Cottle v. Leitch

| Cal. | Jul 1, 1868

By the Court, Sawyer, C. J. :

This is an action for an account and dissolution of a partnership. The plaintiff alleges a partnership in a ferry; that under an arrangement between the parties the ferry was under the exclusive management and control of defendant during a period of three years, ending March 19th, 1865; that during this period the defendant had exclusive charge of the receipts and expenditures, collected the tolls, and kept an account thereof, claiming it to be a correct account of the affairs of the firm; that at the end of three years the ferry, in pursuance of said arrangement, was surrendered to the plaintiff to manage in the same manner for an equal period of time; that the defendant at the expiration of the three years’ management by him, pretended to settle with plaintiff on the basis of the accounts as kept by himself, and on said 19th of March, 1865, made an entry in said books of account in the firm name, stating that the accounts were settled to date; that plaintiff is unable to read and write, and he did not discover that said accounts were false until after he took charge of said ferry; that since he has had charge of said ferry he has had said books critically examined by competent parties, and that he has satisfied himself, and he so avers the facts to be, that said defendant during the time he had charge of said ferry did not keep fair or correct accounts of the receipts and expenditures; but, on the contrary, that the amount of receipts entered and accounted for are much less than they really were, and that defendant has fraudulently retained to his own use large sums which belonged to plaintiff. An account and dissolution is asked. The defendant answered, denying the allegations relating to the false accounts, fraud, etc. At the trial, after the plaintiff closed his testimony, the defendant moved for a nonsuit, on the following grounds:

First—There is no proof of a demand for a reaccounting prior to the commencement of this action.

Second—The proof offered by plaintiff is insufficient to entitle him either to an opening of the account, or to surcharge and falsify the account settled between the parties prior to the commencement of the action.

Third—There is no evidence of an accounting by the plaintiff to the defendant of the copartnership affairs from Mai’ch, 1865, and thence hitherto and during the time that plaintiff has had the entire control of the copartnership property.

The motion being argued and submitted was sustained by the Court on the first ground, and it overruled the same on the second and third grounds.

Conceding the truth of the fraudulent acts charged against the defendant, the complaint states a sufficient cause to entitle the plaintiff to a dissolution, even if the partnership was, by agreement, to continue for a definite fixed term. But the facts averred do not necessarily show a partnership for a fixed term. On the motion for nonsuit the defendant did not claim that the fraudulent acts charged were not proved, unless this claim is found expressed in the second ground of the motion “ that the evidence offered by plaintiff is insufficient to entitle him, either to an opening of the account, or to surcharge and falsify,” etc., and on this ground the Court found against him, for the motion is expressly stated to have been overruled on that ground, and granted solely upon the ground that no demand for a reaccounting was made before an action brought. We must take it, then, on the record, as it now stands, that the charges of the complaint were established. This being so, there can be no doubt that the plaintiff was entitled to a judgment dissolving the partnership, for a party will not be compelled to continue the partnership relation with one who has deliberately perpetrated frauds upon his associates, by keeping and rendering false accounts in the partnership business, and defrauding them of their just share in the profits of the undertaking. By so doing, he violates his agreement, as well as his duty, and shows himself unworthy the confidence reposed in him when the relation was entered into. As incident to the dissolution there must necessarily be an accounting.

Whether there may, or may not, be circumstances which would require a demand upon a partner for an account to constitute a complete cause of action, it is not necessary now to decide. A'demand for a reaccounting was not necessary to enable the plaintiff to maintain his action on the facts as now presented. The Court must have considered this demand necessary—a sine qui non to the maintenance of the action—without regard to what the evidence might be as to the other facts charged. In this we think there was error. Some authorities have been cited by respondent, but without more particularly referring to them, it is sufficient to say now, that we do not perceive their applicability to the facts as presented by the record. We see no good reason for requiring a demand for an account before suit brought, when actual fraud is the gravamen of the action. And whenever the plaintiff is entitled to a judgment for a dissolution, an account is a necessary incident to the dissolution, and follows as a matter of course.

Judgment reversed and new trial ordered.

Mr. Justice Rhodes expressed no opinion.