Case ID: va_40/html/0065-01.html
Source: Caselaw Access Project
Author: {"author": "ALLEN, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Coalter v. Coalter.
    July, 1842,
    Lewisburg.
    (Absent Baldwin, J.)
    Partnership—Suit for Account—Statute of Limitations,  --An action of account by one partner against bis copartner, for a settlement of fbe partnership accounts, must be commenced within five years next after the canse of action, and unless so commenced, will be barred by the statute of limita.tions, 1 R. G. 18X9, ch. 128, § 4. p. 488, for such accounts do not concern the trade of merchandise between merchant and merchant, and therefore are not embraced by the exception to the statute. Accord. Patterson v. Brovin. 6 Monroe 10.
    Same—Same—Same.—A suit in equity by one partner against his copartner, for a settlement of the partnership accounts, being a substitute for the action of account, should, like that action, be brought within five years, and if not brought within that time, will be barred by the statute of limitations. Accord, Patterson v. Brown, 6 Monroe 10.
    Same—Same—Same—Exception- -Cessation of Dealings, —Question whether the exception made by the statute of limitations, of accounts which concern the trade of merchandise between merchant and merchant, prevents the statute from barring an action upon such accounts, when there has been a cessation of dealings between the parties for five years. Per Stanabd and Allion, J., the statute is no bar in such a case. Accord, Mandeville &c. v. Wilson, 5 Cranch 15, and Robinson v. Alexander. 8 Bligh 352.
    Same—Same—Same—Same—Who Are Merchants.— Question whether persons engaged as partners in the business of farming, distilling, and purchasing and selling cattle, can properly be considered merchants within the meaning of the said exception. It seems, from opinions of Stanabd and Allen, J., they cannot be so considered. Accord, Lansdale v. Brashear, 3 Monroe 330, and Forbes v. Skelton, 8 Simons 335, 11 Cond. Eng. Ch. Rep. 466.
    William B. Coalter filed a bill in the circuit court of Augusta against John Coalter, setting forth a partnership between them in the business of farming, distilling, and purchasing and selling cattle &c. and praying for a settlement of the partnership accounts. It appeared by *the bill, that the partnership was entered into in December 1828, to continue for four years, so that the partnership was ended in December 1832. Yet the bill was not filed until December 1838. It stated, that in the summer of 1833, the parties referred the settlement of the accounts to two friends, who found a balance due the plaintiff upon the operations of the partnership ; but there being at that time a crop of grain growing, the value of which could not then be ascertained, the referees did not close the account, and no final settlement had since been made. The defendant, in his answer, admitted that there had been a partnership between him and the plaintiff, though he stated it somewhat differently from the plaintiff. He admitted also that there had been no final adjustment of the accounts of the partnership, but relied on various grounds of defence, one of which was the statute of limitations. The statement of the partnership accounts made by the referees, bore date the 27th of June 1833, and it stated that they had been unable to settle as to the grain then growing. One of the referees deposed, that as they went on, item by item, each one was agreed to by the parties, until they came to the item of the grain in the ground, upon which they could not agree, John Coalter claiming the whole of the grain in the ground, and William B. Coalter claiming one third part of it. The sums agreed upon being then added up, John Coalter refused to sign a paper acknowledging the amount to be correct.
    The circuit court referred the accounts to one of its commissioners,; and a report thereof being made, á decree was pronounced in favor of the plaintiff. From which decree, on the petition of the defendant, an appeal was allowed.
    Michie and John B. Baldwin, for appellant.
    Accounts between partners, though not particularly mentioned in *the statute of limitations, 1 R. C. 1819, p. 488; ch. 128. § 4. are embraced within the limitation of actions of account. Courts of equity having, taken cognizance of matters of account, aud being better able to settle them, the action of account has fallen into disuse : but it may still be maintained. Gow on Partnership 83. And by the rules of equity, where there is concurrent jurisdiction, the statute of limitations is as good a plea in equity as at law. 2 Tuck. Comm. 388. Indeed the statute is never disregarded by courts of equity, except in cases of technical trusts, of which equity has exclusive and peculiar cognizance ; and even in those cases the trust must be continuing. Ibid. 389. Kane v. Bloodgood, 7 John. Ch. Rep. 90. There seems to be no reason why the statute should not run between partners after dissolution, as well as between other persons. Upon the dissolution, the balance due to either partner becomes an individual demand against his copartner; a demand which he ought to be bound to prosecute with as much diligence as any other. All the reasons which led to the enactment of the statute of limitations apply with full force to such a claim. And accordingly, it has uniformly been held that the statute is a good plea between partners. Gow on Partn. 117. Barber v. Barber, 18 Ves. 286. Foster v. Hodgson, 19 Ves. 180. See also Union Bank v. Knapp, 3 Pick. 112. and Lansdale v. Brashear, 3 Monroe 330.
