Opinion
No. 40045.
April 9, 1956.
1. Trusts — proceeds of check in advance payment of farm equipment — deposited in joint account — as not constituting trust fund.
Where buyer of certain farm equipment gave check as advance payment on purchase price, but thereafter rescinded contract on seller's failure to make delivery and demanded his money back, and seller deposited check in checking account which he had jointly with wife, and wife drew out such amount for household expenses without knowledge of husband's contract, the proceeds of the check did not constitute a trust fund, as regards buyer's right to hold wife liable for proceeds of the check, and even if the proceeds did constitute a trust fund, the money had been disbursed by wife so that it could not be traced into the joint account.
2. Trusts — tracing trust funds — burden of proof.
Burden of proof to follow trust funds was upon complainant.
3. Partnership — estoppel — defendant not liable — as partner — as joint adventurer.
Evidence supported finding that one of defendants sought to be held liable for proceeds of check referred to in Headnote No. 1 on ground that he was a partner or joint adventurer with defendant-seller to whom check had been given was an employee of defendant-seller and could not be held liable on theory of a partnership by estoppel.
Headnotes as approved by Ethridge, J.
APPEAL from the Chancery Court of Sunflower County; S.B. THOMAS, Chancellor.
Neill, Clark Townsend, Indianola, for appellant.
I. Neither the husband, William E. Roddy, nor the wife, Mrs. William E. Roddy, were competent as witnesses against each other. Sec. 1689, Code 1942; Chap. 236, Laws 1954.
II. Complainants clearly failed to show, as alleged in the bill of complaint, any joint adventure on the part of all of the defendants. Sample v. Romine, 193 Miss. 706, 8 So.2d 257.
III. Complainants otherwise clearly failed to prove any trust, or that the defendant, Mrs. William E. Roddy, otherwise held the money in question in trust for complainants.
IV. The evidence as a whole is insufficient to sustain the money judgment or decree awarded by the Court below against the defendant, Mrs. William E. Roddy, in favor of complainants.
V. The Court below should have sustained the motion of the defendant, Mrs. William E. Roddy, for a directed verdict.
VI. The Chancery Court of Sunflower County, Mississippi, erred in failing to award complainants in the Court below the relief which they sought as against the defendant, Charles A. Truthman.
VII. The Trial Court erred in rendering a decree in favor of the said Charles A. Truthman.
VIII. The Trial Court erred in dismissing the bill of complaint as against the defendant, Charles A. Truthman.
IX. The Trial Court erred in failing to render a decree in favor of complainants in the amount sued for as against the defendant, Charles A. Truthman, as well as W.E. Roddy.
Edward J. Currie, Edward J. Currie, Jr., Hattiesburg; Forrest G. Cooper, Indianola, for appellees and cross-appellants.
I. The defendant and appellant, Mrs. William E. Roddy, was and is liable to the Lovitt Equipment Company upon the following grounds.
A. Upon the ground that in the creation, maintenance and operation of the aforesaid joint bank account, William E. Roddy and Mrs. William E. Roddy were engaged as partners in a joint venture, joint undertaking and common enterprise, for their mutual benefit and profit, and that they were and are both jointly liable to the Lovitt Equipment Company for having wrongfully deposited the proceeds of said check for $1,155 in said bank account and for having wrongfully withdrawn and for having wrongfully spent the proceeds from said check of $1,155.
B. Upon the ground that an implied, resulting and constructive trust was created in favor of the Lovitt Equipment Company when the said William E. Roddy and his wife, Mrs. William E. Roddy, so wrongfully acquired the proceeds of said check for $1,155, and that both William E. Roddy and his wife became the trustees of said funds, and having wrongfully acquired and spent the same in the manner disclosed by the record in this case, they are jointly liable to the Lovitt Equipment Company therefor.
C. Upon all of the principles of equity and of the law, none of which could or would or should sanction the kind of treatment or mistreatment accorded the Lovitt Equipment Company by the defendant William E. Roddy and his wife, the defendant and appellant, Mrs. William E. Roddy.
Collation of authorities: Sec. 455, Code 1942; 68 C.J.S., Secs. 169-71 pp. 619-22.
II. No error was committed by the Trial Court in admitting the testimony of Mrs. William E. Roddy.
III. No error was committed by the Trial Court in admitting the testimony of William E. Roddy.
IV. A spouse who is present in Court when the other spouse is offered as a witness and testifies, and who does not object, is presumed to have consented. People v. Rulia Singh, 182 Cal. 457, 188 P. 987, 998; Benson v. Morgan, 50 Mich. 77, 14 N.W. 705.
