Title: Brand v. Elledge
Citation: 101 Ariz. 352, 419 P.2d 531
Docket Number: 7733
State: Arizona
Issuer: Arizona Supreme Court
Date: October 27, 1966

101 Ariz. 352 (1966) 419 P.2d 531 Violet Rector BRAND, Appellant, v. Kaye A. ELLEDGE, Appellee. No. 7733. Supreme Court of Arizona. In Banc. October 27, 1966. Rehearing Denied November 22, 1966. *353 Alan Philip Bayham, William R. Peterson, Phoenix, for appellant. John P. Frank, John J. Flynn, Lewis, Roca, Scoville, Beauchamp &amp; Linton, Phoenix, for appellee. McFARLAND, Justice. This is an appeal from a judgment of the Superior Court of Maricopa County finding in favor of the defendant, on remand directed by opinion of this court in Brand v. Elledge, 89 Ariz. 200, 360 P.2d 213. At that time we reversed a motion to dismiss granted by the trial court in favor of the defendant at the close of the plaintiff's *354 case. The action was brought by Violet Rector Brand, hereinafter designated plaintiff, against Kaye A. Elledge, hereinafter designated defendant, for an accounting and dissolution of a partnership. In the first trial the lower court "dismissed the action upon defendant's motion on the ground that the partnership agreement was illegal and void". In passing upon this question, we held, under the record before us at that time, that plaintiff and defendant had entered into a valid partnership agreement, and the defendant having plead the statute of limitations and laches, this court remanded the case and instructed the trial court "to set aside the order of dismissal and permit the parties to present evidence on this question." However, the defendant, in the first case, had also plead that a partnership had not been entered into, and the motion to dismiss having been granted at the close of plaintiff's case, the court, in the second trial, properly permitted defendant to introduce testimony upon this issue. At the close of defendant's case, the trial court, in support of its judgment in favor of defendant, made findings of fact and conclusions of law, parts of which plaintiff complains on this appeal as follows: In the earlier opinion we found that: Defendant, in presenting her case, did not deny signing the agreement above referred to, nor did she claim any circumstances of fraud or misrepresentation surrounding its creation. The only explanation offered by the defendant was the following testimony: The testimony of C.V. Newton, referred to by defendant above, was as follows: The trial court's findings of fact in the instant case recite that the "fictitious name agreement" was recorded with the County Recorder of Maricopa County by the plaintiff and defendant, for the purpose of declaring plaintiff's interest in the name "Happy Landings." The document itself provides as follows: Both plaintiff and defendant subscribed to the above mentioned document, dated August 13, 1941. During January of 1942 the defendant drew up in her own handwriting amounts owed to the plaintiff, which provided that it was "a legitimate and true statement of debt owed to Patricia O'Hara Rector by `Happy Landings' and K.A. Elledge," and further that "Happy Landings [was] in debt to Patricia O'Hara Rector ... $11,797.35", the amount of the settlement.[1] Defendant does not dispute that she drew up the paper, nor does she dispute either the figures on it or her signature. She claims the paper was drawn up by her because of blackmail threats made by the plaintiff based upon certain letters written to the plaintiff by the defendant. Defendant denies the plaintiff ever put up the money referred to in the instrument, either as capital for the creation of a partnership, or as a loan to defendant. Defendant's evidence of blackmail is at best an unconvincing argument. The document evidencing an intent to form a partnership, coupled with the statement of the amounts owed plaintiff, both signed by defendant, leave no room for speculation that there was in fact a partnership entered into between plaintiff and defendant. The instrument itself would not indicate that it was drawn up because the plaintiff blackmailed defendant. It sets out in detail the dates and amounts of money as advanced and corroborates the testimony of plaintiff in certain respects. Plaintiff testified that the $7,150 portion of the money advanced was part of $8,000 which she had brought to Phoenix. Other advances were made from time to time with the dates set forth. The instrument is in writing, in the handwriting of the defendant, and signed by defendant. It does not seem reasonable that defendant would have enumerated definite dates with amounts even to cents if she were not taking it from the records. The blackmail which defendant mentions refers to some letters which she states were returned to her, claiming the plaintiff threatened to give them to her parents. Yet she admits, herself, that she wrote similar letters after the alleged blackmail, which letters were introduced in evidence. Defendant seeks to make her claim of blackmail more plausible by testifying that she paid $5,000 at a later date for the letters which she received at that time. However, she showed no connection between this agreement and the drawing up of the first instrument, nor was the instrument returned to her at the time of the alleged payment. The only corroboration of the payment of this $5,000 was testimony by her own bartender who stated he saw defendant give plaintiff some money and plaintiff gave the defendant some papers. Plaintiff, in her testimony, denied that she received $5,000 from defendant. We do not consider this type of evidence sufficient to refute that contained in the written instrument signed by defendant. The burden is on the person who claims failure of consideration in a written instrument to establish