Case ID: ny-st-rep_27/html/0183-01.html
Source: Caselaw Access Project
Author: {"author": "Daniels, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

James R. Watts, App’lt, v. Samuel B. Adler, Respt.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed November 7, 1889.)
    
    Partnership—Accounting—When action eor will not lie.
    Where in an action for an accounting of a partnership it appeared that the parties had settled after dissolution, and notes had been given by defendant to plaintiff which had passed into other hands, and upon the trial no evidence was given as to outstanding matters except a single claim for rent, Held, that there was no ground for an equitable action and that plaintiffs remedy for the claim for rent was at law.
    (Dahiels, J., dissents.)
    Appeal from a judgment dismissing the complaint on trial at the special term.
    
      Treadwell Cleveland, for app’lt; Jacob H. Miller, for resp’t.
   Daniels, J.

The action was brought for an accounting of the affairs and business of the parties as co-partners. . Upon a preceding trial the complaint was dismissed, on the ground that no cause of action for an accounting was presented by it. An appeal was taken to the general term from the judgment, where the complaint was regarded as sufficient in its statements for an action of this description, and the judgment was reversed and a new trial ordered. Watts v. Adler, 13 N. Y. State Rep., 553.

It appeared that a settlement had taken place between the parties after the dissolution of the partnership, and notes had been given by the defendant to the plaintiff which he had negotiated and passed into the hands of other persons.

But this settlement on behalf of the plaintiff was claimed to have been only partial in its character. And evidence was proposed to be obtained from him as a witness, establishing the fact to be that other liabilities of the firm remained outstanding and unsettled, and that accounts due to it were unpaid. This evidence, in part at least, was objected to by the defendant’s counsel, and it was excluded by the court for the reason that it was more proper to be received and considered upon the accounting itself. The plaintiff, therefore, had no opportunity of making this proof showing the necessity for an accounting before the court. And at the close of the evidence the complaint was dismissed, apparently upon the ground that no action for an accounting, as the proof presented it, existed in favor of the plaintiff. But as there were unsettled dealings of the partnership still outstanding, although not specifically proved, to that extent the action was well founded. The relations and business of the parties was confidential, as they usually are among partners. And when a disagreement shall arise in their adjustment, courts of equity have uniformly taken the jurisdiction of the controversies and settled them according to the rights and liabilities of the parties. Marvin v. Brooks, 94 N. Y., 71.

It has the ability, which a court of law has not, to inquire into and investigate not only the relations of the parties, but their rights to participate in the division of the profits of the firm, and their obligations to satisfy and extinguish its habilities. These attributes all form a part of the decree directed to be entered in this class of cases. And the fact that the parties had largely settled their affairs prior to the commencement of the action formed no objection to their completion and adjustment through its intervention. It was not requisite that the notes should be returned and the settlement as far as it had been carried out rescinded. But what was necessary in the action was to settle and take the, accounting for that which still remained uncollected and unpaid and unadjusted between the parties. And even if the case had been such as to be capable of being made the subject of an action at law, still, as the objection was not presented by the answer-served, it had been waived by the defendant. Truscott v. King, 2 Seld., 147, 165.

The judgment should be reversed, and a new trial ordered, with costs to the plaintiff to abide the event.

Van Brunt, P. J. I cannot concur in the conclusion arrived at by Mr. Justice Daniels. The court below found, upon competent evidence, that upon the termination of the co-partnership the accounts between the partners were settled and liquidated, and notes given for the balance due, and that there was no fraud or mistake by which such settlement could be impeached. The only evidence as to any mistake related to a claim for rent, a single item.

There was no proof of outstanding assets or other liabilities, and if there was only one unsettled item between the parties, no accounting was necessary, as an action at law would lie by one partner against the other to recover one-half of the amount There was no exception taken to the exclusion of evidence upon the ground that the evidence was only competent upon an accounting, and this objection was made "By both parties.

The judgment appealed from should be affirmed, with costs.

Brady, J., concurs with Van Brunt, P. J.