Teas v. Kimball

• Citation: 257 F.2d 817
• Decision Date: 18 September 1958
• Docket Number: No. 17075.,17075.
• Parties: Paul C. TEAS, Jr., Appellant, v. Mildred KIMBALL, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

257 F.2d 817 (1958)

Paul C. TEAS, Jr., Appellant, v. Mildred KIMBALL, Appellee.

No. 17075.

United States Court of Appeals Fifth Circuit.

August 18, 1958.

Rehearing Denied September 18, 1958.

COPYRIGHT MATERIAL OMITTED

John B. Luscombe, Jr., El Paso, Tex., Fryer, Milstead & Luscombe, El Paso, Tex., of counsel, for appellant.

J. F. Hulse, El Paso, Tex., Scott, Hulse, Marshall & Feuille, El Paso, Tex., of counsel, for appellee.

Before RIVES, JONES and WISDOM, Circuit Judges.

JONES, Circuit Judge.

Mildred Kimball, the appellee, formerly Mildred Ruddock, first met Paul C. Teas, Jr., the appellant, in 1954. Each was then engaged in ranching, raising purebred Santa Gertrudis cattle. In 1955, they met again, at a livestock association meeting in Texas, following which meeting the appellee bought some cattle from the appellant. She lived and had her ranch in Colorado, and his ranch and home were in Texas. Following another meeting between the two at a stock show in Ft. Worth, Texas, in February of 1956, they visited each other's ranches. The appellant told the appellee that he wanted to buy some land near his ranch for raising cotton commercially, and had hopes that his father would join with him in the venture. She expressed a desire to join appellant in the enterprise if the latter's father decided to stay out of it, and she gave appellant two $100,000 checks, one to be used for land purchase and the other as a loan for cotton farming operations. Mr. Teas, Sr. did not join his son. The appellant deposited both checks in a checking account which was in the joint names of his wife and himself. At the time the account contained about $34. In March of 1956, a purchase agreement was entered into, signed by the appellant and the appellee as purchasers and various persons named Franklin as sellers, for the sale of 898 acres of land, the consideration to be about $251,500.00. Options were also acquired under that agreement with respect to certain other tracts of land which it was believed might thereafter be useful in the cotton growing operation. On April 7, 1956, the 898 acres were conveyed by deed to appellant alone, appellee's name having been deleted from the deed with her consent. In payment the appellant became primarily obligated on some $180,000 worth of notes, the remainder of the purchase price being paid out of the cash obtained from the appellee's checks.

On May 10, 1956, the parties to this suit entered into a purported partnership agreement for the operation of a cotton farm on the land with each party having a half interest in the lands and sharing profits and losses equally. The appellee signed the agreement in Colorado. The appellant was to be the manager. The business, as recited in the agreement, was to be that of managing and operating a farming and ranching business on the property bought from the Franklins. Half of the mortgage obligations were assumed by the appellee. The partnership books were to be kept at the place of business and be accessible to each partner. The appellee was then the wife of Merritt Kirk Ruddock. Meanwhile, the first cotton crop was planted, the appellant having made the necessary arrangements concerning labor, equipment, supplies, and supervision. During the summer, the appellee tried unsuccessfully to ascertain from the appellant the financial status of the business and the disposition which had been or was being made of the money which she had turned over to the appellant.

In September, 1956, appellee became divorced from her husband and resumed her maiden name of Kimball. Although the divorce took place in Nevada, it is conceded that at all times and for all purposes pertinent to this controversy, the appellee's domicil was in Colorado. Partly because of defective irrigation pumps, the 1956 cotton yield on the land was disappointing to the parties. Appellant, on October 9, 1956, conveyed the land to the appellee, the deed reciting that the grantee had been the actual contracting party in the original purchase, which had been accomplished with her money, and that appellant was the manager of the farm. By the deed, which was signed by both parties, the appellee agreed to assume the unpaid purchase money obligations to the Franklins. There was parol evidence tending to show that this conveyance was made to divest the appellant of title, he being a Texas resident, so that a rescission suit could be brought against the Franklins in a Federal district court with jurisdiction based on diversity of citizenship. Some of the Franklins resided in Texas and some in New Mexico. A rescission suit was then brought by the appellee against the Franklins in a Federal district court in Texas upon the claim that the pumps were defective.

