Smith v. Fitchett — 31 N.Y. St. Rep. 606

Majority

p. 606

Philip W. Smith, Resp’t, v. Harry Fitchett, App’lt.

(Supreme Court, General Term, Third Department,

Filed May 26, 1890.)

Headnote

1. Partnership—Accounting—Interlocutory judgment.

Upon the preliminary report of the referee in an action for a partnership accounting, the court directed an interlocutory judgment to he entered appointing a receiver of the firm property, directing him to dispose thereof, and on his final accounting directing the reference to proceed. Held, that the practice was proper.

2. Same.

It is no defense to such an action that there are judgments outstanding against the firm, especially where it appears that the greater part of the moneys of the firm were received by defendant. The plaintiff- is entitled to his share of the net surplus.

Appeal from judgment entered in favor of the plaintiff in Albany county upon the report of a referee.

• On or about the 25th day of March, 1876, plaintiff and defendant entered into a partnership to conduct the business of maintaining and operating a ferry between the city of Albany and the village of Bath, Eensselaer county, and to that end purchased a ferry boat, hired a franchise, and leased landings and certain real estate on an agreement to share the profits and loss equally between them, the defendant to be paid out of the earnings of the business the sum of seventy-five dollars per month for his services during the running of the boat through the season of navigation, and to have entire charge of the business.

The actual operation of the ferry continued until the burning of the boat “ Abbie,” in April, 1884, and the partnership was dissolved May 21, 1884. Plaintiff then demanded a settlement of the account between them; such settlement was never made, and this action was brought for an accounting and a recovery by the plaintiff of whatever sum might be found due thereon.

Levi Smith, for app’lt; Norton Chase, for resp’t

The parties were co-partners. The partnership was dissolved, and the plaintiff brings this action for an accounting and for such judgment in his favor as the accounting should show. The issues were referred, and upon the trial before the referee it appeared that there were partnership property and assets not disposed of Upon a preliminary report of the referee to that effect,, the special term made an order directing an interlocutory judgment appointing a receiver of the partnership property and assets, and directing the receiver to make disposition thereof, and report thereon, and that after passing the receiver’s final accounts, the trial of the action be resumed and completed before the same referee. Proceedings were bad and completed in pursuance of - the interlocutory judgment, and thereafter upon the referee’s final report the judgment was entered from which this appeal was taken.

We think the practice proper. This is an equity action in which the court having full jurisdiction of the parties and the subject-matter should take such action by interlocutory judgment or otherwise as is needful in order that the proper final judgment be rendered.

p. 607

It appeared by the receiver’s report that there were outstanding and unpaid a number of judgments against- the firm. But it also appeared upon the evidence that the defendant had received the greater part of the moneys of the firm, and that there were no moneys or assets wherewith to pay these judgments, except such as the defendant had received. W e assume that the receiver made a proper disposition of all the partnership assets, except the moneys which came to the hands of the defendant.

The objection of the defendant that the outstanding judgments against the firm defeat the plaintiff’s right to any recovery for his half of the net surplus of partnership assets in the defendant’s hands over and above all partnership liabilities, is not valid.

The defendant owes two duties; one to the firm creditors to pay them, and the other to the plaintiff to pay him. He cannot allege his own breach of duty to protect himself from liability for such breach.

The objection is based upon the rule obtaining in actions by •one partner to recover at law against the other upon some breach of partnership obligation. Actions at law, it is said, cannot be maintained even after dissolution of the partnership by one partner against the other, except after a full accounting, balance struck, and express promise to pay. Arnold v. Arnold, 90 N. Y., 580 . See cases cited in Belanger v. Dana, 52 Hun, 39 ; 22 N. Y. State Rep., 218. But an action in equity lies between the partners, in order, if necessary, to dissolve the partnership, dispose of the assets, pay the debts, state the account, and ascertain and divide the net surplus, and render judgment accordingly. The obstacles to a recovery at law, equity removes. The defendant is not prejudiced by retaining in his own hands partnership assets sufficient to pay outstanding judgments against the firm. It is the plaintiff who may be injured by the judgment creditors. But he is clearly entitled to his share of the net surplus. The defendant alleges that the referee did not give him all the credits to which he was entitled. The plaintiff alleges that the referee did not charge the defendant with all the debits he ought. As the case is presented we cannot discover that the net balance is not right There were no formal requests for findings as to disputed items. The testimony is voluminous and the partnership books are referred to as forming part of the case, but are not handed up. The transactions covering four years are grouped in the results stated by expert witnesses.

It is practically impossible for us to examine this mass of accounts without great danger of making more mistakes than we should correct. The presumption is that the referee is right, and we affirm his findings, because we cannot see that they are wrong.

Judgment affirmed, with costs.

Learned, P. J., concurs • Mayham, J., takes no part.