Opinion
Rehearing Denied Sept. 2, 1930
Hearing Granted by Supreme Court Oct. 10, 1930.
Appeal from Superior Court, San Bernardino County; Charles L. Allison, Judge.
Action by Duff S. Hansen and another, copartners doing business under the firm name and style of the Hansen Lumber Company, against C.O. Burford, Leonard Cole, J.S. Owen, and others. From a judgment for plaintiffs, defendants Cole and Owen appeal.
Reversed as to appellants.
COUNSEL
John T. Houser, of Long Beach, for appellants.
O’Connor & Findlay, of Colton, for respondents.
OPINION
HAINES, Justice pro tem.
By their amended complaint the plaintiffs, who constitute a copartnership known as the Hansen Lumber Company, sued the five defendants, C.O. Burford, Edith Burford, his wife, V.B. Nowling, Leonard Cole, and J.S. Owen, for $3,133.76 on an alleged indebtedness consisting of what is claimed to have been an open book account for goods, wares, and merchandise, of that agreed value, sold and delivered to the defendants in San Bernardino county, for which it is claimed that the defendants agreed to pay upon the completion of delivery. This, as is claimed, was completed on April 20, 1927. There are the usual allegations of demand and failure and refusal to pay. The defendants C.O. Burford, Edith Burford, his wife, and V.B. Nowling made default; but the defendants Cole and Owen answered, denying any sale or delivery by the plaintiffs to them of any goods, wares, or merchandise, of the value claimed or at all, and denying any agreement on their part to pay for the same, or any indebtedness therefor. By way of separate defense they set up that "the goods and merchandise *** were delivered to the owner of certain real estate which these two defendants once owned in San Bernardino county, California, but which has been sold and transferred by them to codefendants C.O. Burford and Edith Burford prior to the sale and delivery by the plaintiffs herein of the goods and merchandise referred to, which said merchandise was used upon the premises once owned by these defendants, but that these defendants had no interest, right, or title, in and to said premises at the time the aforesaid purchases were made, and that they themselves did not contract with the plaintiffs or any of them for said merchandise, by agent or otherwise, or agree in any way to stand sponsor for the payment of same, and that they are strangers in fact and in law to the plaintiffs in said cause."
Findings and judgment went for the plaintiffs and against all of the defendants, from which judgment the defendants Cole and Owen prosecute this appeal.
There is evidence to the effect that the defendants Cole and Owen, real estate men, owned certain land in San Bernardino county, and approached the defendant Nowling to buy it. According to Nowling’s testimony, the discussion "started by Mr. Owen and Mr. Cole coming to my house *** and they told me they had some land *** and they wanted to sell it and I told them at that time I wasn’t interested." Nowling looked at the land with them. "So, then, in a day or two they came back to my house again and wanted to sell me a tract of two acres; that is they would sell the tract of two acres and would take a trust deed back for it, and we would put a loan on it, and build a house, and they would sell the house, and all over and above the actual cost of the house and land would be divided equally between us, the two parties, that is Cole and Owen, and our side." He explained that by "our side" he meant himself and his son-in-law, Mr. Burford. He explained further that "there was a suit pending against me in the Long Beach courts, and I didn’t want to go to the loan people and try to get a loan with them there, and my son-in-law stepped in and took my place, and Mr. Cole and Mr. Owen knew it; I told them about it." Two contracts in writing were made, very similar in form, between Cole and Owen of the one part and C.O. Burford and his wife of the other part, one under date August 31, 1926, and the other dated December 7, 1926, by the terms of each of which Cole and Owen sold to the Burfords a tract of land in San Bernardino county in consideration of which, in each case, the Burfords agreed to procure "from an approved building and loan company" a loan sufficient to enable them, from the proceeds, to erect on the respective properties involved, according to certain agreed plans, a cottage, garage, and chicken house. For these loans the Burfords were to mortgage the respective properties, such mortgages respectively to constitute a first lien on each. They were also, under each contract, to execute to Cole and Owen a note for $1,300, to be secured by a trust deed on the land affected, which trust deed was in each case to be subordinate to the lien of the mortgage on that tract to the building and loan association. After the erection of the buildings, these, according to the contract, were, with the land, "to be sold to the best advantage, subject to the mortgage to some building and loan company as a first lien, and to said trust deed as a second lien thereon." The parties agreed to exert themselves to bring about a favorable resale, the profits from which were to be divided, in each case, into two equal parts, one of which was to "belong" to Cole and Owen, and the other to "belong" to the Burfords. Each contract contained a clause as follows: "This contract shall not be deemed, held or construed anywhere as creating a copartnership between any of the parties to it, and shall be held to be merely the convenient means of recompensing each party for his share or interest in the property, there being no other practicable mode or division known to them at this time."
