Dodson v. Dodson

37 P. 542, 26 Or. 349, 1894 Ore. LEXIS 107

Opinion

Opinion by

Mr. Justice Wolverton.

The only question in this case is whether, conceding the alleged contract set up in plaintiff’s complaint to have been clearly proven, it contravenes the statute of frauds as not being in writing. The contention of plaintiff is that the parties having entered into partnership relations for the purpose of engaging in the fishing business, the “fish wheels and fishing rights ” are held as a necessary incident to the partnership business, and that the statute of frauds has no application. It is admitted by counsel on both sides that the interest in the fish wheels and fishing rights appurtenant thereto is an interest in real property. It is impossible for a partnership, as such, to hold the legal title to real property; it must stand in the name of some person or persons, or a corporation, the corporation being a person in law.

Footnotes

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* How are we to know, then, what real property is partnership property, and what is not ? “The general rule is undoubtedly this: Real estate purchased for partnership purposes, and appropriated to those purposes, paid for by partnership funds, and necessary for partnership purposes, always becomes partnership property. * * * The three elements above stated must unite in order to make the real estate necessarily partnership property”: Parsons on Partnership, 364; Dyer v. Clark, 5 Met. (Mass.), 562, 39 Am. Dec. 697; Howard v. Priest, 5 Met. (Mass.), 582; Knott v. Knott, 6 Or. 142; Sherwood v. St. Paul Railway Company, 21 Minn. 127. Partnership real property thus held, whether by one or more members of the firm, is, by an equitable conversion, regarded as personal property, for the purpose of paying debts and adjusting the equities between the parties; and the individual member or members holding the legal title become trustees for the partnership in respect to the property, as personalty: Fairchild v. Fairchild, 64 N. Y. 479. The pre vailing elements of a resulting trust are found present, and are necessary to impress partnership real property with the characteristics of personalty. There must be a disposition, conveyance, or transfer of the legal estate, and a consideration paid by the beneficiary; and yet another element is necessary to impress the realty with these characteristics, it must be appropriated to the purposes of the partnership. The beneficiary is always the partnership, and the persons holding the legal estate are usually the partners, or some one of their number, but it may be an outside party having nothing to do with the partnership. When these three elements are potent factors in a partnership transaction, the equitable conversion spoken of takes place, and the real property of the partnership is considered personalty for the purposes of paying debts and adjusting equities between the partners. But whether held as personalty or under the conditions of a resulting trust, it is equally unaffected by and is without the statute of frauds. Hill’s Code, § 781, provides that “no estate or interest in real property, nor any trust or power concerning such property, * * * can be created, transferred, or declared otherwise than by operation of law, or by a conveyance or other instrument in writing, ” etc. Real property may, however, be appropriated to partnership purposes, and often is, and may be essentially necessary for such purposes, and not be the property of the partnership.

It now remains to apply the facts of this case to the principles of law herein announced. That a partnership existed between plaintiff and defendant from about January or February, eighteen hundred and ninety, to the commencement of this suit, there is but little doubt. The lower court so found, and this court finds no reason to disturb that finding. The parties divided the profits of the business, and shared in the expenses of the concern, and treated with, and recognized each other in full accord with the existence of a partnership. At the date upon which the parties entered into this copartnership the defendant was the owner in fee of the two wheels and real property described in the complaint. What effect must be given to the contract of copartnership as touching this property ? The plaintiff’s statement of the contract is, that “he (defendant) agreed that I could have half,—one half of the fish, of the fish and interests in the wheels,—the fishing interests there.” But it is not disclosed by this or any other testimony that plaintiff paid defendant anything for this half-interest, or undertook or agreed to pay anything therefor, nor did the partnership, as such, ever pay, or undertake or agree to pay, any consideration for this property; there was no purchase of it by the partnership with partnership funds. Such a contract being in parol could not have the effect of transferring from the defendant to plaintiff a half-interest in the premises and fish wheels. It was a mere nudum pactum, so far as the land and such wheels were concerned. ‘ A parol agreement by the buyer of lands to admit another into partnership with bim is void under the statute of frauds, as not different from the contract of buyer and seller ”: Bates on Law of Partnership, § 302. Nor could it have the effect of creating a trust concerning land, so as to secure a beneficial interest in the plaintiff for the payment of partnership liabilities, and much less a joint personal interest with the defendant. Smith, J., in Parker v. Bowles, 57 N. H. 496, a case wherein two parties had actually purchased and taken deeds each for an undivided one half interest in premises occupied by a mill which was thereafter operated by them as partners, says: “The referee has found that there was no actual notice and no written agreement, and of course no record, by which any conversion of property from separate to partnership estate was effected. He has also found that Atwood purchased half of the mill property with the expectation of going into partnership in the lumbering businessawith Bowles, and did go into partnership with him, and that they considered and agreed between themselves to treat the real estate which they occupied in transacting their partnership business as partnership property. This agreement was not in writing signed by them, and it therefore seems clear that no trust concerning this land could be created, so as to secure a beneficial interest in the owners for the payment of their partnership liabilities by their parol agreement. Indeed, our statute expressly forbids it. (Citing statute, which is similar to the statute of Oregon in that respect.) When land is purchased with partnership funds and for partnership purposes, there is an implication of law that the land is held for the partnership. But where it is purchased with the separate funds of the partners, it cannot, by a verbal agreement between themselves, be converted into copartnership property, because no trust in lands can be created, unless by writing, except such as arises or results by implication of law; and parol evidence is not admissible to prove any declaration of trust, or agreement of the parties for a trust, although it is received to establish a fact from which the law will raise or imply a trust”: Alexander v. Kimbro, 49 Miss. 529; Wheatly's Heirs v. Calhoun, 12 Leigh, 269, 278, 37 Am. Dec. 654.

