Huggins v. Huggins

43 S.E. 759, 117 Ga. 151, 1903 Ga. LEXIS 181

• Court: Supreme Court of Georgia
• Decided: February 10, 1903
• Status: Published

Opinion

Lamar, J.

(after stating the foregoing facts.) 1, 2. The contentions of the plaintiff in error make it necessary to compare two ■sections of the Civil Code: § 2629, which provides that “A joint interest in partnership property, or a joint interest in the profits and losses of the business, constitutes a partnership as to third persons,” and § 2626, which provides that a partnership “ may arise from a joint ownership, use, and enjoyment of the profits of undivided property.” Whether this last section means a “ joint ownership of undivided property” with a joint enjoyment of the profits thereof, or only a joint ownership, use, and enjoyment of the profits ■of such undivided property (Martin v. Tidwell, 36 Ga. 344; Camp v. Montgomery, 75 Ga. 796; South Carolina & Ga. R. Co. v. Augusta Southern R. Co., 107 Ga. 181), it must in either case refer to the status during the continuance of the business and prior to the dissolution. For it may be that by virtue of the provisions of the articles of partnership one partner is to receive no part of the capital on dissolution, and yet, being one of the firm, he would be .a joint owner during the continuance of the business. So that what they are to receive when the concern is wound up does not necessarily afford any test as to their relation. But this provision of the code as to joint ownership is not intended to change the general rule of law (Powell v. Moore, 79 Ga. 528), nor as an exhaustive statement .as to how partnerships arise inter se. The real test is the intention of the parties. If there has been no express agreement, or if proof of an express agreement is inaccessible, the law will infer a partnership from certain facts connected with a joint undertaking. But there is no need for inference when the parties have themselves entered into an express contract on the subject; and hence the importance of the first clause of §2626, which provides that “a partnership may be created either by written or parol contract.” When it is thus created, there need not necessarily be anything said about joint ownership of property, or profits, or joint liability for losses. There is, by virtue of the express agreement, a partnership having the incidents set forth in the articles, with others fixed by law as a consequence'of the relation. One need not have all of the usual rights of a partner; he can be a partner in spite of his agreement that he is to have no share in the profits. He can be a partner although he shares the profits but is by the other partner guaranteed against loss. Hendrick v. Gunn, 35 Ga. 234. One may put in all the capital and stipulate that it shall be returned intact on the dissolution; the other may contribute only skill, experience, and labor, and yet, during the partnership, may be one of the joint owners, entitled to the right of winding up the concern, even though he is to receive none of the capital on the final accounting. And it can' be easily imagined that on the day a non-trading partnership is created and articles are signed between doctors, attorneys, brokers, or real estate agents, there might be no capital, no assets, no debts, no profits, no joint ownership in anything, and yet the contract has created a partnership inter se, which could in the line of the business create debts binding on each member as well as on the firm. While we do not mean that merely calling an association a partnership can make it such when none of the essential elements-of a partnership are present, yet, where there is a joint undertaking, a union of labor or a union of capital and labor, or where some of the essential elements of a partnership are present, and not one party, as in Thornton v. McDonald, 108 Ga. 4, but both distinctly agree among themselves to become partners, there is no reason why the law should not take them at their word, even though that-agreement falls short of the facts from which the law would otherwise have inferred a partnership. See Hazzard v. Hazzard, 1 Story, 371; Couch v. Woodruff, 63 Ala. 466 ; Runnels v. Moffat, 73 Mich. 189 (7); Neihoff v. Dudley, 40 Ill. 407 ; Beecher v. Bush, 45 Mich. 188.

