TREAT v. MURDOCK

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District Court of Appeal, Third District, California.

TREAT et al. v. MURDOCK et al.*

Civ. 5313.

Decided: February 28, 1936

Andrew J. Copp, Jr., of Los Angeles, for appellants. Charles P. Snyder, of San Andreas, for respondents.

Plaintiffs brought this action against five defendants to recover upon an open book account for goods, wares, and merchandise sold and delivered, and cash advanced. Three of the defendants defaulted. The remaining two defendants, Roger Moreno and Connie Moreno, answered, denying the allegations of the complaint. From a judgment in favor of plaintiffs as prayed for, the Morenos prosecute this appeal.

One James A. Murdock, on June 22, 1933, had by an assignment a 361/414 per cent. interest in an option to operate a mine in Calaveras county on a royalty basis. On August 12, 1933, an additional 361/313 per cent. interest in the option was assigned to him. It appears that Murdock also had an option upon the remaining undivided interest in the option contract, but the date when such option was acquired does not appear.

Appellants operated a fruit market in Los Angeles. During the period between July, 1933, and December, 1933, appellants advanced to Murdock various sums of money at different times and which aggregated a sum in excess of $6,000. They contend that the evidence established that these advances were personal loans to Murdock, and that they were not interested in the working of the mine either as general partners, mining partners, or joint adventurers. Admittedly, the goods furnished by plaintiffs were used in the mining operations at the mine, and the cash advanced expended in paying the laborers engaged in working the mine.

The first item in plaintiff's account, the subject of the action, is dated July 28, 1933, and the last item is of December 20 of the same year. On July, 1933, the Morenos advanced to Murdock sums aggregating $1,500. A promissory note was executed to them by Murdock for that amount. Additional sums were thereafter advanced, and on September 30 the total advances amounted to the sum of $4,550. Roger Moreno journeyed to San Andreas to obtain, as he asserts, security for the repayment of this sum. At that time Murdock executed and handed to Roger a promissory note in the sum of $4,550, together with a document which purported to assign to Morenos “a proportional interest in and to” the option held by Murdock and under which he was operating the mine. Roger returned to Los Angeles with the note and document. The assignment was rejected by the Morenos, apparently, on account of its indefiniteness. The following month Murdock journeyed to Los Angeles, and on October 29, 1933, in the office of the attorney for the Morenos, an agreement was prepared and executed between Murdock and the Morenos, in which it was agreed that the $4,550 note and the assignment dated September 30th be canceled, and that a new note in the sum of $6,193 be executed by Murdock to the Morenos to evidence the then-existing indebtedness, and to be paid by applying thereon, monthly, 14 per cent. of the net proceeds from the production of the mine. Murdock agreed also to form a corporation, in which 50 per cent. of the capital stock would be retained as treasury stock to be disposed of to obtain additional working capital, and 10 per cent. of the stock would be issued to the Morenos. Murdock further agreed that in the event he failed to incorporate the corporation, he would continue to pay monthly 14 per cent. of the net proceeds of the production of the mine so long as the mine would be operated and “notwithstanding the fact that such 14 per cent. of the net production of said mine may exceed the amount of said note, to-wit, $6,193, plus accrued interest thereon.” The execution of this agreement was preceded by a general discussion, joined in by the appellants and other parties, who had either contributed money or services in the working of the mine, concerning the interest in the mine to be allotted to each.

Murdock had been, prior to July, 1933, a tenant of the Morenos in Los Angeles, and had owed them for five or six months rent which, however, he paid up later in one payment. Appellants neither knew anything concerning, nor made any investigation of Murdock's financial standing or resources before they began to advance money to Murdock. They admitted that they were aware Murdock was interested in a mine and that the money they were advancing was being used in furthering the mining operations thereon. Roger Moreno first visited the mine about July 4, 1933, and made three other trips from Los Angeles to the mine on subsequent dates in the same year. Connie Moreno made but one visit to the mine, but in September he personally bought and sent to the mine a water tank for use there. Murdock was not a witness at the trial, although one of the Morenos testified that he had seen him in Los Angeles two or three weeks before the trial. On July 17th both of the Morenos went to the place of business of a mechanic in Los Angeles to examine certain machinery which was there being overhauled preparatory to being shipped to the mine.

On July 3d, Roger Moreno and his wife, joined in a discussion at the mine as to the necessity of erecting bunkhouses to house the workmen; and both of the Morenos were shown at other times the results of “runs” which were made while they were at the mine.

The first advance of money to Murdock was made after the trip made by Roger to the mine on July 3d. The plaintiff Wm. T. Treat had a conversation with Roger in San Andreas on October 19, 1933, concerning the indebtedness owing to the plaintiffs, in which Roger stated that within three days after his return to Los Angeles, plaintiffs' bill would be paid.

The complaint alleges, and the answer denies that the five defendants were, during all the time mentioned in the complaint, copartners and engaged in the business of mining. The findings in accordance with plaintiffs' allegations in this regard are attacked as being wholly unsupported by the evidence. The gist of the cause of action is that the defendants became indebted to the plaintiffs upon an open book account. The defendants were declared against as joint debtors. The allegations concerning the mining partnership, and the denial thereof, did not raise a material issue. Shannon v. Calmus, 70 Cal.App. 652, 234 P. 107. It follows that the finding thereon was likewise immaterial and the important question then is whether there is any evidence to sustain the finding that the defendants became indebted jointly to the plaintiffs upon the account.