There are some cases which hold, where persons have been let into partnership by parol under an agreement that they should become partners in the realty held as an incident to the business, after long and continued existence of the partnership, and payment of the consideration, either in part or whole, that they had acquired an interest in the realty by virtue of such copartnership agreement. But those cases are sustained upon the principle of part performance, and that it would be inequitable to allow the other partners to retain the benefits, and at the same time appropriate the entire realty. Of such are the cases of In re Farmer, Ex parte Griffin, 10 Chicago Legal News, 395, and Marsh v. Davis, 33 Kan. 326, 6 Pac. 612, and others of the same class. But these cases have no application here, as no consideration was paid by plaintiff, and there has been no part performance. The plaintiff claims, however, that he expended in putting in these fish wheels upon the premises of the defendant some seven thousand dollars, and gave the son an allowance during his minority of from thirty dollars to forty dollars per month, and that this and other smaller expenditures in his behalf was accepted by the son, upon final settlement of the guardianship, as a consideration for the half interest in the fish wheels and premises. Upon the other hand the plaintiff cut large quantities of wood from the premises during the minority of the son, and received rents and profits from the land and fish wheels, and it does not appear that he ever filed an account with the county court as guardian of the son. The defendant, therefore, claims that plaintiff was in his debt. However this might have been at the time the alleged contract was entered into, these differences were not discussed nor considered, nor was there any settlement between these parties in regard to them until quite a year afterwards, January nineteenth, eighteen hundred and ninety-one, when defendant filed his written consent in the county court to the discharge of plaintiff as his guardian, and the exoneration of his bondsmen. So that at the time the contract was entered into no consideration for the agreement was in the mind of either party, hence it cannot be said that plaintiff parted with anything of value, or that he has performed even in part his part of the agreement.

The counsel for each party cite Knott v. Knott, 6 Or. 142, and Flower v. Barnekoff, 20 Or. 132, 25 Pac. 370, as authority in support of their respective theories. In the case first mentioned the land was a “necessary incident to the copartnership business,” and was purchased with partnership funds, which latter element of the trust is entirely lacking in the case at bar. The case of Flower v. BarneTcoff belongs to another class, of which Bale v. Hamilton, 5 Hare, 369, is the leading case. The land, in this class of cases, constitutes the “substratum of the partnership,” the commodity in which it deals, and is in no way an incident of th© business. The doctrine of these cases is “that the plaintiff might first prove by parol the existence of the partnership as an independent fact, and, that being established, might then show by the same evidence his interest in the lands considered as the substratum of the partnership.” So that the two classes of cases are entirely distinct, and certain elements are necessary and requisite as potent factors in creating the trust in the former which are dispensed with in the latter. Hence it is apparent that the doctrine of the case of Flower v. Barnekoff is not in all respects applicable to the facts of the case at bar. The record shows that a receiver has been appointed in this case, and that funds of the partnership are in his hands, received by him since the commencement of this suit. These funds ought to be divided between the partners. The decree of the lower court will be modified in accordance with this decision, leaving out of the account the fish wheels and realty, as the same are not partnership property.

Modified.

In this connection see Kelley v. Bourne. 15 Or. 476.—Reporter.