it by a preponderance of evidence. A.R.S. § 44-121; Dunlap v. Fort Mohave Farms, Inc., 89 Ariz. 387, 363 P.2d 194; Sisson v. Janssen, 244 Iowa 123, 56 N.W.2d 30; Korabek v. Weaver Aircraft Corporation, 65 Cal. App. 2d 32, 149 P.2d 876. This the defendant failed to do. The evidence substantiates the previous interpretation by this court of these two written instruments. Where the trial court makes findings of fact, the scope of review of these findings on appeal is governed by Rule 52(a), A.R.C.P., 16 A.R.S.: Where a finding of fact is "clearly erroneous" it is our duty to set it aside. Merryweather v. Pendleton, 91 Ariz. 334, 372 P.2d 335; Brown v. City of Phoenix, 77 Ariz. 368, 272 P.2d 358. In the first opinion we construed the business agreement, signed by both plaintiff and defendant, and filed with the county recorder on August 13, 1941, to be a partnership agreement. This instrument stated that plaintiff and defendant were conducting a business known as the "Happy Landings." The finding of the lower court that this instrument was entered into "for the purpose of declaring plaintiff's interest in the name `Happy Landings'" changes and alters the express terms as written in the agreement, and the meaning as construed by this court in the first appeal. The document recorded by plaintiff and defendant is clear and unambiguous. The lower court's finding that the agreement was entered into to "protect" the name "Happy Landings" clearly is based solely upon the testimony of defendant. There is no other evidence that this was the intent of the parties. The law is clear that parol evidence may be used to explain an ambiguous contract, but in the absence of fraud or mistake, it may not be used to change, alter or vary the express terms in a written agreement. Komarek v. Cole, 94 Ariz. 94, 381 P.2d 773. There is no claim made of either patent or latent ambiguity in the instrument, and we find no other conclusion is possible than to reaffirm our position as stated in the earlier opinion that there was a partnership entered into between the plaintiff and the defendant, as evidenced by the recorded instrument. Defendant presented various witnesses familiar with the "Happy Landings" and plaintiff and defendant during 1941, whose testimony amounted to a showing that they had no knowledge that plaintiff and defendant were partners. The fact that one partner, with the knowledge and permission of his copartner, assumes sole control of the business and partnership assets in his individual name does not constitute him sole owner as between himself and his partner. 68 C.J.S. Partnership § 176. Having determined the existence of a partnership between plaintiff and defendant, the next matter to be considered is the time of dissolution. The partnership was one at will. Thus, having no fixed time for continuance, it could be terminated at any time. Costello v. Gleeson, 15 Ariz. 280, 138 P. 544. A partnership may be dissolved by a private settlement and account. Pejsa v. Bridges, 69 Ariz. 315, 213 P.2d 473. The instrument executed by defendant in 1942, recognizing the existence of a debt owed to the plaintiff by the defendant is indicative and capable of being construed as such a private settlement and account. The plain and unambiguous meaning of the words used indicate an acknowledgment by the defendant of a specific amount owed plaintiff, and the words used are not couched in the manner of an annual partnership financial statement. This instrument, construed with the uncontradicted testimony of both plaintiff and defendant that during the period following the execution of this instrument the plaintiff had little or nothing to do with defendant and the "Happy Landings", leads us to the necessary conclusion that the relationship must have terminated at this time. *359 Defendant, in her answer, set up the defenses of laches and the statute of limitations. Examination of the transcript and record presented by the defendant reveals the defense was directed particularly at attacking the existence of the partnership, and very little evidence was adduced concerning the defense of laches or statute of limitations. With reference to these defenses, in Younis v. Griego, 72 Ariz. 369, 236 P.2d 358, we stated: Considering first A.R.S. § 12-544, the statute of limitations quoted in part in Younis v. Griego, supra, provides: The issue presented in determining whether the statute has run is what in fact constitutes "a cessation of the dealings in which they were interested together." If such a cessation occurred upon dissolution, then plaintiff's suit is barred. In Hodge v. Kennedy, 198 Va. 416, 94 S.E.2d 274, the Supreme Court of Appeals of Virginia, in considering a statute of limitations having a clause identical to A.R.S. § 12-544, stated: Hodge v. Kennedy, supra, involved construction of provisions of the Uniform Partnership Act, A.R.S. § 29-201 et seq., adopted in Arizona in 1954, and, specifically, § 50-30, Code of Virginia 1950, presently found in A.R.S. § 29-230: It will be noted the instant partnership agreement and subsequent dissolution occurred prior to adoption of the U.P.A. in Arizona. The U.P.A. was an attempt to codify the existing common law of partnership. In re Safady Bros. (D.C., W.D.Wis.), *361 228 F. 538. The rule enunciated in A.R.S. § 29-230 has been adopted and applied in jurisdictions prior to the enactment of the U.P.A. Wilson v. Hoover, (Missouri U.P.A. enacted in 1949), 342 Mo. 1182, 119 S.W.2d 768; Shapira v. Budish (Massachusetts U.P.A. enacted in 1923), 275 Mass. 120, 175 N.E. 159. We therefore conclude the reasoning set forth in Hodge v. Kennedy, supra, is applicable in the instant case, although the rights and liabilities arose prior to enactment of the U.P.A. in this state. The evidence