Lutz v. Miller
| Decision Date | 01 June 1926 |
| Docket Number | 5492. |
| Citation | 135 S.E. 168,102 W.Va. 23 |
| Parties | LUTZ v. MILLER et al. |
| Court | West Virginia Supreme Court |
Submitted May 19, 1926.
Rehearing Denied Nov. 12, 1926.
Syllabus by the Court.
When a partner retires from a firm, it is his duty to see that notice of such retirement is given to those who have been dealing with the firm. If no such notice be given, the retiring partner is generally treated at law as still a member of the firm and is liable as such.
One who knows he is being held out as a member of a partnership and takes no adequate steps to notify those dealing with the firm to the contrary may be held liable as a partner to those who extended credit to the firm on the faith of his reputed relation to it.
A partner cannot repay himself out of the firm's assets for advances made the partnership, except with the assent of his copartners, express or implied, and not then until the general creditors are paid.
Where a partner who has made advances to his firm signs the firm name to a note payable to himself, which he indorses and which is knowingly accepted by a creditor of the partner in payment of the partner's personal debt, the creditor cannot recover of the partnership without proof of assent, adoption, or ratification by the copartners.
Additional Syllabus by Editorial Staff.
Under Code, c. 125, § 36, in suit for injunction, where in answer it was alleged that certain persons held themselves out to world as being partners, causing credit to be extended to them as partners, failure to file replication thereto made proof of such allegation unnecessary.
Appeal from Circuit Court, Randolph County.
Suit by D. E. Lutz against John Z. Miller and others for an injunction. From an adverse decree, plaintiff appeals. Affirmed in part, and reversed in part.
Spears & Irons, of Elkins, for appellant.
D. H Hill Arnold and E. L. Maxwell, both of Elkins, for appellees.
In the fall of 1919 D. E. Lutz, J. Z. Miller, and R. M. Kittle formed a partnership to manufacture and sell lumber on Beaver Creek, Randolph county, W.Va. In 1920 a lease of the Hart coal mine, which was near the lumber operation, was executed to these three parties as lessees. The lumber operation was conducted until the fall of 1921. The coal mine was operated until the fall of 1923. Pending these operations Miller individually conducted a store, at which the employees of the operations ran accounts. In December, 1923, Miller having become ill, Lutz had a receiver appointed for the mine. A number of suits were instituted against the partnership by employees for unpaid wages. A suit was also brought against it by the Valley Grocery Company demanding payment of five notes bearing the firm signature.
The present suit was brought by Lutz in the circuit court of the said county, in which he united as defendants the said employees, the Valley Grocery Company, Miller, and Kittle. Lutz' bill alleges that he was a member of the partnership during the first three months of its operation only, that he is not responsible for the claims now urged against it, and asks for injunctive relief, etc.
The employees and the Valley Grocery Company filed several answers controverting the allegations of the bill and asking for affirmative relief. Depositions were taken. Upon the pleadings and the proof the lower court decreed: (1) The partnership pertaining to the Beaver Creek operation has never been legally dissolved, and Lutz is liable for its debts; (2) Lutz permitted himself to be held out as a partner in the Hart coal mine operation, and is estopped in pais to deny his liability to its creditors; (3) the several accounts in Miller's store of the employees should be set-offs against their claims against the partnership; (4) the five notes held by the Valley Grocery Company were for an indebtedness of the partnership to Miller, were valid notes were acquired by the grocery company in due course of trade, and the grocery company is entitled to recover from Lutz as a member of the partnership the full amount of the notes and interest.
From this decree Lutz appealed, charging error to the circuit court in holding that: (1) The Beaver Creek partnership had not been dissolved, and Lutz is liable for its indebtedness; (2) Lutz is estopped from denying liability for the indebtedness of the Hart coal mine; and (3) Lutz is liable for the notes held by the Valley Grocery Company.
