Flower v. Barnekoff

• Decision Date: 01 December 1890
• Citation: 25 P. 370,20 Or. 132
• Parties: FLOWER v. BARNEKOFF.
• Court: Oregon Supreme Court

25 P. 370

20 Or. 132

FLOWER v. BARNEKOFF.

Supreme Court of Oregon

December 1, 1890

Appeal from circuit court, Yamhill county; R.P. BOISE, Judge.

This is a suit in equity for a dissolution of a partnership, and for an accounting. The complaint alleges that the contract of partnership was entered into between the plaintiff, James Flower, and the defendant, F. Barnekoff, on March 10, 1889 and that it had for its object the purchase on partnership account of an option upon certain lands of one H.A. Tucker lying adjacent to the town of McMinnville, Yamhill county Or. The purpose of the partnership so formed was, as soon as the privilege had been secured, to plat the land as an addition to McMinnville, and to put it upon the market in the shape of town lots and blocks. Each partner was to pay half of all expenses, and upon the property being sold was to receive half of what was left of the proceeds after providing for the purchase price to be paid Tucker. It was understood and agreed at the time the partnership was formed that Flower should have the special and exclusive charge of that part of the firm business which related to the platting of the land and putting it on the market. In pursuance of this partnership, and as a member of the firm, Barnekoff succeeded in getting a 60 days' option from Tucker on March 14 1889, for which he paid him $100 cash, the purchase price agreed upon being $150 an acre. This option Barnekoff took in his own name, but for and in behalf of the firm. Barnekoff reported to Flower what he had done, and Flower approved of it, and then and there agreed to stand his half of the loss in the event of their not being able to turn over the purchase within the 60 days, to which agreement Barnekoff then and there became a party. The plaintiff at once set to work to carry out his part of the partnership, and before May 1, 1889, had secured a purchaser for the entire tract, able willing, and ready to buy the same at an agreed price of $200 per acre. On that, Barnekoff, taking advantage of the fact that the option stood in his own name, sold the land to the Investment Company of Portland for $18,022, which was at the rate of $200 per acre, without the knowledge or consent of Flower, and in fraud of his rights under the partnership agreement. Barnekoff now refuses to account to Flower for the profits thus made,--viz., $4,505.50. The answer denies each and every allegation of the complaint, except that the defendant secured the Tucker option in his own name, and that he sold the land to the investment company at a profit of $4,505.50. The case was sent to a referee to take testimony, and, upon the coming in of his report, a decree was entered dismissing plaintiff's complaint, from which this appeal is taken.

(Syllabus by the Court.)

A valid contract of partnership for the purpose of speculating in real estate may be made by parol.

. In a suit by one of the partners for an accounting of the profits realized under such an agreement, after the same has been executed, a partner who has received the entire profits is estopped from claiming that the agreement is void under the statute of frauds.

Where two persons agree jointly to secure an option on a tract of land, for the purpose of jointly selling the land, and sharing in the profits of the transaction, they are partners as between themselves for that transaction, and owe to each other the rights and duties of that relation, although option may be taken in the name of one of the parties.

Evidence examined, and held to constitute a partnership.

Milton W. Smith, for appellant.

W.D. Fenton, for respondent.

BEAN, J., (after stating the facts as above.)

