Case ID: ohio-st_60/html/0001-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Spear, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Kunneke v. Mapel.
    
      Partnership — Partner cannot maintain action against co-pariner— On claim of partnership debt — Before final accounting — Unless subject-matter had been withdrawn from partnership account— Defendant required to set up all matters of defense.
    
    1. A partner can not maintain an action for a money judgment against a co-partner upon a claim of payment of a partnership debt before a final accounting of partnership affairs has been had, except upon showing that that particular transaction had, by agreement, been withdrawn from the partnership account. And, in the absence of such showing, it is a defense which will bar a recovery to show that the partnership has not been dissolved and that no final accounting of the partnership affairs has been had.
    2. It is a principle of general application that a party defending is bound to set up all matters which are strictly matters of defense. Swensen v. Cresop, 28 Ohio St., 668. And if, in such action by a partner, the defendant neglects to' make such de-. fense and pleads only that the plaintiff, for a valuable consideration, assumed himself payment of the whole of the deist, and final judgment is rendered against him on that issue, he cannot afterwards maintain an action for an accounting, and to recover thereon.
    (Decided March 14, 1899.)
    Error to the Circuit Court of Putnam county.
    The action was brought by Thomas J. Mapel against' John H. Kunneke for an accounting as partners. He averred that in June, 1891, plaintiff and defendant entered into a partnership as dealers in dry goods, etc., plaintiff contributing $2,650 to the capital and defendant $1,950, and they were to share in the property and profits in the ratio of such contribution. Defendant was to and did manage the business. He has refused to render an account of his management and of the proceeds and property. About October 18, 1891, the partnership ceased to do business, but was not finally dissolved, and at and prior to that date defendant took a large amount of the partnership property ■and refused to account for the same. No division has ever been made, and no final account had.. Defendant has retained a much larger share of the proceeds than he is entitled to, and refuses to account for the same, or pay plaintiff his share. Wherefore plaintiff demands an accounting, and for all proper relief.
    By his answer, defendant denied that he converted any of .the firm property to his own use; denied that he refused to account, but has always been willing and .anxious for an accounting; admitted that plaintiff put in $2,625, and averred that he put in at the time they entered into business $1,975, and that he put in property, money, time and note, more than $2,582.
    
      For a second defense he averred that plaintiff and defendant, to secure a debt of the partnership, executed their joint promissory note July 1, 1891, to one Phoebe M. Croninger for one thousand dollars, with, seven per cent, interest. Prior to August 20, 1892, said Croninger sold and assigned the note to the Farmers’ National Bank, of Find-lay. August 20, 1892, the bank commenced suit on the note against plaintiff and defendant in this court, and October 24, 1892, recovered a judgment on the note against the plaintiff and defendant for the sum of $1,112.06 and costs. Afterwards an execution was issued out of said court on said judgment, directed to the sheriff of Putnam county, and defendant was compelled to and did pay the full amount of said judgment, interest and costs. At the time of the payment of said judgment by defendant there was no other outstanding indebtedness of said partnership, and there has been none since. On January 2, 1894, this defendant commenced an action in this court, being cause number 6653, against said plaintiff, to recover from plaintiff the one-half of said judgment, interest and costs so paid by defendant. In said cause the defendant' therein (plaintiff herein) was duly served with piocess, and filed an answer admitting that said note was a debt of the partnership, and putting in issue his liability on the note. The cause was tried on the issues joined and a judgment rendered at the November term, 1894, in favor of plaintiff (Kunneke) and against defendant, (Mapel). Said judgment is in full force, unreversed and unsatisfied. All the matters and things in connection with the accounting -and dissolution of said partnership were in issue in said cause, 6653, and should have been litigated in said cause, and they were litigated in said cause. By reason of the premises plaintiff is estopped from prosecuting this action for an accounting, and all of said matters and things have been once adjudicated.
    The reply denied every allegation of the answer. Upon trial the court found that the matters and things alleged in the said second defense are each and all of them true, and that all of the matters and things in connection with the dissolution and accounting of said partnership were in issue in said cause number 6653, in the court of common pleas, and should have been and were determined in said cause, and that by reason thereof the plaintiff in this ease is estopped from prosecuting further his suit. Thereupon judgment was rendered, dismissing the petition, and that defendant recover costs of plaintiff.
    A bill of exceptions was taken at the trial, embracing all of the evidence and error was prosecuted by Mapel to the circuit court. That court found and held that the court of common pleas erred in holding and deciding that the matters and things set up in the petition of plaintiff were or should have been heard and determined in said cause number' 6653, and that said court erred in overruling the motion of plaintiff below for a new trial. A judgment of reversal was, thereupon rendered and the cause ordered remanded to the court of common pleas for further proceedings according to law.
    A reversal of this judgment and an affirmance of that of the common pleas is now asked.
    
      Handy, Ogan dk Unverferth, for plaintiff in error.
    
      Bcdley <& Bailey, for defendant in error.
   Spear, J.

The question presented by the record is whether or not the issue sought to be made in the case below was made and disposed of in the former case between the same parties. We think it is to be determined by applying to the controversy familiar rules in relation to partnerships, and that the proper solution is not difficult.

