Willard v. Bullen

¶1after stating the facts, delivered the opinion of the court.

¶2The record herein is somewhat complicated, and many questions have been discussed by counsel. In our opinion, however, the case can be determined by the application of a few well-settled principles of law. As we understand, the primary object of the suit is not to dissolve the partnership and take an accounting between plaintiff and the Bullen Bridge Co., for the purpose of ascertaining the amount, if any, due plaintiff from the Bullens. It does not seem to have been so regarded in the court below, and the Bullens have not appeared in this court, so that we shall not attempt at this time to state an account between them. Nor is it sought to charge the plaintiff, *30as a partner, for debts contracted by the Bullen Bridge Co. The real purpose is to ascertain and determine the rights of the several parties to the record to the balance remaining due the bridge company on its original contract with the City of Portland. Although the Bullens, in their answer, admit that the plaintiff was a partner with them in the substructure work, and was to bear half the expense and share equally-in the profits thereof, it is doubtful whether, under the facts disclosed by the record, he can, as against the creditors, be regarded as a partner, or in any other or different light than an employe, who was to be compensated in part by a share in the profits of that portion of the Bullen contract: Voorhees v. Jones, 29 N. J. Law, 270.

¶31. But, however that may be, he must, we think, be regarded as a dormant partner, if a partner at all, under an agreement by which he was to enjoy a portion of the profits, if any, upon the substructure work, while his interest was practically concealed from parties dealing with the bridge company. The contract for the construction of the bridge was entire, and all the business in relation thereto was conducted in the name of and by the Bullen Bridge Co., with which firm alone the parties to this litigation dealt, relying upon its personal credit and the contract with the city. It is true, some of them were advised that the plaintiff had some interest in the substructure, but they did not know that the work was being done by.him and the Bullens as partners separately from the other parts of the bridge; on the contrary, his conduct was such as to induce them to believe otherwise. He was in charge of the substructure work, apparently as the agent and superintendent of the Bullen Bridge Co., ordered material and made contracts from time to time for and on its behalf and as its agent. Indeed, much of the material purchased from the parties to this litigation was so ordered. Having thus allowed the Bullen Bridge Co. to be held out to the world as the sole party interested in the contract, and having thus permitted it to purchase material and obtain credit on the faith thereof, he cannot now be allowed to say that the property of the company and the *31proceeds of the contract are not liable for the debts thus contracted. Under such circumstances it would be as repugnant to the principles of law as it is to the dictates of natural justice for him to be allowed to come in now and assert a claim to any part of the money arising under the contract superior to that of the material and labor claimants and others who relied upon the apparent interest and ownership of the Bullen Bridge Co. By remaining silent, and allowing the company to conduct the business as one entire contract, and to obtain credit on account thereof, he is estopped from denying that the bridge company was alone interested in the contract when the rights of third persons intervene. By his conduct he, in effect, disclaimed to those dealing with the bridge company that he had any interest in the contract which was superior or would take precedence over the debts contracted in its performance, and he is now bound by such representations.

