Opinion
32705.
DECIDED MARCH 10, 1950.
Complaint; from Richmond Superior Court — Judge G. C. Anderson. July 15, 1949.
Fulcher Fulcher, for plaintiff.
Hammond, Kennedy Sanders, for defendant.
The petition did not set forth a cause of action and the court did not err in sustaining the general demurrer thereto.
DECIDED MARCH 10, 1950.
J. Cecil Davis brought an action against Charles W. Holloway, as permanent administrator of the estate of John H. Holloway, deceased, in which he alleged substantially the following: John H. Holloway, late of Baldwin County, died on January 25, 1947; thereafter Charles W. Holloway was appointed permanent administrator of the estate of John H. Holloway by the Court of Ordinary of Baldwin County; more than one year has elapsed since the appointment of the permanent administrator; prior to the death of John H. Holloway, he and the plaintiff were partners in a certain business conducted in the City of Milledgeville, Baldwin County, Georgia, known as "Holloway's"; the said John H. Holloway owned sixty percent interest in the business and the plaintiff owned forty percent interest; shortly after the death of John H. Holloway and the dissolution of the partnership effected thereby, and on February 28, 1947, the plaintiff purchased from the estate and heirs of John H. Holloway the sixty percent undivided interest of John H. Holloway in the partnership; that the books of the partnership were thereupon examined and disclosed that John H. Holloway had withdrawn from the partnership a considerable sum of money in excess of sixty percent of the net earnings thereof, resulting in an indebtedness to the plaintiff of the sum of $3,499.19 with interest at the rate of 7 percent from January 25, 1947. By amendment this figure was changed to $3,729.61, and the following allegations were added: "10. In carrying forward the December 31, 1941 drawing account of John H. Holloway, which was actually . . $2,579.67, the same was carried forward to January, 1942, as . . $2,714.05; while the drawing account of J. Cecil Davis, which was actually . . $105.65 was carried forward to January, 1942, as . . $396.57. These entries appear in the journal of the partnership. 11. That after determining and carrying forward to January, 1943 the drawings of John H. Holloway for 1942 as . . $3,183.17, and the drawings of J. Cecil Davis as . . $68.15 in the journal of the partnership, these figures were not thereafter considered in making any calculations or partnership adjustments and were dropped from the partnership accounts. 12. That during the year 1944 John H. Holloway adopted a different practice in carrying forward the drawings of the partners and instead of showing a balance carried forward each month he showed on the monthly entries in the journal only the drawings for that particular month and set forth the consolidated monthly drawings in a yearly operations balance sheet in the back of the journal. These amounts were thereafter posted to the year's balance in the accounts receivable ledger. For the year 1945 John H. Holloway drew according to this balance sheet . . $3,855.68, and thereafter posted to his personal account in the accounts receivable ledger the sum of . . $2,855.68 on December 31, 1945. 13. That on July 17, 1946, John H. Holloway paid to the Merchants and Farmers Bank by check No. 2399 the sum of . . $102.80 in payment of a personal note of John H. Holloway at said Merchants and Farmers Bank and charged the same to the investment account of the partnership. 14. That on January 15, 1945, by check No. 1551, on February 13, 1945, by check No. 1594, on March 14, 1945, by check No. 1635, on April 12, 1945, by check No. 1679, on May 11, 1945, by check No. 1716, on June 11, 1945, by check No. 1766, on June 16, 1945, by check No. 1820, on August 17, 1945, by check No. 1862, on September 19, 1945, by check No. 1897, on October 13, 1945, by check No. 1934, on November 13, 1945, by check No. 1986, and on December 14, 1945, by check No. 2056 John H. Holloway paid the Merchants and Farmer Bank the sum of . . $1200 in payment of his personal note, each of said checks being for the sum of . . $100 and charged the same to the investment account of the partnership. 15. That on December 12, 1946, by check No. 2619, John H. Holloway paid to the Collector of Internal Revenue the sum of . . $287.11 in payment of a deficiency in his personal income tax and charged the same to the investment account of the partnership. 16. That on January 15, 1947, John H. Holloway, by check No. 2679, paid to the Collector of Internal Revenue the sum of . . $470.47, representing his personal income tax payment, and charged the same to the investment account of the partnership, which check did not reach the bank on which drawn until after the death of John H. Holloway, but J. Cecil Davis approved the payment thereof pending the adjustment of the accounts and to avoid said check's being returned. 17. That the drawings of John H. Holloway for the month of January 1947 amounted to . . $296.26, less a salary of . . $150, resulting in a deficit in his account of . . $146.26 for that month. J. Cecil Davis drew for the month of January, 1947 the sum of . . $198.82, less his salary of . . $100, resulting in a deficit of . . $98.82, neither of which amounts have been charged to the accounts receivable ledger of the partnership. 18. That during the month of February, 1947, there was paid for the account of John H. Holloway and charged to his account as authorized by Charles W. Holloway, as permanent administrator of the estate of John H. Holloway, deceased, the sum of . . $97.14. 19. That in addition to the foregoing the amounts charged to the account of John H. Holloway on the accounts receivable ledger in 1947 amount to . . $35.59. 20. That the books of said partnership consisted solely and entirely of the journal and accounts receivable ledger above referred to. 21. That John H. Holloway kept the books of the partnership and all of the entries above referred to appear in his handwriting prior to the date of his death on January 25, 1947. 22. That the accounts receivable ledger as of January 1, 1947 as set forth in the handwriting of John H. Holloway showed a credit balance due J. Cecil Davis of . . $827.48, which when corrected in accordance with the foregoing entries should properly reflect a credit balance of . . $3,729.61, and also showed a credit balance in favor of John H. Holloway of . . $2,614.36, which when corrected in accordance with the foregoing entries should properly reflect a debit balance due by him of $3,729.61. Wherefore, plaintiff prays that this his amendment be allowed, and that he have judgment against defendant for the sum of . . $3,729.61 with interest from January 25, 1947 at the rate of seven percent per annum." The defendant demurred generally and specially. The court sustained the demurrers and dismissed the petition and the plaintiff excepted.
