Tiburon Nat. Bank v. Wagner

• Decision Date: 20 September 1968
• Citation: 71 Cal.Rptr. 832,265 Cal.App.2d 868
• Court: California Court of Appeals Court of Appeals
• Parties: TIBURON NATIONAL BANK, a National Banking Association, Plaintiff and Respondent, v. Warren O. WAGNER, Defendant and Appellant. Civ. 24465.

Page 832

71 Cal.Rptr. 832

265 Cal.App.2d 868

TIBURON NATIONAL BANK, a National Banking Association, Plaintiff and Respondent, v. Warren O. WAGNER, Defendant and Appellant.

Civ. 24465.

Court of Appeal, First District, Division 3, California.

Sept. 20, 1968.

Gabler, High & Clark, by Jack B. Clark, Van Nuys, for appellant.

Bagshaw, Martinelli, Weissich & Jordan, San Rafael, for respondent.

HAROLD C. BROWN, Associate Justice.

This is an appeal from a judgment against defendant Warren O. Wagner and in favor of the plaintiff Tiburon National Bank on a promissory note executed by Mooney Yacht Company, a co-partnership. Appellant, Warren O. Wagner, claims that there was no evidence to support the court's finding and conclusion that he was liable on the note as a 'general partner' of Mooney Yacht Company.

Also joined as defendants in the action were J. A. Maillian, Jr. (who was not served with process), and Lyle H. Turner (who defaulted). Neither testified at the trial.

The Facts: A. E. Mooney, J. A. Maillian, Jr., and Lyle H. Turner (a lawyer) intended to go into the business of buying and selling yachts in Marin County. They required financing. Sometime in late September or early October of 1963, Maillian went to Pasadena and called on Warren O. Wagner, with whom he had had prior financial transactions, in order to induce him to assist in the financing in exchange for an interest in the venture. At this meeting Maillian informed Wagner that a yacht had been purchased on the East Coast; that 'they' (presumably Maillian, Turner and Mooney) desired to bring it to the San Francisco Bay area for resale, but that Wagner's credit backing was needed.

Maillian returned to Marin County and he and Turner prepared a letter dated October 4, 1963. It may be inferred that this letter expressed the agreement reached by Maillian and Wagner at this meeting in Pasadena. The letter is as follows: 'Dear Mr. Wagner: This letter will serve to confirm that you and the undersigned are to become limited partners with Addison E. Mooney as general partner under a limited copartnership to be formed for the purpose of engaging in the purchase and sale of pleasure craft, as owners, vendors, and subsequently as yacht brokers.

'Said business shall be known by a trade name to be subsequently selected and shall be financed by a loan of $25,000 by a lending institution in the San Francisco Bay Area.

'$5,000 of the proceeds of the said loan shall be by the partnership lent to you, the terms of repayment to be due and payable out of the profits of the business. Said $5,000 shall be disbursed one-third to you and one-third to each of the undersigned.

'You and Mrs. Wagner are to guarantee the loan to the bank and we confirm that each of the undersigned hereby guarantee to you the payment of one-third of any amounts that you may have to pay by reason of your continuing guarantee to said lending institution, less any recovery from the general partner.

'It is agreed that your interest as a limited partner shall be eight and one-third percent (8 1/3%) until such time as the said loan is repaid, or three (3) years, whichever shall be longer. After the repayment of said loan, the interest of yourself and each of the undersigned shall be reduced to five percent (5%) each.

'You and the undersigned will execute as limited partners a Limited Partnership Agreement with Addison E. Mooney, incorporating the foregoing provisions to the extent that the same will be appropriate in standard articles of limited copartnership.

'If the foregoing correctly sets forth our agreement, kindly so acknowledge by signing below. Very truly yours, /s/ Lyle H. Turner Lyle H. Turner /s/ J. A. Maillian, Jr. J. A. Maillian, Jr.'

This letter was not mailed. It was personally delivered by Maillian to Wagner on October 10, 1963.

Meanwhile, on October 7, 1963, Maillian, in the company of Turner and Mooney, called at the Tiburon National Bank (hereinafter referred to as Bank) for the purpose of obtaining a loan for the partnership in the sum of $25,000.

In support of this application for the loan they presented the Bank with (1) a certificate of limited partnership with Mooney as a general partner and Wagner, Turner and Maillian as limited partners; (2) a statement of Wagner's finances disclosing his net worth to be in excess of $400,000; and (3) a continuing guaranty purporting to bear Wagner's signature and guaranteeing the loan if granted. The Bank granted the loan in the sum of $25,000 to the partnership. The promissory note evidencing the loan was otherwise unsecured and was executed by 'Mooney Yacht Company, a partnership by A. E. Mooney general partner(s) By J. A. Maillian, Jr. limited partner(s)'. (Emphasis added.)

