Court Opinion

ID: 5865390
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:31:25.14328+00
Date Added: 2024-06-11T08:44:33.851564
License: Public Domain

Asch and Silverman, JJ.,
dissent in a memorandum by Silverman, J., as follows: We would reverse the judgment appealed from and direct an interlocutory judgment for a partnership accounting and remand the matter for such an accounting. We see nothing in this case to take it out of the general rule that partners cannot sue each other at law, and that the proper remedy is an action in equity, usually for an accounting. (Arnold v Arnold, 90 NY 580, 583; Dalury v Rezinas, 183 App Div 456, 460, affd 229 NY 513; Bassett v American Meter Co., 20 AD 2d 956, 957; Pace v Perk, 81 AD2d 444, 453.) The defect is not merely one of form. The rights and liabilities of the partners, inter sese, are not finally known until there has been a judicial accounting. Here defendant-appellant Maroulis has been sued at law for the amount of the capital contributions which were called for by the partnership, and judgment has been rendered for such contributions. But "such a capital contribution is not the absolute property of the other partners in which the contributing partner has no interest; it is only one element in the complex of rights and liabilities whose net result can result in a judgment in some as yet undetermined amount one way or the other. It is claimed that defendant-appellant Maroulis and her predecessor *655have wrongfully dissolved the partnership. But the remedy for that is “damages for breach of the agreement.” (Partnership Law, § 69, subd 2, par [a], cl [II].) There is no necessary relationship between the amounts that the other partners happened to have called for as capital contributions and such damages. The fact that defendant-appellant offered to transfer her interest in the partnership to the remaining partners for a nominal consideration indicates that she probably thought her interest in the partnership was worthless; that is not at all the same as an admission that she and her predecessor partner owed $18,054, the principal amount of the judgment. Nor are the audit statements furnished from time to time to the partners an adequate substitute for a judicial accounting. Audit statements and other such financial statements prepared by professional accountants are prepared to show the financial condition of the enterprise in accordance with “generally accepted accounting principles.” (Thus in accordance with such principles, the financial statement shows real estate at historical cost less depreciation rather than realizable value.) A judicial accounting on the other hand is a judicial action which results in a final judgment whereby a court adjudicates the rights and liabilities of parties to a venture among themselves and in relation to the venture or its property, and directs the parties to make payments in accordance with that adjudication. A judicial accounting is the appropriate procedure whereby partners may sue each other. The suggestion by plaintiff that the defendant-appellant is barred by the Statute of Limitations from requesting an accounting is fallacious. To begin with, the defendant-appellant is not suing the plaintiff; a judicial accounting is the form in which plaintiff partnership must sue defendant-appellant, their former partner. In any event, the Statute of Limitations would have been tolled under CPLR 203 (subd [c]). We note also that as early 1976, on the denial of a motion for summary judgment, the issue of action at law or accounting had been raised (.the motion Judge recognizing “that partners cannot sue each other at law for anything relating to the partnership unless there has been an accounting,” but believing that the auditor’s report satisfied that requirement).