On the execution of these respective contracts, Nowling went ahead with the erection of the buildings. He bought the two bills of lumber for them from the Hansen Lumber Company at Fontana. According to his testimony, in going to talk with one of the Hansens about the contemplated lumber purchase, he represented "Mr Burford, my son-in-law, and Mr. Cole and Mr. Owen. We were all kind of interested in the building together." Though the written contracts were between Cole and Owen on the one part and the Burfords on the other, these did not, according to Nowling, tell the whole story. The writings said nothing in terms about the purchase of lumber nor about Nowling’s connection with the matter. "No, you get me wrong. That wasn’t a written contract, but the contract shows whereby we were all kind’a connected together. I acted as agent for my son-in-law and was authorized to go and buy the lumber." Nowling claims to have been agent for Owen and Cole "in a way as I spoke about the contract we had," though he had testified that they did not direct him to get lumber of the Hansens. Nowling’s authority from Cole and Owen was to be found, he says, "in that contract and that conversation amongst ourselves, and we talked about the business." Again he says: "As I understood it, they were all kind’a linked together, and I was authorized to buy the material but they didn’t say where to buy it but I bought it from Mr. Hansen."
Nowling claims that he was in fact a partner all through the enterprise and recognized by Cole and Owen as such. "Many times we talked about this, and they would go up there and see how we were getting along and say ‘this is good’ and ‘this is good’ and were up there every week." This went on "all the time we were on them houses." On one occasion Nowling got $500 from appellants through Cole, for which Cole took back a note. Whether this occurred merely "to help pay the bills," or, as Cole testifies, after appellants were led to believe that all other construction bills were settled, is a matter on which the evidence conflicts. It conflicts also as to whether the note was signed by Nowling or Burford. Concerning his dealings with the Hansens, Nowling says that he was superintending the work for his son-in-law, Mr. Burford, but, as he understood it, in the interest of Cole and Owen also, and that he told Mr. Hansen that a loan had been put on the property, that the deed stood in the name of his son-in-law, but that Owen and Cole were "interested in a way" with him and were responsible men. As a part of his cross-examination Nowling was asked: "You told Mr. Hansen that these men were interested in a way with you." He answered: "Yes, interested with us." This talk was "when we first commenced out there, some time in October, 1926."
The defendant C.O. Burford testified, in substance, that, while Nowling’s interest in these contracts did not appear on their face, Nowling had direct supervision and charge of the building operations and was, in fact, equally interested with the Burfords in the half of the net profits of the enterprise that were, on the face of the contract, to belong to them, of all of which Burford had advised Cole and Owen, and which, indeed, was known as between all of the defendants when the original contract was signed. On cross-examination he said that he did not himself buy the lumber; that it was bought by Nowling. "In making the contract," he says, "I and Mr. Owen and Mr. Cole directed him to proceed with the building." At the time the lumber was bought, Burford says, "I directed him, the same as these other defendants." He later says that he talked to Nowling in appellants’ presence "and Mr. Nowling was to go ahead and get his bids and figure on the material wherever he could get it." However, when asked who was to pay the bills, he said, "We were to pay out of the loan far as we could," and, when asked whether any liability was to be charged to Cole and Owen, his answer was that "there was no liability to be charged to any one, excepting at the bills would hold against the property."
The plaintiff Duff S. Hansen testified that Nowling was the first party he met, that Nowling came to the lumber office and said he was going to build a house or two on a lot in Fontana; that "he figured a bill of lumber with us and we sold him the lumber." According to Hansen, "the lumber and material on the house was to be paid out of a loan." Elsewhere this witness testified when the first bill of goods was bought Nowling stated that "others" were interested with him in it, that he may have named the parties, but that the witness does not recollect the names except that of Nowling’s son-in-law.
On behalf of the appellants, there was placed in evidence the conveyances executed by them to the Burfords of the two parcels of land under dates September 10, 1926, and December 4, 1926, respectively, and both appellants in their testimony deny that there was any understanding whereby Nowling was to be a partner in the transaction or authorized to buy lumber, from the Hansens or otherwise, on the appellants’ account. It is, however, apparent from the testimony of both appellants that the original talk was between them and Nowling; that his son-in-law Burford was substituted because of the litigation in which he was himself involved; that Nowling nevertheless was, from the outset of the building operations, known to appellants to be in actual charge of these; and that they discussed with him the question of where he was to get his lumber.