    This case does not fall either within the letter or the reason of the exception in the statute. A construction by which these partners should be held to be merchants within the meaning of the exception, would virtually repeal the statute; for there is hardly any one who would not be a merchant under such a construction. The word merchant applies to those who are such in the ordinary acceptation of the term, and perhaps to some others, the similarity of whose pursuits brings them clearly within the reason of the exception. See Lansdale *v. Brashear, 3 Monroe 330. Where the objects of the partnership are such as existed in this case, the parties cannot be considered merchants at all. But if they could not be so considered as between their firm and another firm, they cannot be so regarded in this case ; for the two partners constitute, in fact, btit one merchant. If, however, they should be held to be strictly within the exception, still all dealings having ceased for more than five years, .the statute would be a bar to the recovery. In Coster v. Murray, 5 Johns. Ch. Rep. 522, chancellor Kent, after reviewing the.english cases, concludes that the weight of authority is in favour of this position. See also 1 Rob. Prac. 101.
    Peyton, for appellee.
    This is not a case in which an action at law could have been maintained by the plaintiff. The association between the parties, from its nature and character, treated such an unity of interest between them, that neither of them, whatever share of the stock or profits he might have been entitled to, or in whatever sum the firm might have been indebted to h;m, could exercise an exclusive right to enjoy or receive it, until a balance had been struck between them. Holmes v. Higgins, 1 Barn. & Cress. 74. 8 Eng. Com. Law Rep. 27. Bovill &c. v. Hammond, 6 Barn. & Cress. 149. 13 Eng. Com. Law Rep. 126. Milburn v. Codd &c. 7 Barn. & Cress. 419. 14 Eng. Com. Law Rep. 67. Bac. Abr. tit. Merchant, letter C. If one partner cannot sue his co-partner till a settlement is had and a balance struck, then the action does not accrue till such settlement. In the present case, no settlement was ever made before this suit was brought; and therefore the statute cannot bar the suit.
    But the statute excepts such accounts as concern the trade of merchandise between merchant and merchant, their factors or servants. And this exception applies to all accounts current, which concern the trade of merchandise. Webber v. Tivill, 2 Saund. 124. and cases *cited p. 127. note 6. If lord Hardwicke said what is reported in Welford v. Liddel, 2 Ves. 400. he is not sustained by the authorities, either english or american. The contrary is held in Franklin v. Camp’s ex’ors, 1 Coxe’s Rep. 196. and Mandeville &c. v. Wilson, S Cranch 15. The cases further shew that all persons will be embraced within the exception, whether merchants or not, provided the accounts be open and current. Cotes v. Harris, Bull. N. P 149. Cranch v. Kirkman, Peak’s N. P. C. 121. Catling &c. v. Skoulding &c. 6 T. R. 189. Wilkinson on Lim. 21. Moreover, persons associated for such purposes as those for which the parties were associated in this case, are to be considered as merchants. The old idea was, that a merchant meant one who traded to and from foreign parts. But this definition is too narrow. Wilkinson (p. 21.) refers to an old case where it is said, “There are four sorts of merchants ; that is, -merchants adventurers, merchants dormants, merchants travelling, and merchants residents.” Hamond v. Jethro, 2 Brownl. 99. The english bankrupt law, passed in the same year with the statute of limitations, defines a trader to be one who uses the trade of merchandise by way of bargaining, exchange, re-exchange, bartering, chevisance or otherwise, by gross or retail, or making a living by buying and selling. In Com. Dig. title Merchant. A. a merchant is defined to one who traffics by way of buying arid selling any goods, within the realm or in foreign parts. Lord Holt, in The Mayor &c. v. Wilks, Salk. 445. says, a merchant includes all sorts of traders, as well and as properly as merchant adventurers. In the present case, the partnership extending to farming, to distilling, and to the purchase and sale of cattle, hogs and other stock, the parties come within the definition of merchants.
    
