Board of Trade v. Hayden

The opinion of the court was delivered by

Stiles, J. —

These were four cases the trials of which were consolidated. In two of the cases the theory of the complaints was that appellant and her husband were actual partners in the mercantile business under the firm name of J. P. Hayden & Co. In the other two the theory was that the community composed of "the husband and wife was ' carrying on business, and that the husband and wife were its agents. The evidence did not tend to ’support either theory as pleaded, but was directed wholly to an effort to show that P P. Hayden was doing. business under the name of J. P. Hayden & Co., and that appellant made herself liable as a partner by “holding out.” The real object in making appellant a party, and taking judgment against her, was to subject certain real estate which she claims is her separate property, to the payment of debts incurred by J. P. Hayden & Co. The main question involved is, Can a husband and wife become partners in trade in this state? It is claimed that they may under the act of November 21, 1881, commonly known as chapter 183 of the code of that year. Of that chapter the following sections are supposed to be especially pertinent to the matter in hand:

“Sec 2396. Every married person shall hereafter have the same right and liberty to acquire, hold, enjoy and dispose of every species of property, and to sue and be sued, as if he or she were unmarried.”

“Sec. 2398. All laws which impose or recognize civil disabilities upon a wife, which are not imposed or recognized as existing as to the husband, are hereby abolished, and for any unjust usurpation of her natural or property rights, she shall have the same right to appeal in her own individual name, to the courts of law or equity for redress and protection that the husband has.”

“Sec. 2400. The property and pecuniary rights of every married woman at the time of her marriage, or afterwards acquired by gift, devise or inheritance, with the rents, issues and profits thereof, shall not be subject to the debts or contracts of her husband, and she may manage, lease, sell, convey, encumber or devise by will such property to the same extent and in the same manner that her husband can property belonging to him.”

“ Sec. 2401. Should either husband or wife obtain possession or control of property belonging to the other, either before or after marriage, the owner of the property may maintain an action therefor, or for any right growing out of the same, in the same manner and to the same extent as if they .were unmarried.”

“Sec. 2406. Contracts may be made by a wife and liabilities incurred, and the same may be enforced by or against her to the same extent and in the same manner as if she. were unmarried.”

Prior to the act of 1881, but for the acts commencing in 1869, the common law would have regulated the property rights of husband and wife. It did then and still does regulate them excepting so far as the statute has directed otherwise; and notwithstanding that this act provides in § 2417 that the “rule of common law that statutes in derogation thereof are to be strictly construed has no application to this act,” it is not to be supposed that the legislature intended or proposed to extend the scope of the act beyond the language used further than the .implications naturally flowing therefrom. At the common law a wife could not be a partner in business with anyone, because partnership is based on a contract, as to which she was under a disability, and yet in equity she had always been permitted to enforce contracts made for her benefit, even with her husband, and her claim against him as her debtor had always been sustained. Story, Eq. Jur., §§ 1372, 1373; Valensin v. Valensin, 28 Fed. Rep. 599; Clark v. Hezekiah, 24 Fed. Rep. 663; Huber v. Huber’s Admr., 10 Ohio, 372. She could havea separate estate,meaning an equitable estate held by a third person in trust for her. This estate she could charge in equity, but not at law. Judgments upon her debts went not against her person, when allowed at law, but were allowed as equitable burdens upon her estate or personal property in possession at the time of the marriage and that acquired afterward; her chosesin action when reduced to possession, and her earnings became her husband’s; in her freeholds and lands in fee the husband took a life estate; hebecame liable for her antenuptial debts and jointly with her for her torts during coverture; her responsibility at law for contracts was entirely suspended; and in equity, before the courts would hear anything against her, it must appear that she was possessed of a separate estate in the common law sense. Now this act of 1881 does certain things for a married woman: First, It gives her full-dominion over her own property whether acquired before or after marriage, to enjoy and dispose of it without the intervention of her husband, or responsibility for him or his debts; second, it removes from her all civil disabilities not imposed upon her husband; third, she can sue and be sued as if she were unmarried, either at law or in equity; fowrth, for her debts she alone is responsible; fifth, her property is chargeable with family expenses. In short, the purpose of the act seems to be to set her free from all influence or dominion of her husband in so far as her property rights are concerned, and leave her to manage, control and dispose of them as she pleases, whether to her gain or loss.