It was established at trial that the signature of Wagner to both the continuing guaranty and the certificate of limited partnership had been forged. The certificate of limited partnership was never filed or recorded pursuant to the provisions of section 15502 of the Corporations Code. The financial statement had been given to Maillian by Wagner and contained a true statement of the net worth of Wagner, but Wagner testified that he did not permit the financial statement to get into Maillian's hands for the purpose of obtaining the loan. The record is silent as to his reason for giving it to Maillian.

Mooney, who was the working member of the partnership, had no knowledge that Wagner's signatures on the continuing guaranty and the certificate of limited partnership were forged. He was also of the belief that each member was a general partner in the venture.

Two days after obtaining the loan from the Bank, on October 10, 1963, Maillian again called upon Wagner at Pasadena and presented him with the letter dated October 4, 1963, heretofore set out in full. Wagner indicated his approval of the contents of the letter by affixing his signature on it in the following manner: 'APPROVED AND ACCEPTED this 10th day of October, 1963. / s/ Warren O. Wagner * * *' (Emphasis added.) During this meeting Maillian handed Wagner a check signed by Turner on Turner's law office account in the amount of $1,667.67. This was the exact amount which Wagner was to receive under the agreement evidenced by the letter of October 4. Wagner endorsed and cashed the check. Prior to Maillian's visit to Wagner, Mooney had been induced to sign two blank partnership checks. One of them was made out to Wagner for $5,000. Wagner's endorsement was placed thereon by Turner. Turner's check to Wagner for $1,667.67 represented one-third of the $5,000 so obtained. Maillian and Turner were each entitled also to $1,667.67 pursuant to the October 4 letter, making the total of $5,000.

The partnership paid the purchase price for the yacht in the sum of $14,500 plus $2,501.94 for the expense of shipping it to the San Francisco Bay area. The total expenses of the partnership came to $24,878. This included the $5,000 withdrawn by Turner of which $1,667.67 had been paid to Wagner.

The installments on the $25,000 note to the Bank became delinquent and on January 17, 1964, Mooney wrote the following letter to Wagner: 'Dear Mr. Wagner: Kindly be informed that for the past several weeks I have been requesting Mr. J. Mallian (sic) and Mr. Lyle H. Turner to contact you with respect to collecting the five thousand dollars you borrowed from the Mooney Yacht Company. I have not heard from either Jay or Lyle on this matter and thereby believe you, as a partner in this company, should be aware of the situation.

'As you know, we borrowed a non secured sum of twenty five thousand dollars from the Tiburon National Bank, Tiburon Calif. Such loan was received in the name of the Mooney Yacht Company, a partnership, with you as the guarantor.

'We purchased a 50 Chris Craft cruiser from the Rodi Boat Company of Ft. Lauderdale, Florida, and boat was shipped, viarail, rail, to San Rafael, Calif. When this boat was purchased I informed both Jay and Lyle that our first transaction would run around $22,000 before putting her on the market for resale.

'Due to your loan our account with the bank was not sufficient to handle the bills and I have had to make up the balance from my own. We owe the bank for the past two months interest and a number of accounts which, I'm sure you will agree, is no way to run a business.

'I would very much appreciate hearing from you on this matter. Kindest regards, A. E. Mooney'

On February 10, Mooney again wrote Wagner. He received no reply to the two letters. Upon receiving the letters, Wagner forwarded them to Maillian.

Default having been made on payments on the note, the Bank instituted these proceedings for the balance due against Mooney, Wagner, Maillian and Turner as 'general partners.'

By the time of trial Mooney had sold the yacht for $20,500 and had repaid the Bank $17,587.37. There was a balance due the Bank in the principal sum of $7,413.63 and interest of $1,389.01.

The court rendered judgment against Wagner, Mooney, Maillian and Turner on the basis that each was a 'general partner' and liable for the balance due with interest and attorney's fees. Only Wagner appeals.

It is clear that Wagner could not be held liable to the Bank on the guarantee because the undisputed evidence showed that Wagner's signature thereon was forged. Likewise, Wagner could not be held liable as one who formally agreed to become a general partner because the agreement which he signed on October 10, 1963 provided that he would be a limited partner. Since limited partners are not liable for the debts of the partnership (see Corp.Code, § 15501), the question presented is: Did Wagner become liable as a 'general partner' to the Bank as a creditor of the partnership, by reason of Wagner's participation in the venture and his failure either to comply with the recordation requirements of section 15502 of the Corporations Code relating to limited partnership or to renounce his interest in the partnership...