In November of 1956, the appellee learned about the year's cotton sales and ascertained that the appellant had used her funds to pay his personal obligations. The venture began to lose its lustre. Relations between the parties became less amicable, but there was talk of a partnership cotton operation in 1957. In January of 1957, the parties entered into an agreement in writing which purported to define the relationships between them with respect to the pending rescission suit against the Franklins. Title to the land and purchase contract was to remain in the appellee. The rescission suit was not to be settled except with the approval of the two parties and their named attorneys, neither of whom is of counsel on this appeal. Expenses of litigation and any losses which might result from the "transaction" were to be divided equally. Should the appellee acquire any land as a result of or in settlement of the litigation, she was to convey half of it, together with attaching obligations and a lien securing the equity in her favor, to the appellant, who would execute a note for such equity payable out of crop realizations. At about the same time as the execution of the January agreement, the appellee wrote to the appellant's father outlining the business difficulties in which the appellant and she found themselves and delineating what she considered to be the best courses to follow to keep losses to a minimum. The language of the letter indicated that its author considered that a partnership had been formed in the spring of 1956 and that the January agreement provided for a division of the 898 acres should the land not be returned to the Franklins. During 1956, cotton tickets were designated "Teas & Ruddock" and the farm was commonly referred to in the area as the Teas-Ruddock farm. The appellee, upon receiving receipts from cotton sales from the appellant in November, 1956, spoke of the money as going into "our cotton kitty." For 1957, partnership accounts were set up by the appellee's accountant. Stationery was bought with the heading, "Teas and Kimball". Without obtaining the appellant's consent, the appellee dismissed the rescission suit. Prior to the dismissal, a $9,000 settlement offer was made by the Franklins and rejected by the appellee. The appellant had objected to the accepting of the settlement offer.

The action from which this appeal had its origin was commenced during the summer of 1957. The appellee instituted the action to recover (a) part of the $200,000, which she claimed had been converted by appellant to his own use; (b) money received by appellant from cotton brokers as advances on cotton crop earnings, which she charged had been converted by him to his own use instead of being paid over to her; and (c) certain sums owed to the appellee because of incidental transactions between the parties, which need not be discussed. The appellant answered, denying the allegations, and counterclaimed. Two counterclaims were put forth in the alternative, by one of which he sought a declaration that he and appellee were partners in the cotton venture, with half interest each in profits accruing therefrom, and that he had an undivided half interest in the lands; and asking for a partnership accounting and partition of the lands and for a money recovery on account of certain incidental transactions which are not here important. The second counterclaim was based upon an asserted agency relationship between the parties, in which the appellant sought compensation and costs owing to him as agent as offsets to any sums owed by him to the appellee. He also claimed security for his liability on the $180,000 of mortgage notes.

The trial was to a jury which answered special interrogatories submitted to it by the court, and the entry of judgment followed. Upon being instructed as to the general Texas law concerning what constitutes a partnership, the jury found that the relationship between the parties in regard to their 1956 cotton operation was that of partnership and not of principal and agent. So finding, it made no answer to the question concerning compensation for appellant as agent or as to telephone charges incurred by him for the appellee. It further found that by agreement of the parties the appellee was entitled to repayment of her $200,000 advance before appellant participated in the profits of the enterprise and determined that the appellant was entitled to no part of the profits, if any, derived from the 1956 operation. It also found that appellee settled the rescission suit without the appellant's approval. Other findings were made relating to the accounts owing by each to the other on items which need not here be considered.

Each side moved for judgment with respect to particular aspects of the case. The district court entered judgment determining that (a) by virtue of the deed of October 9, 1956, title to the land was in the appellee; (b) the parties were not partners in the 1956 farm operation, "she having been a married woman at the time the alleged partnership agreements were made and therefore being incapable as a matter of law of becoming a partner and having reaffirmed the relationship of principal and agent after her divorce on ...