In this opinion we shall not discuss the question how large her power is, but confine ourselves to the single matter before us. Counsel for respondents contend that, as it is the evident purpose of these provisions to emancipate the wife from the control of the husband, and to enfranchise her with the power, denied to her under the common law, to acquire, hold, enjoy and dispose of property, and do business on her own account as freely as he can, or even more freely than he can, under the same act, it must follow that she can enter into a contract of partnership in all the ways, and with all the liabilities that her husband can, and that unless she is permitted and held to be able to enter into the same contracts with him that she can with others, she is deprived of the full measure of liberty which the law intends to confer upon her. It may be said that she can and in some case will he held to become a general partner with third persons under the terms of the act, and the necessary implications thereof. It has been so held in Newman v. Morris, 52 Miss. 402; Abbott v. Jackson, 43 Ark. 212, and elsewhere, when no one of the persons engaged with her as partners was her husband. But the question still remains, does the statute intend that she can enter into ordinary contracts with her husband, and particularly the contract of partnership? On this point we think the position of the respondents is antagonistic to itself. In the foreground of the discussion is placed the proposition that the purpose of the statute is to free the wife from the control and influence of her husband, and to relieve her property from his debts and management; hut the next following suggestion, that unless she can become his partner she will not be wholly free, if yielded to will place her and her property within touch of the very dangers which it is sought in the first place to withdraw her from. Her improvident husband, by the most ordinary persuasion, or by his mere declaration made in her presence, as in the case at bar, could, in spite of her, unless she assumed a hostility, which would endanger the continuance of the marriage relation, waste and dissipate her entire estate, and thus the very purpose which, it seems to us, stands out the most clearly in the act in question, i. e., to secure her protection in the management and enjoyment of her estate, would be defeated.

In Massachusetts, the married woman’s property acts, which existed until 1874, when the legislature expressly forbade husband and wife to contract, provided: “Any woman may, while married, bargain, sell and convey her real and personal property, which may be her sole and separate property, or which may hereafter come to her by descent, devise, bequest or gift of any person, except her husband, and enter into any contract in reference to the same, in the same manner as if she were sole; ” and “any married woman may carry on any trade or business, and perform any labor or services on her own, sole and separate account; and the earnings of any married woman from her trade, business, labors or services shall be her sole and separate property, and may be used and invested by her in her own name; and she may sue and be sued as if sole in regard to her trade, business, etc., and her property acquired by her or her trade, etc., may be taken on any execution against her.” This act covers every material point of our own, and notably the wife is permitted to make “any contract” in reference to her property; which is all that any person can do. But in Lord v. Parker, 3 Allen, 127, it was held that she could not be a partner in a firm where her husband was a partner. Speaking of the statutes, the court said:

“Their legal object is,to enable married women to acquire, possess and manage property, without the intervention of a trustee, free from the interference or control, and without liability for the debts, of their husbands. They are in derogation of the common law, and certainly are not to be extended by construction. And we cannot perceive in them any intention to confer upon a married woman the power to make any contract with her husband, or to convey to him any property, or receive any conveyance from him. The power to form a copartnership includes the power to create a community of property, with a joint power of disposal and a mutual liability for the contracts and acts of all the partners. To enter into a partnership in business with her husband would subject her property to his control in a manner hardly consistent with the separation which it is the purpose of the statute to secure, and might subject her to an indefinite liability for his engagements. The property invested in such an enterprise would cease to be her “sole and separate” property. The power to arrange the terms of such a contract would open a wide door to fraud in relation to the property of the husband. If she could contract with her husband, it would seem to follow that she could sue him and be sued by him. How such suits could he conducted, with the incidents in respect to discovery, the right of parties to testify, and to call the opposite party as a witness, without interfering with the rule as to private communicatioijs between the husband and wife, it is not easy to perceive; and the consequences which would follow in respect to process for the enforcement of rights fixed by a judgment, arrest, imprisonment, charges of fraud, proceedings in invitvm under the insolvent laws, and the like, are not of a character to be readily reconciled with the marital relation. We cannot suppose that an alteration in the law involving such momentous results, and a change so radical, could have been contemplated by the legislature, without a much more direct and clear manifestation of its will.”

To the same effect is the construction of the similar statute by the supreme court of the State of Maine, Smith v. Gorman, 41 Me. 405; McKeen v. Frost, 46 Me. 239. In Michigan, Howell’s Stat., § 6295, provides that the separate property and estate of a married woman “may be contracted, sold, transferred, mortgaged, conveyed, devised or bequeathed to her, in the same manner and with the like effect as if she were unmarried.” And § 6297 provides that “actions may be brought by and against her in relation to her sole property, in the same manner as if she were unmarried.” It is true that these provisions in the Michigan statute (and those of several other states) speak particularly only of her separate estate, but her separate estate is by § 6295 expressly defined to be the same as thaf which is equally her separate property in this state; but if she be thus enabled to contract with absolute freedom in reference to her separate estate, then, according to the logic of respondent’s argument, her freedom in that respect would be unlawfully curtailed by holding that she could not contract with reference thereto with her husband. Yet the supreme court of Michigan, in Artman v. Ferguson, 73 Mich. 146 (16 Am. St. Rep. 572); after alluding to decisions in other states where it is held that a married woman may be> where she has separate estate, a partner with persons other than her husband, uses this language:

“It is the purpose of these statutes to secure to a married woman the right to acquire and hold property separate from her husband, and free from his influence and control, and if she might enter into a business partnership with her husband it would subject her property to his control in a manner whollyinconsistent with the separation which it is the purpose of the statute to secure, and might subject her to an indefinite liability for his engagements. A contract of partnership with her husband is not included within the power granted by our statute to married women. This doctrine was laid down in Bassett v. Shepardson, 52 Mich. 3, and we see no reason for departing from it. The important and sacred relations between man and wife, which lie at the very foundation of civilized society, are not to be disturbed and destroyed by contentions whch may arise from such a community of property and a joint power of disposal and a mutual liability for the contracts and obligations of each other.”

In Indiana, under the third section of the act of March 25, 1879, it was provided that a married woman might enter into any contract in reference to her separate personal estate, trade, business, labor or services, and the management and improvement of her separate real property, the same as if she were sole, and her separate estate, real and personal, should beheld liable and on execution sold. But in Haas v. Shaw, 91 Ind. 384, 46 Am. Rep. 607, and in Scarlett v. Snodgrass, 92 Ind. 262, it was distinctly held that she could not bind herself by a contract of copartnership with her husband. These citations from eminent courts are sustained in Schouler’s Husband and Wife, § 317, and 2 Bish. Married Women, §435.

Opposed to these adjudications counsel cites us to a line of authorities of which May v. May, 9 Neb. 31, 31 Am. Rep. 399), is a sample. There a husband made and delivered his promissory note to a third party, who endorsed and delivered it to the maker’s wife, and a second note he made directly to his wife. She brought an action at law against him on both notes, and the court held that the demurrer of the wife to the husband’s answer setting up the marriage of the parties in the nature of a plea of abatement should have been sustained. The statutes of that state with regard to the separate property of married women are substantially the same as our own, and we see no reason for dissenting from the views therein expressed, and the conclusions therein arrived at. The holding of the court was in effect simply to substitute an action at law for a suit in equity. In its decision, on page 226, the court said:

“Even under the old system of practice, and before the beneficent legislation defining the rights of married women herein quoted, this could have been done by resorting to the circuity of proceeding in the name of a trustee and a court of equity. But now not only is the administration oflawand equity vested in the one court, but all forms of procedure which heretofore distinguished legal and equitable suits are abolished, and the need of the intervention of a trustee is done away with by the statute which provides that ‘every action must be prosecuted in the name of the real party in interest.’ ”

But, notwithstanding these cases, and the doctrine established by them, no case is cited, and we have not been able to find one in which either husband or wife has been permitted either at law or in equity to enforce a purely ex-ecutory contract against the other, and in that lies the kernel of this controversy, becase such a contract must be enforcible by both parties, and at its beginning it is entirely executory. The terms of the partnership may be that it shall continue for a certain length of time, that certain capital shall be invested, that the services of the parties to the contract shall be devoted to the business of the partnership, that the profits and losses of the business shall be divided equally or in certain proportions, and many others, all of which are executory, and some of which are absolutely indispensable to the prosecution of any partnership business to advantage. It is also insisted, and citations are made to authorities to show that the husband and wife in states where the doctrine of community property prevails, are in a sense partners at all events. One of the citations is Fuller v. Ferguson, 26 Cal. 547, and another is Schmidt’s Civil Law of Spain and Mexico, but turning to Fuller v. Ferguson, page 567, we find this language:

“The law recognizes a partnership between the husband and wife as to the property acquired during marriage, and which exists until expressly renounced in the manner prescribed. To this community or partnership belongs: First, All the property, of whatever nature, which the spouses acquire by their own labor and industry. Second, The fruits and income of the individual property of the husband and wife. Third, Whatever the husband gains by the exerciseof a profession or office. Fourth, The gains from the money of the spouses, although the capital is the separate property of one of them.”

It is scarcely necessary to say that because the relation of husband and wife as to their common property is likened to a partnership, the reason for the similitude is totally wanting when their separate property is concerned.

But the respondent produces two decisions of New York and Mississippi, respectively, which expressly hold that a husband and wife may be partners. Suau v. Caffe, 122 N. Y. 308; Toof v. Brewer (Miss., Feb. 20, 1888), 3 South Rep. 571. The statutes of New York governing the former case were almost identical with those of Massachusetts above quoted. Husband and wife filed a certificate by which they assumed to form a limited partnership under the firm name of “George Caffe;” the husband was the general and the wife the special partner, she contributing twenty-five thousand dollars. The firm became indebted, and both husband and wife were sued. The court, after reviewing New York cases only, said:

“Upon principle and authority, we think that when a husband and wife assume to carry on a business as partners, and contract debts in the course of it, the wife cannot escape liability on the ground of coverture.”

