Opinion
13804.
JULY 8, 1941.
Equitable petition. Before Judge Edwards. Madison superior court. March 4, 1941.
Clarence E. Adams, for plaintiff.
Rupert A. Brown and R. Howard Gordon, for defendant.
1. Where the plaintiff, without first obtaining sanction of the court, files in the office of the clerk an amendment to the petition, which later the court refuses to allow, such paper does not become a part of the record so as to be brought to this court under the provision embodied in the Code, § 6-810, it never having legitimately become a part of the record. Compare Holmes v. Cobb Real Estate Co., 142 Ga. 56 ( 82 S.E. 496); Gibson v. Gross, 143 Ga. 104 ( 84 S.E. 373); Douglass v. Williams Art Co., 143 Ga. 846 ( 85 S.E. 993); Simmons v. Freeman, 146 Ga. 118 ( 90 S.E. 965).
2. A petition in equity, filed on January 26, 1939, by one partner against another, alleged that the latter was indebted to him on two promissory notes under seal, signed by the partnership and payable by it to the plaintiff, both due January 1, 1921, and representing loans made by him to the partnership, and that about the year 1922 the defendant partner took charge of all the solvent notes of said partnership and has held and collected them and applied the proceeds thereof to his own use, has failed and refused to pay the said two notes due petitioner, and has excluded petitioner from any of the firm's assets, converting them to his own use, it not being averred, however, when the plaintiff learned of this, the petition being silent as to any other conduct of the defendant, the period for which the partnership was to run not being stated, there being no allegation that the partnership had been dissolved, or of any demand made by plaintiff on defendant for an accounting, and of a refusal thereof, no express allegation that the partnership business had been wound up, and, if this last could be said to have been inferentially stated, no date given when the cessation of active business took place. The prayers, omitting the one for process, were: (1) that he have judgment against defendant for the amount shown to be due on the notes sued on, principal and interest, to be paid out of partnership funds held by defendant; (2) that, in case it should be found by the court that the amount held by the defendant is in excess of amount due on said notes, the plaintiff have judgment against defendant for one half of the amount in the hands of defendant over and above the amount due on the notes sued on; (3) that in case the partnership funds should be insufficient to pay said notes in full, the plaintiff have judgment against the defendant for one half of the amount due thereon, over and above the partnership funds in the hands of the defendant; (4) that in case it should appear to the court that defendant has no funds legally to be applied on said notes, plaintiff have judgment against defendant, as one of the partners in the firm of Bray Burroughs, in the sum and amount of one half of the amount of principal and interest shown to be due on said notes. Held, that it was error to dismiss the action on the ground that the plaintiff's claim was barred by the statute of limitations.
No. 13804. JULY 8, 1941.
On April 26, 1939, Bray filed against Burroughs what he termed an equitable petition for accounting of the partnership funds of Bray Burroughs, alleging, that the defendant was indebted to him in a stated sum on two promissory notes, one executed by the firm of Bray Burroughs on February 9, 1920, and the other on April 1, 1920, each being under seal and payable to the plaintiff for loans made by him to the partnership; that about the year 1922 the defendant took charge of all the solvent notes of the firm of Bray Burroughs, held and collected them and applied the proceeds thereof to his own use, and has failed and refused to pay the notes now sued on, copies of which were attached to the petition. The plaintiff prayed, that he have judgment for the amount of the notes with interest; that if it be found that the amount held by the defendant is in excess of the amount due on said notes, the plaintiff have judgment against the defendant for one half of such excess; that if it should appear that the defendant has no funds legally to be applied on said notes, the plaintiff have judgment against the defendant as one of the partners in the firm of Bray Burroughs, for half of the amount of the principal and interest shown to be due on said notes.