We have set forth the evidence upon which the trial court based its decision. Much of this testimony was denied by the appellants while they were on the stand. They exhibited a lack of candor and a degree of hedging under cross-examination. One of them changed his testimony upon a material inquiry when prompted by his counsel. There are frequently many factors available to a trial court in determining the credibility of a witness which the record before a reviewing court does not divulge. Suffice it to observe that the trial court placed no credence in the testimony of appellants upon this important question as to reasons for, and the understanding had by them with Murdock in the advancements made by them to Murdock. “The most positive testimony of a witness may be contradicted by inherent improbabilities as to its accuracy contained in the witness' own statement of the transaction, or there may be circumstances in evidence in connection with the matter, which satisfy the court of its falsity. The manner of the witness in testifying may impress the court with a doubt as to the accuracy of his statement, and influence it to disregard his positive testimony as to a particular fact, and, as it is within the province of the trial court to determine what credit and weight shall be given to the testimony of any witness, this court cannot control its finding or conclusion denying the testimony credence, unless it appears that there are no matters or circumstances which at all impair its accuracy.” Davis v. Judson, 159 Cal. 121, 113 P. 147, 150.

The evidence above detailed evinces circumstances which cast doubt upon the testimony of the two appellants. It is improbable that two business men would loan such large sums of money without any security to one about whose financial standing and ability to repay they had made no investigation, and with knowledge that the money was to be used in the highly speculative venture of developing a mine. The interest displayed by the appellants in visiting the mine, buying the tank for use there, discussing the need of bunkhouses, watching clean-ups, examining machinery which was to be sent to the mine, all show a special attention which, with all the other facts and circumstances, indicate an understanding between them and Murdock that the mine was being worked for their joint profit. The promise to pay plaintiffs' account, though made too late to raise an estoppel, was made at a time when the mining venture was discouraging. Such a promise would more likely be made by one interested as an owner and responsible for this indebtedness, than by one creditor to another creditor of the mine.

Section 2511 of the Civil Code provides: “A mining partnership exists when two or more persons who own or acquire a mining claim for the purpose of working it and extracting the mineral therefrom actually engage in working the same.” Section 2512 of the same Code provides that an express agreement to become partners or share the profits and losses is not necessary to the formation and existence of a mining partnership. It is not essential that each partner shall actually perform physical work, and one who supplies money to be used in working the mine is as much a partner as one who devotes his own labor. A mining partnership is formed where one in possession of a mine under an option contract, transfers to another an interest therein, in consideration of the latter furnishing capital to be used in its development, and the former continues in possession and the actual working thereof. Harper v. Sloan, 177 Cal. 174, 169 P. 1043, 181 P. 775. Appellants, however, contend that there was no transfer to them of an interest in the mine, because the assignment of September 30th was not accepted, and was too indefinite to convey any interest; and the contract of October 27th amounts to no more than an agreement by which appellants were to receive an interest in the net proceeds in return for money loaned, and that this falls short of the requirement of ownership of an interest in the mine, to constitute the owners copartners.

Concluding, as we do, that the finding of the trial court upon the question of the mining partnership is immaterial, the judgment must be affirmed if there is evidence supporting the finding that the appellants became indebted to respondents upon any theory. If it is conceded, as urged by appellants, that the defendants did not constitute a partnership in the full and generally accepted sense, or a mining partnership within the qualifications of the Code sections, nevertheless, the evidence supports the implied finding that they were engaged in a joint adventure. If money is loaned by one to another with the understanding that it is to be repaid whether the venture in which the money is to be used proves a success or a failure, the relationship is usually construed to be that of borrower and lender. “But if the person receiving the money assumes no obligation for its return, and it is subject to the risks of the business, the partners have usually been held to be joint adventurers, notwithstanding the contract provides that the money is to be returned with interest before the net profits are divided, or that the lender is to receive notes as security for the money invested, or is to be given a lien upon the property put into the venture.” 33 C.J. 843.

The inference can reasonably be drawn from the evidence detailed that appellants, although protecting themselves to the extent of securing notes to represent advances, and at times insisting upon security for the repayment of their contributions, by agreement either express or implied, had a present interest in the mine as well as to future recoveries therefrom.

The liability of the members of a joint adventure extends to all contracts reasonably necessary to carry on and within the scope of the business in which the joint adventure is engaged. The item of cash loaned included in plaintiffs' account was borrowed by a Mr. Pohl, the superintendent of the mine, for the purpose of, and was expended in paying the wages due the workmen at the mine. From the start of the enterprise Pohl had been the superintendent of the operations, and this was at all times known to appellants. The evidence shows that the borrowing of the money for the purpose mentioned was both reasonably necessary and within the scope of the business of the joint adventure.

The judgment is affirmed.

Mr. Justice pro tem. LEMMON delivered the opinion of the court.

We concur: THOMPSON, J.; PULLEN, P. J.

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