This, as is seen by the facts above stated, was an ex-tréme case in which the wife had by a solemn instrument placed upon file among public records, shown her intention of assuming a partnership relation with her husband, and contributing to the firm large sums of money. Whether or not the firm was insolvent is not disclosed; all that appears is that she was retained as a party to the action. But we find that of the seven judges of the New York court of appeals but four joined in the opinion while three dissent on the very point in question. Haight, J., in his dissenting opinion, reviews the course of decision in the State of New York, as well as in other states, and comes to the conclusion which is, we think, unassailable, that the majority opinion was wrong. The decision in this case is to us a curious one, inasmuch as we find the same court, only one year previous, in the case of Hendricks v. Isaacs, 117 N. Y. 411 (15 Am. St. Rep. 524), holding by a unanimous court that under these same statutes a husband and wife could not contract with each other at all. Toof v. Brewer was a controversy which was controlled by the statutes of Arkansas, which are again almost exact duplicates of those of Massachusetts. The court after alluding to Abbott v. Jackson, 43 Ark. 212, in which it was held th at a married woman could become a partner as a sole trader with a third person other than her husband, and would as to her property be bound by all the contracts of the firm as effectually and to the same extent as if she were a man, discusses cases in Massachusetts, New York and other states, and comes to the conclusion that a married woman under the law of Arkansas could also become the business partner of her husband. Just why it becomes necessary for the court in this case to decide this question is not clear from the report. It is said that the Brewers, husband and wife, were carrying on planting operations in Arkansas, and Toof and others made to them advances of supplies. After this the Brewers moved to Tennessee, and there gave to Toof and others four notes in payment of the indebtedness due them, in which notes Mrs. Brewer charged her separate estate for their payment. From this it would seem that the question of partnership was not necessarily involved in the case, but that the real question was whether upon her note which assumed to expressly charge her separate estate, a personal judgment at law should be entered against her. The case of Wells, v. Caywood, 3 Col. 489, is also cited by respondents, and the general language used by the court in that case, on p. 494, is abundantly broad enough to support the citation were it not that the point in issue had no analogy whatever to that of the case at bar. We conclude upon the whole that the better reason as well as authority is with the position that these married women’s statutes generally agree on their material points, and that it was not intended thereby that a husband and wife could become partners.

But in our statutes there are one or two provisions which we think make this position clearer than it is, perhaps, in any of the others. Sec. 2397 substantially makes each of them, as to all transactions between them, a trustee for the other. The burden of proof, as between them, is upon the party asserting the good faith. Persons who are free to contract with each other are not subject to such a rule. They stand at arms’length, and unless there is actual fraud the law gives no relief. Again, it would seem that if husband and wife are at liberty to contract with each other with perfect freedom, as strangers, the provisions of & 2416 would have been left out. By that section husband and wife, when they attempt to make any agreement as to the status or disposition of the community property, must do so by the execution of an instrument in writing, and under seal, which must be acknowledged and certified, as a deed to real estate. Why so much solemnity with regard to her interest in community property, and such looseness and absolute want of protection with regard to her separate property, which, it is conceded by all, it was the first purpose of this act to secure to her?

The case at bar is, perhaps, as strong an example as experience could produce of the evil effects of such a construction of this statute as is contended for by respondents. The wife held certain real estate which she claims is her eparate property — it is all she has. The husband engaged in a mercantile business in a building built by her upon her land, and painted over the door a sign, “J. P-Hayden & Co.” He went to Seattle to buy goods for his stock, and his wife went with. him. In a certain store where he was about to make some purchases he was asked who constituted the firm. His answer was: “My wife is the only partner I have.” She sat within a few feet of where this was said, and the witness who testified to the statement of Mr. Hayden thought she might have heard what he said. Again, a traveling agent for a firm in San Francisco, who sought to sell Hayden goods, when in the store at Fairhaven, asked a question similar to the one asked in Seattle, and received a similar answer; and on this occasion Mrs. Hayden was sitting at a desk in the view of the two men, and again the testimony was that she might have heard what her husband said. The jury found as a special verdict that these were the only two men to whom any such statement was made, although others were testified to. Yet upon this testimony, and some other of as slight moment, and because, as it is said, the wife remained silent and'did not deny what her husband said in her hearing, she was held to be a general partner by “ holding out,” and a judgment was rendered against her not only for the claims of the two firms to whose representatives her husband had said that she was his partner, but also for the claims of eighteen or twenty other firms, none of whom, with the exception of one or two, pretended to have heard that she was in any wise interested in the business, or that she existed as the wife of J. P. Hayden.

It is clear that to sustain such a judgment would be to render the estate of every married woman wholly unsafe, and all but destroy the most beneficial purpose designed to be subserved by the statute as we understand it.

Judgment reversed, and cause dismissed.

Anders, O. J., and Hoyt, J., concur.