Burrows v. Williams

• Decision Date: 26 March 1909
• Citation: 100 P. 340,52 Wash. 278
• Parties: BURROWS et ux. v. WILLIAMS et al.
• Court: Washington Supreme Court

100 P. 340

52 Wash. 278

BURROWS et ux. v. WILLIAMS et al.

Supreme Court of Washington

March 26, 1909

Appeal from Superior Court, Chehalis County; Mason Irwin, Judge.

Action by O. P. Burrows and wife against F. F. Williams and others. From a judgment for plaintiffs, defendants appeal. Reversed.

John C. Hogan, for appellants.

Morgan & Brewer, for respondents.

CHADWICK J.

On the 21st day of May, 1901, O. P. Burrows was the agent of the owner of certain lands in Chehalis county. Williams & Johnson were engaged as copartners in the logging business on the Humptulips river. By a previous arrangement, Burrows had obtained permission to log the lands belonging to his principal. Burrows was not engaged in the logging business. In order to carry out his purpose and to turn his opportunity into profit for himself, and Williams & Johnson being prompted by a desire to extend their logging operations, the following agreement was entered into: 'This agreement made on this 21st day of May, A. D. 1901, by and between F F. Williams and C. E. Johnson, copartners in business under the firm name and style of Williams & Johnson, parties of the first part, and O. P. Burrows, of Hoquiam, Washington, party of the second part, witnesseth: That the parties hereto have and do hereby agree to log off the merchantable timber in sections 3 and 4 in Twp. 18 north, of range 11 west of W. M and sections 27 [52 Wash. 280] and 28 in Twp. 19 north, of range 11 west of the W. M., as described in logging contract hereunto attached. The parties of the first part shall furnish the plant and capital sufficient to carry on said logging operations. Out of the proceeds of the logs sold off said property shall be paid the stumpage due for the same, and next an amount sufficient to reimburse said parties of the first part for the amount expended by them for plant and wages paid to labor on same, together with interest on such amounts at the rate of ten per centum per annum, all of which shall be considered a first lien on the amounts first received on the logs. The said C. E. Johnson, one of the parties of the first part herein, shall receive as wages for his personal services in running the camp of the parties conducting said operations the sum of _____ dollars per month, which sum shall in arriving at the net proceeds of the business be considered as an expense of such operations and rank as labor. The net proceeds of this enterprise shall be divided as follows, to wit: One-third to said party of the second part, and two-thirds to the parties of the first part herein. This agreement shall be binding upon the parties hereto and to each of their heirs, executors, administrators and assigns. In witness hereof the parties hereto have hereunto set their hands and seals the day and year first above set forth. Williams & Johnson. [Seal.] O. P. Burrows. [Seal.]' Thereafter stumpage contracts were entered into between Hiscock, the owner of the land, and Williams &amp Johnson, a firm, and O. P. Burrows. Before beginning logging operations on the Hiscock lands, other lands were bought and logged off by the parties. In dealing with the public, no concern was taken of Burrows. All contracts, aside from deeds and stumpage contracts, were made, and the business carried on in the name of Williams & Johnson. A bank account was carried in the name of Williams & Johnson, which was replenished from time to time by the sale of logs, and money borrowed on the individual credit of Williams & Johnson. At the time the contract was entered into Williams & Johnson had in boom on the Humptulips river about 5,000,000 feet of logs. These were also sold, and the proceeds turned into the bank. Additional equipment and machinery for logging was purchased from time to time. The parties carried on a logging business under the contract from May 21, 1902, until the 13th day of January, 1903, when the business relations between them ceased. The lower court held, among other things not material to our present inquiry, that:

'The proceeds of logs put in by Williams & Johnson which had come to market under the contract of May 21, 1901, and which proceeds were collected by them and turned into the bank account of Williams & Johnson at the First National Bank, were never sufficient at any time up to January 13, 1903, to reimburse Williams & Johnson for moneys expended and paid out of their individual funds for carrying on such logging operations. * * *

'The total amount deposited in the bank account of Williams & Johnson during the period of May 21, 1901, to January 13, 1903, was made up of the following items:

Cash from Geo. L. Davis loan......... $ 3,257 50 Proceeds of Williams & Johnson notes to the bank for loans......... 13,000 00 Grays Harbor Com. Co., check for logs................................ 854 71 American Mill Co., checks for logs 15,136 33 Panel Folding & Box Co., for logs.... 450 00 Cash deposits (probably from logs) 7,004 25 ---------- Total............................. $40,315 46

'From May 21, 1901, the date of the agreement between Williams & Johnson and O. P. Burrows, and up to the transfer from Burrows to Williams & Johnson on January 13, 1903, the proceeds of the sale of logs in which Williams & Johnson and O. P. Burrows were interested were insufficient to reimburse Williams & Johnson for expenditures made by them in logging said lands, and no dividends or profits had ever been declared or divided between Williams & Johnson and O. P. Burrows under the agreement of May 21, 1901.'

No profits appearing, and the parties being mutually dissatisfied, after some preliminary negotiations, a give and take proposition was made by Williams & Johnson, which was accepted by Burrows. He was paid the sum of $3,000 in cash for his one-third interest in the business. Burrows and wife made deeds to Williams & Johnson for a one-third interest in and to all of the real property owned by Burrows and Williams & Johnson in common. At the time the title to all of the land so conveyed stood in the names of the three parties to the contract. On September 13, 1902, the account of Williams & Johnson was overdrawn at the bank. To cover this overdraft and to create a fund to meet the needs of the business, Williams & Johnson borrowed the sum of $2,000 for which Williams executed a note in the name of Williams & Johnson. On the 20th day of September, 1902, Burrows took out four delinquency tax certificates covering land in Chehalis county, Wash. On September 29th he made an assignment of two of them, covering 240 acres of land, to F. F. Williams, by which he in terms conveyed all his 'right, title and interest of, in, and to the within delinquency certificates to F. F. Williams,' and in terms authorized 'the treasurer of Chehalis county to pay the redemption money therefor or issue a deed for the property therein described to the said F. F. Williams.' Burrows paid for the tax certificates the sum of $301.69 out of his own funds. But on September 22, 1902, Williams drew a check upon the account of Williams & Johnson for that amount, in consideration of which Burrows assigned the certificates to him. It was paid out of the credit created by the $2,000 note. Burrows ordered the deputy prosecuting attorney to attend to the foreclosure of the certificates retained by him, as well as those assigned to Williams, and from time to time manifested an interest in the speedy culmination of these proceedings. He also directed the prosecuting attorney to bid in the lands at tax sale in the name of, and to have the deed executed to, Williams. All expenses of foreclosure and sale, however, were paid by Williams probably out of the funds carried in the name of Williams & Johnson. The tax deed was issued by the treasurer of Chehalis county on January 3, 1903, 10 days before the settlement of January 13th, day was recorded January 19th, at the request of George D. Robertson, who was acting for Williams. The deed was returned to Williams when recorded. This case was brought by Burrows and wife, praying for a decree establishing a trust in the tax title lands, and praying that Williams and wife, in whom the record title then stood, be required to make a deed to an undivided one-third interest therein. The court below found in favor of Burrows, and defendants have appealed.

It is the theory of respondents that, by reason of the fact that the money for the tax title lands was paid out of the funds carried in the name of Williams & Johnson during the life of the agreement theretofore entered into between the parties, a trust resulted in their favor. As we have said, a general settlement was had between the parties to the partnership or profit-sharing enterprise (it is not material to decide which it was, although the question is discussed at some length in the briefs), at which time, in addition to the settlement of the personal estate of the concern, respondent O. P. Burrows deeded his interest in the land standing in part in his name to appellants Williams & Johnson. An attorney was present and the papers were drawn by him and presumably under his direction and advice. The question quite naturally occurs why, if the tax title lands were property in which Burrows and Williams & Johnson each had a one-third interest, a like deed was not made by Williams to Burrows, inasmuch as a deed had been issued by the county and was in the possession of Williams. Respondent O. P. Burrows says: 'Q. How did you arrive at the basis of $3,000 for your interest? A. Mr. Williams asked me what I would take for my interest, and, after considering it for a few days, I made an estimate in a rough way of the logs we had in the water. We knew the books in the office showed how many logs we sold,...