V. Under statutes making a husband or wife incompetent to testify for or against the other without such other's consent, where husband and wife are sued jointly, and the husband by answer disclaims any interest in the subject-matter of the suit, plaintiff may examine the wife as an adverse party, under an applicable statute, without consent of the husband. 70 C.J., Sec. 169 p. 140.
VI. The husband or wife of one codefendant with others may testify after the suit has been dismissed as to the spouse, or judgment has been rendered against him or her. 70 C.J., Sec. 188 (bb) p. 155.
VII. In any and every event, if any of the testimony of William E. Roddy was erroneously admitted as against the appellant, Mrs. William E. Roddy, such error, if any, was not prejudicial or reversible error, but was wholly harmless, because the liability of the appellant, Mrs. William E. Roddy, had been conclusively established, and such small portion, if any, of the testimony of William E. Roddy which could be said to relate to the liability of the appellant, Mrs. William E. Roddy, was merely cumulative, and did no more than corroborate the previous testimony of the appellant, Mrs. William E. Roddy. Whittington v. State, 160 Miss. 705, 710, 135 So. 190; Gunter v. Reeves, 198 Miss. 31, 21 So.2d 468; Harris v. State, 209 Miss. 141, 46 So.2d 91; Bryant v. State, 172 Miss. 210, 214, 157 So. 346 and 179 Miss. 739, 176 So. 590.
VIII. Equity, of course, follows the law, and it seems to us that the elementary principles of the law of conversion, when applied to the facts of this case, make the escape of the appellant, Mrs. William E. Roddy, impossible. 89 C.J.S., Secs. 1, 8, 13, 23, 34, 36-39, 41, 45-46, 77-78, 101(2) pp. 531, 537-39, 541, 544-45, 547-48, 550-53, 575-77, 594.
IX. Charles A. Truthman was and is jointly liable with the defendants, William E. Roddy and Mrs. William E. Roddy, as a partner. 68 C.J.S., Secs. 22, 24-25, 27, 30(b) pp. 442-45, 450-51.
X. If there had been no partnership relation existing between William E. Roddy and Charles A. Truthman, both of said defendants would still be liable to the Lovitt Equipment Company under the undisputed facts and circumstances of this case.
XI. When persons, not partners inter se, have held themselves out as partners, and thereby induced others to deal with them as such, it is no defense that there was no partnership between them. One who holds himself out as a partner becomes liable as such to those who deal with the firm in the belief that he is a partner, and he cannot avoid liability on the ground that a recorded instrument would show that he had no interest in the partnership. The same liability attaches to one who knowingly allows himself to be held out as a partner. When persons have held themselves out as partners, they may be liable, although the dealings for which they are sought to be charged were outside the scope of the partnership as set out in the partnership articles. The conduct of the parties may be such as to estop them from denying that the partnership has begun. 68 C.J.S., Secs. 31-32, 35-36, 40, 48 pp. 456-59, 462, 466.
John C. Webb, Holland O. Felts, Greenville, for cross-appellee.
I. The decision of the Chancellor that Charles A. Truthman was not a partner and that he is not liable to cross-appellants is supported by ample evidence. Unger v. Walter Fisher Co., 138 Miss. 675, 103 So. 348; Thompson v. National Bank, 111 U.S. 529, 28 L.Ed. 507, 4 S.Ct. 689; Turnipseed v. Hudson, 50 Miss. 429; LeRoy, Bayard Co. v. Johnson, 2 Peters 186, 7 L.Ed. 391; Lindley on Partnership (1st ed.), pp. 45-47, (4th ed.), pp. 48-50.
Appellees Norman W. and David O. Lovitt, doing business as Lovitt Equipment Company, hereinafter referred to as Lovitt, brought this suit in the Chancery Court of Sunflower County against Mr. and Mrs. William E. Roddy and Charles A. Truthman. The bill sought an accounting for alleged trust funds paid by Lovitt to the three defendants in the amount of $1,155, and a personal decree for that sum. The chancery court dismissed the bill as to defendant Truthman, but rendered judgment against Mrs. Roddy, who had filed an answer and had contested her liability, and against her husband, William E. Roddy, who filed no answer and did not contest the suit, and against whom a pro confesso decree had been entered.
