Wikstrom v. Davis

• Decision Date: 11 September 1957
• Citation: 315 P.2d 597,211 Or. 254
• Parties: Alvin F. WIKSTROM, Appellant, v. Cash DAVIS and Alice Ree Davis, Respondents and Cross-Appellants.
• Court: Oregon Supreme Court

Page 597

315 P.2d 597

211 Or. 254

Alvin F. WIKSTROM, Appellant, v. Cash DAVIS and Alice Ree Davis, Respondents and Cross-Appellants.

Supreme Court of Oregon, Department 2.

Argued and Submitted March 20, 1957.

Decided Sept. 11, 1957.

Hugh B. Collins, Medford, argued the cause for appellant. With him on the briefs were John L. Flynn, Portland, and J. Everett Barr, Yreka, Cal.

George W. Kellington, Medford, argued the cause for respondents and cross-appellants. On the brief were Roberts, Kellington & Branchfield, Medford.

Before PERRY, C. J., and LUSK, WARNER and KESTER, JJ.

WARNER, Justice.

This is a suit for the dissolution of a partnership and an accounting. It relates to the operation of a gift and drug business in Medford, Oregon, known as the West Side Pharmacy, in which the parties were partners.

The court found in favor of the defendants Davis upon their counterclaim and against the plaintiff Wikstrom in the sum of $14,383.84, together with interest at the rate of five per cent from the date of the decree, as the amount of the balance due upon the original purchase price of plaintiff's interest in the firm. It is from this judgment that Wikstrom appeals. The respondents have taken a cross-appeal, claiming that this determination of that balance is insufficient and that they are entitled to judgment in the amount of $26,384.18. The figure employed by the court is the fruit of the partnership accounting.

Prior to January 1, 1948, the respondents Davis had operated the business for a short while. On that date they sold a 49% interest in the pharmacy to the appellant Wikstrom, retaining for themselves a 51% interest. The Davises owned the premises where the business was conducted and rented it to the partnership.

The articles of partnership are not in conventional form and leave much to be desired in an instrument of this kind. The instrument as drawn has contributed much to the difficulties encountered by the circuit court and the accountants whose services the parties invoked in aid of their respective positions. The articles in their entirety read:

'For And In Consideration of the mutual covenants and stipulations hereinafter contained, the undersigned parties do hereby associate themselves together as partners, for the purpose of establishing and maintaining a wholesale and retail merchandising drug and prescription business at 135 West Main Street, Medford Oregon, with such partnership arrangement to become effective as of January 1, 1948.

'It is understood and agreed between the parties that at the time this instrument is executed the undersigned Cash Davis and Alice Ree Davis are the owners of the merchindise, fixtures, and the building in which the same are located. It is further understood and agreed that the depreciated price of the store fixtures now owned and being involved in this partnership amounts to $3820.50, as of January 1, 1948. The price to be paid by the said Alvin F. Wikstrom for the 49% interest in the stock, good will and fixtures shall be 49% of the value of the fixtures at the figure above mentioned, plus 49% of the value of the stock which is to be determined by an inventory to be taken as of January 1, 1948, by or under the supervision of the parties hereto; that such an inventory will be based upon the cost of the items of merchandise (but such cost price shall in no case exceed the present replacement value) plus an allowance of 3% to cover freight handling and storage charges.

'The undersigned Cash Davis and Alice Ree Davis will retain an interest equal to 51% of the stock and fixtures of such business, and the undersigned Alvin F. Wikstrom will become purchaser of the remaining 49%.

'Each of the undersigned partners will devote his full working time to such business and shall have drawing accounts as follows:

Cash Davis $300.00 per month

Alice Rees Davis $200.00 per month

Alvin F. Wikstrom $300.00 per month.

Said Cash Davis and Alice Rees Davis will be entitled to 51% of the profits of such business, and the said Alvin F. Wikstrom will be entitled to 49% of the profits of such business, and will share losses in the same proportion, if losses rather than profits should result.

'For the purpose of this agreement, and not otherwise, the drawing accounts of the parties will be considered in the same catagory as salary or wages for services so rendered, and profits will be computed and divided thereafter.

