McGilvery v. McGilvery & Seeley Ltd.
| Decision Date | 14 December 1912 |
| Citation | 128 P. 978,23 Idaho 116 |
| Court | Idaho Supreme Court |
| Parties | D. J. McGILVERY, Appellant, v. McGILVERY & SEELEY, LTD., Respondents |
PARTNERSHIP-INCOMING PARTNER-LIABILITY-LEASE-COVENANT-DEFAULT.
(Syllabus by the court.)
1. Where a sale is made of an interest in a partnership to a stranger, and it is provided in the contract of sale that the new partner who purchases an interest in the partnership makes such purchase upon the books and inventory of the assets and liabilities of said business, and such books and inventory are furnished to the purchaser by the partnership in which the purchaser is buying an interest, and such books and inventory show the debts and liabilities of the copartnership and the interest the purchaser is buying, such contract completes the things in respect to which the contract is made, and does not include other debts.
2. Where a contract is made for the sale of an interest in a copartnership, which shows the debts and liabilities of the copartnership and the interest the purchaser is buying, and shows the matters concerning which the parties propose to contract, and not matters unknown to them other debts and liabilities not known to the purchaser and not described are not obligations for which the purchaser is liable.
3. Where one partner who is a member of a copartnership knows more about the state of the partnership accounts than another, and a stranger is purchasing an interest in such copartnership, and such partner conceals what he knows about the liabilities of the copartnership in which the incoming purchaser is purchasing, and an agreement is entered into with the purchaser by one of the copartnership selling his interest to the purchaser, which is known to the partner at the time, and the purchaser agrees to purchase said interest upon the books and inventory of the assets and liabilities of said business, and such books and inventory are furnished to the purchaser by the partnership in which the purchaser is buying an interest, such purchaser is not liable for other liabilities or obligations not embraced in the contract which were known and not divulged to the purchaser.
4. Evidence in this case examined, and held sufficient to support the findings and judgment of the trial court.
APPEAL from the District Court of the Second Judicial District for Nez Perce County. Hon. Edgar C. Steele, Judge.
Action to recover a judgment for debt. Judgment for respondent. Affirmed.
Judgment affirmed. Costs awarded to respondent.
Geo. W Tannahill, for Appellant.
Under the peculiar conditions of the lease and of the obligation it is not a current bill or an ordinary obligation of the firm. On this account the general authorities on the question of a partnership and the liability of a retiring partner will be of little assistance to the court. It also appears that the lease was kept in the safe with the insurance policies and other similar documents, was at no time concealed from any of the incoming or retiring partners, and they could have obtained the information concerning the lease had they taken the trouble to examine the same.
The various incoming partners purchased their interests from the various retiring partners, agreeing to collect all of the obligations and assume and pay off all of the liabilities, and it is immaterial whether each retiring partner knew of this previous liability or not. It was a liability of the partnership, just the same as the various bills due the firm were an asset of the partnership, and it went with each retiring partner; each partner assumed and agreed to pay off and discharge all of the liabilities. (Marks v. Chumas, 82 Kan. 562, 109 P. 397; Olmstead v. Dauphiny, 104 Cal. 635, 38 P. 505; Bessemer Sav. Bank v. Rosenbaum Grocery Co., 137 Ala. 530, 34 So. 609; Cobb v. Benedict, 27 Colo. 342, 62 P. 222; Heller v. Heller, 21 Ky. Law Rep. 1387, 55 S.W. 433; Fellerman v. Goldberg, 28 Misc. 235, 58 N.Y.S. 1113; Freeman v. Hutting Sash & Door Co. (Tex. Civ. App.) 135 S.W. 740; Gillen v. Peters, 39 Kan. 489, 18 P. 613; Bunton v. Dunn, 54 Me. 152; Morgan v. Wordell, 178 Mass. 350, 59 N.E. 1037, 55 L. R. A. 33; Alexander v. McPeck, 189 Mass. 34, 75 N.E. 88.)
"In general, whatever might be the technical effect of the contract, if, in substance, it amounts to an agreement by the incoming partner to share in the debts due from the firm, he would be held accordingly." (Parsons on Contracts, p. 435; Gage v. Lewis, 68 Ill. 604.)
After a prima facie case as to partnership is made, the admissions and conduct of the several partners in the course of the partnership business are admissible against the others. (Dennis v. Kolm, 131 Cal. 91, 63 P. 141; Summerville v. Penn Drilling Co., 119 Ill.App. 152; Waller v. Davis, 59 Iowa 103, 12 N.W. 798; Flour City Nat. Bank v. Widener, 167 N.Y. 276, 57 N.E. 471; Houck v. Kelsey, 17 Kan. 333.)
