Manry v. Hendricks , 192 Ga. 319 ( 1941 )

This court having no jurisdiction, under article 6, section 2, paragraph 5, of the constitution of this State (Code, § 2-3005), the case is transferred to the Court of Appeals.

No. 13658. MAY 15, 1941. REHEARING DENIED JUNE 14, 1941. Mrs. Hendricks sued C. A. Manry in the superior court, her petition as amended containing in substance the following allegations: She and Manry became partners in a mercantile business, the management thereof being left to him, she looking entirely to him for a full and fair accounting so far as her interest was concerned. Having full faith and confidence in him, she never required of him a particularized statement of the affairs of said business, but trusted to his honesty and fairness to render unto her her proportionate share of any earnings or profits. In May, 1931, she did at her own expense have the affairs and accounts of said business audited, the audit covering a period of years. When said audit was begun, the accountants conducting the same found that the individual ledger account of Manry was missing from October 1, 1925, to March 28, 1931, and that the balance shown to be due by Manry to the partnership on the first day of April, 1931, was $3242.18. Upon being requested to produce said individual ledger account, said accountants were informed that the balance above stated had been transferred to a new sheet, and the old ledger sheets had been destroyed. Manry did then and there assure said accountants that the balance of $3242.18 was correct and all that he personally owed said copartnership. Petitioner, being dissatisfied with the conditions found to prevail in said business, began negotiations which led to her securing from Manry on July 24, 1931, an offer to buy the interest of petitioner in said business upon certain terms, and said offer was also stipulated to be "a give or take proposition as per the books." In pursuance of said offer petitioner on July 30, 1931, purchased the interest of Manry upon the basis of his indebtedness to said business being $3230.20, and an error of $1000 in addition in the account kept by him of his personal account, making a total of $4230.20, "and a dissolution of said partnership was effected upon that basis, a copy of said dissolution agreement being hereto attached and marked Exhibit A." Petitioner then personally took charge of the business. On July 28, 1931, the personal ledger account of Manry from October 1, 1925, to March 28, 1931, was found, it being the same which Manry had represented as having been destroyed; and the averment is made that the same had been concealed by Manry to prevent a disclosure of the truth of his personal account.

Other allegations were, in substance, that the books were tampered with, and false entries made thereon, all of which were concealed from petitioner, which showed Manry's indebtedness to the partnership to be $8500 in excess of what he claimed; that Manry had procured a loan of $861.35 on a policy issued by a life-insurance company on his life, in favor of the copartnership; that the same was the property of the partnership, but Manry converted the entire amount of the loan to his own use and benefit; that certain customers' accounts on the books, although represented by Manry to be correct, were in fact not true and correct; that "petitioner shows that said unlawful abstractions and deductions of the amount due by the said C. A. Manry to the Farmers Hardware Furniture Company, as set out in the above and foregoing paragraphs, amount to the sum of $8500, and in a fair and equitable dissolution of said partnership should have been admitted as an indebtedness of the said C. A. Manry to said firm account, and deductible from any interest that he might have had at the time of said dissolution, but said facts of said abstractions from said business were concealed from your petitioner by the deliberate concealment of said ledger sheets which were found by petitioner on the ____ day of July, 1931, and for the first time the actual knowledge of the imposition practiced by the said Manry upon your petitioner in the dissolution and closing out of said partnership business became known to her. Your petitioner shows that at no time between the first day of October, 1925, and the 28th day of March, 1931, was she aware of the fact that the said Manry had deliberately taken out of his personal account the amounts as above set forth without having paid or secured said business for said sums, amounting to the sum total of $8500. . . Your petitioner shows that to arrive at the truth of the account of the said Manry with Farmers Hardware Furniture Company from the first day of October, 1925, to the 28th day of March, 1931, it will be necessary to investigate a vast number of entries and accounts appearing thereon; and that because of the intricacies of bookkeeping and accounting as would affect the assets of said Farmers Hardware Furniture Company at the time of the dissolution thereof as between petitioner and the said C. A. Manry, it will be necessary that an accounting be had, to determine in what sum and amount the said C. A. Manry had defrauded your petitioner."