The defendant demurred generally and specially, and on his motion the judge entered the following judgment: "Upon motion of counsel for the defendant to dismiss the original petition in the above-stated case on the ground that the plaintiff's claim is barred by the statute of limitations, said petition is hereby dismissed unless the plaintiff amends said petition so as to bring the cause of action within the statute of limitations within thirty days from the date hereof. 3/4/41." The plaintiff excepted. Within twenty days after the bill of exceptions was served, the defendant petitioned the judge to certify, as a part of the record material to a clear understanding of the error complained of, an amendment filed with the clerk of the superior court by the administratrix of the estate of Bray (who had died) on March 5, 1941, the defendant invoking the provisions of the Code, § 6-810. This petition was granted, and the court so ordered. The amendment, omitting the caption, is as follows:
"1. That the notes alleged in paragraph 4 as having been taken charge of by defendant E. L. Burroughs was by agreement of the other member of the partnership, J. W. Bray, for the purpose of liquidating the assets of the partnership. That said notes were given for live stock; that the depression of 1920 and some years thereafter followed, and many of the makers of the notes due the partnership were unable to pay their notes when due, and it was necessary to extend time, to take back some of the live stock formerly sold, and resell same, which was done mainly in the years 1923 and 1924; that since said time the said defendant, E. L. Burroughs, has remained in possession of said notes of said partnership, and has from year to year made collections on said notes, and all collections have not yet been made on said notes which may yet be made, said extension of time being by agreement of parties and to the best interest of the partnership; that in view of these facts, and a settlement not having been made by the said Burroughs, this suit was brought for the purpose of an accounting, a final settlement, and dissolution of the partnership.
"2. Said J. W. Bray now being dead, said partnership is now dissolved by law."
This paper, filed as an amendment with the clerk of the superior court and certified by the judge as petitioned by the defendant, was sent to the clerk of this court and by him attached to the record in this case. In this second transcription, however, is an order of the trial judge in the following language: "The foregoing purported amendment is hereby stricken from the files, the same not having been allowed within the time provided for in the order of March 4, 1941, dismissing the petition because the plaintiff's claim was barred by the statute of limitations. This April 19, 1941." Pending the action the plaintiff's personal representative, Mrs. Gober, administratrix, was made a party in his stead.
1. Nothing will be added to what is announced in the first headnote.
2. We shall not challenge the right of the defendant to invoke, by an oral motion to dismiss, the defense of the statute of limitations ( Cleveland v. Walden, 62 Ga. 163; Davis v. Boyett, 120 Ga. 649, 48 S.E. 188, 66 L.R.A. 258, 102 Am. St. R. 118, 1 Ann. Cas. 386), or deny the correctness of the statement of the general rule relied on by his counsel that the true test to determine when a cause of action accrued is "to ascertain the time when the plaintiff could first have maintained his action to a successful result." Mobley v. Murray County, 178 Ga. 388 ( 173 S.E. 680). But is there a date or an event, short of dissolution in some cases, which definitely marks the time when one partner must bring a petition in equity against his copartner, and which upon his failure then so to do will cause the statute of limitations to begin to run against him; and if so, does it appear that such date or event had arrived, and when? In the instant case there was no dissolution. So far as it appears the copartnership was still in existence on the date of the filing of the petition. There is an averment that the defendant partner "about the year 1922 took charge of all the solvent notes of said firm of Bray Burroughs, and has held and collected them and applied the proceeds thereof to his own use, and has failed and refused to pay the said notes herein described due to petitioner as an individual, excluding petitioner from any of the firm's assets, converting them to his own use." The period for which the partnership was to run is not stated. It is not averred that the partnership business has been wound up or that the partnership has become inactive, unless the latter could be legitimately inferred from an allegation that for some years after 1920 "plaintiff and defendant as joint partners were engaged in the live-stock business principally in selling mules and horses." But even if this be taken to mean that they had ceased to be engaged in the live-stock business, we are not advised when the cessation took place. The petition was filed January 26, 1939. In 47 C. J. 1207, may be found this statement: "The general rule that the statute of limitations begins to run from the time when a complete cause of action accrues applies to suits for partnership accountings, so that in each case the statutory period is to be computed from the time when the cause of action set forth in the complaint matured, and until such maturity of the cause of action the statute does not begin to run. As a partner is ordinarily not entitled to sue for an accounting during the existence of the partnership, it is very generally agreed that the statutory period of limitation does not begin to run against a suit for an accounting prior to the dissolution of the firm, or the exclusion of the complaining partner from participation in firm affairs." For the statement that the statute does not begin to run prior to dissolution, a number of authorities are cited. For the added statement that it begins to run from "the exclusion of the complaining partner from participation in firm affairs," one case is cited, Evans v. Honsinger, 11 Ont. L. R. 861.
