"It is the duty of one who has received money to the use of another to pay it over; and no demand is necessary by the latter before action." Howard v. France, 43 N.Y. 593. "A final decree of a county court is of equal rank with a judgment entered in other courts in this state, and is entitled to the same faith and credit."
We think the learned counsel for the appellant is in error in assuming that no action would lie in behalf of the trustor against the other members of the firm to recover the amount of his loan account without first having a partnership accounting. Although ordinarily one partner may not sue his copartner at law in respect to partnership dealings, if the cause of action is distinct from the partnership accounts, and does not involve their consideration, it is maintainable. ( Howard v. France, 43 N.Y. 593; Ferguson v. Baker, 116 id. 257.) In many cases involving transactions between partners separate and apart from their contributions to capital, the courts have permitted actions at law to be maintained between partners to recover sums loaned to or borrowed of the firm.
It is entirely separate and distinct from the partnership accounts, and this forms the true test in determining whether an action at law will lie by one partner against his copartner. 1 Story, Eq. Jur. § 665; Brown v. Tapscott, 6 Mees. W. 119; Van Ness v. Forrest, 8 Cranch, 30; Currier v. Rowe, 46 N. H. 72; Neil v. Greenleaf, 26 Ohio St. 570; Howard v. France, 43 N. Y. 593; Crater v. Bininger, 45 Id. 545; Lindley, Partn. 1024. 2.
( Mills v. Mills, 115 N.Y. 80.) All liabilities of the firm had then been discharged; the assets of the firm had been collected, and consisted of moneys in the hands of the defendants' testator, and there was nothing remaining to be done, as to partnership accounts, except the distribution of this asset, so unexpectedly recovered. It is a general rule that an action at law cannot be maintained by partners against each other respecting partnership transactions; but this rule does not apply to actions brought upon express or implied promises in relation to special transactions, or where a balance has been declared, or the action does not involve an accounting of the partnership transactions. ( Howard v. France, 43 N.Y. 593; Crater v. Bininger, 45 id. 545.) The right of the plaintiff to recover this asset is based upon the obligations of the partnership agreement and a promise, to be implied from the circumstances of the case, to pay it. The dissolution of the firm, leaving this asset unaccounted for, under the circumstances, worked no bar to an action by the plaintiff to recover it. It is entirely immaterial whether the action brought is for an accounting as to the particular asset; or an action for money had and received; or upon an implied trust, the rule of limitation applicable thereto in the absence of special circumstances, not appearing in this case, is that of six years.
Indeed, a court of equity not only should not, but cannot make a different division and settlement between these parties, but must leave them where their own voluntary acts have placed them, and that is, where they are cognizable in a court of law. The rule is well settled that though, ordinarily, one partner cannot sue his copartner at law in respect to partnership dealings, if the cause of action is distinct from the partnership accounts and does not involve their consideration, the action may be maintained. ( Crater v. Bininger, 45 N.Y. 545; Howard v. France, 43 id. 593.) Now, as to the evidence introduced upon the trial, to prove the facts to the jury.
Though the rule that partners may not sue one another at law until an accounting has been settled is sometimes expressed in broad terms, it is not inflexible and yields to the nature of the obligation in suit. The rule does not apply to express promises made in relation to special transactions ( Middleton v. Twombly, 125 N.Y. 520, 524; Howard v. France, 43 N.Y. 593, 596; Herrick v. Guild, 257 App. Div. 341, 342). Usually, rights under contracts between partners as individuals are treated the same as if they were not partners (1 Rowley, Partnership [2d ed.] § 21.1, subd. A, par. 5; cf. Corr v. Hoffman, 256 N.Y. 254, 271-275). "While partners cannot sue one another at law for any of the business or undertakings of the partnership, they may so sue each other for a breach of any distinct covenant in the partnership agreement" ( Guccione v. Scott, 21 Misc. 410, 411, affd. 33 App. Div. 214). Hence, I would construe defendants' undertaking as personal and not a partnership liability; and I see no virtue in requiring plaintiffs to allege specifically that creditors have been paid or may be paid from the assets of the partnership.
It is undoubtedly true that ordinarily one partner cannot sue his copartner at law in respect to their copartnership dealings. If, however, the cause of action is distinct from the partnership accounts and does not involve their consideration, an action at law may be maintained. Howard v. France, 43 N.Y. 593, 596. In the case at bar the copartnership accounts are in no way involved.
But we think he was in error in refusing to allow interest before demand, that is, the commencement of the suit. It is a corollary to his main proposition that the bank was guilty of misapplication of the plaintiff's funds ab initio, and in such cases no demand is necessary. ( Marshall v. de Cordova, 26 App. Div. 615; Howard v. France, 43 N.Y. 593. ) The judgment should be modified by adding interest on each check from its date, and, as modified, affirmed.
However, it is clear that the buyer knew of plaintiff's claim to the escrow balance by or about February 21, 1975, and that the buyer knew that plaintiff was making this claim against the buyer as well as the bank by March 28, 1975, when the attorney who had represented the buyer at the closing of title (cf. Farr v Newman, 14 N.Y.2d 183) wrote plaintiff a letter in which he indicated that he had consulted with his client and that they denied liability. (See Howard v France, 43 N.Y. 593.) Under the circumstances, the court finds it equitable that interest run from March 28, 1975, and at a rate of 6% per annum (CPLR 5004).
It has been repeatedly held that before an action at law, as distinguished from an action in equity, can be maintained by one partner against the other, the partnership relation must have fully ceased with respect to the transaction in question. Belanger v. Dana, 52 Hun, 39, 42; Howard v. France, 43 N.Y. 593; Crater v. Bininger, 45 id. 545, 549. In other words, the transaction must either never have been part of, or must have been completely separated from the partnership affairs, in order to form a separate cause of action at law.