Dinsmore v. J. H. Calvin Co.

108 So. 583, 214 Ala. 666, 1926 Ala. LEXIS 122

• Court: Supreme Court of Alabama
• Decided: April 15, 1926
• Docket: 8 Div. 829.
• Status: Published

Opinion

SAYRE, J.

The action was for the price of goods, wares, and merchandise sold by appellee to a number of defendants alleged in the second count of the complaint to have been “engaged in business as an unincorporated company under the name of Farmers’ Co-operative Union or Farmers’ Union Store.” At the conclusion of the evidence the court gave the general charge for plaintiff as against the appellants, four in number. As for the other defendants named in the complaint, pleas of bankruptcy by four of them were confessed, and the rest were stricken from the complaint. The principal questions to be considered are raised by the brief filed in the interest of the defendant J. J. Dinsmore.

The Farmers’ Co-operative Union was a secret fraternal organization of farmers in Morgan county, having lodges, rituals, signs, passwords, etc. A limited number of members of the union associated themselves together for the purpose of carrying on a mercantile business at Ilartselle, the general purpose being to eliminate profits of middlemen and to distribute profits realized among members of the. union who might trade at the store. The association for carrying on the Farmers’ Union Store was organized among members of the Farmers’ Union, the General Convention of which formulated the plan for the business and for a division of the anticipated profits. The General Convention also, in the beginning at least, elected directors. It appears, however, that afterwards some vacancies in the board of directors were filled by the board, but whether this was correct and general practice we are not informed. Not all members of the union were interested in the store. Individual members acquired an interest in the business of the store by the purchase of stock; but, as witnesses phrased it, stock represented loans to the store which entitled the owners to receive 8 per cent, per annum out of profits and a “bonus” — the witness Kent, who managed the details of the business, referred to this bonus as a dividend —if more than 8 per cent, was earned, and their loans might-be withdrawn at any time. For a time before bankruptcy ensued it was determined to divide profits among all customers, whether or not members of the unioii, in the ratio of their purchases; but, of course, there were-no profits to divide.

With the information afforded by the record as to the purposes and methods of the union at large, it cannot be affirmed that appellants became liable for goods sold to the Union Store by reason solely of their membership in the union. A more definite connection with the business enterprise was necessary to create such liability. But “stockholders,” to use the term apparently preferred by the witnesses, who associated themselves together for the purpose of conducting the business of the Union Store, thereby became members of a quasi partnership, and each individual liable for debts contracted by the association. In this connection, we cannot do better than to quote the following clear statement from 5 O. J. p. 1363, § 97:

“Commercial Associations. — An unincorporated association organized for business or profit is in legal effect a mere partnership so far as the liability of its members to third persons is concerned; and accordingly each member is individually liable as a partner for a debt contracted by" the association. As each partner represents his copartners, so each member of the association represents his comembers, and each is bound by the acts of the others in the common behalf. This liability for the debts of the association is imposed on each member by law. It arises out of his membership as a necessary incident thereto. It does not depend upon any stipulation in the laws of the society making him thus liable, or upon his assent to the contract out of which the debt arises; nor is it necessary that the member should have held himself out as a partner, or that the. credit should have been extended to him rather than to the association. But, on the contrary, by becoming a member, he subjects himself to liability for all debts contracted by the association within the scope of its object and during the period of his membership.”

Many cases are cited in the footnote. To these may be added our cases of Clark v. Jones, 87 Ala. 481, 6 So. 362, and Burke v. Roper, 79 Ala. 142.

On the facts appearing in tlie record, no one could bind these appellants or any other members of the general organization as partners or parties to an enterprise or contract of which they had no knowledge and to which they did not assent; but, to speak cautiously, those-who engaged in the business, that is, became members of the organization for the purpose of .carrying on the store or reaping profit from its business, became thereby liable for its obligations. Lewis v. Tilton, 64 Iowa, 220, 19 N. W. 911, 52 Am. Rep. 436.

Within the letter and fair import of the foregoing statements of principle, it is clear on the facts that appellant defendants were, prior to the date of the account in suit, so connected with the business of the store as to make them liable for goods furnished to that concern, and this is true, we think, notwithstanding the store, a legal nonentity, was nobody’s principal according to strict definition — indeed, they are made liable because of that fact. Lewis v. Tilton, supra. All the appellants were members of the Farmers’ Cooperative Union, all took stock in the Union Store, and three of them at least, Sabotka, Goodson, and C. M. Dinsmore, participated actively as directors in the conduct of the business until it wound up in the bankruptcy court. Fuller v. Rowe, 57 N. Y. 26.

