Ross v. Ross' Administrator

• Decision Date: 28 January 1930
• Citation: 232 Ky. 583
• Court: United States State Supreme Court — District of Kentucky
• Parties: Ross et al. v. Ross' Administrator.

232 Ky. 583

Ross et al. v. Ross' Administrator.

Court of Appeals of Kentucky.

Decided January 28, 1930.

1. Partnership. — Judgment of appellate court establishing partnership relation as to individual assets necessarily carried with it the debts which had been incurred in creating assets and conducting business.

2. Witnesses. — Surviving partner interested in having individual debts paid out of partnership assets, and thereby testifying for himself as to particular claims, was not disqualified from so testifying under Civil Code of Practice, sec. 606, subsection 2, in view

of fact that testimony did not relate to any conversation or transaction had with or acts done or omitted by deceased partner.

3. Witnesses. — Partnership relation is one of mutual agency, and so long as active partner with whom claimants contracted is living, all are competent witnesses to prove such facts, though if active agent is dead parties may not testify for themselves as to any conversations or transactions with deceased agent.

4. Partnership. — Where judgment determines that business was a partnership, acts of individual respecting such business became partnership transaction, and money borrowed for purpose and actually used in such business was a partnership obligation, regardless of fact that credit was extended to individual acting as owner of property and manager of business with title thereto.

5. Principal and Agent. — Where a party does business with agent for an undisclosed principal and afterwards discovers the principal, he may hold principal for the debt.

Appeal from Madison Circuit Court.

JOHN NOLAND, JOE ROBINSON, H. CLAY KAUFFMAN and J.P. CHENAULT for appellants.

BURNAM & GREENLEAF and G. MURRAY SMITH for appellee.

OPINION OF THE COURT BY JUDGE WILLIS.

Reversing.

This appeal is a sequel to the case of Ross v. Ross, 216 Ky. 577, 288 S.W. 305, and an understanding of that case is essential to a comprehension of this one. Salem W. Ross was the grandfather of A.D. Ross, who had been managing his farms for him. On April 20, 1917, the two acquired a tract of land containing 67.25 acres, taking title in fee to A.D. Ross, with a life estate in one-half thereof to Salem W. Ross. That land cost $6,725, of which Salem W. Ross paid $1,000, and the balance of the consideration was payable in installments secured by vendor's lien. Salem W. Ross also owned a life estate in a tract of land containing 200 acres. On February 3, 1919, a written agreement was executed by Salem W. Ross and A.D. Ross, whereby the latter agreed to buy the Prewitt property and permit the former to have the use and possession of it during his life; and Salem W. Ross agreed to allow A.D. Ross to have the use of his farm land for life. A.D. Ross then purchased the Prewitt property at a commissioner's sale at a cost of $7,000. Salem W. Ross moved upon it and continued to live there until 1923. A.D. Ross operated and managed the two farms. On October 17, 1923, Salem W. Ross instituted an action against A.D. Ross to reform the deeds so as to vest the title to the Prewitt property in himself alone, and the title to the 67.25-acre farm in the parties jointly. He further sought to be adjudged a lien on the one-half interest of A.D. Ross, for $3,367.50, claiming that he had paid the entire consideration. The ground of his action was that the title had been taken to A.D. Ross in violation of a confidential relation, when plaintiff, by reason of age and infirmity, was incapable of taking care of his own interests. On August 25, 1924, Salem W. Ross filed another suit against A.D. Ross seeking to cancel the contract of February 3, 1919, and to compel an accounting of an alleged agency created in 1916 for the management and operation of his farm lands. The circuit court dismissed both actions, and Salem W. Ross appealed to this court, resulting in a reversal of the judgment. 216 Ky. 577, 288 S.W. 305. The lower court was directed to settle the transactions between the parties upon the basis of a partnership and to treat the conveyances to A.D. Ross as in trust for the firm. The lands were to constitute the partnership assets, and each partner was to have back what he had paid on the lands from his individual means, apart from the firm funds. Naturally such an adjustment led to complications, because neither the parties nor those dealing with A.D. Ross in conducting the business had so understood the relationship. The circuit court referred the case to the master commissioner to ascertain what Salem W. Ross and A.D. Ross had paid on the lands out of their respective funds and authorized further proof to be heard. In the meantime Salem W. Ross had died and the action was revived in the name of his personal representative. The master commissioner reported a settlement of the matters between the partners, and all exceptions to the report were overruled. Neither party is complaining upon that score. It should be noted, however, in view of certain claims to be presently discussed, that A.D. Ross, in the settlement of the partnership, was allowed nothing for the money he had borrowed and put into the firm property. Obviously, this was on the assumption that such claims would constitute partnership debts. If they were to be treated as individual debts, then A.D. Ross would be entitled to have returned to him the amount which he had borrowed and put into the firm property. The case was again referred to the master commissioner to ascertain and report on the claims filed against the partnership. He received the formal proofs of claims and the testimony offered thereon, and made a report allowing all claims filed. Upon exceptions to the report the circuit court rejected three of the claims as follows: (1) Claim of the Citizens' National Bank upon a note for $2,430.80 with interest from June 30, 1927; (2) claim of G.W. Ross upon a note for $1,000 with interest from August 26, 1919; (3) the claims of R.M. Ross arising upon three separate notes, one for $994 with interest from February 4, 1921, less certain credits, one note for $554.84 with interest from July 1, 1925, less certain credits, and another note for $514 with interest from January 1, 1925. The Citizens' National Bank note was signed by G.W. Ross as surety. The master commissioner found as a fact that these three claims were for money lent A.D. Ross to pay the original owners the purchase price of the partnership lands, and that he had used it for that purpose. The present appeal is prosecuted from the judgment of the circuit court disallowing the three claims.

It is ably argued that the judgment may be soundly supported upon any one or all of three different grounds, which are: (a) That the testimony of A.D. Ross is incompetent: (b) that if competent, the testimony is too vague and uncertain to support the finding that the money lent to A.D. Ross went into the partnership property; and (c) that even if the partnership did receive the benefit of such funds, the partnership assets are not liable if the money was borrowed by one partner in his individual capacity and not upon the credit of the partnership. It is apparent that the case required either that A.D. Ross be given the money invested in the lands, although borrowed by him, or that the notes given by him for money borrowed and put into the partnership should be treated as firm obligations. A.D. Ross was carrying on the business which required considerable capital. In order to buy the lands, and to operate the business, it was necessary to use his credit, and considerable money was...