The salient allegations of the petition are: The plaintiff and John H. Holloway had been engaged as partners in a business known as "Holloways." The plaintiff owned 40 percent interest in the business and Holloway owned 60 percent interest. On January 25, 1947, Holloway died. Holloway's death effected a dissolution of the partnership. Charles W. Holloway was appointed permanent administrator of the estate of John H. Holloway and on February 28, 1947, the plaintiff purchased Holloway's 60 percent undivided interest in the business from the estate and heirs of Holloway. The books of the partnership, which had been kept by Holloway, were then examined and they disclosed that Holloway had withdrawn from the partnership a considerable sum in excess of his 60 percent of the net earnings. Construing the petition most strongly against the pleader on demurrer, the petition shows that the partnership was dissolved upon the death of Holloway. Code, § 75-107. The plaintiff came into control of all of the assets of the partnership, including the books of the firm. Code, § 75-208. Without entering into a dissolution settlement, striking a balance between the partners, or auditing or examining the books, the plaintiff purchased from the estate and heirs of Holloway, the deceased partner's 60 percent undivided interest. The books were thereafter examined and found to contain certain errors, which, when corrected, showed that Holloway had withdrawn from the partnership a considerable sum of money in excess of 60 percent of the net earnings. These errors in the books are alleged to have occurred in carrying forward the drawing account balances of the two partners from year to year over a period of several years, beginning in 1941; and in Holloway's having used partnership funds in payment of his individual, personal notes, which he charged to the firm's investment account, all of which resulted in an overdraft of $3,729.61, or a balance of that amount due to the plaintiff. The plaintiff's action is not one upon the contract of purchase and sale of the deceased partner's interest in the firm. The contract is not attached to the petition, nor is any of its terms set out therein. There is no allegation that the plaintiff entered into the contract of purchase and sale of the deceased partner's interest in the firm because of misrepresentation, fraud, or deceit, nor is there any prayer for rescission or reformation of the contract of purchase and sale of the deceased partner's interest. At best, it appears that the plaintiff has attempted to plant his action upon the theory of money had and received by the estate and heirs of the deceased partner which in equity and good conscience belongs to the plaintiff. Although a suit for money had and received is a legal action, it is founded upon the equitable principle that no one ought unjustly to enrich himself at the expense of another, and thus it is a substitute for a suit in equity. Bass v. Cates, 74 Ga. App. 363, 370 ( 39 S.E.2d, 550). If the plaintiff is to recover at all he must do so by showing that, as a result of the mistakes in the books, he was misled into paying too high a price to the estate and heirs of the deceased partner for that partner's interest, or that he would not have purchased at so high a price had he been aware of the mistakes in the books. It is nowhere alleged that the plaintiff relied upon the books as stating the true value of the deceased partner's interest, but let us assume that he did rely upon them for that purpose, there is no allegation that this reliance was induced by the legal representative or the deceased partner for that matter. There is not even an allegation that the plaintiff was unaware of the errors in the books, or that he endeavored in any way to determine the accuracy of the books before he purchased the deceased partner's interest. He chose to leap and then look. As surviving partner he had every opportunity to examine, audit, and correct the books; so far as the petition shows he did nothing. As we have said, the action for money had and received is a legal one in which equitable principles are applied. Equity will relieve for mistakes of fact, but equity does not relieve for ignorance, where the party complaining could have had knowledge of the truth by reasonable diligence. The slightest examination of the books would have revealed that the checks charged to the investment account by the deceased partner were his personal payments for his personal indebtedness, and that the drawing account balances had been erroneously posted when brought forward at each year's end. Under all the allegations of the petition, we do not think that the plaintiff has shown that the defendant, the legal representative of the deceased partner's estate, received money which in equity and good conscience belongs to the plaintiff. See Adler v. Adler, 205 Ga. 818 ( 55 S.E.2d 139), and cases cited, and Hargrove v. Bledsoe, 78 Ga. App. 107 ( 50 S.E.2d 223), and cases cited. On the death of the partner an accounting could have been had, and doubtless should have been had, since the administration of the deceased partner's estate was involved. The factum of the partner's death would not alone give the plaintiff the right to sue the legal representative for the overdraft, until a balance had been struck and the fact of the indebtedness had been determined, or was such as could have been determined by the jury without the necessity of an accounting. No balance was struck showing such fact, and the deceased partner's estate became indebted to the plaintiff only after he had purchased that partner's interest. If he chose to guess at the true value of the deceased partner's interest, or rely upon the books without examination, and got less than the true value by virtue of the mistake in the books, he cannot now complain.
The petition did not set forth a cause of action and the court did not err in sustaining the general demurrer to the petition.
Judgment affirmed. Gardner and Townsend, JJ., concur.