As for appellant J. J. Dinsmore, he at one time owned stock in the store for which lie advanced money, traded there, indorsed its notes — just how executed as to principal does not appear — attended a meeting of stockholders where the affairs of the store were discussed, and was elected a director. There was testimony of witnesses to the effect that the stockholders got the benefit of the business, 8 per cent, and a dividend besides, if more was earned; but whether by this they meant that interest and dividends were actually' paid, or only that the plan contení-Xilated such payments, is not clear. J. J. Dinsmorc’s testimony was that he got 8 per cent, on his stock, but that he got nothing more in the way of bonus or dividend. The evidence showed that along with 75 or1 80 other plaintiffs, describing themselves as “associated and doing business under the name of the Farmers’ Co-operative Union,” whereby', as the evidence disclosed, they meant the business of the store, the name of this apxiellant was used in bringing a suit against the National Surety Company on account of the defalcation of one Self, who x>rior to that time had managed the business. The other appellants in this cause also appeared as plaintiffs in that. The money collected went to the credit of the store with the bank. But this ax>pellant denied that he knew anything of the suit. That made a jury question. But whatever may have been the truth as to that, the facts- of undisputed proof warrant and require the conclusion that the connection of J. J. Dinsmore with the business of the store was such as made him liable for its obligations assumed or contracted during that connection. But he contends that, prior to the time when appellee furnished the goods, wares, and merchandise on account 'of which this suit is brought, he severed all connection with the business of the store. If this contention was sustained by the xiroof, a legal defense was established. We think it clear that by withdrawing from the business in good faith he might thus avoid responsibility for its future engagements. The chief difference between such associations and partnerships, so far as concerns outsiders who deal with them, appears to be that the death or withdrawal of one or more members does not work a dissolution, and that stock may be assigned without affecting the integrity of the concern. In these respects such associations partake of the nature of corporations. Burke v. Roper, supra; Lumber Co. v. Pine Land Association, 31 Tex. Civ. App. 379, 72 S. W. 875; 4 Cyc. 315; 5 C. J. 1338.

Appellant J. J. Dinsmore testified that, after previous indebtedness to plaintiff had been paid in full and prior to the first item of the account here in suit, he transferred his stock to his sister in part payment of a debt he owed her and had had no further interest in or connection with the business of the store. For the certificate of stock thus transferred his transferee afterwards, but prior to the bankruptcy, collected its face value from the store. For the plaintiff the evidence went to show that this appellant attended the last meeting of the directors', shortly before bankruptcy, where that step was discussed, and was there elected or designated in some way to serve as secretary of the meeting. This circumstance appellant explained as follows: Appellant was with his brother, G. M. Dinsmore, and went casually with him to thei place of the meeting, but declined to serve as secretary, and after 10 or 15 minutes left the place without taking any part in the proceedings. The full and true significance of his presence at this meeting of directors was, also, a question for the jury. ■

There is no evidence that J. J. Dins-more gave notice of his retirement from the association. Plaintiff had had dealings with the association prior to the time of the bill in suit. Plaintiff, a wholesale merchant, had furnished goods to the store on -credit for retail. That relation continued over the time in which the goods in suit, so to si>eak, had been furnished. Whether J. J. Dinsmore’s connection with the business — -assuming for the moment that .he severed his connection before the creation of the account in suit — was known to plaintiff, or not, does not appear. Recurring to the analogy afforded by the law of partnership, if, on -principles heretofore stated, this appellant had responsible connection, as a member of the store association or the quasi partnership, with dealings x>i'ior to the time of the bill in suit and was known to plaintiff as a member, this appellant should have brought home to plaintiff notice of his retirement in order to exonerate himself in the matter of future dealings. Park v. Wooten, 35 Ala. 245; Mauldin v. Bank, 2 Ala. 510; 5 C. J. 1362. A retiring member of Such an association may be liable for subsequent debts to creditors who had knowledge of his membership, but had not had notice of his withdrawal. Tyrrell v. Washburn, 6 Allen (Mass.) 466. On the evidence in this record we hold that whether J. J. Dinsmore withdrew in good faith, whether plaintiff knew of his previous connection with the Union Store, and whether plaintiff hgd notice of his withdrawal — if the inquiry reached that stage — were all questions for jury decision.

It is now complained that the trial judge by his remarks to the jury adopted so peremptory a tone as to amount to coercion. We think that what the court said to the jury was no more in effect than the general affirmative charge. Certainly, the record makes it clear that the court intended nothing more.

It results from what has been said that the judgment as against appellants C. M. Dins-more, Sabotka, and Gaodson must be affirmed. As for appellant J. J. Dinsmore, the question of liability should have been submitted to the jury.

Affirmed in part; reversed in part, and remanded.

ANDERSON, C. J., and GARDNER and MILLER, JJ., concur.