Lovitt was engaged in the retail farm equipment business in Hattiesburg. On March 31, 1953, Norman W. Lovitt, representing the partnership, issued a check at Hattiesburg in the sum of $1,155, payable to W.E. Roddy. It was in payment for a grain dryer, which Roddy agreed to deliver to Lovitt within a week. The dryer never was delivered. Roddy took the check and deposited it to a joint account in the name of himself and his wife in a bank in Greenville. Mr. Roddy made deposits at various times in this account which was used to defray family expenses. Mrs. Roddy admitted that she wrote practically all of the checks on this account, and that she drew out of the joint account most of the funds deposited in it, for household and other expenses of herself and her husband. The bill charged that Mrs. Roddy was engaged in a joint adventure or business with her husband and Truthman, and that she had received and used the proceeds of Lovitt's check. Roddy testified as an adverse witness for complainants. He admitted that he received the proceeds of the check and deposited the same to the joint account with his wife, had never delivered the equipment to Lovitt and had not returned the money. Mr. Roddy took no appeal from the decree against him.
About two months after Roddy failed to deliver the dryer, Lovitt orally rescinded the order and demanded their money back; and on July 8, 1953, Lovitt rescinded the order by a letter to Roddy of that date. Mrs. Roddy made no deposits to the joint account, but left her salary on the books of the company for which she worked in Leland. She knew that the money deposited by her husband to the joint account from time to time and in various amounts was derived from his business. However, the payment of household expenses was the primary obligation and duty of the husband. Mrs. Roddy knew nothing about the source of the funds, until after she had spent the money for household expenses.
(Hn 1) There is no basis to support the decree against Mrs. Roddy, the appellant. The evidence shows that she was not a joint adventurer or partner with her husband in his business. Lovitt contends that the decree against her can be upheld on the ground of a resulting or constructive trust. Lovitt gave the check to Mr. Roddy as an advance payment of the purchase price for the grain dryer. No trust was created by that payment. In return for the advance payment, Roddy simply agreed to deliver the equipment within a stated time. Upon his failure to do so, Lovitt rescinded the contract and demanded that Mr. Roddy refund to him the money previously paid. This created the relationship of creditor and debtor. The proceeds of the check deposited to the joint account were not trust funds, but were a payment by Lovitt to Roddy in advance on the contract to sell and deliver the equipment. When Roddy breached this contract, Lovitt had a right of action in debt to recover the money owed them by Roddy. But the rescission did not occur until about two months after the check had been deposited in the joint account, and after its proceeds had been drawn out and paid by Mrs. Roddy for household expenses. There is no contradiction of her testimony that she knew nothing of her husband's contract with Lovitt. So the proceeds of the check did not constitute any trust fund. And even if they did, the money has been disbursed by Mrs. Roddy for household expenses and the assumed trust property cannot now be traced into the joint account of Mr. and Mrs. Roddy. See 54 Am. Jur., Trusts, Sections 248-259. (Hn 2) And of course the burden of proof to follow such assumed trust funds was upon the complainants. Ibid, Sections 259, 603. Because Mrs. Roddy was neither a joint adventurer nor partner with her husband in his business, and the purchase price of the equipment was not a trust fund, and even if it were, it could not be traced, the trial court was in error in rendering a personal judgment against Mrs. Roddy.
(Hn 3) The chancery court dismissed the bill of complaint as to appellee Charles A. Truthman. We cannot say that it was manifestly wrong. The weight of the evidence reflects that he and Roddy were not partners or engaged in a joint adventure. On the contrary, although the arrangement between them was somewhat unusual, the chancellor was warranted in finding that Truthman was an employee of Roddy, and that Truthman's employment was terminated three months before the date of the Lovitt contract. Since they were not partners in fact, complainants had to rely upon the theory of a partnership by estoppel. This was a disputed issue of fact, and we cannot say that the chancery court was manifestly wrong in finding that there was no partnership by estoppel, which it necessarily did by dismissing the bill as to Truthman.
On the direct appeal, the decree is reversed and judgment rendered for Mrs. William E. Roddy. On the cross-appeal by Norman W. and David O. Lovitt, doing business as Lovitt Equipment Company, in which it is contended that the decree was in error in failing to render judgment against Truthman, the decree dismissing the bill as to Truthman is affirmed.
On direct appeal, reversed and judgment rendered for appellant, Mrs. William E. Roddy; on cross-appeal, affirmed.
Roberds, P.J., and Lee, Holmes and Gillespie, JJ., concur.