¶4“A partner cannot keep his membership secret,” says Mr. Bates, “and afterwards be allowed to appear and embarrass creditors or persons who have acquired claims on the faith of the sole ownership of the ostensible partner”: 1 Bates, Partn. § 155. And Mr. Justice Catón, in referring to this same question, says: “The law and the courts discountenance these secret trusts and partnerships as opening a wide door to the greatest frauds. Most effectually to prevent this, whenever the rights of third persons intervene, neither of the parties are permitted to assert the partnership, but the whole is considered as an individual transaction, and the property as belonging to the ostensible partner, unless the creditors choose to treat the dormant partner as interested. Indeed, I may say there is no partnership, only as between the parties themselves”: Talcott v. Dudley, 4 Seam. 427, 438. And in Lord v. Baldwin, 6 Pick. 348, it is held that the attachment of a stock of goods in the hands of the ostensible partner in a suit against him alone has preference over a subsequent attachment of the same goods by another person in an action against the ostensible and the dormant partner, Mr. Chief Justice Parker saying: “Even if he (the dormant partner), owned the whole of the stock, as *32between, him and the known man of business still it is in law the property of the latter, for he is allowed to claim and use it as his alone, and thus lead persons to trust him upon the faith of the goods in his possession. … The property then is not the dormant partner’s, to the prejudice of those who trust him who carries on the business and obtains the credit.” And in Cammack v. Johnson, 2 N. J. Eq. 163, the suit was brought by the dormant partner against the person in whose name the business was conducted for an accounting and dissolution of the partnership and to enjoin certain individual judgment creditors from enforcing their claims against the partnership property in preference to partnership debts, and the court, after referring to and approving Lord v. Baldwin, 6 Pick. 348, and French v.Chase, 6 Greenl. 166, say: “The cases cited arose on disputes between creditors; but in the case before me the complainant, who asks the aid of the court, is himself the dormant partner; and surely, if creditors cannot claim the appropriation of partnership effects for payment of their demands first, there is less reason for doing so at the instance of the silent and unknown partner. The step is voluntary with him. He chose to place himself in this position, and it is far more just that he should suffer by it (however much that is to be regretted) than innocent traders who have been kept in the dark as to the true condition of things by his act. Upon the creditors of the firm there is no other hardship than that which occurs continually when one creditor is preferred by his debtor over another. The law authorizes this preference, if obtained by way of judgment, and it is practiced every day. Had there been no partnership, they must have been postponed in their demands by those judgments and executions; and there is no good reason why the discovery of a partner at this late day should, in justice and equity, change the rights or remedies of any of the creditors.” In Allen v. Brown, 39 Iowa, 330, it was held that if, after making an overdraft at a bank, the drawer takes a secret partner, who supplies money with which subsequent deposits are made, they may be applied by the bank to the prior overdrafts, on the ground that, so far as it was eon*33cerned, the deposits were properly regarded as money of the ostensible partner. See, also, to the same effect, 17 Am. & Eng. Ency. Law (1 ed.), 931; How v. Kane, 2 Pin. 531 (54 Am. Dec. 152); Brown’s Appeal, 17 Pa. 480; Callender v. Robinson, 96 Pa. 454; Van Valen v. Russell, 13 Barb. 590. Within the doctrine of these authorities, the contract between the plaintiff and the Bnllens that he should be a partner in the substructure work did not vest him with any title or ownership as against creditors of the bridge company in the money due from the city for the construction of the bridge, or any part thereof. That partnership was an affair between himself and the Bullens, by which the creditors of the latter cannot be prejudiced. The money due upon the contract for the construction of the bridge is the assets of the Bullen Bridge Co., to which the plaintiff has no claim until all the debts incurred by it ón account thereof have been paid.

¶52. The remaining question is one of priority between the several creditor claimants. Objection to the intervention of Thatcher was made on the ground of laches-, but that was a matter within the judicial discretion of the trial court, and we do not think its conclusion ought to be disturbed.

¶63. The orders in favor of the Commercial National Bank, the North Pacific Lumber Co., Kelly, Dunne & Co., and Jacobson operated as an equitable assignment of a part of the fund (McDaniel v. Maxwell, 21 Or. 202, 27 Pac. 952, 28 Am. St. Rep. 740; Erickson v. Inman, 34 Or. 44, 54 Pac. 949), and gave to these order claimants a prior right to be paid out of such fund before the general creditors. As there is sufficient money to pay all of these orders in full, it is unnecessary to consider the question of priority as between the holders thereof.

¶7The other parties to the suit, standing in the position of general contract creditors of the Bullen Bridge Co. with equal equities, are entitled to share pro rata in any surplus that may . remain after the order claimants have been paid. Under the order of distribution made by the trial court on December 10, 1897, the Commercial National Bank did not receive the *34full amount to which it was entitled, and the general creditors received the excess. According to the terms of such order, they will be required to return to the cleric of the court below a sufficient amount of the money paid to- them to make up the balance due the bank; and, as they have had the benefit of the money, and the bank has been denied the use thereof, it is equitable and just that they should pay interest thereon.

¶8A decree will be entered here in accordance with the views expressed in this opinion. Modified.