Court Opinion

ID: 3975429
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:33:20.323114+00
Date Added: 2024-06-11T07:44:05.787852
License: Public Domain

If the judgment challenged by this appeal is based exclusively, or to any material extent, upon a cause of action not pleaded by either party, a fundamental error is shown. In my opinion, a proper interpretation of the record shows that the cause of action, to which the special verdict of the *Page 926 
jury had reference, was one for an accounting. This view accords, as I understand it, with the majority opinion. We differ in the view that no cause of action in favor of plaintiff against the defendants for an accounting was alleged. That difference of opinion results, of course, in a corresponding divergence of views regarding the existence of fundamental error.
It is plain that the trial judge, who is now an esteemed associate on this court, regarded the suit in part, at least, as one for an accounting. The plaintiff himself seems to have done so, and that would very naturally account for the error, if any, on the part of the trial judge in adopting that view. In the prayer in plaintiff's petition he asked in part that "judgment be rendered that an accounting be taken," etc. If it were a mere matter of interpreting an ambiguous pleading, plaintiff's own construction should be given much, if not controlling, weight. But as I see it, the question is not one to be governed by that principle for very compelling reasons. The allegations of plaintiff'spetition were in effect a denial of the existence of a cause of action foran accounting. There being no allegations in plaintiff's petition, alternative to other allegations, if a cause of action for an accounting could not exist without contradicting the allegations, then it seems to me that something more than a mere matter of construction is involved. Either no cause of action of any kind was alleged, or, if so, then it was not a cause of action for an accounting. The winding up of the business of the partnership, including the payment of partnership debts, to accomplish which the recovery of possession of the 320 acres of land as the principal partnership asset was sought as at least one of the purposes of the suit, was an indispensable prerequisite to the possible existence of any duty on the part of Donnell as the surviving partner to account to the defendants as the heirs and legal representatives of the deceased partner. Plaintiff's general duty as survivor of the partnership, dissolved by the death of one of its members, to finally render an accounting to the defendants, was a duty subject to his right to have the exclusive possession, control, and management of all the partnership assets to enable him to liquidate the partnership business and make the accounting. Martin v. Dial (Tex.Com.App.) 57 S.W.2d 75, 81; Dial v. Martin (Tex. Civ. App.) 37 S.W.2d 166; Altgelt v. Alamo Nat. Bank,98 Tex. 352, 83 S.W. 6; Rogers v. Flournoy, 21 Tex. Civ. App. 556,54 S.W. 386; Shivel  Stewart v. Greer Bros., 58 Tex. Civ. App. 115,123 S.W. 207; Caognard v. Tarnke (Tex. Civ. App.) 202 S.W. 221; Amarillo Nat. Bank v. Harrell (Tex. Civ. App.) 159 S.W. 858; Sherk v. First Nat. Bank (Tex.Com.App.) 206 S.W. 507; Schwab Clothing Co. v. Claunch (Tex. Civ. App.) 29 S.W. 922; 47 C.J. 1047, § 616. In a California case it was said: "An action by surviving partners against a deceased partner's administrator, who has taken possession of partnership property and refuses to deliver it to the survivors, is in claim and delivery, and notin equity for an accounting." (Italics ours.) Fong Sing v. O'Dell,50 Cal. App. 55, 194 P. 745; 47 C.J. 1100, § 735, note 95. This accords with the proposition that "An accounting will not lie against a partner who has no account to render." 47 C.J. 1156, § 837, note 30. The general principle or rule is further stated thus: "Surviving partners are not ordinarily entitled to an accounting from the representatives of a deceased partner," an exception being that they "may be entitled to an accounting from representatives of a deceased partner as to matters under control of the latter." 47 C. J. 1159, § 841; Mares v. Mares,60 Mont. 36, 199 P. 267. Nothing, the proper subject matter of an accounting, was under the control of the defendants. In an accounting suit the plaintiff's pleadings must show "that a duty to account restsupon the defendant and further that the right to an accounting is vestedin the plaintiff." (Italics ours.) 1 C.J. p. 633 § 97. No such duty or right was attempted to be shown by any of the pleadings in this case. As said before, the possible existence of such right or duty was inconsistent with the allegations of plaintiff's pleadings. The undisputed evidence showed that no such duty in fact existed. There is, therefore, as I see it, no escape from the conclusion that there was no pleading alleging a cause of action for an accounting. Since the verdict manifests that such was the cause of action upon which the judgment rests, the very rendition of such a judgment upon such a verdict, without support in the pleadings, is, in my opinion, a good example of fundamental error.
