is contemplated. In such case there is no ground for the implied authority to incur debts, such as exists in regard to a general trading business."
In the instant case, however, the very language of the agreement is conclusive as to the extent to which the holders of the various shares bound themselves; and the third party, who is seeking to enforce the terms of this agreement, is bound thereby.
It is well settled in this state that if one person, upon a sufficient consideration, makes a promise to another for the benefit of a third, such third person may maintain an action in law upon the promise; nor need he be named especially in the agreement as the person benefited. Emmitt v. Brophy, 42 Ohio St. 82; Trimble v. Strother, 25 Ohio St. 378, 381: "The plaintiff's right rests solely on the agreement."
Entertaining the view that the parties to this agreement were joint tenants, arising from a contract creating a joint adventure, and not a partnership, the modification of the order of the court of common pleas made by the Court of Appeals was right; and this conclusion must be affirmed whether the agreement be a partnership or a joint adventure, for the rights of the plaintiffs in error can rise no higher than the terms of the written agreement upon which they rely, which fixes the liability of the various signers to such agreement to be "for their one-fourth interest in the above stated mortgages which is now on said premise." More than this the plaintiffs in error cannot recover. It therefore follows that the judgment of the Court of Appeals must be affirmed.
Judgment affirmed.
WEYGANDT, C.J., ALLEN, STEPHENSON, JONES and MATTHIAS, JJ., concur.
BEVIS, J., not participating.