      
      He had been counsel for the appellant.
    
    
      
       Partnership—Suit for Account—Statute of Limita» tions.—The principal case is cited in Foster v. Rison, 17 Gratt. 333, 334, 335, and Jordan v. Miller, 75 Va. 449. See footnote to Marsteller v. Weaver, 1 Gratt. 391.
    
    
      
      Same—Same—Same—Construction. — The principal case is cited in Boggs v. Johnson, 26 W. Va. 827. to the point that the statute, regulating the time within which an action by one partner against his co-partner for a settlement of the partnership accounts may be brought, applies to suits in equity as well as actions at law. See foot-note to Marsteller v. Weaver, 1 Gratt. 391.
    
   ALLEN, J.

Supposing the complainant to be entitled to his proportion of the grain crop growing at the *time of the reference, that must have been gathered in the summer of 1833. There is nothing to shew that any debts have been collected or paid by the firm since that period. The partnership had terminated, and all its transactions with others would seem to have been closed, more than five years before the institution of this suit. As early at least as the summer of 1833, there might have, been a full settlement of the accounts, so as to ascertain the rights and liabilities of the different partners. The attempt which had been made, with the assistance of their mutual friends, to settle, had failed ; the parties disagreeing. This occurred more than five years before the bill was filed; and from that period they stood, in regard to the partnership, in a hostile attitude towards each other. Upon this state of facts, it becomes necessary to determine whether the statute of limitations is a bar to the relief sought.

The counsel for the appellee has contended, That the exception “of such accounts as concern the trade of merchandise between merchant and merchant, their factors and servants,” extends to all such accounts, although there may be no item within five years : That a partnership for the purposes disclosed in this record, constituted these persons merchants within the meaning of that clause : and That the statute cannot be pleaded in bar to an unsettled account between partners.

On the first point, there seems to have been much diversity of opinion amongst the english judges, and the question until recently was considered as an open one in that country. On the one hand, the courts held, that as between jjarties not merchants, where some of the items of a mutual account are within the period of limitation, the case is taken out of the statute : whilst on the other hand it has been determined, that as between merchant and merchant, where all accounts had ceased for six years, the statute was a bar. These decisions 'Mestroyed all distinction between accounts concerning the trade of merchandise between merchant and merchant, and other open mutual accounts. The various cases upon this subject are reviewed and commented upon by chancellor Kent in Coster v. Murray, 5 Johns. Ch. Rep. 522. He seems inclined in that case to adopt the construction given by the english courts in the earlier cases, which would, in effect, repeal the exception contained in the statute altogether. .Since these cases were reported, the question has been decided in the house of lords, and the construction of the exception settled in opposition to the earlier opinions; the house of lords holding that the account was not barred, though none of the items were within the six years. Robinson v. Alexander, 8 Bligh 352. The supreme court of the United States, in the case of Mandeville &c. v. Wilson, 5 Cranch 15. has adopted the same construction. Chief justice Marshall, delivering the opinion of the court in that case, says—“ The exception extends to all accounts current which concern the trade of merchandise between merchant and merchant. An account closed by the cessation of dealings between the parties is not an account stated, and it is not necessary that any of the items should come within five years.” The same construction has been given to the statute by the courts of some of our sister states. In our own courts the question has not been decided. It was discussed in the case of Watson &c. v. Lyle’s adm’r, 4 Leigh 236. but the case went off on other grounds. Judge Tucker however, in the opinion delivered, concurs with judge Marshall. After referring to the contradictory decisions in England, he quotes the opinion in Mandeville &c. v. Wilson, and adds, “ This is the reasonable doctrine; for otherwise there would be no perceivable difference between merchants’ accounts and others.” It seems to me to be the clear intention of the statute to except such accounts from its operation *altogether. Independent .of the statute, there is no bar to personal actions, except the presumption arising from the lapse of time. The law was passed to rem edy this evil; but, by express words, exempted certain accounts from its operation. Such accounts stand as though the statute had never been enacted ; and Ihe courts, in requiring some of the items to be within the period of five years, bring within the operation of the statute a subject which the legislature had intended to exclude.

