Esdaile v. Wuytack — 25 Abb. N. Cas. 474

Majority

p. 474

ESDAILE v. WUYTACK.

N. Y. City Court, General Term;

October, 1890.

Headnote

Partnership ; action at law ; claim not involving partnership accounts.J Although one partner cannot maintain an action against another to recover an amount claimed by him .by reason of partnership transactions, until there has been a final settlement of the firm’s affairs by discharging its liabitities, collecting its assets, and definitely ascertaining the surplus to be divided, yet, under a complaint showing that the partnership between' plaintiff and defendant has-been dissolved by mutual consent, and the assets divided between them, and that it was, at the same time, agreed that all partnership liability then outstanding, should, at its maturity, beborne and. paid equally between them ; and that the plaintiff has paid all the outstanding debts, and that there are no outstanding claims of the-. . firm to be or that can be collected; an action may be maintained', against the defendant to recover his half of the obligations paid, since the judgment in such an action will be a final settlement between the partners.

Appeal by the plaintiff from a judgment dismissing the= complaint at the trial.

Charles J. Esdaile brought this action against Andrew J. Wuytack. The • complaint alleged that the plaintiff and defendant were co-partners up to December 1, 1889, when the-co-partnership was dissolved by mutual consent, all partnership assets and property being equally divided between them in consideration of which, it was at the same time, agreed, that all co-partnership liability then outstanding and existing should, at its maturity, be borne and paid equally between» them.

p. 475

That there was an outstanding note of $500, a few little debts, aggregating $25, all of which the plaintiff paid,, and the plaintiff demands judgment against the defendant for his half of the obligations paid, to wit, $262.50.

The defendant interposed an answer, admitting the partnership and its dissolution, and alleging that the proceeds of the $500 note were applied to the plaintiff’s individual use, and not to any partnership account of the parties.

The trial judge dismissed the complaint on the ground that the action involved the co-partnership accounts of the parties, that an action at law would not lie, and that the court had no jurisdiction of the subject matter of the action. The plaintiff appeals.

Harrison & Langdon, for the plaintiff, appellant.

H. Hall, for the defendant, respondent.

The action did not involve the investigation or settlement of the co-partnership affairs or accounts of the parties. The partners had dissolved their copartnership relations, divided their assets and property,, and, for all that appears to the contrary, the claims paid by the plaintiff effectually and forever closed the partnership-business. There was nothing to collect, and the only thing-left open was the payment of the partnership obligations paid by the plaintiff, one-half of which the defendant was bound to contribute. It is an action of which a court of equity would not have jurisdiction, and the plaintiff must, find his remedy in a court of law, or he is remediless.. Equity does not invite suits between partners, and entertains them only where an accounting is necessary, or some equitable relief required.

In Jepson v. Peck ( 78 Cal. 540 ) the court held that where-a partnership is dissolved by mutual consent, and an account

p. 476

ingis had between the members, and an agreement is entered into that the firm debts shall be paid equally, one of the partners who collects all the available partnership assets, ■and applies them to the payment of the firm indebtedness, ■and pays the balance with his-own funds, may maintain an action against the other to recover his proportion of the indebtedness so paid, although no definite balance has been ■agreed upon between them. The rule is well settled that one partner cannot maintain an action against another to recover an amount claimed by him by reason of partnership transactions, until there has heen a final settlement of ■ the. affairs of the concern, by discharging its liabilities, collecting its assets, and definitely ascertaining the surplus to a share of which he is entitled.. The. reasons for this rule have been variously stated, but this case, as 'we view it, is not within any of them. The complaint shows (inferentially at least) that there are no outstanding demands against the partnership, and no outstanding debts to be collected, or that can be ■collected, so that the judgment to be rendered herein will be' a final settlement between the partners.

In Ferguson v. Baker ( 112 N. Y. 257 ) the court held vthat although ordinarily one partne'r may not sue his co-partner at law in respect to partnership dealings, if the cause -of action is distinct from partnership accounts, and does not involve their consideration, it is maintainable. In that case, the complaint alleged, in substance, that the parties were formerly copartners ; that the partnership had been dissolved and a settlement made; that the defendant had agreed to collect the debts due the firm, amounting to a sum specified, and as soon as collected to pay over to the plaintiff his share, i. e., one-half thereof ; that defendant had collected ■said amount, but had not paid as agreed, and .judgment was demanded for the one-lialf.. It was held, that the action was maintainable upon the facts alleged.

There is no rule forbidding one partner from suing ■another at law, in respect of a debt arising out of a partnership transaction, if the obligation or contract, though relating

p. 477

to the partnership business, is separate and distinct from all other matters in question between the partners, and can be determined without going into the partnership accounts-(Crator v. Binninger, 45 N. Y. 545 ). In Wright v. Cumpety ( 41 Penn. St. 102 ) the plaintiff and defendant dissolved partnership, but before the formal and public dissolution, the defendant contracted debts in the name of the old firm, which the plaintiff paid, and it was held that the plaintiff might recover the amount in an action against the defendant, as money paid to 1ns use, no accounting being necessary.

In Johnson v. Kelly (4 Supra. Ct. [T. & C.] 417) the complaint stated that plaintiff and defendant entered into partnership for a year; that, by the partnership agreement, the plaintiff was to furnish the capital and the plaintiff and defendant were to share the profits and losses equally, and that a loss accrued at the expiration of the partnership, foione-half of which a money judgment was demanded. It was held on appeal that such a complaint in an action at law was not' demurrable. So, through the books the rule is followed that where the cause of action is distinct from partnership accounts, and does not involve their consideration,, nor require their examination, a court of law may proceed with the action.

Viewed in the light of these authorities, the complaint states a cause of action of which this court has jurisdiction. It was error, therefore, to dismiss the complaint, and the judgment entered on such dismissal must be reversed and a new trial ordered, with costs to the appellant to abide the. event.

Footnotes

* McAdam, Ch. J., and Ehklich, J.

Cases cited

Jepsen v. Beck 78 Cal. 540 Cal. 1889-03-30 p. 475
Crater v. Bininger 45 N. Y. 545 N.Y. 1871-05-23 p. 477