The bill of exceptions sets out the entire record in the former case, and shows that, notwithstanding Mapel’s denial, in his reply in this case of Kunneke’s second defense, (which included a denial of the allegation as to the origin of the Croninger note), it was in fact a partnership note. The petition in the former case stated a good cause of action, but it was a straight action at law. The answer, however, alleged that prior to and for a long time after the date of the note, plaintiff and defendant were partners; that the note was the debt of the partnership and of the partners; that at the dissolution of the partnership, on or about February 4, 1893, plaintiff, for good and valuable considerations, moving from defendant to plaintiff, assumed and agreed to pay said note and all other’ debts of the partnership. The reply admitted that plaintiff and defendant were partners as alleged and that the note was the debt of the partnership and partners. The suit, therefore, was one by a partner against his co-partner to recover one-half of a partnership debt which had been paid by the former. Whether or«not he could recover did not depend alone upon whether he had in fact paid such debt, for it might be that in doing so he had not paid more than was his proper proportion to pay. This could be determined only by a marshalling of accounts, by an accounting, and an ascertainment of how each partner stood with respect to the partnership. The fact, if it were such, that the partnership had not been finally dissolved, although it had ceased to do business, and that no accounting had been had between the parties and no final or full division of the partnership assets and proceeds had been had, (all which facts were alleged in Mapel’s petition in the case below), would have been a complete defense to any right of Kunneke to recover at law by reason of his payment of the joint note. That is, had such issue and none other been made, and had the evidence stopped with proof of that fact, it would have been the duty of the court to dispose of that controversy at once by a judg-ment for defendant. This by reason of the well established rule that one partner cannot, in the absence of a showing that, by some special agreement, the particular matter has been withdrawn from the partnership account, maintain an action at law against another to recover an amount claimed by him by reason of partnership transactions, until there has been a final settlement of the business of the partnership. Before such settlement his only remedy is to allege the pertinent facts and ask a dissolution and accounting and an ascertainment of the balance, and for a recovery upon such accounting. The reasons for this 'rule are so apparent, and the rule itself so well understood, that it seems unnecessary to take space to state the reasons, or to cite authorities in support of the rule. It may, however, be proper to add that the above principle follows as an immediate corollary from the rule declared in Oglesby, Exr., v. Thompson, 59 Ohio St., 60.

If therefore, Mapel did not present, as a defense, the fact of continuing unsettled partnership relations between himself and Kunneke, he placed himself in the - position of a litigant who, having full knowledge of facts that would make for him a valid defense, fails to assert them at the proper time, and submits to a final judgment against him arrived at without consideration of such facts. That such omission is to be treated as a waiver which will be conclusive of any right to subsequently avail himself of such defense, is well settled in this state. Hites v. Irvine’s Admr., 13 Ohio St., 283; C. & C. Bridge Co. v. Sargent, 27 Ohio St., 233; Roby v. Rainsberger, same vol., 674; Rindskopf v. Doman, 28 Ohio St., 516; Petersine v. Thomas, same vol., 596; Swensen v. Cresop, same vol., 668; Hixson v. Ogg, 53 Ohio St., 361; Cincinnati v. Emerson, 57 Ohio St., 132. We have not overlooked the case of Cramer v. Moore, 36 Ohio St., 347, nor Porter v. Wagner, same vol., 471. The doctrine of those cases has no application here for reasons which we think must be obvious upon a comparison of the facts involved.

It was argued by counsel for defendant in error that the claim of Mapel, as set out in the petition below, would have been, had it been presented in the former case, a set-off or counterclaim, and that the only result of a failure to set it up in that case would have been to prevent a recovery of cos-ts in the subsequent action, as provided in section 5073, Revised Statutes. We think not. If the case made in the petition in the former suit was an action at law, then as already found, allegations showing that defendant was entitled to an accounting’ would have been a complete defense; if, on the other hand, considered in connection with the answer and reply, the plaintiff’s case was to be treated as a demand for an accounting, then the issue was directly made and the judgment disposed of it finally. In either aspect, it was incumbent upon Mapel to then make the defense.. Had the claim of Kunneke been one wholly independent of the partnership dealings, then the right to an accounting would have been a set-off available upon a showing of the plaintiff’s insolvency, and Mapel could have set it up or not as he might choose. True, the claim for an accounting partook somewhat of the nature of a counterclaim, yet, since it was impracticable to determine whether Kunneke was entitled to recover without an inquiry into the affairs of the partnership, it was primarily a defense. Nor would there have been any inconsistency between an allegation of promise to assume a partnership debt, and an averment that there had been no dissolution and no accounting, for, as already indicated, partners may withdraw a special matter from the partnership business, and deal with it by itself.

But whether or not we are correct in holding that the issue as to the subsisting partnership and the rights of the partners upon a settlement, ought to have been presented in the former case, the bill of exceptions shows, as we think, that it was in fact presented by the evidence and without objection. Mapel assumed the affirmative and by his own testimony and that of others gave evidence showing the origin, conduct and conclusion of the partnership enterprise. The proofs, as a whole from both sides, tended to show what each partner put in, what each drew out, what had been done with the partnership property, what debts were created, who paid them so far as paid, and what remained unpaid, and what the residue of the property was worth, and what became of it. The special point of contention was whethér Kunneke had agreed to pay all the partnership debts, Mapel testifying that he had so agreed, while Kunneke denied this and claimed that it was only certain debts, those which were liens on the property which he took in the effort to wind up their affairs, that had been assumed by him. And whether, taken togethér, the evidence would or not have enabled an accountant easily td state a satisfactory account between the litigants, the parties undertook to state facts which disclosed their entire partnership transactions. It is enough to know that the inquiry embraced the entire partnership matters.

It follows that the judgment of the circuit court should be reversed and that of the common pleas affirmed.

Reversed.