It has also been held that the statute begins to run as soon as one partner disputes the claim of the other or holds assets adversely to him. Another view is that the running of the statute commences when the partnership business is closed, unless the business is unsettled at that time; and in case there are unsettled accounts, the statute begins to run from the time they are disposed of. For the authorities supporting these views, see notes in 47 C. J. 1207-8-9. On this subject, it is stated in 20 R. C. L., under the title Partnership, in par. 259: "The right to have an accounting may be lost by the operation of the statute of limitations. No hard and fast rule can be laid down as to the time from which the statute of limitations runs, and it can not be asserted that the statute commences to run immediately on the dissolution of a partnership, irrespective of the particular case. It may begin to run from the time that nothing remains to be done except to settle the affairs of the partnership, or from the date when it was the duty of the accounting partner to have the firm in a condition for its complete settlement. On the other hand a cause of action against a liquidating partner for an accounting is not necessarily postponed until the complete and final ending of the partnership business. Such a cause of action accrues after the liquidating partner, under the circumstances of each particular case, has had a reasonable time within which to perform his duty and has failed to complete the accounting; but it may not begin to run so long as such partner acts under the trust relationship and does not repudiate it." It has been held that a partner who has been excluded from the firm business is not bound to commence his action immediately, but may wait until the expiration of the period for which the partnership was to exist, and bring his action within the statutory period thereafter. Beller v. Murphy, 139 Mo. App. 663 ( 123 S.W. 1029). And it has been held that there must be some action taken by one partner against another, for example, a demand for an account and settlement, to terminate the fiduciary relationship between them, before the statute of limitations will begin to run. Baker v. Brown, 151 N.C. 12 ( 65 S.E. 520). The record in the instant case shows no such demand.
On questions similar to the one that confronts us in this case we find frequently quoted the following language by Mr. Chief Justice Fuller in Riddle v. Whitehill, 135 U.S. 621 ( 10 Sup. Ct. 924, 34 L. ed. 282): "We are not prepared to decide that there is a definite rule of law that statutes of limitation commence to run immediately upon the dissolution of a partnership, irrespective of the circumstances of the particular case. Mr. Justice Lindley, in his excellent work on Partnership, says: `So long, indeed, as a partnership is subsisting, and each partner is exercising his rights, and enjoying his own property, the statute of limitations has, it is conceived, no application at all; but as soon as the partnership is dissolved, or there is any exclusion of one partner by the others, the case is very different, and the statute begins to run.' American ed. 1888, 510. The learned author in his last edition cites Knox v. Gye, L. R. 5 H. L. 656, and Noyes v. Crawley, 10 Ch. Div. 31, in which Vice Chancellor Malins quotes the above language with commendation, and dissents from Miller v. Miller, L. R. 8 Eq. 499. Where, however, partnership affairs are being wound up in due course, without antagonism between the parties, or cause for judicial interference; where assets are being realized upon and liabilities extinguished, and no settlement has been made, the cause of action has not accrued, and the statute has not begun to run." But the Chief Justice was dealing with a case where there had been a dissolution, and his remarks must be interpreted accordingly. The defendant relies on Sherling v. Long, 122 Ga. 797 ( 50 S.E. 935). Suit was brought by one joint obligor against his co-obligor, its object being to seek contribution from the defendant because the plaintiff had paid off and discharged a promissory note which both had signed. The only point there ruled was that the cause of action arose when the one paying the note thereby extinguished the debt due the payee, and therefore that suit for contribution must be brought, if at all, within four years from the date of the payment, or else the bar of the statute of limitations attaches. That decision offers no aid in the consideration of the case at bar. Hogan v. Walsh, 122 Ga. 283 ( 50 S.E. 84), is also relied on. That was an illegality case, the issues in which were referred to an auditor. Exceptions of fact to his report, which was favorable to plaintiff, were overruled by the judge. The contention there made was that the proceeding was an action at law, and, there being issues of fact, that the court erred in not submitting to a jury the findings and the exceptions. This court determined that the case was one in equity, and affirmed the judgment refusing to submit to a jury the issues thus arising on the exceptions of fact to the auditor's report. This court ruled: "An equitable accounting between partners may be had in cases where one