Miller v. Ashley Rumelin , 127 Or. 215 ( 1928 )

In Banc. Plaintiffs sued defendant for an accounting. Plaintiff Martha Miller is the executrix of the estate of her deceased husband, J.A. Miller. For many years prior to the death of J.A. Miller he and defendant were partners engaged in constructing city improvements such as sidewalks, sewers and pavements. J.A. Miller died testate August 19, 1924. For a number of years beginning in 1917 the partnership of Miller and Bauer did a large amount of work for the City of Astoria. They received for their work city warrants, part of which were general warrants and others special warrants payable as collected from the property owners. The partnership of Miller and Bauer completed their work in Astoria in 1921. A disastrous fire occurred in Astoria December 8, 1922. The fire so depleted the resources of Astoria and its citizens that the city was unable to pay the warrants issued to Miller and Bauer. During all of the years said partnership was engaged in said work defendant was their banker and financed them, thus enabling them to continue work. Plaintiffs sued for an accounting, showing the account of Miller and Bauer with defendant during the years, 1920, 1921, 1922, 1923 and 1924. The aggregate amount of business transacted during said time by the said partnership was large and plaintiffs claimed that defendant had failed to account to said partnership for a large amount of money. The case was tried as an equity case and after considerable testimony was taken the claim of plaintiffs was reduced from approximately $300,000 to about $30,000. Defendant having failed to account for the said sum of about $30,000 satisfactorily the learned trial court referred the case to John P. Winter, Esq., to take the testimony for the purpose of determining the liability of defendant on said items. A large amount of testimony was taken. At the oral argument in this court plaintiffs frankly conceded that only the items aggregating $12,400 and $5,100 were unaccounted for. Twelve thousand four hundred dollars were city warrants which defendant claims to have purchased from said partnership in 1921. The item of $5,100 consisted of warrants deposited as security in the U.S. National Bank. The latter warrants originally secured a note for $6,000 to said U.S. National Bank given by defendant. Said note was signed individually by both Messrs. Ashley and Rumelin. Defendant claims that the proceeds of that note, said $6,000, was in reality a loan made to said partnership which applied to defendant for a loan. Defendant was not then in a situation to make the loan but borrowed the said sum from the U.S. National Bank, giving its note signed by Ashley and Rumelin as aforesaid and deposited the warrants as security. These warrants were finally collected by J.H. Kelley, an attorney for plaintiffs, in July, 1925. It is claimed by plaintiffs that the $12,400 warrants belonged to said partnership; that the $5,100 warrants belonged to said partnership and was used by defendant to secure its obligation to said U.S. National Bank; that the money borrowed from said U.S. National Bank by defendant was not for the benefit of said partnership, and that said partnership did not receive the proceeds of said loan. The defendant answered admitting the formal parts of the complaint, the capacity of the parties, that J.A. Miller and E.H. Bauer were partners during the time covered by the account under investigation, denied that a full and complete accounting had not been made, and pleaded two separate affirmative defenses. First, that during the time mentioned in plaintiffs' complaint the said partnership carried an active account with defendant; that statements were rendered by defendant to said partnership from time to time; that no objection had ever been made to said statements and that the same had become accounts stated; that plaintiffs were bound by said account so rendered and were estopped now from claiming an accounting; second, this defense repeats the averred facts in the first affirmative defense and alleges the death of J.A. Miller of said partnership on August 19, 1924; that said Miller transacted all the business with defendant; that during all the said time said Bauer of said partnership was ill and incapacitated from transacting business; that by reason of the death of said Miller long prior to the institution of this suit defendant was deprived of the benefit of said Miller's testimony; that said Miller could and would have testified that the accounts made by defendant to plaintiffs were accurate and correct; that said Miller acted for said partnership, sold said warrants to defendant, and would so testify if living. The court found for defendant and rendered judgment in favor of defendant against plaintiffs for the sum of $900 principal with $159 accrued interest, together with interest on the sum of $900 at the rate of 8 per cent per annum from June 15, 1927, the date of the judgment. Neither party recovered costs. Thirteen alleged errors are assigned by plaintiffs. In the oral argument here, however, the only assignments insisted upon are the alleged errors of the court in holding that the $6,000 par value of warrants placed with the U.S. National Bank for security for a note of Ashley Rumelin was placed there for the benefit of said partnership, and that the $12,400 warrants were sold by said partnership to defendant. For that reason the discussion to follow will be confined to those two items.