Plaintiff's right to the exclusive possession of the partnership assets authorized him to sue and recover such assets held adversely by others "including the representatives of a deceased partner." In addition to authorities already cited, see 47 C.J. 1058, § 634, note 97; Clay v. Freeman, *Page 927 118 U.S. 97, 6 S. Ct. 964, 30 L. Ed. 104. He may maintain such a suit for possession of the assets or for the conversion thereof. 32 Tex.Jur. 533, § 205, note 2. I can see no reason why he may not maintain such a suit to remove a cloud from title, especially if it be shown, as plaintiff's petition alleged, that the cloud interferes with the settlement of the partnership business, or payment of its debts. Asrespects such right, the defendants in this case are to be regarded asoccupying no different position from that of any other person. "The estate of the decedent acquires no right in the firm's assets and receivables, but only a right to an accounting and to the amount of decedent's interest, if any, in the firm, after liquidation and settlement." 32 Tex.Jur. p. 529, § 201, note 12. As further said by the same authority, "The surviving partner's right of possession and administration of the firm assets is exclusive of that of the decedent's personal representative, in the absence of any agreement with decedent for a survival of right or a continuance of the firm or of any provision of will inconsistent therewith." Id. 529, § 201, note 15.
There would perhaps be no difference of opinion that the plaintiff was entitled to judgment, under the undisputed facts, for the possession of the land, except as that question may be affected by the existence or absence of a necessity for administration and/or the existence or absence of unpaid debts due by the former partnership at the time of the dissolution. This presents the most difficult question in the case and one upon which I must admit I have been unable to find direct authority in the law books.
For the sake of emphasis, let me repeat what has already been said:"As respects such right, the defendants in this case are to be regardedas occupying no different position from that of any other person." This proposition, I take it, is unquestionably established by the authorities before quoted to the effect that the heirs of the deceased partner have no right in the partnership assets as such, but their right is limited to that of enforcing an accounting after the settlement of the partnership affairs. Can it be the law that any person may take possession, however wrongful, of partnership assets before or after the dissolution of a partnership by death of a member, and the surviving partner in a suit for such possession must litigate with a stranger the question of the existence of debts subject to be denied the right of possession if for any reason he fails to establish the existence of debts? Suppose one heir of a deceased partner immediately upon dissolution of the partnership by the death of his ancestor takes possession of all the assets of the partnership, there being other heirs to whom the surviving partner will, after winding up the affairs, be under the duty to account. Let us further suppose that all the evidence of any indebtedness due the partnership happens to be such that under the circumstances of the particular case is rendered incompetent under the "dead man's statute." Are we required to so interpret the law that the surviving partner must fail in his suit for possession simply because of his inability to prove the existence of partnership debts? If so, what must his answer be when subsequently called upon to account to the other heirs in part for the very assets of which he has been denied possession?
Sound reasoning seems to me to justify the conclusion that in a suit by a surviving partner for the possession of partnership assets involving no question of the title of the firm, but simply one of the right of possession by the survivor, the question of the necessity for administration and/or the existence of debts should be controlled by the determination of such questions by the surviving partner, subject, of course, to the right in the representative of the deceased partner's estate to a faithful and true accounting after such administration. An analogy is believed to exist in the right of the Comptroller of the Currency or of a state banking commissioner to levy an assessment upon stockholders to pay the debts of an insolvent bank under federal or state statutes. In such cases it was held that the right and power of such officers to make and enforce such assessments was not dependent upon a showing of the existence of debts, nor could such right be defeated under a showing that there were no debts. Collier v. Smith (Tex. Civ. App.)169 S.W. 1108; Kennedy v. Gibson, 75 U.S.(8 Wall.) 498, 505, 19 L. Ed. 476, 478. The two kinds of administration are similar in purpose and so far as I can see the reason of the rule in the one case would equally apply in the other. It seems to me wholly unreasonable and inconsistent with the duty of faithful and prompt administration by a surviving partner that he be required to litigate with every adverse claimant of firm *Page 928 
assets, the question of the necessity for administration by an action liable to be defeated, with resultant loss of the firm's assets to persons having no right thereto, simply on account of his failure or inability to show such necessity for administration or the existence of debts. It seems to me far more reasonable and in consonance with the purpose of the law to give to the judgment and discretion of the surviving partner controlling effect in enforcement of his clear right to the possession and control of the firm assets, necessary in any event to enable him finally to make the accounting which the law undoubtedly imposes upon him the duty to make. Particularly is this view reinforced, I think, by the consideration that since his judgment and exercise of discretion, whether right or wrong, cannot preclude or legally prejudice the right of any creditor of the partnership or final distributee of the partnership property.