1. Lutz testified, regarding the Beaver Creek operation, that about September, 1920, he agreed with Miller to withdraw from the partnership and had no further connection with it after that time; that he had never authorized Miller to issue checks, notes, etc., for the firm; that he did not know he was being connected with the partnership in any way after his withdrawal; and that he did not publish or give notice in any way of his withdrawal. Miller testified that he did not recall any agreement with Lutz for the latter to withdraw from the firm, and that he would remember if there had been any; that he often discussed the partnership business with Lutz until the time the operation was finished; that he opened an account in the name of "Lutz, Miller, and Kittle, Lumber and Coal," in the First National Bank of Belington, W.Va., on February 18, 1920, which continued until the institution of the present suit; that he often paid Beaver Creek employees with checks printed with the firm name; and that he always gave such notes, checks, etc., as the business demanded. It was general information in the neighborhood that the Beaver Creek operation was conducted by the firm. Employees testified that they were paid with the firm checks, and had seen workmen's compensation notices signed in the firm name, and understood that the firm operated the mill. One employee testified that he applied to Lutz for a job at the mill, and Lutz told him to "go up over the hill; we have another job over there." So widespread was the reputation of partnership that the attorney for Lutz alleged, without consulting Lutz, the partnership both as to the lumber and the mine operations in the suit of 1923 for a receiver.
It appears that Lutz gave no such notice of his retirement from the Beaver Creek partnership as the law requires. 30 Cyc. p. 670, par. (c); 20 R. C. L. pars. 190, 193; Parsons on Partnership, par. 321; 22 A. & E. Ency, of Law (2d Ed.) p. 179, par. (d), and page 180, par. (bb). He is therefore liable for all valid claims against it. 30 Cyc. p. 677, par. 7; 20 R. C. L. par. 194; Caspersz on Estoppel, p. 113, par. 107; 22 A. & E. Ency. of Law, pp. 176, 177, pars. 1 and 2.
We therefore affirm the finding of the lower court that there has been no legal dissolution of the Beaver Creek partnership, and that Lutz is liable for its debts.
2. Both Miller and Lutz testified that Lutz was not a partner in the Hart coal mine operation, and that Lutz had signed the lease thereto merely as surety. The signature of Lutz to the lease was made above those of Miller and Kittle, and in the body of the lease there appears, "and D. E. Lutz, John Z. Miller, and Ralph M. Kittle, of Randolph county, W.Va., parties of the second part, lessees." The firm name was signed to workmen's compensation notices posted at the mine, and to posters and newspaper advertisements. Later they appeared signed by Kittle or Miller only. Contracts and invoices for sale of coal were signed by the firm. Some twelve suits were prosecuted against the firm in regard to matters relating to the mine, and one suit was instituted in the name of the firm to recover for coal sold. Some of the employees were paid with the firm checks. Lutz attempted to obtain a certain right of way from the mine, saying, according to one witness, "he wanted to get the road so they could get out more coal." It was general reputation, according to the evidence of employees of the firm and others, that the Hart mine was run by the partnership. Lutz testified that when the compensation notices and the posters and advertisements appeared in the firm name he protested to Miller, who changed them; that he never published any counternotices; that whatever was done in the firm name in the matters of the bank account, the checks, suits for and against the firm, the selling of coal, and the giving of notes, etc., was done by Miller on his own initiative without Lutz' knowledge or consent (in which statements Miller supports him); that he did not know he was being connected with the partnership by any one until the institution of the present litigation; that the suit for a receiver was instituted by him to protect himself as surety, and the allegations of partnership made therein were made by his attorney without his knowledge; that his attempt to obtain the right of way for the mine was due to the fact that he already had some rails and a section of railroad on his own property from which he was asked to put an extension to the mine.
The evidence indicates that Lutz was not a partner in fact in the Hart coal mine operation. However, he knew, by his own admission, that he was named on the workmen's compensation notices, the posters, and the advertisements as a partner. A private protest to Miller and a subsequent knowledge that the advertisements had been changed was not enough to assure him that the public had notice that he was not a partner.
"If a person learns that his name is being used as that of a member of a firm, he is under a duty to prohibit such use and it is the general rule that when one knows that he is held out as a partner in a particular business, he is bound to take such steps as an ordinarily prudent person would take in the circumstances to notify the public, as well as individuals to whom he knows the holding out has been given, that he is...
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