Cole says that he thought Nowling had bought the lumber at Long Beach. "I thought Mr. Nowling bought it there through the Hansen Lumber Company." This was "a little while before they commenced building there." According to Owen: "Mr. Cole and I were present one day and he (Nowling) *** went up with us and saw Mr. Hansen in Fontana about the lumber, and we took him out there and he talked with Mr. Hansen. *** And then he came back and said he had better prices made him in Long Beach and he didn’t know but what he would make his lumber deal there."
Appellants interpret their own right under the written contracts to participate, to the extent of one-half, in any net profits of the enterprise, as simply a right to commissions as salesmen or promoters in the event of a favorable resale; their theory being that the price for which they themselves sold the land to the Burfords was covered by the two $1,300 notes and the trust deeds which they took back, and that they no longer retained any interest in the land. It may be noticed in passing that under the contracts as written their right to half of the net profits in case of a resale was not confined to a resale made by their efforts, but would have been equally applicable to a resale made by the Burfords without their assistance.
The records of the lumber company show that lumber was bought of the Hansens and by them charged on their books to Nowling to the extent of $1,712 in excess of all credits for the first job, and to the extent of $1,404.09 on the second job, together making an unpaid balance of $3,116.09. It was for this amount that the trial court gave judgment. The foregoing illustrates the character of the evidence on which it acted.
The court found it to be true that the plaintiffs "sold and delivered to these defendants" the goods and merchandise in question of the reasonable value stated, and "that it is true that the defendants agreed to pay plaintiffs said sum therefor. ***"
The court also found, inter alia: "That at said time" (i.e., when the lumber was delivered) "defendants, as shown by plaintiffs’ exhibit No. 2, and defendants’ exhibit No. ‘A’ herein" (these being the two contracts) "were engaged upon a joint adventure and that the title to said premises was delivered and transferred to defendants C.O. Burford and Edith Burford in compliance with said contract of joint adventure and that said goods, wares and merchandise were delivered to defendants as such joint adventurers."
It is claimed on behalf of the appellants that what is alleged is a book account, but that the evidence shows none except as against Nowling; that, inasmuch as the complaint does not set up any partnership or joint adventure between the defendants, evidence of such a relation was inadmissible, and that the finding that such a relation existed is outside the issues and cannot, therefore, be relied on to support the judgment; that the evidence is wholly insufficient to justify the finding that the appellants were engaged with the other defendants in a joint adventure, or that the appellants in any wise authorized the purchase of the lumber on their account, or agreed to pay for it; that the trial court should have granted them a nonsuit at the conclusion of the plaintiffs’ evidence; and that, as against them, the judgment cannot be supported.
1. Appellants, as we saw, assert that, according to the pleadings, the account sued on is a book account to which they are strangers, since the proofs show that the only person charged on the plaintiffs’ books was Nowling. The distinction, as a matter of pleading, between a book account and an ordinary contract debt not founded on a writing, is only important when, as in Wright v. Loaiza, 177 Cal. 605, 171 P. 311, the statute of limitations is involved and where the question arises whether suit may be commenced within four years, or must be begun within two years after the cause of action has accrued. In the present case, all the transactions were had within two years before the complaint was filed. In these circumstances the distinction between pleading a book account and pleading an indebtedness generally seems to us inconsequential.
2. Appellants, quoting from 20 California Jurisprudence, 757, urge that: "There is a material variance between a complaint against an individual for what is pleaded as an individual debt, and proof that the debt is that of a partnership of which he is a member"— citing Miner v. Rickey, 5 Cal.App. 451, 90 P. 718.
While, therefore, as they say, they "do not question the propriety of the common counts in the ordinary action against a debtor or joint debtors," they "do deny their sufficiency to hold the appellants as joint adventurers."
The situation in Miner v. Rickey was that an action was brought by the plaintiff Miner against Rickey alone, as the court said, at page 453 of 5 Cal.App., 90 P. 718, 719: "Upon the theory that plaintiff was employed by and rendered services for the defendant [Rickey] individually. The defendant relied simply upon the denials in his answer of the material allegations of the complaint ***. Defendant’s evidence *** tended to prove that whatever liability existed in favor of plaintiff was against a partnership of which the defendant" and another "were the members." The court went on to say that "in this state it has been held that, when ‘several persons contract together with the same party for one and the same act, they shall be regarded as jointly and not individually or separately liable in the absence of any words to show that a distinct as well as entire liability was intended to fasten upon the promissors. Especially is this the rule as to the legal liability of partners upon their partnership obligations.’ "
The language quoted by the court is taken, in substance, from Harrison v. McCormick, 69 Cal. 616, 620, 621, 11 P. 456, 458, where the Supreme Court, after making use of it, and citing sections 1430 and 1431 of the Civil Code, as well as section 2442 of that Code and certain cases, goes on to say: "It is also well settled that parties to a joint contract must all be made defendants. ‘Of the parties to the action,’ the Code says, ‘those who are united in interest must be joined as plaintiffs or defendants.’ Section 382, Code Civil Proc. The plaintiff had the right to bring his action on the joint obligation of the parties to the contract against all the parties, or against the firm name by which they collectively contracted with him."
