Bass v. Cates , 74 Ga. App. 363 ( 1946 )

A cause of action was alleged in both counts of the petition, and the court erred in sustaining the demurrers and dismissing the action.

DECIDED SEPTEMBER 19, 1946. REHEARING DENIED OCTOBER 3, 1946. This was an action in two counts, brought by Gene Bass against R. R. Cates. Count one as amended alleged in substance: The defendant is indebted to the plaintiff in the sum of $15,050. Prior to December 8, 1941, the parties were partners in the ownership and operation of Albany Amusement Company. On that date said partnership was dissolved by mutual consent, the plaintiff retiring from the partnership and selling his interest therein to the defendant. A copy of the dissolution agreement containing the provision, that the "party of the first part (R. R. Cates) is to pay the party of the second part (Gene Bass) as part of the purchase-price for his interest aforesaid the actual book value of the interest purchased as shown by the partnership books to be audited as of date of December 31, 1941," was attached as an exhibit and made a part of the petition. It was further alleged: An audit was had in accordance with the agreement, and a copy thereof was also attached as a part of the petition. Certain notes receivable held by the partnership, aggregating the principal sum of $30,100, and more fully described in the petition, were not included in said audit. Said unmatured notes, which were secured by a retention-title contract, had an actual book value on the books of the partnership of $30,100; and the one-half interest of the plaintiff, Gene Bass, in said notes as shown by the partnership books was $15,050, or one-half of the actual book value of the notes. The plaintiff demanded the payment of said amount of the defendant, and the same was refused. The written records of the partnership consisted of two books and said notes and retention-title contract, all of which were in writing and kept among the records of the partnership in its safe and office. This was the only book entry of the notes and assets of the partnership. The defendant was to pay to the plaintiff under their trade the actual book value of the interest purchased by him in the assets of the partnership (which was a one-half interest); and the auditors in auditing the books and listing the assets left off of the audit any value for said notes, and they were not included in any other item in said audit.

The petition alleged further: In accordance with the dissolution agreement of December 8, 1941, the plaintiff did on January 1, 1942, execute to the defendant a bill of sale to his interest in the partnership property covered by the dissolution agreement, expressly including the notes referred to above; and said dissolution agreement, which was then recorded in the office of the Clerk of the Superior Court of Dougherty County, Georgia, was expressly referred to and specifically made a part of the bill of sale, a copy of the bill of sale being attached and made a part of the petition. It was also alleged: That the plaintiff has complied with the dissolution agreement, but has been paid no consideration whatsoever by anyone for his one-half interest in said notes, a partnership asset, as the defendant was obligated to pay the plaintiff under the agreement; that there was no reason why said notes, a valuable asset, were not included in the audit, and the plaintiff did not discover that the same were left out until the first part of 1945, when the Government demanded of him approximately $6500 as income tax on said notes, and the plaintiff then examined the audit and discovered that said notes were not included in said partnership assets as they should have been and were not valued in any sum whatsoever. Thereupon a demand of the defendant for one-half of the amount collected by him on said notes was made by the plaintiff and refused by the defendant. It was also alleged that the consideration of $24,690.60, mentioned in the bill of sale, did not include any amount paid by the defendant to the plaintiff for the notes referred to. This count was based on the written contract of sale executed by the parties, which included the original dissolution agreement incorporated therein.

Count two as amended made substantially the same allegations as count one, but was based on the theory of an action for money had and received. It was alleged therein: That the notes aggregating $30,100 were assets of the partnership, and were owned equally by the plaintiff and the defendant; that after the dissolution the defendant had collected each and all of the notes, and had received thereby money which in equity and good conscience belonged to the plaintiff; that no consideration had ever been paid to the plaintiff by the defendant or anyone else for his one-half interest in said notes; and that the defendant, having collected the money on the notes, was in possession of $15,050, representing the one-half interest of the plaintiff in the notes as partnership assets, for which the defendant had paid nothing and for which the plaintiff had received nothing from the defendant.

Copies of the original partnership dissolution agreement, and of the audit of the books of the partnership, and of the bill of sale made by the plaintiff to the defendant, were attached to both counts of the petition and made a part thereof. The audit showed total current assets of $19,438.81, which did not include any amount for "notes receivable," although that item was listed under the general heading of current assets; and the fixed assets as listed in the audit did not include any notes receivable shown as such.

General and special demurrers were filed to both counts of the petition on various grounds. It was contended by the demurrers that no cause of action was alleged, because it appeared that the indebtedness sued for arose out of a partnership transaction; that the partnership had not been dissolved so as to authorize an action at law; that no violations of contractual rights were alleged; and that there was no allegation of compliance by the plaintiff with the conditions of the sales agreement. Certain paragraphs of both counts were demurred to as conclusions of the pleader and as being vague, indefinite, uncertain, and insufficient. Count two was demurred to on the ground that the plaintiff did not offer to do equity, and that there were no allegations of fraud, accident, or mistake so as to authorize an equitable action.

