Wayne Smith Construction Co. v. Wolman, Duberstein & Thompson

65 Ohio St. 3d 383
CourtOhio Supreme Court
DecidedDecember 14, 1992
DocketNo. 91-1479
StatusPublished
Cited by14 cases

This text of 65 Ohio St. 3d 383 (Wayne Smith Construction Co. v. Wolman, Duberstein & Thompson) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wayne Smith Construction Co. v. Wolman, Duberstein & Thompson, 65 Ohio St. 3d 383 (Ohio 1992).

Opinion

Holmes, J.

I

Appellants contend that Smith Construction is barred by the principle of res judicata from executing on their personal assets in order to satisfy the outstanding debt of the partnership. According to their reading of the South Carolina Court of Appeals decision, the individual partners of Wolman, Duberstein & Thompson were absolved of any liability, joint or several and, therefore, their personal property is not subject to execution. Consequently, appellants maintain that the Full Faith and Credit Clause of the United States Constitution requires that the South Carolina judgment be given preclusive effect in the courts of Ohio. Clause 1, Section 1, Article IV of the United States Constitution.

As indicated by the language of the decision quoted supra, the South Carolina Court of Appeals spoke in terms of the liability of the partners “as individuals.” In the present context, this language is somewhat ambiguous; specifically, did the South Carolina court determine that since the partners had not contracted in their individual capacities, Smith Construction could not obtain satisfaction of the entire debt from any one partner {i.e., no several liability)? Or did that court hold that the partners’ personal assets were not available to satisfy any portion of the outstanding debt (i.e., no joint liability)? In their briefs on the merits and in oral argument before this court, appellants maintain that the latter is the proper interpretation of the South Carolina [386]*386Court of Appeals decision. We believe that appellants’ position mischaracterizes that court’s decision.

Under South Carolina law, although a partnership is an entity separate and distinct from the persons who compose it, this does not mean that the partnership may sue or be sued in its own name.1 Marvil Properties v. Fripp Island Dev. Corp. (1979), 273 S.C. 619, 258 S.E.2d 106. Before an action against a partnership may properly be commenced, the plaintiff must name as defendants the individual partners as well as the partnership. Accordingly, the South Carolina lawsuit was postured as an action against “Wolman, Duberstein and Thompson, an Ohio general partnership consisting of Herbert P. Wolman, James S. Duberstein and Kenneth E. Thompson.”

South Carolina common law also requires that a partnership judgment creditor first exhaust partnership assets before proceeding against the individual property of the partners. Blair v. Black (1889), 31 S.C. 346, 9 S.E. 1033; Middleton v. Taber (1896), 46 S.C. 337, 24 S.E. 282. Only after satisfying this condition precedent may the judgment creditor then proceed against the property of the individual partners who, at the time of the South Carolina judgment rendered herein, would have been jointly liable for their proportionate share of the partnership debt. “The settled rule is that a partnership debt is a joint debt, and not joint and several, and an action thereon must be joint and all the parties must be joined as parties in an action upon such obligation.” Palmetto Prod. Credit Assn. v. Willson (1971), 257 S.C. 13, 16, 183 S.E.2d 565, 566.2 Accordingly, because the liability was joint, and not joint and several, no one partner could have been made liable for the entire partnership debt arising under the contract (unless, of course, that partner undertook to contract in his individual capacity in addition to signing on behalf of the partnership).

Appellants’ argument that the South Carolina Court of Appeals decision should be construed in Ohio as precluding execution on the partnership debt against the property of the individual partners is clearly inconsistent with the [387]*387well-established precedent from that jurisdiction. We will not interpret that court’s decision as an attempt to “overrule” law handed down by South Carolina’s high court for over a century. Nor will we presume an intent on its part to hold contrary to legislative enactments. The more logical conclusion is that the South Carolina Court of Appeals abided by principles of stare decisis and held that actions could not be maintained and judgments rendered against the individual partners upon the entire debt, thereby vacating the lower court’s decision as to “several” liability only. The partners’ proportionate share of responsibility for the contractual debt of their partnership remains, leaving to appellee the power of execution.

Accordingly, the only judgment entitled to full faith and credit is that finding the partnership liable for the debt. Moreover, to apply the doctrine of res judicata as appellants encourage would create a violation of the Full Faith and Credit Clause as set forth in Clause 1, Section 1, Article IV of the United States Constitution. Accordingly, we affirm the Tenth District Court of Appeals decision that principles of res judicata do not bar appellees from executing in Ohio against the personal assets of the partners of Wolman, Duberstein & Thompson, an Ohio general partnership.

II

We now proceed to a discussion concerning the procedural steps involved in executing upon the judgment obtained against the partnership. Specifically, we must determine the nature of the liability of a partner for partnership debts, and then determine whether a judgment creditor must first exhaust all partnership assets before resorting to the partners’ personal assets in satisfaction of the judgment.

The applicable general law is relatively clear. Ohio’s R.C. 1775.14, like Section 15 of the Uniform Partnership Act (“UPA”),3 distinguishes the nature of a partner’s liability for contractual obligations of the partnership from the nature of his or her liability for tortious claims against the firm. While the partner is rendered “jointly and severally” responsible to third persons for the wrongful acts of another partner acting in the ordinary course of business (R.C. 1775.12) and for a fellow partner’s breach of trust (R.C. 1775.13), he or [388]*388she is only “jointly” liable for the ordinary business debts of the partnership, R.C. 1775.14.

At common law, partnership contracts were the joint obligations of all of the partners. Simon v. Rudner (1932), 43 Ohio App. 38, 41, 182 N.E. 650, 651. “Partnership contracts are obligations of all of the partners.” Brown & Bigelow v. Roy (App.1955), 71 Ohio Law Abs. 438, 440, 132 N.E.2d 755, 757. Unlike contractual liability, the liability of partners for torts committed in the course of firm business is joint and several. R.C. 1775.14(A).

These early rules have, in the main, been adopted within the UPA, and within the applicable Ohio law, R.C. Chapter 1775, adopting the UPA. Accordingly, R.C. 1775.14 reads as follows:

“Subject to section 1339.65 of the Revised Code, all partners are liable as follows:

“(A) Jointly and severally for everything chargeable to the partnership under sections 1775.12 and 1775.13 of the Revised Code. This joint and several liability is not subject to division (D) of section 2315.19 of the Revised Code with respect to a negligence claim that otherwise is subject to that section.

“(B)

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Bluebook (online)
65 Ohio St. 3d 383, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wayne-smith-construction-co-v-wolman-duberstein-thompson-ohio-1992.