The plaintiff prayed, that an auditor be appointed, with authority to bring Manry to an accounting with her; that she recover of Manry a judgment of $5000; and for general relief. By amendment "the sum of $5000" was stricken from the last prayer, and "the sum of $8,500, with the proper allowance for interest thereon," was inserted in lieu thereof.

Demurrers on general and special grounds, and an answer denying material allegations of the petition, were filed. The case was referred to an auditor, whose report was adverse to Manry. He filed exceptions of fact and of law, all of which were disapproved by the judge, and final judgment was entered. Manry excepted. The petition bears a filing date of August 20, 1931. It is alleged that on July 30, 1931, the petitioner purchased her partner's interest in the partnership business on stated terms, "and a dissolution of said partnership was effected upon that basis, a copy of said dissolution agreement being hereto attached and marked Exhibit A." The writing attached recites the fact of the parties having theretofore entered into partnership, each equally interested therein; "and the said parties, desiring to dissolve said partnership, hereby agree to dissolve the same, upon the following terms, to wit," the terms being then and there recited, being in part that "The said C. A. Manry for and in consideration of said sums and notes hereby conveys and sells and assigns to the said Mrs. Ruth Hendricks all his right, title, and interest in said business, stock of goods, fixtures, notes and accounts and choses in action, and all assets of any nature whatsoever, to the said Mrs. Ruth Hendricks, and the said Mrs. Ruth Hendricks agrees to pay the notes, accounts, and debts owing by said business as a further consideration for the interest bought of said Manry, and to relieve the said Manry from any liability thereon." Therefore it appears that no copartnership was existing at the time the suit was filed. It had been dissolved. Nor does the petition ask that a court of equity through a receiver take charge of the assets formerly belonging to the copartnership. No injunction is prayed for. There is no expressed desire to cancel or rescind the dissolution agreement, or to reinstate the partnership relationship. The petition contains allegations appropriate to an action of damages for fraud and deceit, and none other; and that is a common-law action. "If one partner having charge of the books and business of the firm, by making material, false and fraudulent representations to the effect that certain items of charge against others constituted debts owing to the firm, when in fact some of said items had been collected by him, and others were false charges, induced the other partner to enter into a contract finally settling and dissolving the partnership, whereby the latter took over for value as his individual property all of said items of charge, the latter may, upon discovery of the fraud, sue the former at law for any damages occasioned by the deceit." 2 Rowley's Law of Partnership, 761, § 760. It is true that an accounting is prayed for, but this prayer can be granted by a court of law, as well as a court of equity. Indeed it has been held that the mere necessity for an accounting to ascertain the amount due on contract is insufficient to give equity jurisdiction to order an accounting. Burress v. Montgomery,148 Ga. 548 (97 S.E. 538). The prayer "for such other and further relief as to the court may seem meet and proper" can not unaided make this an equity case. Atlanta Finance Co. v.Fitzgerald, 189 Ga. 121 (5 S.E.2d 242).

Nor is this made an equity case by reason of the provisions of the Code, § 37-301, as follows: "Equity jurisdiction over matters of account shall extend to mutual accounts growing out of privity of contract, or where accounts are complicated and intricate, or where a discovery or writ of ne exeat is prayed and granted, or where the account is of a trust fund, or accounts between partners and tenants in common, or where a multiplicity of suits would render a trial difficult, expensive, and unsatisfactory at law." This section is not of statutory origin, nor was it taken from any decision of this court. It first appeared in the Code of 1861 (§ 3063), and was intended only to state a general principle. It must be construed and applied in connection with, and not to the exclusion of, other principles, one of which is § 37-120: "Equity will not take cognizance of a plain legal right where an adequate and complete remedy is provided by law; but a mere privilege to a party to sue at law, or the existence of a common law remedy not as complete or effectual as the equitable relief, shall not deprive equity of jurisdiction." The reason why equity will entertain a case for an accounting between partners is that ordinarily at law one partner can not sue another on a matter growing out of the partnership relation. In 2 Rowley's Law of Partnership, § 716, it is stated that "Where the partnership has been fully dissolved by written contract and the rights of each party definitely established, in case of a breach of such contract equity will not order an accounting, as the remedy is at law." In line with this statement is the language of Chief Justice Simmons, in Miller v. Freeman, 111 Ga. 654 (36 S.E. 961, 51 L.R.A. 504), where it was held that under the facts of that case it was one of partnership, and not maintainable at law. Said he: "The case fell within the recognized rule that one partner can not, before a final winding up of the partnership, maintain against his copartner an action at law based upon partnership transactions. This rule has but few exceptions, most of the so-called exceptions being apparent only and not real. After the partnership is practically at an end, whether it be a single venture or otherwise, the rule can not apply, for the parties are no longer partners."