It is manifest that these cases lend no support to appellants’ thesis. The liability asserted in the amended complaint is set up as the obligation, not of one person, as in Miner v. Rickey, but according to the pleading of several persons— that is, all the defendants— and therefore presumptively joint. Civ.Code, § 1431. The pleading is accordingly sufficient to charge that the liability is joint, and, as to that matter, no more would be affected had it been charged in terms that the defendants were joint adventurers. In Pike v. Zadig, 171 Cal. 273, 277, 152 P. 923, 925, following 15 Ency.Pl. & Pr. 920 and cases there cited, it was held that: "In an action against partners upon a partnership obligation, it is not necessary to allege a partnership between the defendants, but they may be declared against as any joint debtors."
The court added: "Indeed, a denial of the partnership, where it is alleged, does not raise a material issue."— citing Hunter v. Martin, 57 Cal. 365, where it is said: "If they enter into that agreement, their liability did not depend upon their being partners."
Pike v. Zadig was followed by Shannon v. Calmus, 70 Cal.App. 652, 655, 234 P. 107, to the same effect.
A joint adventure has been defined as: "A special combination of two or more persons where in some specific adventure a profit is jointly sought, without any actual partnership or corporate designation." 33 C.J. 841.
If, then, in suing partners on an obligation contracted by them as such, it is not necessary to allege the existence of the partnership, it would seem that the rule must apply a fortiori when the action is against joint adventurers, since a joint adventure is the looser form of association. We are therefore of the opinion that it was unnecessary for the plaintiffs, even though they claimed that the obligation of the defendants was that of joint adventurers, to allege the fact of the joint adventure. Proof of it, or that the obligation was incurred in the course of it, was not objectionable as a variance from the allegations of the complaint, and evidence of that relationship, in so far as it was a logical step in the plaintiffs’ effort to prove, as against the defendants, what they had alleged as a joint obligation, was within the issues and properly admitted. Neither is the finding on the subject outside the issues, but it amounts really to the finding of a probative, rather than an ultimate, fact within the issues, and is, strictly speaking, unnecessary; the ultimate fact alleged and covered by another finding being the participation of all of the defendants jointly in the purchase of the lumber and their joint agreement, whether express or implied, to pay for it.
3. Whether the findings of the trial court are supported by the evidence, however, is another question. Appellants stipulated in their written contracts with the Burfords that they should have half the net profits of the enterprise, and we think the meaning of that stipulation was that they were to have them as profits and not as resale commissions. By the provisions in the contract as to what should be done and how the project should be financed, and by their stipulation that the arrangement should not be construed as a partnership, they undertook to provide that the enterprise should be conducted in a certain way, that expenditures should be made in so doing, and, in effect, that, while they should receive half the profits, they should incur no liabilities. Whatever verbal directions they may, in conversations with Burford and with Nowling, have given the latter about going ahead with the work or ordering lumber or other materials for it, were, as we think the evidence shows without conflict understood by all of the defendants to be subordinate to this general scheme. There is no evidence that can be taken to mean that the appellants ever intended or were understood by Nowling or Burford to intend that any lumber should be bought except such as should be paid for from loans made in advance as provided for in the written contract. The mere arrangement for participation in the profits is by no means conclusive of the existence of a partnership. Coward v. Clanton, 122 Cal. 451, 55 P. 147. Partnership or none, indeed, there can be no doubt that the enterprise here involved was in some sort a joint adventure and that all of the defendants were participants in it. Appellants’ contention that Nowling may have been engaged in a joint enterprise with the Burfords but that he was not a joint adventurer with the appellants seems to us a meaningless refinement. Taking it, then, as established that there was such a relation, how does this affect the responsibility for debts incurred by Nowling in pursuing the business of the association?
In Leake v. City of Venice, 50 Cal.App. 462, 195 P. 440, 441, involving a voluntary unincorporated association engaged in promoting a racing enterprise, it was said that, "conceding the association did not, as to the members thereof, constitute a partnership in the full and generally accepted sense, nevertheless it appears that defendants were engaged in a joint venture in the nature of a partnership, to which the same rules for enforcing liability for debts incurred apply"— citing Ash v. Guie, 97 Pa. 493, 39 Am.Rep. 818.
