Cheesman v. Sathre

• Citation: 45 Wn.2d 193,273 P.2d 500
• Decision Date: 12 August 1954
• Docket Number: No. 32769,32769
• Parties: CHEESMAN, v. SATHRE et al.
• Court: United States State Supreme Court of Washington

Page 193

45 Wn.2d 193

273 P.2d 500

CHEESMAN, v. SATHRE et al.

No. 32769.

Supreme Court of Washington, Department 2.

Aug. 12, 1954.

John F. McCarthy, Longview, Imus & Marsh, Kelso, for appellants.

Ronald Moore, Jerome Walstead, Kelso, Weiser & Bowles, Portland, Or., for respondent.

DONWORTH, Justice.

This lawsuit grew out of a disagreement between two partners who jointly invented a hydraulic shock absorber device called a boomsnub, designed to prevent accidents caused by rigging failures on cranes equipped with heavy booms. The disagreement culminated in the execution by defendant partner of a licensing agreement purporting to convey to the other two defendants here all right to manufacture and sell the device, for which an application for a patent was then pending.

Defendants have appealed from an eight thousand dollar judgment for plaintiff entered on a jury verdict.

Plaintiff sued for damages he alleged he suffered as a result of a conspiracy between defendants to defraud him by ousting him from the Boomsnub Company, a limited partnership composed of plaintiff and defendant C. J. Sathre as general partners and six persons (not parties to the action) as limited partners.

In his complaint plaintiff alleged that he and defendant Sathre were general partners under a limited partnership agreement doing business under the assumed name of Boomsnub Company; that defendants George R. Steele and Al Hauge were partners doing business under the name of Columbia Marine Steel Works and that prior to September 19, 1952, the Columbia Marine Steel Works was manufacturing boomsnubs for the Boomsnub Company on a fixed fee basis; that some time prior to September 20, 1952, the three defendants entered into a conspiracy to defraud plaintiff of money and property and to violate the terms of the limited partnership agreement by ousting plaintiff from the partnershiup business, thus depriving him of his rights and profits to be derived from a certain United States patent for which plaintiff and defendant Sathre had applied.

In the complaint it was further alleged that pursuant to the conspiracy defendant Sathre ousted plaintiff from the partnership business of the Boomsnub Company and thereafter entered into an agreement with defendants Steele and Hauge by the terms of which defendants Steele and Hauge were given the exclusive right to manufacture, sell and distribute boomsnubs; that the signing of this agreement between defendant Sathre and defendants Steele and Hauge was in violation of the terms of the limited partnership agreement, of which all defendants had notice and knowledge, and allowed defendants Steele and Hauge to manufacture, sell and distribute Boomsnubs under terms and conditions especially beneficial and profitable to each of the defendants and to the great loss of plaintiff.

Plaintiff's complaint prayed for damages of fifty thousand dollars against the defendants and each of them.

In his answer defendant Sathre denied all of the material allegations of the complaint and alleged as an affirmative defense that prior to September, 1952, the Boomsnub Company was in bad financial condition and was heavily in debt with no funds with which to further the sale of its product; that plaintiff and defendant Sathre discussed with defendants Steele and Hauge the feasibility of entering into an agreement under which Columbia Marine Steel Works would manufacture and sell boomsnubs on a royalty basis; that on September 19, 1952, a royalty agreement was executed between the Columbia Marine Steel Works and defendant Sathre, acting on behalf of the Boomsnub Company, under which the Columbia Marine Steel Works was given the exclusive right to manufacture and sell boomsnubs for the whole life of the patent (until February 10, 1970) with the Columbia Marine Steel Works assuming all of the cost of promoting and developing the boomsnub and agreeing to pay the limited partnership doing business as the Boomsnub Company a royalty of 7 1/2 percent of the gross sales price of all boomsnubs sold.

The affirmative defense also alleged that the agreement entered into by defendant Sathre in behalf of the Boomsnub Company with the Columbia Marine Steel Works was for the benefit of the plaintiff, defendant Sathre and the persons who were limited partners in the Boomsnub Company and that defendant Sathre had not conspired with the other defendants to oust and exclude plaintiff from the Boomsnub Company nor attempted to deprive plaintiff of any interest or benefit arising out of the manufacture, sale or distribution of boomsnubs.