It is contended by respondent at the outset of this case that the agreement of the parties, if a contract of partnership, being for a partnership to deal in real estate, is void under the statute of frauds, because not in writing. This question has been much discussed by the courts, and there is considerable conflict in the adjudged cases. On the one hand it is claimed that a parol agreement for a partnership to deal in lands would be within the statute which provides that no "estate or interest in real property *** can be created, transferred, or declared otherwise than by operation of law, or by a conveyance or other instrument in writing, subscribed by the party creating, transferring, or declaring the same." 1 Hill, Code, § 781. And to this effect is the case of Smith v. Burnham, 3 Sum. 435. On the other hand there are many authorities which hold that such an agreement is not within the statute, for the reason that the real estate is treated in equity as personal property for all the purposes of partnership. Dale v. Hamilton, 5 Hare, 369; Essex v. Essex, 20 Beav. 449; Chester v. Dickerson, 54 N.Y. 1. The question is ably and exhaustively examined in Dale v. Hamilton, and the conclusions reached by the vice-chancellor in that case seem to us to be supported both by reason and authority. The general doctrine is there laid down that a partnership agreement between A. and B. that they shall be jointly interested in a speculation for buying, improving for sale, and selling lands may be proved without being evidenced by a writing signed by, or by the authority of, the party to be charged therewith within the statute of frauds; and, such an agreement being proved, A. or B. may establish his interest in land, the subject of the partnership, without such interest being evidenced by any writing. In Chester v. Dickerson it is said: "Most of the conflict in the authorities has arisen in controversies about the title to the real estate after the dissolution of the partnership or the death of one of the partners. But, suppose two persons, by parol agreement, enter into a partnership to speculate in lands, how do they come in conflict with the statute of frauds? No estate or interest in lands has been granted, assigned, or declared. When the agreement is made, no lands are owned by the firm, and neither party attempts to convey or assign any to the other. The contract is a valid one, and in pursuance of this agreement they go on and buy, improve, and sell lands. While they are doing this, do they not act as partners, and bear a partnership relation to each other? Within the meaning of the statute, in such case, neither conveys or assigns any land to the other, and hence there is no conflict with the statute. The statute is not so broad as to prevent proof by parol of an interest in lands. It is simply aimed at the creation or conveyance of an estate in lands without a writing." In Knott v. Knott, 6 Or. 146, WATSON, J., in discussing this question, says: "While there is a conflict in the authorities, many of the courts having followed the decision in Smith v. Burnham, we regard the doctrine laid down in Dale v. Hamilton as better adapted to the course of business in this country, where mercantile, manufacturing, and various other partnerships are necessarily compelled, in the course of their business, the investment of their capital, and the collection of debts due them, to become the owners of real property." While the case just referred to was not a partnership formed for the purpose of dealing in real estate, the decision shows the tendency of this court to follow Dale v. Hamilton rather than Smith v. Burnham. From a careful examination of the authorities, we are of the opinion that a valid contract of partnership for the purpose of speculating in real estate may be made by parol. Traphagen v. Burt, 67 N.Y. 30; King v. Barnes, 109 N.Y. 267, 16 N.E. 332; Richards v. Grinnell, 63 Iowa, 44, 18 N.W. 668; Treat v. Hiles, 68 Wis. 344, 32 N.W. 517; Wallace v. Carpenter, 85 Ill. 590; Holmes v. McCray, 51 Ind. 358; Newell v. Cochran, 41 Minn. 374, 43 N.W. 84; Black v. Black, 15 Ga. 449; Coward v. Clanton, 79 Cal. 23, 21 P. 359; Meagher v. Reed, 24 P. 681. Many of the cases above cited go much further than is necessary for us to go in this case in order to admit the proof of the formation of the partnership here. The contract does not in any way affect the title to real estate nor does the present controversy involve any such question. The subject-matter of the contract was the profits to be realized from the sale of the Tucker land, and the controversy here is as to such profits. The contract of purchase from Tucker was not secured to hold as land, or with any intention of ultimately vesting the legal title in the partnership, but for the purpose of sale and the acquisition of profits. It was secured simply as an article of commerce, and for speculation. No controversy exists here about the title to any land taken or owned by the partners, but it simply relates to the conduct of the defendant while he was acting as a partner; and in such a case the statute of frauds certainly cannot be invoked to defeat this suit. The object of the alleged partnership has been accomplished, and this suit is for the purpose of adjusting the accounts between the parties. This is a matter over which a court of equity has jurisdiction, and the defendant cannot, after the contract has been executed and the profits of the transaction gone into his hands, be heard to say that the contract, under which the profits were realized, is void under the statute of frauds. Coward v. Clanton, 79 Cal. 23, 21 P. 359; Morrill v. Colehour, 82 Ill. 619; Chester v. Dickerson, 54 N.Y. 1.

The next question presents more difficulty and relates to the allegation of partnership set up in the complaint and denied in the answer. The defendant, Barnekoff, resides at McMinnville, and is engaged in the milling business, while the plaintiff is a real-estate dealer in Portland. About the 1st of March, 1890, defendant, desiring to purchase some land for use in his business,...