After the plaintiff had amended both counts by alleging the making of a bill of sale by the plaintiff to the defendant, in accordance with the dissolution agreement, and by amplifying the allegations with respect to the books and records of the partnership, and enlarging upon other allegations in the original petition, the defendant filed additional demurrers, both general and special, to each count of the petition as amended. These demurrers challenged the sufficiency of the petition, on the ground that it sought to vary, explain, or contradict the written agreement of the parties without seeking the reformation of the contract; and because it appeared that the contract had been fully performed by the defendant, and that all the notes were included in the sale for the consideration paid by the defendant; and because the plaintiff was charged with knowledge of the way in which the notes of the partnership were carried on the books of the company, and in the absence of ignorance, imposition, concealment, or deception, he could not recover. Certain allegations of the petition were demurred to as being vague, indefinite, uncertain, and evasive, and as naked conclusions which did not sufficiently state the facts; and other allegations were demurred to as irrelevant, immaterial, impertinent, and prejudicial. The demurrers alleged that the plaintiff had acquiesced in the contract as it was construed by the defendant for a four-year period of time, and that he was for that reason bound by such construction; and invoked the rule that, since the plaintiff had executed the instrument (the bill of sale), the construction most strongly against him was to be preferred; and alleged that the mistake charged by the plaintiff in the petition was not shown to have been mutual. As to count two, the demurrers were renewed, on the ground that the plaintiff had not offered to do equity, and could not recover in the absence of allegations of fraud, misrepresentation, duress, undue influence, or such mistake as was relievable in equity. These were substantially the material grounds of the demurrers interposed by the defendant. The demurrers were sustained to both counts of the petition as amended and the action was dismissed. The exception here is to that ruling of the trial court. It is a general rule that an action at law can be maintained by one partner against another partner, on a demand growing out of a partnership transaction, where there has been a settlement of the partnership and a balance struck, or where the affairs of the partnership have been so settled that the jury can, without an equitable accounting, ascertain the amount due as the balance owing by one partner to the other under a settlement made by them. Paulk v. Creech, 8 Ga. App. 738 (5) (70 S.E. 145);Little v. Moore, 55 Ga. App. 570 (190 S.E. 811). It was alleged by the plaintiff that the partnership, out of which the alleged indebtedness arose, had been dissolved by mutual consent on a named date before the filing of the suit. These allegations with others in the petition were sufficient to bring the case within the rule stated, and the grounds of the demurrers alleging that the suit was not maintainable at law because the indebtedness sued for grew out of a partnership transaction were without merit.

The record does not show why the court sustained the demurrers, or whether they were sustained on only one or more grounds. After carefully considering the petition and the demurrers, it seems to us that a cause of action was alleged in each of the counts, and that it was error to sustain the demurrers for any reason and dismiss the case.

Count one was based on the contract of sale made on January 1, 1942, by the plaintiff to the defendant. Although it stated a definite consideration of $5000 cash and $24,690.60 secured by notes and a bill of sale, it made reference to the original agreement between the parties and recited that "the terms therein contained are hereby specifically made a part of this instrument." The terms expressed in the first agreement, all of which became a part of the final sales contract, included the provision that Cates would pay Bass "the actual book value of the interest purchased as shown by the partnership books." It was alleged that certain notes held by the partnership, with an actual book value of $30,100, in which the plaintiff had a one-half interest, were not included in the audit on which settlement was made, either as notes or in any other item therein, and that the plaintiff had been paid no consideration whatever for his interest in said notes, and that the amount named as the consideration of the bill of sale did not include any sum paid by the defendant to the plaintiff for the notes. We think it clear that count one alleged with sufficient fullness and definiteness an indebtedness by the defendant to the plaintiff predicated upon the contract of sale.