Were these parties, from the facts disclosed in the record, merchants within the meaning of that clause of the statute ? I have not thought it necessary to consider the question whether a partnership for carrying on such business as these parties were engaged in, would constitute them merchants in the proper sense of the word. In the view I have taken, it is not necessary to decide whether persons engaged in such transactions can properly be styled merchants ; though I have a very strong conviction that such accounts do not fall within the description of accounts concerning the trade of merchandise. But waiving that question, is there any authority for the position that accounts between partners in merchandise are embraced in’ the exception, and that they are to be treated, in regard to their mutual accounts, as merchant and merchant ? No such authority has been produced ; nor have I been able to find any case in the english reports, where the questions has been much considered It arose in 1726, in the case of Bridges v. Mitchell, Bunbury’s Rep. 217. but was not adjudged. This case is referred to as a very important authority upon the point decided by it, by the lord chancellor in Foster v. Hodgson, 19 Ves. 180. In Bridges v. Mitchell, the bill set forth that the plaintiff and defendant, many years before, were partners as merchants; and prayed a discovery, account and satisfaction.

The defendant relied on the statute of limitations. *The plea was allowed on the long acquiescence of the party. And it is stated that “ the court seemed to think this was not a merchant’s account within the statute, these persons not dealing as merchants with one another, but as one merchant with others ; but gave no opinion on this head.” Notwithstanding the intimation thus given at so early a period, the subject seems not to have been again adverted to in any of the english cases. Our own reports are silent respecting it. But in the case of Patterson v. Brown, 6 Monroe 10. the precise question was decided by the court of appeals of Kentucky. There the complainant charged, that he and the defendant were partners in a grocery store : that they had long since dissolved, and had never settled their accounts. The defendant admitted the partnership and its dissolution, denied any balance, and relied on the statute. The court held, that accounts between the partners of this mercantile firm were not embraced by the terms “ accounts concerning the trade of merchandise &c.” and therefore that such demands were barred by the lapse of five years. The court say, that the first clause of the exception would seem to meet the case, and the mutual accounts of the parties with each other might be considered as accounts concerning the trade of merchandise: but that this clause alone cannot give the construction : that the whole exception must be taken together, otherwise all accounts between a merchant and his ordinary customers would fall within the exception, for they are accounts concerning the trade of merchandise : that the accounts must not only be concerning the trade of merchandise, but they must be between merchant and merchant: that both parties must be merchants dealing in their several businesses with each other ; and that partners cannot be regarded as occupying such a relation to each other. On this head, their reasoning is but an amplification of the suggestion contained in the case of Bridges v. Mitchell, that “these persons *do not deal as merchants with one another, but as one merchant with others.” And it seems to me that no other conclusion could have-been arrived at. Whilst the partnership subsists, the individuality of each partner, for the purposes of the partnership, is merged. Their mutual accounts grow out' of the dealings of the firm, as a unit, with third persons, and do not arise out of individual dealings with each other. When the business has closed, they stand, in respect to such accounts, in the same situation as others having unsettled accounts to adjust; and I do not perceive how such accounts can be considered as accounts between merchant and merchant.