Defendants Steele and Hauge answered denying all of the material allegations of the complaint but admitted that on September 19, 1952, in accordance with a prior verbal agreement between the answering defendants and the partnership composed of plaintiff and defendant Sathre, in which prior negotiations and agreements plaintiff participated, defendants Steele and Hauge entered into a written agreement in which the limited partnership doing business as the Boomsnub Company granted to defendants Steele and Hauge the right to manufacture, sell and distribute boomsnubs. Defendants Steele and Hauge also admitted that they were manufacturing, selling and distributing boomsnubs in accordance with the terms of the agreement and were paying to the Boomsnub Company the royalties provided for in the agreement.

After a trial on the issues raised by the pleadings, the jury returned a verdict for plaintiff. Defendants moved for judgment notwithstanding the verdict or for a new trial, which motions were denied and judgment was entered on the verdict. Defendants appeal, making fifteen assignments of error, eleven on them directed to instructions given or refused.

The judgment must be reversed and the cause remanded for a new trial because of the refusal of the trial court to instruct that the alleged conspiracy had to be proven by clear, cogent and convincing evidence. We have repeatedly held that a plaintiff in an action for conspiracy to defraud must meet the burden of proving his case by clear, cogent, and convincing evidence. Harrington v. Richeson, 40 Wash.2d 557, 245 P.2d 191, and cases cited therein. By proposing proper instructions and by taking exceptions to six improper instructions given, appellants preserved their right to urge in this court that the trial court erred in instructing the jury that the alleged conspiracy could be proven by a mere preponderance of the evidence. Unquestionably the words 'clear, cogent and convincing' mean something more than a mere preponderance of the evidence. Dovich v. Chief Consolidated Mining Co., 53 Utah 522, 174 P. 627.

Respondent concedes in this court that the instructions given were erroneous and that the jury should have been instructed that the plaintiff had to prove his case by clear, cogent and convincing evidence. But respondent asserts that the error was not prejudicial, saying that the existence of a conspiracy between appellants was so conclusively established by the evidence that reasonable minds could not differ upon the question and consequently the jury would have arrived at the same verdict even if proper instructions had been given. Under such circumstances, respondent contends, this court should not be concerned with errors in instructions, citing Ellefsen v. Wilt, 36 Wash.2d 56, 217 P.2d 318, and a number of other cases on the same point.

Respondent's argument is based upon the false premise that under the evidence in this case the minds of reasonable men could not disagree on the question of the existence of a conspiracy. The case was submitted to the jury on extremely conflicting testimony on every issue involved. If the jury had chosen to believe appellants' testimony, that testimony would have supported a verdict for appellants. Therefore, this court cannot say, as respondent would have us do, that the jury could have reached only one verdict regardless of the instructions given. Consequently, appellants are entitled to a reversal of the judgment and a new trial on the basis of the erroneous instructions.

Before discussing appellants' other assignments of error insofar as they apply to issues which may arise on retrial of the case, we hold that the trial court did not err in denying appellants' motion for judgment notwithstanding the verdict. In passing upon such a motion this court and the trial court must view the evidence in the light more favorable to respondent, giving him the benefit of all favorable inferences which reasonably may be drawn therefrom. Respondent's evidence, so viewed, is ample to warrant the denial of the motion for judgment n. o. v. The issues involved were questions for the jury to determine.

Since there must be a retrial of this case, it is necessary to discuss another ground of appellants' motion for new trial. Appellants urge, in support of their assignment that the court erred in denying their motion for a new trial, that the rule in this state is that:

'One partner can not sue another partner for damages without dissolution of the partnership or an accounting.'

In support of that proposition appellants cite Stipcich v. Marinovich, 13 Wash.2d 155, 124 P.2d 215, and cases therein cited.

Respondent concedes that the general rule is that before one partner can sue his copartner at law there must have been a dissolution of the partnership and an accounting between them. Respondent asserts, however, that one exception to the general rule is that one partner may maintain an action against his copartner and others for damages arising out of a conspiracy between the copartner and others.

The question is one of first impression in this state. Appellants cite Lachmann v. Benson, 167 Ill.App. 85, as holding that a partner cannot maintain an action at law against his partner and others for conspiracy. In that case plaintiff alleged that her partner and his coconspirator had sold the partnership property, thus...