shows the dissolution of the partnership occurred on January 12, 1942 at the time the settlement of account was drawn. But, this dissolution did not terminate the partnership because dissolution does not necessarily result in immediate termination. Hodge v. Kennedy, supra. There was to be a type of continued existence until such time as distribution would be made of the firm assets in accordance with the agreement. The evidence presented by both parties was to the effect that in 1942 the partnership assets amounted to considerably less than the $11,797.35 indicated as owed to plaintiff by defendant and "Happy Landings" at that time. Nowhere does defendant testify she paid plaintiff this amount, nor does plaintiff present any evidence of any payment. Defendant presented the evidence of the alleged blackmail, and testified she paid plaintiff $5,000 as a result of the blackmail. As stated above, this story is not supported by the evidence. Plaintiff's uncontradicted testimony is to the effect that every time she sought information concerning the profits of the "Happy Landings" she was informed there were none, or that any profits made had been reinvested in the business. The intent of the parties was not to liquidate the assets of the partnership at the time of the dissolution, but that the defendant should pay the plaintiff out of profits. Certainly the nature of the relationship between the plaintiff and defendant, which we commented upon in our earlier opinion, gives rise to the necessary implication that plaintiff relied upon defendant for information concerning profit and loss, and this, coupled with the admitted lack of business acumen on the part of plaintiff, explains the failure to demand more stringent payment in settlement of the amount due her. The record is clear that the "Happy Landings" was still in existence in 1956 when plaintiff filed the instant suit. In light of these circumstances we hold there was no cessation of dealings prior to filing of the suit and plaintiff's claim is not barred by A.R.S. § 12-544. The final point for determination is whether plaintiff's claim for an accounting and dissolution is barred by laches. The circumstances of each case determine whether laches bars recovery in a suit to have an accounting of partnership affairs. Younis v. Griego, supra. In such an action the general rule is that as long as the partnership exists failure to demand a partnership accounting does not amount to laches. Englestein v. Mackie, 35 Ill. App.2d 276, 182 N.E.2d 351; Caveney v. Caveney, 234 Wis. 637, 291 N.W. 818; Wiley v. Wiley, 115 Md. 646, 81 A. 180. The mere lapse of time does not constitute laches. Hodge v. Kennedy, supra; Sibert v. Shaver, 111 Cal. App. 2d 833, 245 P.2d 514. The existence of a confidential relationship between partners is an important circumstance in determining if the delay constitutes such laches as to defeat any right to an accounting. Bankers' Trust Co. v. Riter, 60 Utah 1, 206 P. 276. To make the doctrine applicable it must appear the one interposing it as a defense has suffered prejudice by virtue of delay in instituting the action. Stewart v. Grant, 126 Me. 195, 137 A. 63. In the instant case the doctrine of laches sought to be interposed is not applicable for the reason the plaintiff has not been lax in seeking an accounting, but any laxness must be found in her failure to enforce collection of the settlement made in 1942. Therefore, we must examine the position of the parties with respect to the *362 amount found due plaintiff from defendant at that time. The defendant's answer set up the defense of laches to the claim of the plaintiff that there was in fact a relationship of partnership between the parties. Nowhere in the answer does the defendant claim laches prevents or hinders the enforcement of the settlement of accounts entered into in 1942. The specific amount owed plaintiff by virtue of that settlement is without question. By virtue of the testimony introduced during the trial, it is clear the parties did not contemplate immediate payment of these amounts, and as noted above, the particular relationship existing between plaintiff and defendant explains the failure of plaintiff to attempt enforcement of the settlement until 1956. Certainly the condition of defendant has not changed to her detriment with respect to the payment of the $11,797.35. The evidence introduced during the trial indicates a very large increase in her net worth, rather than any loss during this period. She is now in a better position to pay plaintiff than at the time of the settlement, or shortly thereafter. Defendant's testimony indicates the present value of the "Happy Landings" tavern is in excess of one hundred thousand dollars. The failure of plaintiff to seek the sums specified has not resulted in circumstances prejudicial to defendant. The defense of laches is not applicable and does not bar plaintiff's right to recover. We therefore hold the lower court was in error in entering judgment in favor of the defendant, and we hereby reverse the judgment of the lower court and order judgment to be entered in favor of the plaintiff in the amount of $11,797.35, plus 6% interest from January 12, 1942. BERNSTEIN, V.C.J., and UDALL, J., concur. STRUCKMEYER, C.J., dissents. NOTE: Justice LORNA E. LOCKWOOD did not participate in the determination of this appeal. [1] Plaintiff's Exhibit "C", introduced in evidence, and purporting to be an accounting in defendant's own handwriting, shows a balance as follows: "Jan. 12 Bal. owing Patricia O'Hara Rector $11.797.35". And on the back thereof: "From Sept. 1941 to Jan. 1942 These papers are a legitimate and true statement of debt owed to Patricia O'Hara Rector by `Happy Landings &amp; K.A. Elledge. (Signed) K.A. Elledge"