If this proposition be true, we think that there is nothing confusing or inconsistent between the two sections of the code. (1) If one only receives part of the profits as a salary or compensation for services, he is not a partner. Civil Code, § 2629. (2) If he actually retires from the firm and fails to give notice thereof as required by section 2634, he is confessedly not a partner, but is estopped from denying that he is liable as such to certain creditors. (3) If by reason of the terms of the contract he is not a partner interse, but has a joint interest in the property which he has embarked in the business, and which may be increased or decreased as a result thereof, he is liable to third persons. (4) If under the contract he is not a partner inter se, but is jointly interested in profits and losses, he is treated as a partner so far as third persons are concerned, by virtue of his express agreement to pay the losses. He assumed that relation to outsiders, and is liable to them whether he be called, a partner or not. (5) A joint interest in profits and losses is generally indicative of a partnership inter se, but not necessarily so, and therefore the law will not from this fact alone infer a partnership between the parties. (6) A joint ownership, use, and enjoyment of the profits of undivided property is a fact from which the law will infer a partnership inter se. Civil Code, § 2626. (7) Where there is a joint undertaking, a partnership may be created by a contract in which the rights and obligations of the partners inter se, and as to the partnership property, profits, and losses, are different from those fixed or implied by law. It being, then, possible to create a partnership having elements short of those from which the law would infer a partnership, and as it appears from, the letters of J. H. Huggins Sr. that he considered his son a partner and treated him as such, and the son likewise claiming to have been a partner, there is no reason why the court should refuse to recognize him as such, even if it was not stipulated that he should have “a joint ownership, use, and enjoyment of the profits of undivided property.” • Both parties having treated the son as a partner during - the lifetime of the father, the courts must treat the son as a surviving partner when the firm has been dissolved by death.

3. But there was evidence from which the court might have found that H. T. Huggins had contributed to the assets of the firm. The answer of the defendant that .he was entitled to interest on the profits left in the business may mean that these sums were left; or it may be construed, in the light of the letters from his father, that the' son was entitled to interest because J. H. Huggins, Sr. .had overdrawn, and therefore the other partner was entitled to interest on an amount equal to such overdraft, according to the plan indicated by the correspondence. There was enough in the evidence to show that if H. T. Huggins left profits in the business and neither party overdrew, there would be no interest due to either. “All the interest, if any, would belong to the firm. ” In other words such profits so contributed would be capital employed by the firm, and each partner by leaving an equal amount of such profits in the business would not be entitled to interest thereon as a debt, but the earnings resulting from the use of such capital would belong to the firm, and be divided between them on any subsequent account. This will appear from the statement of facts and the letters of J. EL Huggins Sr., in which he objected to all of the profits being withdrawn, and desired his son to leave in the business all the latter’s share of earnings except what was necessary for actual living expenses. If either partner overdrew his account, he was to pay interest on such overdraft, and such interest was to be the property of the partnership and not of either of them. H. T. Huggins claimed that he had contributed some six thousand dollars out of his profits. If the facts show it was a loan, he is to that extent a creditor; but if it was a contribution to capital, according to the terms proposed by the letters of J. H. Huggins Sr., the son should be treated to that extent as a joint owner of capital of this firm, and would measure up to the terms fixed in the last clause of Civil Code, § 2626.

4, 5. There having been evidence as to intent, and also of contribution, from which the trial judge could have found that H. T. Huggins was a partner, and the judge having so construed the testimony, it was then proper to determine what were his power and liability as survivor. Primarily the surviving partner is liable for the debts, and for that reason the law gives him the right to administer the partnership assets. Civil Code, § 2647, 2648. It charges him with the duty of paying the firm debts, of winding up its affairs, and of coming to an accounting with the administrator of the deceased partner within a reasonable time after the dissolution. After such reasonable time for settlement he has no right to continue the business in the name of the old firm, or in his own name; and if he buys new goods or incurs new debts, or makes sales for cash and on credit, he does so at his own risk. He is liable for the debts incurred, and for the losses arising from bad debts or from a depreciation of the property. The administrator would be entitled to an injunction against such illegal acts, and also to the appointment of a receiver to hold the assets until a final accounting, provided the surviving partner is insolvent or there are any other peculiar circumstances from which there may be danger of loss or irreparable injury to the estate, or a likelihood that the amount due the administrator on a proper accounting will not be forthcoming. In this case there is no allegation of insolvency. It appears that the surviving partner has offered to settle; that the administrator, insisting that he is a mere clerk in possession of assets, refuses to deal with him on the basis of a surviving partner, and demands possession of all the books of account, documents, merchandise, and assets. The surviving partner insists that to the extent of six thousand dollars he has ‘an interest in these assets either as partner, or creditor; that he is one of the heirs, and has purchased the interest of other heirs, whereby he has become the owner of five sevenths of the estate of J. H. Huggins Sr. It also appears that since the death of J. H. Huggins Sr., the surviving partner has made a' profit out of the business of about five thousand dollars. While the ownership of the former interest of the other heirs, solvency, and making profits were no answer to the administrator’s contention that the business should have been wound up within a reasonable time, it does show that there has been no waste, and that there is no such danger of loss or irreparable injury as would require the summary remedy of injunction and receiver. Civil Code, §§ 4901, 4902, 4904.