AFFIRMED. The principal contention of plaintiffs in this court is that said partnership was a nontrading partnership, and that J.A. Miller of that firm was not authorized without special authority from or consent of his partner to sell the warrants involved in this litigation: 1 Rowley on Partnership, §§ 151, 426;Schumacher v. Summer Tel. Co., 161 Iowa, 326 (142 N.W. 1034, Ann. Cas. 1916A, 203, 207); Harris v. Mayor, 73 Md. 22 (17 A. 1046, 20 A. 111, 25 Am. St. Rep. 565, 8 L.R.A. 677);McManus v. Smith, 37 Or. 222 (61 P. 844); Lee v. Ellis,121 Or. 259 (233 P. 873).

The evidence shows beyond question that decedent Miller transacted all of the business with the bank. He conducted this business for several years. Plaintiff Bauer knew that his partner Miller was transacting the business and never at any time inquired of the bank about the business nor made any objection to the manner in which it was being transacted until many months after the death of his partner. Indeed, plaintiff Bauer testified as follows:

"Q. You never authorized anybody to do any business, did you? Mr. Miller looked after the business, didn't he? A. Practically altogether, yes.

"Q. And he had power to sell these warrants from time to time, didn't he? A. Sure.

"Q. So that if the bank here, the Ashley Rumelin Bank, bought them and put it on the account, it was a perfectly legitimate transaction, so far as you know? A. So far as I know. * *

"Q. Where did Miller Bauer get their money to transact business on? A. Almost exclusively from Ashley Rumelin. The last few years we got some down at Astoria, but almost exclusively from Ashley Rumelin.

"Q. How did you think Ashley Rumelin were paid back? A. By interest, and so on and so forth.

"Q. How would you pay the principal? * * A. As soon as the warrants were either sold with Freeman, Smith Camp or several other bonding houses, I understood we always sold those, some I have not mentioned, and as soon as the money was released, then the money was taken to Ashley Rumelin to liquidate any debt that they may have had there at the time. That was my understanding of the whole transaction.

"Q. And yet Mr. Miller might have sold them to Ashley Rumelin direct, as these transactions show he did? A. Well, he reported the statement to me that he did not.

"Q. Answer the question. He may have sold them to Ashley Rumelin direct, as these transactions show he did? A. Sure.

"Q. And if he did, it was a legitimate transaction, as far as you are concerned? A. I expect it would be."

There is no disputing the claim of defendant that Miller of the partnership almost exclusively attended to the financial affairs of the partnership. The partnership business was so conducted for several years. It was not necessary that direct authority be conferred by one partner upon the other to transact such business as is usually transacted by a commercial partnership. The fact that the business of a nontrading partnership is conducted in a certain manner for a number of years is very convincing evidence that both parties acquiesced in and assented to that manner of doing business. If one partner transacts a certain line of business necessary to the promotion of the partnership affairs for a number of years without objection from the other partner we may conclude that the former was authorized by his partner to so transact the business. Long acquiescence will amount to ratification: Maasdam v. Van Blokland, 123 Or. 128, 135 (261 P. 66). Plaintiff Bauer received the benefits of the transactions with defendant and enjoyed the fruits of the money received by said partnership. He cannot now repudiate the transactions of his partner.

Mr. Kelley, one of the attorneys for plaintiffs, collected the warrants under discussion. In his argument to this court Mr. Kelley said:

"* * In February, 1924, Mr. Miller came to me and asked me to endeavor to collect the balance of the Astoria warrants which they had, amounting to about $18,000, comprising warrants issued on three different districts. * * On July 30, Miller of Miller and Bauer gave an order. * * On July 30th an order was given by Mr. Miller on Ashley Rumelin to deliver the warrants to me for collection. * * At the time the warrants were delivered Miller signed an authorization to deduct from the proceeds $1,500 for attorney's fee for making the collection and to deliver the balance of the money to the United States National Bank. * *"

Mr. Kelley received the warrants from the U.S. National Bank, collected the warrants with interest, deducted his attorney's fees and delivered the proceeds to said U.S. National Bank. It will be noticed that this entire transaction with Mr. Kelley was done with the authority of the partnership acting by and through Miller. Plaintiff Bauer could as well challenge that transaction as he could the want of authority in his partner Miller to sell the warrants to defendant. The transaction with Mr. Kelley itself supports the contention of defendant that decedent Miller transacted the financial business of the said partnership.

Plaintiffs' exhibit, which is a letter given by C.E. Rumelin for defendant, directs the warrants to be delivered to Mr. Kelley for collection and is as follows:

"No. 10084 to 10109 Inc., $2600, Solem Gustafson, Oct. 10, 1921.

"Or. 5967 Lexington Ave. 2d to 8th Sts. Int. not paid Oct. 19/21.

"No. 8832 to 8929 Inc., $9800 Miller Bauer.

"No. 8781 to 8831 Inc., $5100, M. B. (Pencil notation.)

"5838 Sewerage Draining Dis. No. 6, Apr. 5, 1921. Presented Apr. 8, 1921.

