Kelly-How-Thompson Co. v. Minn. Loan & Trust Co.

• Citation: 199 N.W. 233,159 Minn. 529
• Decision Date: 13 June 1924
• Docket Number: No. 23988.,23988.
• Court: Supreme Court of Minnesota (US)
• Parties: KELLY-HOW-THOMPSON CO. v. MINNESOTA LOAN & TRUST CO. et al.

159 Minn. 529

199 N.W. 233

KELLY-HOW-THOMPSON CO.

v.MINNESOTA LOAN & TRUST CO. et al.

No. 23988.

Supreme Court of Minnesota.

June 13, 1924.

Appeal from District Court, Hennepin County; E. F. Waite, Judge.

Action by the Kelly-How-Thompson Company, substituted for O. F. Kelting, against the Minnesota Loan & Trust Company and others. From an order denying a motion for a new trial, defendants appeal. Affirmed.

Syllabus by the Court

R. and K., during the fall and winter of 1919-20 were engaged in buying and selling potatoes on a joint account. R. was in exclusive charge of the selling. In October, 1919, R. made several contracts for the delivery of potatoes in March, 1920. On their face, they were the contracts of R. He made no contemporaneous record, in his accounts or otherwise, indicating that they were for the joint account with K. K. was not so advised until the end of the season. Cash payments received on the contracts were not credited to the joint account. When the contracts were filled in March, 1920, joint account potatoes were applied to them when the market was far above the contract price, and the joint account was attempted by R. to be charged with the resulting loss. Held, that such action on the part of R. was a fraud upon K.

The standards of good faith and open dealing applicable to partners govern such a joint adventure.

The wrongful diversion of the joint account potatoes was in the nature of a conversion, and the joint account accordingly should have credit for the value of the diverted potatoes at the time and place of diversion. E. P. Kelly, of Minneapolis, for appellants.

Geo. A. Lewis, of Minneapolis, for respondent.

STONE, J.

This is an action for an accounting wherein the decision below was for plaintiff. Defendants moved for amended findings or a new trial and appeal from the denial of a new trial. The plaintiff, as his assignee, has been substituted for O. F. Kelting, the original plaintiff. Since the action was commenced, D. E. Ryan, the original defendant has passed away, and his executors have been substituted.

[1] In 1919 and 1920, Mr. Ryan was doing a produce brokerage business in Minneapolis. Mr. Kelting resided at Downer, Minn., where he operated a potato warehouse and bought direct from the producer. On August 13, 1919, Kelting and Ryan entered into a written contract whereby, as a joint adventure, they agreed ‘to handle potatoes during the season of 1919-20.’ Kelting was to do the buying at Downer and have full charge of the enterprise at that end. Ryan was to ‘have charge of selling and disposing of all said potatoes purchased at Downer,’ which were to be ‘bought at prices agreed upon by both parties.’ Ryan was to finance the business and ‘stand all expenses incurred in the sale and disposition of said potatoes.’

There is no question but that Kelting, on his part, strictly performed the contract. From September, 1919, to March, 1920, inclusive, he bought at Downer and shipped on his joint account with Ryan 79 carloads of potatoes. This comprised out a small amount of Ryan's business, who, during the same season, handled over 2,000 cars. It was a most unusual season for the potato market. From a quiet and unexciting level at the beginning of the season, prices rose in a most unexpected and unexplainable fashion until in March potatoes had sold for over $6 per hundred.

At the end of the season there was what, on the part of Ryan, purported to be a final accounting. It disclosed a profit of $5,900.05, Kelting's one-half of which was paid. He was not satisfied. Ryan's accounts of the joint enterprise were gone over and this suit resulted. The decision below awarded Kelting an additional sum of $5,787.08. That result is right, if the future delivery contracts about to be discussed were not made from the joint account. The decision under review held that they were not.

Four future delivery contracts, for more than 10 carloads, were made in October, 1919, between Ryan personally and certain customers of his in other markets. They called for March, 1920, delivery. The prices ranged from $3 to $3.70 per hundred. Because of the unprecedented rise in the market, the potatoes, when finally delivered under these orders, represented a very considerable loss to the seller in comparison with what they would have brought on the open market at that time. Several cars of Kelting's potatoes, shipped on the joint account, were applied by Ryan on these contracts. The actual proceeds (as distinguished from the then value of the potatoes) were credited by Ryan to the joint account, which would have been entirely proper if the contracts under which they were delivered had been those of Ryan and Kelting, instead of the individual affairs of Ryan.

On behalf of the plaintiff it was claimed, and the trial court sustained the claim, that the joint account should not have been charged with any of the future delivery contracts, and that it should have credit instead for the much higher prices of the Downer potatoes, used to fill them, that would...