McKinnis v. Dodge

McCOURT, J. — Upon the hearing had in the lower court, plaintiff and defendant each introduced oral testimony in support of their respective claims against the partnership. An account-book purporting to show the receipts and expenditures of the firm and the capital contributed by each member thereto was introduced in evidence, and also a statement of the partnership account to October 1, 1918. The items set forth in these documents were. explained by the oral testimony. The record upon appeal does not contain a transcript of the oral testimony introduced at the hearing, and is therefore insufficient to enable this court to review the determination of the Circuit Court in respect to the claims made by plaintiff and defendant against the partnership. 1. A partnership is dissolved by notice of one partner to his associates of his election to terminate the partnership. No particular form of notice is required, and the notice given in this case was sufficient to, and did, effect a dissolution of the partnership between plaintiff and defendant: 20 R. C. L. 954; 30 Cyc. 650; Rowley on Modern Law Partnership, Yol. 1, § 593; Burdick’on Partnership (3 ed.), p. 235. 2. During the existence of the partnership, each member is the agent of his copartners and has implied authority from them to transact any business within the scope and object of the partnership, and after dissolution this mutual agency continues to a limited extent until the affairs of the partnership are administered and wound up: Riggen v. Investment Co., 31 Or. 35, 40 (47 Pac. 923); 20 R. C. L. 883, 968. 3. But after dissolution a partner is without authority to bind the firm as a party to negotiable paper, or to any other new business engagements or [14] contracts, without actual authority therefor from his associates. As to new contracts, the implied agency of a partner for his associates ceases when the partnership is terminated: Burdick on Partnership (3 ed.), pp. 235, 243; 20 R. C. L. 968; 30 Cyc. 659. 4. The authorities are agreed that the borrowing of money to meet pre-existing obligations of a partnership constitutes a new contract, and that a partner after dissolution has no power to issue notes in the name of the firm, without express or implied authority to do so, for the purpose of liquidating pre-existing firm debts, or to borrow money for that purpose: 20 R. C. L. 971; 1 Rowley on Modern Law Partnership, § 604; 30 Cyc. 667, 668; Burdick on Partnership (3 ed.), p. 243; Bank of Monroe v. Drew, 126 La. 1028, (53 South. 129, 32 L. R. A. (N. S.) 255, and note); Pollak Bros. v. Niall-Herin Co., 35 L. R. A. (N. S.), note, at p. 55. 5. The Garrett note and chattel mortgage were not obligations of the partnership and should not have been treated by the court as such. Without the Garrett claim, the partnership account as found by the Circuit Court after the payment of all costs of the receivership, was as follows: Cash in hands of the receiver...........................$2,133.25 Claims against the partnership: Paul Piute ...............................$ 260.00 Matt Eiggs ............................... 22.00 M. V. Dodge, defendant................... 1,177.73 ' $1,459.73 Balance for distribution between plaintiff and defendant. .$ 673.52 If the Garrett claim is left out of consideration, the foregoing claims are entitled to payment in full, leaving $673.52 to be divided between plaintiff and defendant. The court found that plaintiff was indebted to the partnership in the sum of $488.25, so [15] that plaintiff’s share of said surplus would amount to $92.63, and that of defendant to $580.88. Garrett’s note and chattel mortgage, however, are valid obligations against the defendant. The partnership was dissolved, though its accounts were not settled when the note and chattel mortgage were, given, and the chattel mortgage became a lien upon the interest of defendant in the partnership property and assets, subject to the claims of creditors against the firm: Marx v. Goodnough, 16 Or. 26 (16 Pac. 918); Marx v. Goodnough, 23 Or. 545 (32 Pac. 511); Eilers Music House v. Reine, 65 Or. 598, 605 (133 Pac. 788). When the property upon which this chattel mortgage was a lien was sold by the receiver, Garrett’s lien was transferred to the proceeds of the sale; hence the share of Dodge in the said proceeds, including his claim against the partnership, and his share of the assets, after paying the debts, amounting to $1,758.51, was subject to Garrett’s claim. 6. A partner who pays more than his share of a partnership debt is entitled to contribution from his copartner upon an accounting and final settlement of the affairs of the partnership: McDonald v. Holmes, 22 Or. 212 (29 Pac. 735); Webb v. Butler, 192 Ala. 287 (68 South. 369, Ann. Cas. 1916D, 815, and extensive note where many cases are collected). The law authorizes a partner paying more than his share of firm indebtedness “to charge the whole to the firm in the partnership account of which he will have the benefit as a credit on settlement of that account voluntarily or by a suit in equity”: McDonald v. Holmes, 22 Or. 212, 216 (29 Pac. 735). 7, 8. Defendant not only had a right to pay the overdue interest on the first mortgage upon the part* nership lands, but he was obliged to do so, and the [16] same is true of Ms right and obligation with respect to the overdue interest and principal upon second mortgage upon the lands in favor of James W. Garrett, trustee. Both the first and second mortgages might have been presented as claims against the partnership assets, and had that been done, the claimants would have been entitled to payment from the assets of the partnership pro rata with other creditors, without in anywise affecting the security of the mortgages; Kellogg v. Miller, 22 Or. 406 (30 Pac. 229, 29 Am. St. Rep. 618); White v. Ladd, 34 Or. 422 (56 Pac. 515); Rockwell v. Portland Sawings Bank, 39 Or. 241 (64 Pac. 388). In that event it could not have been successfully objected that the second mortgage was a purchase-money mortgage; that objection is only available in case resort is had by the mortgagee to the remedy of foreclosure. The moneys secured by defendant upon the note ■ and chattel mortgage were applied by defendant upon overdue obligations of the partnership. Defendant appears to have acted in good faith in the transaction. Plaintiff was equally liable with defendant for the payment of those obligations, and when defendant’s share of the partnership assets is taken to satisfy the new obligations of defendant, incurred in making the payments mentioned, the share of plaintiff in those assets in equity and good conscience becomes liable to contribute to defendant, to the extent that he has paid more than his proportion of the debts under consideration. Contribution can be required of plaintiff in this proceeding, notwithstanding that the claim upon the note and chattel mortgage is presented by Garrett, instead of defendant. The court has power to adjust the entire matter so far as the parties before it and [17] the subject matter over which it has jurisdiction will permit. As pointed out, Garrett is entitled to be paid $1,758.51, the share of defendant in the partnership assets; thereupon payment to that amount by defendant upon the firm obligations is consummated, if it was not already complete, and defendant is entitled to credit for such payment against the firm. The partnership assets, including the indebtedness of plaintiff to the firm, are insufficient to satisfy the contribution due defendant, so the exact amount of such contribution need not be determined. The foregoing views do not entitle plaintiff to a decree more favorable than that from which he appeals. None of the other interested parties have appealed and presumably they are satisfied with the decree of the lower court. The decree of the Circuit Court is therefore affirmed. Affirmed. Burnett, C. J., and Bean and Brown, JJ., concur.