Stickney v. Kerry

• Citation: 348 P.2d 655,55 Wn.2d 535
• Decision Date: 28 January 1960
• Docket Number: No. 35035,35035
• Court: Washington Supreme Court
• Parties: C.L. STICKNEY and H.A. Preszler, Respondents, v. Harold B. KERRY, Ruth B. Kerry and Israel Torrico, Appellants. . Department 2

Page 535

55 Wn.2d 535 348 P.2d 655 C.L. STICKNEY and H.A. Preszler, Respondents,
v.
Harold B. KERRY, Ruth B. Kerry and Israel Torrico, Appellants. No. 35035. Supreme Court of Washington. Department 2. Jan. 28, 1960.
Rehearing Denied March 16, 1960.

O'Leary, Meyer & O'Leary, Olympia, for appellants.

Brodie & Fristoe, Olympia, for respondents.

ROSELLINI, Judge.

While there are two plaintiffs and four defendants named in the title to this action, C.L. Stickney is the only plaintiff and Ruth B. Kerry the only defendant involved in this appeal.

The question in the case is: In a partnership accounting, can a nonpartnership debt owed by a bankrupt partner to one of the other partners be paid to him out of the bankrupt partner's interest?

Page 536

The partnership involved in this litigation was composed of four members, one of whom, Stickney, leased the partnership property, known as the West Tenino Lumber Company, and employed another partner, Harold E. Kerry, to manage it. The latter held a 51.13 per cent interest in the partnership, and the former, his employer, held an interest of 19.32 per cent.

Under the terms of the employment contract, Kerry's salary was to be determined on the basis of the earnings of the business.

During the course of this employer-employee relationship, Kerry was advanced $7,000 in excess of his earnings. On October 2, 1953, he and the community composed of himself and Ruth B. Kerry filed their petition in bankrupty in the United States District Court for the Western District of Washington, Southern Division, and on October 5, 1953, were adjudged bankrupt. They included the $7,000 owing to Stickney as a debt in their schedule of unsecured creditors, and listed as an asset their interest in the partnership. Thereafter the referee entered findings of fact [348 P.2d 656] and conclusions of law to the effect that the trustee in bankruptcy was, on dissolution of the partnership, "entitled to receive all right, title and interest in assets distributed" as the result of Kerry's interest in the partnership. This ruling was later affirmed by the judge of the district court.

Subsequently, Ruth B. Kerry purchased from the trustee in bankruptcy all of the right, title and interest of H.E. Kerry in the partnership and, on March 19, 1954, entered into an earnest-money agreement with the other three partners for the purchase of their interests. At that time Stickney claimed the right to have the $7,000 owed him by Kerry set off against a $9,782.85 debt which he owed the partnership for rent. Mrs. Kerry disputed his right to do so, and it was agreed that this matter would be settled in court. This action is the result. Before trial, however, Stickney's debt for rent was paid by setting off other credits against it. So the question before the court was whether he was entitled to receive $7,000 out of Kerry's

Page 537

interest in payment of Kerry's nonpartnership debt to him. The trial court answered this question in the affirmative.

Whether a nonpartnership obligation can be enforced in an accounting and dissolution proceeding, is a question which has not been determined in this...