Eugene A. Cox, for Respondent.
Partners and incoming and retiring partners do not deal at arms'-length. The relation is necessarily one of mutual trust and confidence, and this is accentuated where one partner, by reason of his relation to the business, is more conversant with the facts than the other. (30 Cyc. 438; George on Partnership, p. 160; 1 Rapalje's Lindley on Partnership, c. 2, 303, p. 510; Mechem's Elements of Partnership, p. 84, sec. 112, p. 146, secs. 219, 220; Bloom v. Lofgren, 64 Minn. 1, 65 N.W. 960; Caldwell v. Davis, 10 Colo. 481, 15 P. 696, 3 Am. St. 599.)
Where a sale is made upon the basis of the books, and upon that showing the purchasers agree to assume all liabilities, the language of the contract is limited, as between the parties, by the obvious understanding of the parties that the liabilities disclosed are all the debts. (Case v. Cushman, 3 Watts & S. (Pa.) 544, 39 Am. Dec. 47.)
An agreement to assume all obligations upon the purchase of a going business will not be construed to include unusual and extraordinary liabilities not usually an incident of such a business, unless such liabilities were specifically called to the attention of the purchaser. (Moon v. Allen, 82 Minn. 89, 84 N.W. 654; Dorwin v. Laughlin, 117 Wis. 617, 94 N.W. 641; Dunham v. Johnson, 85 Minn. 268, 88 N.W. 737.)
Except where there is special legislation like our bulk sales law, the liability of persons purchasing a business is limited strictly by contract. (Bank of Commerce v. Ada County Abstract Co., 11 Idaho 756, 85 P. 919.)
If in transactions between partners and retiring and incoming partners there is any element of concealment or the withholding of facts, the liability of the partners will be strictly limited by that fact. (Richards v. Fraser, 122 Cal. 456, 55 P. 246, and cases cited.)
This action was brought by the appellant against the respondent for the purpose of recovering a sum of money paid by the appellant upon a judgment rendered against appellant by a lessor upon a written lease, wherein it is claimed that the respondent, as assignee of the lessee, assumed the liability under said lease. The cause was tried to the court and findings of fact, conclusions of law and judgment rendered in favor of the respondent. A motion for a new trial was made and overruled. This appeal is from the judgment and from the order overruling the motion for a new trial.
The sole question presented to this court is upon the evidence: Does it support the findings and judgment of the trial court?
The facts are about as follows: The appellant, D. J. McGilvery was engaged in the furniture business in Lewiston, Idaho, during the years from 1897 to 1906. During this time he had successively as partners in said business, Aune, Culver, Willis, Boston, Beach, Givens and Seeley. These various partners were generally engaged in other professions, and McGilvery, the appellant, was practically the sole manager, and conducted the business of the copartnership and made all contracts with reference to the tenancy of the business premises occupied by the respective copartnerships. The first lease was made in 1900 by McGilvery and Boston; in 1903 Boston sold his interest in the business to William Thompson, and the firm of McGilvery & Thompson occupied the premises under the lease, and were bound by the provisions of the lease. The lease expired in June, 1905. McGilvery contended that no demand for the restoration of the premises was made before the termination of the lease, and that at its expiration a new oral lease was made for a year. In June, 1906, Thompson sold his interest in the business to Beach. Beach was advised that the premises were occupied on a year's oral lease. A few days afterward Beach sold his interest to Givens. Both Beach and Givens seem not to have been advised, or known, of the existence of the old lease, or any demands or liability arising therefrom. At the time each of said members purchased an interest as a partner with McGilvery they seemed to have made such purchase upon an inventory of the stock and a verified list of creditors. After Givens became a member of the partnership, the firm of McGilvery & Givens decided to remove their place of business to a new location in another block in said city of Lewiston, and the old premises occupied by McGilvery & Givens and owned by Binnard were relet to Granlich & Ledson, and the removal was made to the new location in May, 1906. On June 30, 1906, Seeley succeeded by purchase to the half interest owned by Givens in the partnership of McGilvery & Givens. This purchase was made on inventory and a verified list of creditors, and after such purchase it was agreed that the business should be conducted as a corporation, and in about thirty days a corporation was formed, and the business transferred to the respondent, McGilvery &...
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