Dunbar v. Farnum

• Decision Date: 04 May 1937
• Docket Number: No. 269a.,269a.
• Parties: DUNBAR v. FARNUM et ux.
• Court: Vermont Supreme Court

196 A. 237

DUNBAR

v. FARNUM et ux.

No. 269a.

Supreme Court of Vermont. Caledonia.

May 4, 1937.

On Reargument Jan. 4, 1938.

Exceptions from Caledonia County Court; Alfred L. Sherman, Judge.

Action by Harold J. Dunbar against Scott M. Farnum and wife, copartners. Verdict for defendants, and plaintiff brings exceptions.

Affirmed.

Argued before POWERS, C. J., and SLACK, MOULTON, SHERBURNE, and BUTTLES, JJ.

Conant & Parker, of St. Johnsbury, for plaintiff. Porter, Witters & Longmoore, of St. Johnsbury, for defendants.

POWERS, Chief Justice.

This is an action of contract to recover damages for the breach of an executory contract for the sale of a water system in the town of Lyndon. It was tried by jury in the court below, and, at the close of the evidence, a verdict was ordered for the defendants. The plaintiff excepted.

The defendants are husband and wife. They owned and operated the water system in question and thereby supplied their customers with domestic water at scheduled rates. They carried on this and other business, ostensibly as partners, under the firm name and style of Scott M. Farnum & Wife. They regarded and conducted themselves as partners, and so registered in the secretary of state's office. The title to the water system and other real estate was held by them in their trade-name. Mr. Farnum was the active and managing partner, while Mrs. Farnum made collections, did the banking, and kept the company books.

There was evidence warranting findings of the following facts:

The plaintiff negotiated with the defendants for the purchase of the water system, and on November 24, 1934, he and Farnum went to St. Johnsbury, and had a contract drawn by an attorney. This contract is captioned "Memo. of Agreement between Scott M. Farnum and Wife and Harold Dunbar, all of Lyndon, Vermont," and is signed by the plaintiff and Scott M. Farnum. The name of Nellie M. Farnum is attached to it, but it is not denied that this name was written by Farnum. This contract was subject to the approval of the Public Service Commission, and called for a down payment of $1,000 by way of an order on S. E. Richardson, payable March 1, 1935. The approval of the commission was granted December 27, 1934. The hearing on the application for this approval was held on December 20, 1934, and thereafter, on the same day, the plaintiff asked Farnum for a deed of the property. The latter replied that he would not make the deed unless the plaintiff paid a hundred dollars for the upkeep of the property for the 20 days then preceding and give the defendants the next three months' water rent on about a dozen tenements owned by them. Subsequently, at different times, the plaintiff told Farnum he was ready to carry out the contract, and called for the deed. This demand was not complied with.

The defendants are sued as partners. To establish the contract sued on, the writing above referred to was received in evidence. As we have seen, this contract was not signed by the partnership and does not profess to be executed as a partnership agreement. Rather, it purports to be the joint contract of the individual Farnums.

The waterworks in question were real estate. This is admitted. So, by force of the statute of frauds, no action upon a contract for the sale thereof could be maintained unless such contract was in writing, signed by the party to be charged. P.L. 1678. The party here sought to be charged is the partnership known as Scott M. Farnum & Wife. No such party signed the contract referred to. So the suit against the firm breaks down right at this point.

But the contract of November 24, 1934, purports, at least, to evidence a joint obligation of Scott M. Farnum and Nellie M. Farnum. So whatever theory we should adopt as to the entity of a partnership as distinct from and independent of its individual members, it is quite certain that a partnership is not the same thing as joint ownership or joint responsibility. Therefore these defendants may be liable as joint contractors, though not liable as partners. But here again the plaintiff is met with the statute of frauds. If Nellie M. Farnum is to be held as a joint contractor, she must have signed the contract, either by her own hand or by an agent duly authorized by a writing. P.L. 1675. No claim is made that Scott Farnum had written authority to sign his wife's name to the contract in question.