"No. 7850 to 7853, Inc., $400.00. Miller Bauer.

"5619

"7828 7828 Miller Bauer, Oct. 19, 1920.

"Niagara 11th to 14th St., $976.55. Pres. Oct. 23, 1920.

"U.S. Nat. Bank,

"Mr. Dick:

"Introducing Mr. J.H. Kelly. "Will you please accommodate Mr. Kelly with Nos. amount and Improvement, Astoria Warrants of Miller and Bauer, held as security Ashley Rumelin. — Thanking you I am,

"Truly yours, "C.E. RUMELIN."

It is contended by plaintiffs that this letter states that the warrants therein described belonged to Miller Bauer. Defendant claims that the letter simply referred to the warrants of Miller Bauer held as security by the U.S. National Bank to secure the note of Ashley Rumelin. The books of defendant introduced in evidence show that the $12,400 in warrants in controversy were carried as the property of defendant from September 7, 1922, until June 30, 1924, and show the collection thereof. For some time prior to September 7, 1922, said warrants were a part of a larger number of warrants carried by defendant as its property. A part of said larger amount of warrants were redelivered or otherwise disposed of by defendant on September 7, 1922, leaving the sum of $12,400. The books have not been impeached. During that time defendant rendered a number of statements of account to said partnership for which a receipt was given. A copy of the receipt is as follows:

"Portland, Oregon, Jan. 19 — 23.

"Received from Ashley Rumelin, Bankers, Portland, Oregon, pass book together with cancelled vouchers, to be examined at earliest opportunity. If not advised to the contrary within 15 days, it will be understood that the account is acknowledged as correct.

"J.A. MILLER. "By F.L. SULIVAN."

The evidence also shows that a short time prior to the death of said Miller he burned a number of papers, and it is claimed statements from the bank were included in those burned. In our judgment the preponderance of the evidence as to the sale of the warrants amounting to $12,400 is in favor of defendant. We cannot sustain plaintiffs in their contention that Miller was not authorized to dispose of the warrants. We think the evidence is overwhelming to the effect that Miller was authorized to dispose of the warrants and transact such other business as was necessary to finance the firm of Miller Bauer. That being true and the evidence preponderating in favor of defendant that it purchased said warrants aggregating $12,400, the ruling of the Circuit Court thereon is affirmed.

As to the other warrants aggregating $5,100 but little need be added. Those warrants were held by the U.S. National Bank as collateral for the note given by Messrs. Ashley Rumelin, owners of defendant bank. Their testimony to the effect that the note at the U.S. National Bank signed by them individually was for the accommodation of said partnership is not seriously disputed. In the oral argument here Mr. Sleight, attorney for plaintiffs, said:

"They have accounted for the $6,000 worth of warrants upon which they borrowed $6,000 from the U.S. National Bank and they show that they credited Miller's account, and that Miller drew checks on it."

It was contended also at the argument that Miller had no authority to appropriate money belonging to said partnership. The evidence discloses some funds belonging to said partnership were paid to decedent Miller. It is seriously argued that defendant is liable because it did not inquire of plaintiff Bauer or formally get his consent to the transfer of that quantity of money from the partnership to said Miller. We do not think this is the law. By the established manner of transacting the affairs of said partnership, the decedent Miller must be held to have had authority to draw the money, and defendant is not responsible for what Miller did with that money under the evidence in this case. There is no showing that decedent Miller had no right to the fund. Unless notice of a misappropriation of the partnership funds by the decedent Miller was brought to defendant, or such a state of facts as to put defendant upon inquiry, it cannot be held liable for funds of the partnership taken by one of the partners. It is only fair to add that there is no intimation that Miller unlawfully appropriated any of the funds of the partnership. His executrix and plaintiff Bauer are acting together in this suit. There is no presumption that Miller unlawfully appropriated the funds.

An account stated is binding only as to the items included in the account: Crawford v. Hutchinson, 38 Or. 578,580-582 (65 P. 84). It is claimed by plaintiffs that the warrants in controversy were deposited with defendant for safekeeping. If that were true the warrants would not appear necessarily in the account rendered by defendant from month to month to said partnership. For that reason we do not rest our decision on the principle of accounts stated. We have considered, however, the accounts as rendered and retained without objection as evidence tending to show that defendant Bauer must have had some knowledge of these transactions. The receipts given for the accounts stated were signed by a clerk for Mr. Miller. The statements were probably burned by Mr. Miller, according to the testimony of his son.

A judgment was rendered in favor of defendant against plaintiffs for the balance due on a note and is not disputed as we understand the record. The decree is affirmed. Neither party will recover costs in this court. AFFIRMED.

BEAN and ROSSMAN, JJ., absent.