In Manry v. Hendricks, 66 Ga. App. 442 (18 S.E.2d 97); 192 Ga. 319 (15 S.E.2d 434), an action was brought for an indebtedness growing out of the dissolution of a partnership. It was based on the contract entered into by the parties in consummating the dissolution. The suit was for an amount that the retiring partner owed the partnership at the time of the dissolution, over and above the amount which he claimed to owe, it being alleged that the true indebtedness of such partner to the partnership had been concealed by him and misrepresented to the other partner who purchased his interest. In construing the petition in that case, this court said that, while it contained allegations appropriate to an action for damages for fraud and deceit practiced by the defendant upon the plaintiff, the action was in fact a suit by one person against another, who had formerly been the plaintiff's partner, upon an indebtedness, and that the indebtedness was one for which an action would lie by reason of the contract entered into between the parties in consummating the dissolution of the partnership. We think that the principle thus stated in the Manry case applies to the case at bar. While no fraud or deception or misrepresentation was alleged against the defendant in the instant case, the petition clearly alleged an error or mistake in the audit, resulting in the plaintiff receiving less than he was entitled to receive, represented by the sum for which the suit was filed. If, as a matter of fact, as alleged in the petition, the book value of the assets of the partnership was $30,100 more than the audit showed, the plaintiff, who was the owner of a one-half interest therein, would be entitled to recover one-half of that amount as a part of the purchase-price for his interest, as contemplated and provided under the dissolution agreement. It matters not how the mistake occurred or who made the error, if, in truth and in fact, there was an error as alleged by the plaintiff.

In Paulk v. Creech, supra, on page 743, this court 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 [italics ours], 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, is cited. Assumpsit may be either express or implied. "Express assumpsit is an undertaking made orally, by writing not under seal, or by matter of record, to perform an act or to pay a sum of money to another.Implied assumpsit is an undertaking presumed in law to have been made by a party, from his conduct, although he has not made any express promise." Bouvier's Law Dictionary (1914), p. 269.

An action on an implied assumpsit for money had and received may be maintained where the defendant has received money which the plaintiff, in justice and good dealing, is entitled to recover, and which the defendant is not entitled in good conscience to retain. Dobbs v. Perlman, 59 Ga. App. 770 (2 S.E.2d, 109); Sheehan v. Augusta, 71 Ga. App. 233 (30 S.E.2d 502). In an action for money had and received, it is not necessary to allege a demand and refusal to pay. Jasper SchoolDistrict v. Gormley, 57 Ga. App. 537, 544 (196 S.E. 232);Morgan v. Hutcheson, 61 Ga. App. 763, 772 (7 S.E.2d 691). In Dobbs v. Perlman, supra, it was held that, "In an action for money had and received, because the defendant is in possession of money which was paid the defendant because of a negligent mistake of the plaintiff, a cause of action is made out and a right to recover demanded, unless it appears that the negligence of the plaintiff amounted to a violation of a positive legal duty owing the defendant." That case was a suit by stockbrokers for the difference in the selling price and the actual market value of stock of the defendant sold by them for the defendant. It appeared that day they made a mistake in selling the defendant's stock as stock in a new corporation, when as a matter of fact it was stock in the old corporation, and had a value of only about one-sixth the value of the stock in the new corporation. It was held that the plaintiffs were entitled to recover, although they were negligent and themselves made the mistake which enriched the defendant. If it be conceded that the plaintiff in the case at bar was negligent to a degree, as alleged in the demurrers, this would not bar a recovery, under the ruling in the Dobbs case, unless such negligence amounted to the violation of a positive legal less such negligence amounted to the violation of a positive legal duty. We do not think that any negligence properly chargeable to the plaintiff went that far, and the error or mistake in the audit in this case was not made by the plaintiff. Applying the rule of law announced in the Dobbs case to the case at bar, we think that count two of the petition stated a cause of action. "The strictest good faith is required among partners." Code, § 75-201. Although a suit for money had and received is a legal action, it is founded upon the equitable principle that no one ought unjustly to enrich himself at the expense of another, and thus it is a substitute for a suit in equity. Jasper SchoolDistrict v. Gormley, 184 Ga. 756, 758 (193 S.E. 248). Where one partner bought the interest of his copartner in the partnership assets, which seemed larger than they really were, by reason of a mistake in the books, and the mistake was unknown to both partners, and neither was in laches respecting its discovery, and where the purchase of such interest was at a price based on an erroneous set of books, the Supreme Court held "that the consequences of the mistake ought in equity to be corrected, where it could be done without injustice to the selling partner."Branch v. Cooper, 82 Ga. 512 (9 S.E. 1130). That decision "based the correction of such mistake upon natural justice and equity," as was said in Whittle v. Nottingham, 164 Ga. 155,159 (138 S.E. 62). If, as alleged in count two of the petition, the plaintiff did not receive any consideration for the sale and transfer of his one-half interest in the notes of the partnership, and the defendant collected the money on said notes, the action for money had and received, as alleged in said count, was maintainable. None of the authorities cited by the defendant in error requires a different holding in this case.

The plaintiff stated a cause of action in both counts of the petition, and the court erred in sustaining the demurrers and in dismissing the action.

Pursuant to the act of the General Assembly, approved March 8, 1945, requiring that the full court consider any case in which one of the judges of a division may dissent, this case was considered and decided by the court as a whole.

Judgment reversed. Sutton, P. J., MacIntyre and Gardner, JJ.,concur. Broyles, C. J., and Felton, J., dissent.