See, to the same point, Stitzinger v. Truitt, 81 Cal.App. 502, 506, 253 P. 971; Nowell v. Oswald, 96 Cal.App. 536, 537, 274 P. 423; Old River Farms Co. v. Roscoe Haegelin Co., 98 Cal.App. 331, 335, 276 P. 1047. The Supreme Court, speaking by Mr. Justice Henshaw, said in Westcott v. Gilman, 170 Cal. 562, 569, 150 P. 777, Ann.Cas.1916E, 437: "The all-important difference in construing partnerships and relationships of this kind as between the parties themselves upon the one hand, and as between the parties themselves and those who have dealt with them upon the other hand, is this: That as between the parties themselves, when the rights of no third persons are involved, the question is one of determination merely upon the letter of the contract and the conduct of the contracting parties to each other under it. When, however, the rights of third parties are involved, the basis of the inquiry shifts materially, and the fundamental question is, What had those third parties the right to believe from the language of the contract and from the conduct of the parties to it as affecting them? and not as affecting each other."
It is, as we think correctly, laid down in 33 C.J. 872, title, "Joint Adventurers," that "one who is a member of a joint adventure but who is not known to be such at the time by a third person who enters into a contract with another member individually is not rendered liable to such third person for services rendered under such contract, or for damages for the breach thereof, by the fact that the contract relates to the business of the joint adventure, if the contracting member in making such contract exceeded his authority and had no power to bind his associates thereby."
That, indeed, follows from the like rule of the general law of agency thus stated in the same work (2 C.J. 842): "In the absence of estoppel or ratification an undisclosed principal is not liable on the contracts of one assuming without authority to act for him, or on contracts made by his agent in excess of his authority or not in the course of his employment." Harder v. Continental Printing Co., 64 Misc. 89, 117 N.Y.S. 1001.
If there is one thing undisputed upon the testimony, taken as a whole, it is that, though the enterprise was in some sort a joint one, and, though there is in the testimony of Nowling and Burford much loose talk, largely in the nature of conclusions of the witnesses, about what Nowling was authorized to do, it was clearly understood by all the associates that all the material bills were to be paid from the mortgage loans, and that they all understood the writings to negative any idea that appellants should be holden for them.
We think it clear from the record that Nowling had no actual authority from the appellants to bind them to any personal liability for lumber bills. As between the parties, their arrangements will be given effect.
If, then, there is any basis for the trial court’s finding that appellants participated in ordering from the plaintiffs the merchandise mentioned in the complaint and agreeing to pay for it, it must rest on some apparent authority to Nowling to represent appellants in so doing. While appellants admit having originally gone with Nowling when he first talked to the Hansens, and while one of the Hansens, who so far as appears is the only one with whom Nowling talked, as we saw, testified that Nowling, in negotiating with him, said that there were "others" interested, and while Nowling says that in such negotiations he specified Cole and Owen as responsible men interested with him, yet, as Hansen testifies that he did not even recollect that Nowling had mentioned appellants by name, it is clear that in furnishing the lumber the plaintiffs could have placed no particular reliance on appellants’ association with Nowling, or on appellants’ responsibility. They may have understood generally that there was a group of persons involved, though no group name was used and no individuals were apparently considered by them, other than Nowling and Burford, whose names alone seem to have made any impression on them. It seems clear that this evidence is too tenuous to support any claim of estoppel, or any theory that the plaintiff is entitled to recover as against the appellants by reason of reliance by the latter on any ostensible agency. It was said in Nofsinger v. Goldman, 122 Cal. 609, 614, 55 P. 425, 427, with respect to an ostensible partnership, and it may be said by analogy with respect to an ostensible agency claimed to result from a joint enterprise, that "the rule of responsibility and liability declared in section 2444 of the Civil Code is founded upon the equitable principle of estoppel. One who has suffered another to give credit or incur a liability upon the strength of his representations, made or permitted, that he is in fact a partner, will not thereafter be allowed to deny those representations. But, as is declared in the succeeding section of the Code (2445), no one is liable as a partner who is not such in fact, excepting as provided in section 2444."
It is apparent from the testimony of Mr. Hansen that credit was not given to Nowling by reason of his statement, if he made any, of the relation of the appellants to the enterprise.
In these circumstances the finding of the trial court, in so far as it determines that the appellants participated in the purchase of the goods, wares, and merchandise from the plaintiffs and in the agreement to pay for the same, is, it seems to us, without any substantial support in the evidence. As respects the defendants and appellants Cole and Owen, therefore, the judgment is reversed.
We concur: CARY, P.J.; BARNARD, J.