'It is not contemplated that the undersigned Alvin F. Wikstrom shall pay in cash any amount for his capital contribution, either at the present time, or on the first day of January 1948. Instead the amount he should pay to the undersigned Cash Davis and Alice Rees Davis will be calculated and established, and may be evidenced by a non-negotiable note, ledger account, or other means satisfactory to all parties. He shall then pay the said Cash Davis and Alice Rees Davis their money plus 5% interest thereon in payments from time to time, and in such amount as the parties will hereafter agree upon. All his share in said business and his right to participate in the profits (over and above the $300.00 per month drawing account) shall stand as security for and shall be applied toward payment of such debt.

'It is further agreed that such partnership shall pay as rental for its use of Lot 16, Block 45, City of Medford, Jackson County, Oregon, a sum equal to 3% of the gross sales from operations conducted on said premises, and in no case less than $150.00 per month; and out of such rental the owners of said building shall maintain the same and will pay all taxes, insurance and municipal liens that may be assessed upon or against said premises. Such rent may not be increased prior to January 1, 1958. And in order to make effective the intention of the parties hereto, the undersigned Cash Davis and Alice Rees Davis each agree to incorporate within his will a provision devising to Alvin F. Wikstrom the right to use and occupy said premises for a period to expire not later than January 1, 1958, at a rental not to exceed that which is herein indicated.

'Because of the peculiar relationship between the parties hereto they have refrained from reducing to writing each and all of the terms and conditions of the partnership agreement, and are writing only those covenants and stipulations which are considered to be the most essential. However, none of the covenants and stipulations which are herein written will be altered except by some further instrument of writing.

'Dated in duplicate at Medford, Oregon, December 1, 1947.'

During the continuance of the firm, all the partners took an active part in the business, giving their separate attention in a general way to different major departments of the business.

Mr. Davis and Mr. Wikstrom operated the prescription and veterinary sections, while Mrs. Davis supervised the rest of the store. In addition to keeping the books and handling the funds, she worked on the sales floor and in the stockroom.

As a result of two fires, one in December, 1949, and another in March, 1951, a large amount of merchandise was destroyed or damaged by fire and smoke, but this loss was offset to a substantial degree by insurance coverage.

Friction finally developed between the parties. This prompted the Davises to declare a dissolution of the association as of June 30, 1951, resulting in Wikstrom's explusion and a continuation of the business by respondents operating alone.

Later in the year 1951, Wikstrom started the suit from whence this appeal comes. The defendants Davis in their answer and cross-complaint asked for judgment against plaintiff for the unpaid portion of the purchase price of his share in the firm and for the foreclosure of their lien against Wikstrom's 49% partnership interest.

As an aid to a better understanding of what we later say concerning the various periods through which the venture passed after the break between the partners up to the final liquidation of assets by the receiver's sale, we set out the principal events in chronological order, employing dates and periods as revealed to us by the findings of the court. The first item of importance in the accounting is the date of dissolution, June 30, 1951. This was not followed by steps looking to a winding up of the partnership affairs as might be expected, but rather by a continuation of the business without cessation by the Davises and without participation by Wikstrom from June 30, 1951, to September 7, 1954, the date upon which the receiver qualified and took possession of the assets of West Side Pharmacy from the Davises. The receiver's sale was had on November 10, 1954. Wikstrom filed his complaint in this matter on December 19, 1951, praying for an accounting and the appointment of a receiver. The trial began on June 23, 1952, and continued two days, then was resumed on December 8, 1952, and after hearings for two days was continued again to February 2, 1954, and concluded on February 3, 1954.

After the commencement of the trial and sometime prior to December 31, 1952, the parties stipulated in open court:

'* * * that an account of the affairs of the partnership business as of December 31, 1952, should be made and that the plaintiff should not be entitled to any share in the profits, if any, made from and after said date and the purchase price of plaintiff's 49% interest in said business should not draw any interest from and after said date and that from and after said date the capitalization of the business would remain the same until such time as the matter was finally disposed of by the court and, hence, no harm would be done to the parties, plaintiff and defendants.'

The plaintiff-appellant rests his appeal upon four assignments of error. He first advances the proposition that the court erred in finding that the business operated on a gross margin of 30%, i.e., 30% of the total retail sales price from January 1, 1948, to June 1, 1951. It is his...