Benton v. Hunter, 119 Ga. 381 (46 S.E. 414), was a case that involved a petition brought by one man against another who had formerly been his partner in business, to which was interposed a demurrer based on the contention that the suit, having been brought in a court that exercises only common-law jurisdiction, could not be entertained. In answering this contention it was said: "Counsel for the plaintiff in error sought to bring this case within the rule that an action at law will not lie in favor of a partner against his copartner during the continuance of the partnership; and in support of their position the case of Miller v. Freeman,111 Ga. 654, is cited. It is true that "it is a general rule that an action at law will not lie in favor of one or more partners or their representatives against one or more copartners or their representatives upon a demand growing out of a partnership transaction until there has been a settlement of accounts and a balance struck.' 15 Enc. Pl. Pr. 1005. The petition in the present case, however, proceeds upon the idea that all partnership relations between the plaintiff and the defendant have come to an end, that a balance has been struck, and that an indebtedness is due by the defendant to the plaintiff, which can not be affected by any transactions between the partnership and its creditors or debtors. Strictly speaking, it is not an action by a member of a firm against his copartner, but an action by one man against another who had formerly been his partner, upon an indebtedness a part of which grew out of the formerly-existing partnership between them. ``The reason most frequently assigned for the rule under consideration rests upon the principle that one can not be both a plaintiff and a defendant in the same suit either singly or with others;' but ``the objection to the maintenance of this class of actions between partners lies deeper than any mere question of procedure or forms of action. The real reason for the rule is found in the inherent nature of the partnership relation, and consists simply in the fact that prior to an accounting and settlement of the partnership affairs no cause of action exists between partners founded solely upon partnership dealings.' 15 Enc. Pl. Pr. 1011, 1015." See alsoPaulk v. Creech, 8 Ga. App. 738, 743 (70 S.E. 145), where it was said: "Of course, in any case, if the partnership has been closed and the accounting settled, and one partner has been required to pay an item that was overlooked, he may recover contribution, where there has been a settlement and a balance struck which is agreed to. The partner in whose favor the balance lies may sue in assumpsit. 7 Am. Eng. Enc. Law, 361." Nothing to the contrary was ruled in Smith v. Hancock, 163 Ga. 222 (136 S.E. 52). An examination of the record in that case shows that it affirmatively appeared that no final settlement had been made between the partners. Similarly, in Loyd v. Camp,172 Ga. 510 (158 S.E. 40), as shown by the record, it was averred that a partnership existed, and there was no allegation that there had been a dissolution, or a division, or other disposition of the assets.

Nor can equity entertain jurisdiction by reason of that portion of the Code, § 37-301, which states in effect that its jurisdiction exists "where accounts are complicated and intricate." There is no allegation of that kind here, and nothing to indicate any reason why, if an auditor be needed, one appointed at law under the Code, § 10-102 et seq., could not give the complainant adequate relief. Since there is no need of equity to grant to the complainant all the relief she needs, it will not be presumed that she intended to invoke the needless powers of a court of equity, even if her petition be susceptible of two constructions. If the petition in the instant case had been addressed to the city court of Morgan, a court having no equitable jurisdiction, the complainant could have obtained in that court all the relief she here seeks. Compare Benton v.Hunter, supra; Welborne v. State, 114 Ga. 793, 796 (40 S.E. 857).

It is the duty of the Supreme Court ex moro motu to transfer this case to the Court of Appeals.

So ordered. All the Justices concur.