If the parties are not to be treated as merchants, is there any thing in the mere relation of partners, which would exempt their unsettled accounts, after the business of the firm has entirely closed, from the operation of the statute ? No case has been cited, in which it has been held that the existence of such an unsettled account constitutes an exception. Most of the cases, indeed, have proceeded upon the presumption that no such exception exists. The case of Barber v. Barber, 18 Ves. 286. was a case of partnership. The bill prayed an account against the representative of a deceased partner. The dealings having ceased for more than six years, the court held the case to be within the statute. The plaintiff relied upon the exception : but if the mere fact of there being unsettled accounts between partners had been sufficient to take the case out of the statute, it was unnecessary to rely on the exception, and the court should have entertained the case. The same remark applies to the case of Patterson v. Brown, 6 Monroe 10. In Coster v. Murray, 5 Johns. C. R. 522. chancellor Kent entertained the bill, upon the ground of a trust between the parties. But his argument goes to establish that the parties did not stand in the relation of debtor and creditor, or of joint partners, but in that of agent or factor and principal, and so the ^statute did not apply : from which it may be inferred that in his opinion it did apply to joint partners. The words of the statute embrace the accounts of partners, as well as others ; and if they cannot be treated as merchant and merchant trading with each other, the exception cannot apply to them.

Nor can I perceive any thing in the policy of the law, which should lead us to create a new exception, not contained in the statute. Hooking to the period at which the exception was introduced, there can belittle doubt that it was intended to apply principally to cases of merchants resident in England, and their correspondents, servants and factors abroad. Owing to their distance, the difficulty of communication, and the necessity of an extended credit for the transaction of their business with each other, it was deemed improper to subject them to the operation of the statute. But none of the reasons which apply to them are applicable to the case of partners. They are ordinarily in the habit of communication with each other : the business having closed, there is no necessity for an extended credit: and the risk of doing injustice, from the death of witnesses, loss of vouchers, and failure of evidence, is as great in their case as in the case of ordinary accounts. Upon the close of the business, each partner is entitled to his share of the partnership effects; and for the . balance which may be due from one to the other, they stand in the situation of ordinary debtor and creditor. They should also be held to the same degree of diligence.

In the case under consideration, there was every motive to urge the partners to an immediate settlement. As early as the spring of 1833, when the partnership had terminated, and its concerns been closed (according to the pretensions of both parties) except as to one inconsiderable item, the grain which was then growing, *they made an effort to settle, but disagreed. The pretensions on the one hand and the other were controverted. But though apprized that his claim to any balance would be resisted, the complainant seems to have abandoned the subject for more than five years. Under these circumstances, the statute, it seems to me, was a complete bar to any investigation of these accounts, and the court should have dismissed the bill.

STANARD, J. The claim of the appellee, under its most favourable aspect so far as it is affected by the defence on the statute of limitations, is that of one partner against another, arising from a partnership in the cultivation of a farm, the purchase and sale of stock, and the conducting of a distillery ; the partnership having ceased, and the claim asserted by the bill having been resisted by the partner sued, more than five years before the suit commenced ; and there having been no item of debit or credit to either partner, nor any claim by or against the partnership outstanding, within five j-ears before suit. The first question is, does the statute of limitations present an effectual defence to such a claim ?

The argument on the part of the appellee is, that an account between mercantile partners is embraced by the exception in the statute, of accounts “relating to the trade of merchandise between merchant and merchant, their factors or servants that such a partnership as that which existed between these parties, is, within the intent and meaning of the statute, a mercantile partnership : and that while the accounts between such partners remain open and unsettled, the stattute of limitations is no defence to a suit for the settlement of them.

