J.M. Schultz Seed Co. v. Robertson

• Decision Date: 05 July 1983
• Docket Number: No. 1-982A274,1-982A274
• Citation: 451 N.E.2d 62
• Parties: J.M. SCHULTZ SEED COMPANY, Plaintiff-Appellant, v. David ROBERTSON, In His Individual Capacity, and John King and David Robertson, d/b/a Crop Systems, Defendants-Appellees.
• Court: Indiana Appellate Court

Page 62

451 N.E.2d 62

J.M. SCHULTZ SEED COMPANY, Plaintiff-Appellant, v. David ROBERTSON, In His Individual Capacity, and John King and David Robertson, d/b/a Crop Systems Defendants-Appellees.

No. 1-982A274.

Court of Appeals of Indiana First District.

July 5, 1983.

John W. Van Laere, Parker, Brummer, Siemer, Austin & Resch, Effingham, Ill., for plaintiff-appellant.

Gary L. Watson, Gary L. Watson & Associates, Lebanon, for defendants-appellees.

NEAL, Judge.

STATEMENT OF THE CASE

Plaintiff-appellant J.M. Schultz Seed Company (Schultz) appeals a negative judgment in a trial before the Boone Circuit Court without a jury in its suit on partnership debts against an alleged partner, John King (King).

We affirm.

STATEMENT OF THE FACTS

From the first part of May until June 5, 1979, Schultz made sales of agricultural chemicals to David Robertson d/b/a Crop Systems, payment for which became due July 10, 1979. On August 15, 1979, as a part of delinquent account collection procedures, Schultz took Robertson's note for the $97,208.87 balance which he executed as "partner." At that time Robertson told Schultz representatives that before he signed it he wanted to talk to King, his partner. When the note was not paid, suit was brought against both Robertson and King on the theory of the existence of a partnership. The trial court entered judgment for Schultz against Robertson, but in favor of King. The trial court found that no partnership existed on August 15, 1979, nor had King signed or agreed to pay the note. On this appeal Schultz contends that the evidence compels the conclusion that Robertson and King were general partners and King should be liable individually also.

The evidence on the subject of the existence of a partnership is as follows: King, in the early part of 1979, had cosigned renewal notes to the Citizens Bank and Trust Company of Lebanon for David Robertson d/b/a Crop Systems. On August 15 and October 8, 1979, Robertson told Schultz's representative, in effect, that King was his partner. He said that King was helping him work out financial solutions and he wanted to consult him before signing the August 15 note. However, all of Robertson's statements concerning King were made after the sales and no reliance on King's credit was involved in the sales. On October 8, 1979, and in January, 1980, King met with Schultz representatives, attempting to work out an arrangement for paying the debt by installments. In 1980, Schultz received a personal financial statement of King. The financial statement for the year ending December 31, 1979, prepared sometime in 1980 by Robertson and his accountant, reflects a John King capital account of $80,000. A partnership tax return for 1979, prepared in 1980, showed Robertson and King as partners. The return showed heavy losses from Crop Systems.

Robertson testified that in early August, 1979, he considered King a partner. He had borrowed money from King in October, 1978, and early 1979, and had entered it on the books of Crop Systems as a capital account for King. King also had cosigned other notes for him. Robertson stated that he believed King was a general partner:

"Because at the time when we put the note funds that were mine personally that I borrowed from John into the capital accounts or into the contribution of the company, it was my opinion at that time that we should be considered partners to protect John, more than anything else."

The capital account entries were not made in Crop Systems' books until year end.

When asked about the nature of his involvement with Crop Systems, John King testified, "I guess I'd be a partner." However, he further stated that he had loaned Robertson money in the fall of 1978 and all through 1979, but he did not consider himself a partner until sometime in the early spring of 1980. After consulting with his attorney and accountant he decided in 1980 to consider it a partnership for tax return purposes. Until that time he carried the loans to Robertson as notes receivable, and he did not consider himself a partner until that determination in 1980. King stated that his further involvement with Robertson and Crop Systems occurred because he had loaned Robertson as much as $400,000. King's actions of cosigning notes and attempting to work out financial solutions were to prevent foreclosure on Robertson so as to protect King's own loans. King stated that he had no voice in the management, but was consulted by Robertson on some major decisions. There had never been a partnership agreement, written or oral, and none was discussed until 1980. Nor was there any agreement between King and Robertson to share profits.

ISSUE

The sole issue is whether the trial court erred in concluding that a partnership did not exist at the time of the incurrence of the debt or the execution of the note.

DISCUSSION AND DECISION

If a partnership existed at the time of the transactions King would be liable. Ind.Code 23-4-1-15. Probably an accurate and comprehensive definition of a partnership has not been stated. Bacon v. Christian, (1916) 184 Ind. 517, 111 N.E. 628. A partnership is an association of two or more persons to carry on a business for profit as co-owners. Ind.Code 23-4-1-6. Mere tenants in common or joint tenancies in property do not, by themselves, establish a partnership. Nor does the sharing of gross income. The receipt of a share of the profits is prima facie evidence of a partnership, but such inference is not applicable where the profits are received as payment of wages, debt, rent, interest, a loan or a sale. Ind.Code 23-4-1-7. Generally, the question of the existence of a partnership is one of fact. Musgrave v. Madonna, (1976) 168 Ind.App. 145, 341 N.E.2d 789. In Vohland v. Sweet, (1982) Ind.App., 433 N.E.2d 860, we reviewed the creation of partnerships as follows:

"Under Ind.Code 23-4-1-7(4) receipt by a person of a share of the profits is prima facie evidence that he is a partner in the business. Endsley v. Game-Show Placements, Ltd., (1980) Ind.App., 401 N.E.2d 768. Lack of daily involvement for one partner is not per se indicative of absence of a partnership. Endsley, supra. A partnership may be formed by the furnishing of skill and labor by others. The contribution of labor and skill by one of the partners may...