partner has sought to withhold from his copartner the right of participation in the partnership and to exclude or expel his copartner, without a prayer for a dissolution." In the opinion it was said: "It is further contended that a court of equity has no jurisdiction to entertain a petition for an accounting between partners, unless the petition prays for a dissolution of the partnership. The old equitable rule that no account between the partners could be taken, save with the view to the final determination of all questions and cross-claims between them and a dissolution of the partnership, has been considerably relaxed, though it is still applicable where there is no reason for departing from it. 2 Lindley on Partnership, *495. On the same page of the authority just cited, three instances are given where an accounting without a prayer for dissolution may be had, one of these instances being where one partner has sought to withhold from his copartner the right of participation in the partnership affairs, and to exclude or expel his copartner or to drive him to a dissolution." Although the latter portion of the above quotation may be in accord with the contention that there may be an accounting in equity between partners in certain instances without a prayer for dissolution, this is far from adjudicating that because an accounting may be had without a prayer for dissolution, where one partner has sought to withhold from his copartner the right of participation in the partnership affairs and to exclude or expel his copartner and drive him to a dissolution, the wronged partner must then move for an accounting or suffer the peril of having the statute of limitations commence to run against him. No question of the statute of limitations was involved in Hogan v. Walsh, supra. All the court was called on to decide was whether or not the suit of Walsh against Hogan was an equitable action. The same conclusion would necessarily have been reached had the court been of a different view from that expressed in the headnote and in the opinion. It would still have been an equity case, though a bad instead of a good equity case. Compare O'Callaghan v. Bank of Eastman, 180 Ga. 812, 817 ( 180 S.E. 847); Candler v. Bryan, 189 Ga. 851, 855 ( 8 S.E.2d 81); Mosely v. Alspaugh, 192 Ga. 216 ( 14 S.E.2d 737). A court of law would have been without jurisdiction, since it was a suit by one partner against another on a matter growing out of partnership affairs. Miller v. Freeman, 111 Ga. 654 ( 36 S.E. 961, 51 L.R.A. 504); and see cases cited in Paulk v. Creech, 8 Ga. App. 738, 742 ( 70 S.E. 145). In Roach v. Roach, 143 Ga. 486 ( 85 S.E. 703), the partnership had been dissolved by death. Code, § 75-107. It is therefore not in point. For a like reason Purvis v. Johnson, 163 Ga. 698 ( 137 S.E. 50), is distinguishable. It was squarely ruled in Hammond v. Hammond, 20 Ga. 556, that the statute of limitations does not commence to run in favor of one partner against another, even after a dissolution of the partnership, as long as there are debts due from the partnership to be paid, or debts due to it to be collected. The opinion in that case, after laying down the proposition that so long as there are debts of a partnership to be paid the statute does not begin to run as to the account between the partnership and any of its members, contains this further statement: "And when the statute does not run as to the account between the partnership and the members, it does not run as to the account between one partner and the other; for in reality that account is between not one partner and the other, but between the partners and the partnership. He owes the partnership so much — the partnership owes him so much — not he owes the other partners so much; the other partners owe him so much. His suit is against the Partnership." That ruling was reaffirmed in Prentice v. Elliot, 72 Ga. 154, by the statement that in Hammond v. Hammond, "it was ruled that the statute of limitations does not commence to run in favor of one partner against another, even after the dissolution of a partnership, as long as there are debts due from the partnership to be paid, or due to it to be collected. Nor, as long as these things are so, is a partner barred as against his copartner by the principle of stale demands. This decision is in point, and rules this case." In Harris v. Mathews, 107 Ga. 46 ( 32 S.E. 903), it was ruled: "As to a claim or demand by one partner against another, arising out of the partnership business, the statute of limitations does not in any event begin to run until after a dissolution of the partnership, and this is true although for a considerable period before dissolution the firm had not been actively engaged in the prosecution of its business but had placed its assets in the hands of an agent for the purpose of collecting the same and paying the partnership debts." See Powell v. Powell, 171 Ga. 840 ( 156 S.E. 677), particularly the comment there made as to Hammond v. Hammond, supra.
Our conclusion is that the petition did not show on its face that the action was subject to dismissal on the ground that it was barred by the statute of limitations.
Judgment reversed. All the Justices concur.