It is remarkable that the question, whether the accounts between partners who are confessedly partners as merchants, are embraced by the exception in the ^statute of limitations, seems never to have been adjudicated by our own courts, and has never been distinctly decided by the courts of Westminster hall. In the case of Bridges v. Mitchell, Bunb. 217. the reporter states, that “the court seemed to think that this was not a merchant’s account within the statute of limitations, these persons not dealing as merchants with one another, but as one merchant with others ; but gave no opinion on this head and I have found no case in the reports of the decisions of Westminster hall, in which an opinion on that question is more strongly intimated.

The absence of decisions of this question is to be ascribed to the operation of the decisions of two other questions, the combined effect of which rendered the decision of this supererogatory.

These were, 1st, That where there had been mutual dealings between parties, whether merchants or others, and whether the dealings related to the trade of merchandise or not, if one of the items of the current account was within the term of limitation of the statute, the claim for the balance that might be ascertained on the adjustment of the account embracing that and the other items, was not barred by the statute: and 2dly, That although the account were confessedly between merchant and merchant, relating to the trade of merchandise, yet if the dealings had ceased for the term of limitation, and there were no item within that term, the claim on such account was subject to the bar of the statute. Although there was some fluctuation in the decisions upon this second question, I think with chancellor Kent in Coster v. Murray, 5 Johns. C. R. 522. that up to the time when he decided that case, the preponderance of authority of the courts of Westminster was in favour of the decision. A different (and, I presume, final) decision has been since made by the house of lords in the case of Robinson v. Alexander, 8 Bligh 352. and the law as now settled in England, leaves the case *of accounts between merchant and merchant, relating to the trade of merchandise, within the exception of the statute, though the dealings may have ceased for more than the term of limitation, and there be no item within the term.

Were the decree of the court in this case to be governed by the decisions of the english courts prior to the case in 8 Bligh, they requiring that in respect to claims on accounts, even between merchant and merchant, relating to the trade of merchandise, some item should be within the term of limitation, to prevent the bar of the statute, it would sustain the defence in this case.

The objection (and I think a most cogent one) to those decisions in the combined effect, is, that that effect renders the exception in the statute practically superfluous and inoperative. My opinion is, that accounts between merchant and merchant, relating to the trade of merchandise, being expressly excepted from the effect of the statute, suits on them while they continue open and current are not liable to the bar of the statute, even though the dealing may have ceased for more than five years, and there be no item within that time. This opinion rests on the plain language of the statute, and is sustained by the case in Bligh, which finally settles that question in England, and the authority of the supreme court of Massachusetts, Bass v. Bass, 6 Pick. 362. S. C. 8 Pick. 187. and of the supreme court of the United States, Mandeville &c. v. Wilson, 5 Cranch 19.

The question remaining to be solved is, are accounts between merchant partners embraced by the exception ? The absence of decisions on this point both in England and in this state has already been noticed. The question has, however, been expressly decided in the negative by the supreme court of Massachusetts, Cotman v. Rogers, 10 Pick. 112. and in Kentucky, 3 Monroe *330. 6 Id. 10. The result of my examination of the question is a concurrence in those decisions. It is hardly necessary to remark, that according to this opinion, to subject a suit for the settlement of partnership accounts to the bar of the statute, it must not only appear that the partnership has ceased more than five years, but that there were no valid claims of debit or credit against or in favour of - the partnership, paid or received, or outstanding, within that time. For, as any such claim paid or received by either partner would form an item in the account between them, that might protect the claim on the account from the bar of the statute, on the principle applicable to mutual accounts, whatever may be the subject of such accounts, or whatever the vocation of the parties.

It is not necessary to decide the third proposition Which it was incumbent on the appellee to sustain : that is, whether, within the meaning of the exception, the partnership in questioh is a mercantile one, and its dealings to be regarded as dealings relating to the trade of merchandise. My impression is, that it is not: but, for the reasons assigned, I forbear to express a definitive opinion on the point.

The other judges concurring, decree reversed and bill dismissed with costs.