If this suit was one against any other than the present defendants, or if there was no question that the former partnership owed unpaid debts, other than a debt to the surviving partner himself, I think it very probable his right to such possession would never have been questioned. But the right of the surviving partner to the exclusive possession of the firm assets for the purpose of paying debts due to himself by the partnership is just as clear and certain as his right to such possession for the purpose of paying debts to others. In Moore v. Steele, 67 Tex. 435,3 S.W. 438, it was held that a surviving partner having the right and charged with the duty of holding possession of and selling partnership assets to pay partnership debts has the right to reimburse himself for advances to the firm. A fine statement of the law as applicable to this and other questions in this case is as follows: "As against the heirs, devisees and creditors of a deceased partner the legal title to firm assets vests in the surviving partners, who are given the exclusive right to the possession and control of the partnership assets, for the purpose of paying the partnership debts and disposing of the effects of the concern for the benefit of themselves and the estate of the deceased. This ownership continues until the partnership affairs are settled, and a surviving partner in possession of the partnership property has a right to hold it until the debts of the firm are paid, including anyindebtedness to himself." (Italics ours.) 20 R.C.L. 995, § 232; Clay v. Freeman, supra. If the surviving partner has such right, its very nature is such that it is not necessary that he have recourse to the courts to enforce it.
The record in this case strongly suggests, if it does not conclusively show, that the partners were good friends and trusted each other implicitly. The very fact that they kept no firm records to show the state of the accounts of the firm with its members evidences such trust and confidence in each other. It may well be true, as the plaintiff contended, that the firm owed him for advances the sum of $3,659. With plaintiff's mouth closed by operation of the "dead man's statute" (Vernon's Ann.Civ.St. art. 3716) as a witness to testify to the essential facts, it is not at all strange that the jury, upon consideration of the meager testimony admitted, found by their verdict that the firm owed plaintiff nothing. That finding which I have endeavored to show was not based upon any cause of action pleaded, or which had any possible existence, denies the plaintiff the right to pay himself the amount, if any, which the partnership owed him. That would be all right if that matter was determined in a proper action, but as I see it the time had not come when that question was ripe for decision by a court. On the contrary, plaintiff had the right, without the intervention of any court, to determine it for himself, subject to the subsequent right of the defendants to assert against him a cause of action for an accounting. If it be suggested that in such case the defendants would be similarly handicapped by the dead man's statute, it would at least be true that the plaintiff would be protected in his undoubted right to pay himself any debts due him by the partnership and it certainly should not be presumed as a matter of law that the trusted partner would be guilty of bad faith or fraud to the injury of that partner's surviving wife and children.
Plaintiff's suit being undoubtedly one in part to recover possession of partnership assets for the purpose of administration, the effect of the attempt to combine therewith a cause of action for an accounting, which by the very allegations of the petition when tested by the law could not exist, presents a situation somewhat analogous to that involved in Commercial Cas. Co. v. Hilton, 126 Tex. 497, 87 S.W.2d 1081,89 S.W.2d 1116. In that case an attempt was made to set aside a compromise of a claim for compensation insurance on account of fraud and to recover compensation. It was *Page 929 
held that the court had jurisdiction to set aside the compromise, but no jurisdiction to award compensation. The cause of action for compensation in that case corresponds, I think, to the cause of action for an accounting, in this case. Although here it is not a strictly jurisdictional matter, yet it is as certainly true that the court had no authority to adjudicate a cause of action not alleged as to adjudicate a cause of action of which it has no jurisdiction. In the only sense of importance here, the court would have no jurisdiction in either case. Plaintiff's petition, I think, should be regarded as asserting at most only a cause of action to recover possession of the partnership assets for the purpose of administration. It may be that the statement of that cause of action was so intermingled with the matters upon which an accounting was prayed as to justify the view that no cause of action of any kind was sufficiently alleged. At any rate, it seems to me that the judgment should be reversed because it is based upon a cause of action not alleged and which, according to the allegations of plaintiff's petition, could have had no existence, and the cause should be remanded for a new trial.