The administrator further insists, that as the law fixes one year as a reasonable time within which the estate of a decedent should be wound up, the same period is prima facie sufficient for a surviving partner to collect the assets, pay the debts, and settle with the representative of the deceased partner; and in the absence of facts showing that more time was required, we think the analogy is fair, and one year ought to be enough to enable a survivor to come to an accounting with the administrator. The refusal of the administrator to consent to a division in kind is no excuse for the surviving partner’s failure to wind up the partnership affairs within the time required by law. If he desired to secure the right of a division in kind, he should have paid the debts, and, on the refusal of the administrator to appoint an appraiser, he could have applied to the ordinary to name assessors, under the provisions of the Civil Code, § 2647. If the administrator had sought to enjoin such action, or otherwise prevented the surviving partner from pursuing a remedy or enforcing a right granted to him by law, this might have afforded sufficient excuse for the delay.

6. The plaintiff in error insists that the unreasonable delay of two years was of itself sufficient cause for the appointment of a receiver, regardless of any question of solvency or irreparable injury. There are cases which hold that where a partner, without sufficient excuse, continues the business beyond the reasonable time allowed by law for winding up the partnership affairs, a receiver may be appointed. Miller v. Jones, 39 Ill. 54; George on Partnership, 358,359 ; High on Receivers, § 532. In a contest between partners, where both are entitled to the possession of the assets, a receiver will be more readily appointed than in ordinary cases. Here the surviving partner is alone entitled to the possession ; and no matter how much to blame he may be, the other party has no right to the possession as against a survivor, and in fact only insists upon the appointment of a receiver because of the threatened danger to the estate and the unreasonable delay by the survivor. There are few, if any, cases, under the equity practice of this State, in which receivers are appointed as a matter of right; they are appointed to preserve rights; and no matter how strong the apparent equity of the complainant may be, if there is no necessity for a receivership, the courts will not change the status until final decree. A preliminary hearing on an application for receiver and injunction is not intended to be a means of trying title. Civil Code, § 4917. Ordinarily it should require a verdict and final judgment to oust one of his land or other property. A receivership is not intended to be better than an action of ejectment or trover, and to take property from a defendant claiming title and right of possession. Where such defendant is himself solvent and there is no reason to doubt that he will be able to answer the final decree in the case, and there are no other special circumstances requiring the interposition of the extraordinary remedies, his solvency makes the court treat him as a quasi receiver, the property being regarded as in safe hands. If later the solvency of this quasi receiver should become doubtful, or if waste or danger of probable" loss should appear, the chancellor would interfere and-grant appropriate relief.

7. Any improper demand or refusal by the administrator was no excuse-for a surviving partner continuing the business beyond the reasonable time allowed by law; and, while'we do not think a receiver should have been appointed, the accounting prayed for in the petition should be speeded, and the auditor should be required to state the account as of the date when the surviving partner should have settled with the administrator. The latter, on such accounting, will be entitled to the amount due the estate on that date, with interest; or at his option the administrator may elect to take profits instead of interest. The facts that the survivor is solvent, that the estate can not be made liable for debts or losses sustained, and that the administrator may either collect principal and interest, or principal and profits, are reasons why the estate of the ■deceased partner can not suffer; and the chancellor did not err in refusing to appoint a receiver.

Judgment affirmed.

By Jive Justices.