But the plaintiff insists that this defect of authority goes for nothing because Mrs. Farnum ratified the contract made and signed by her husband as above stated, with full knowledge of its terms and provisions. A subsequent ratification is, of course, equivalent to a prior authority. But the rule is that the ratification of an unauthorized act must be of the particular mode or form necessary to confer authority to perform it in the first place. So, by the common-law rule, power to execute an instrument under seal must be given by an instrument under seal, and the ratification of an instrument that the law requires to be sealed must also be sealed. Blood v. Goodrich, 12 Wend., N.Y., 525, 27 Am.Dec. 152; Drumright v. Philpot, 16 Ga. 424, 60 Am.Dec. 738. So, too, where written authorization is required and none exists, ratification must be in writing to bind the principal. Bruns v. Huseman, 266 Ill. 212, 107 N.E. 462, 463; Meachem, Agency, § 136; Despatch Line v. Bellamy Mfg. Co., 12 N.H. 205, 37 Am.Dec. 203; Llewellyn v. Sunnyside Coal Co., 242 Pa. 517, 89 A. 575; Allegany Gas Co. v. Kemp, 316 Pa. 97, 174 A. 289, 293; 2 C.J.S. Agency, § 45; Stammelman v. Interstate Co, 112 N.J.Law, 342, 170 A. 595, 597.

Such a ratification need not be a formal document. It need not be addressed or delivered to the other party to the contract. If it recognizes the existence of the contract and either expressly or impliedly approves it, the Statute of Frauds is satisfied. Allegany Gas Co. v. Kemp, supra. Though here it must be evidenced by a writing signed by Mrs. Farnum, the ratification itself is merely an act of her mind, Bayley v. Bryant, 24 Pick. 198, 41 Mass. 198, 203 —a deliberate choice to be bound.

The only written ratification claimed by the plaintiff is (1) the filing which Mrs. Farnum indorsed on a typewritten copy of the contract of November 24, 1934; and (2) the application made to the Public Service Commission under P.L. 6106. The filing referred to falls far short of a sufficient ratification, since it does not express Mrs. Farnum's approval of the contract.

The application to the Public Service Commission, being a necessary step in the furtherance of the sale, and being necessarily an approval thereof, might be a sufficient ratification by Mrs. Farnum if she signed it. But the record does not show that she did sign it. To be sure it is stated in the brief that "she petitioned the Public Service Commission for authority to sell the system according to the contract." And we are referred to certain pages of the transcript and to one exhibit for authority for this statement. These references do not support the statement, and we find nothing in the record to indicate that Mrs. Farnum signed the application.

The views hereinbefore expressed render the other exceptions of no consequence.

Judgment affirmed.

Upon Reargument.

When the foregoing opinion was read at the May term, the plaintiff filed a motion for reargument. This was granted and the entry order was withheld. The reargument was heard and has been considered.

It must not be forgotten that this suit is against the firm of Scott M. Farnum & Wife, and not against the defendants as joint promisors.

In the original opinion we did not undertake to pass upon the question of just what a partnership is before the law. Perhaps a determination of that question will be of aid in disposing of the questions now before us.

There is a spirited disagreement among the authorities as to whether a partnership is a legal entity, separate and apart from the individuals composing it. Some say that it has no such separate existence, basing their conclusions upon what is said to be the theory of the common law. Others hold that it has such separate existence and that it stands before the law the same as a person or corporation does. Still others maintain that it is so far personified as to be treated as an entity in most of its relations, though it does not have all the attributes of a person. The business world has always regarded a partnership as a person, and there is a growing tendency on the part of the courts to adopt the commercial view. Some of the many cases holding to the view that a partnership is an entity, now at hand, are Good v. Jarrard, 93 S.C. 229, 76 S.E. 698, 43 L.R. A.,N.S., 383, 387; State v. Pielsticker, 119 Neb. 419, 225 N.W. 51, 52; Bankers Trust Co. v. Knee, Iowa, 263 N.W. 549, 551; Holmes v. Alexander, 52 Ok1. 122, 152 P. 819, Ann.Cas.1918D, 1134; Clarke v. Slate Valley R. Co., 136 Pa. 408, 20 A. 562, 10 L.R.A. 238; Johnson v. Shirley, 152 Ind. 453, 53 N.E. 459, 461. See, also, Fourth Nat. Bank v. Mead, 216 Mass. 521, 104 N.E. 377, 378, 52 L.R.A.,N.S., 225.

Caswell v. Maplewood Garage, 84 N.H. 241, 149 A. 746, 73 A.L.R. 433, is an interesting and instructive case covering the subject now under discussion. Upon a full review of the authorities, the court reaches the conclusion that a partnership is an entity separate and apart from the individuals composing it.

Judge Learned Hand, now an eminent member of the Circuit Court of Appeals, Second Circuit, said in Re Samuels & Lesser, D.C., 207 F. 195, 198, that "The whole subject of partnership has undoubtedly always been exceedingly confused, simply because our law has failed to recognize that partners are not merely joint debtors. It could be straightened out into great simplicity, and in accordance with business usages and business understanding, if the entity of the firm, though a fiction, were consistently recognized and enforced. Like the concept of a corporation, it is for many...