Bennett v. Anson Bank & Trust Co., 541

• Decision Date: 23 July 1965
• Docket Number: No. 541,541
• Citation: 265 N.C. 148,143 S.E.2d 312
• Court: North Carolina Supreme Court
• Parties: Eva R. BENNETT, surviving widow, and Clifton C. Bennett, surviving son of C. C. Bennett, deceased, and Eva R. Bennett, Administratrix of C. C. Bennett, deceased, Plaintiffs, v. The ANSON BANK & TRUST COMPANY, Executor of the Estate of Rosalie Polk Bennett, and The Anson Bank & Trust Company, Administrator, c. t. a., d. b. n. of the estate of Purdie Richardson Bennett, Defendant.

Page 312

143 S.E.2d 312

265 N.C. 148

Eva R. BENNETT, surviving widow, and Clifton C. Bennett surviving son of C. C. Bennett, deceased, and Eva R. Bennett, Administratrix of C. C Bennett, deceased, Plaintiffs, v. The ANSON BANK & TRUST COMPANY, Executor of the Estate of Rosalie Polk Bennett, and The Anson Bank & Trust Company Administrator, c. t. a., d. b. n. of the estate of Purdie Richardson Bennett, Defendant.

No. 541.

Supreme Court of North Carolina.

July 23, 1965.

Long, Ridge, Harris & Walker, by George A. Long, Burlington, and Theron L. Caudle, Wadesboro, for plaintiffs, appellants.

Taylor & McLendon by H. P. Taylor, Jr., Wadesboro, for defendant, appellee.

SHARP, Justice.

By this action instituted September 9, 1963, plaintiffs seek an accounting for a partnership which was dissolved March 16, 1936, by the death of a partner under whom they now claim. They further seek to trace partnership assets into the estate of the widow of the surviving partner and impress a trust upon such assets. Defendant, as administrator c. t. a., d. b. n. of the partner who survived in 1936, and as executor of his widow, pleads the lapse of time--over 27 years--in bar of plaintiffs' right to an accounting. Specifically, defendant pleads G.S. § 1-47, 10 years; G.S. § 1-49, 7 years; G.S. § 1-50, 6 years; and G.S. § 1-52, 3 years. Upon defendant's plea of the statute of limitations the burden devolved upon plaintiffs to show that their action was not barred but was instituted within the time permitted by statute. Jewell v. Price, 264 N.C. 459, 142 S.E.2d 1; Fulp v. Fulp, 264 N.C. 20, 140 S.E.2d 708.

Before plaintiffs can obtain a money judgment against defendant upon a demand arising out of the partnership transactions of Bennett Brothers, there must be an accounting of partnership affairs and a balance struck. Pugh v. Newbern, 193 N.C. 258, 136 S.E. 707, 58 A.L.R. 617; Baird v. Baird, 21 N.C. 524, 539. Their first task, therefore, is to show that their right to an accounting has not been lost by lapse of time.

The partnership existing between the Bennett brothers created a fiduciary relationship imposing upon P. R. Bennett--the managing partner, according to plaintiffs' evidence--the duty to render to C. C. Bennett at any time upon his request 'a full and actual account of partnership affairs.' Prentzas v. Prentzas, 260 N.C. 101, 103, 131 S.E.2d 678, 680; accord, Pentecost v. Ray, 249 N.C. 406, 106 S.E.2d 467; Casey v. Grantham, 239 N.C. 121, 79 S.E.2d 735. As between the partners themselves the statute would not begin to run on the cause of action for an accounting until one partner had notice of the other's termination of the partnership and his refusal to account. This is but an application of the rule that the statute of limitations does not commence to run against a trustee until he repudiates his trust. Fulp v. Fulp, supra; Prentzas v. Prentzas, supra; 40 Am.Jur., Partnership § 335 (1942).

In the absence of an express agreement to the contrary, every partnership is dissolved by the death of one of the partners. In re Estate of Johnson, 232 N.C. 59, 59 S.E.2d 223; Bank of Hollingsworth, 135 N.C. 556, 47 S.E. 618; 40 Am.Jur., Partnership § 286 (1942). This common-law rule is now codified as G.S. § 59-61.4. Upon the death of C. C. Bennett, P. R. Bennett immediately stood 'in the relation of trustee charged with the duty of faithful management and accounting to those entitled to the surplus of the deceased partner's interest after settling the debts of the partnership and winding up its affairs.' In re Estate of Johnson, supra at 60, 59 S.E.2d at 225; accord, Walker v. Miller, 139 N.C. 448, 52 S.E. 125, 1 L.R.A.,N.S. 157. It was the duty of P. R. Bennett, as his surviving partner, to have filed with the Clerk of the Superior Court, within 12 months of the death of C. C. Bennett, a verified account stating his action as surviving partner, and, unless the Clerk had extended his time for good cause shown, to have come to a settlement with Mrs. C. C. Bennett, as administratrix of his deceased partner. N. C. Code of 1935, § 3285 (now G.S. § 59-82). The Clerk of the Superior Court did not extend the time for P. R. Bennett to account, and he died without ever having accounted. Clearly, therefore, on March 16, 1937, plaintiff administratrix had the right to sue P. R. Bennett for an accounting. In re Johnson, supra; see Ewing v. Caldwell, 243 N.C. 18, 89 S.E.2d 774; Sherrod v. Mayo, 156 N.C. 144, 72 S.E. 216. Within 3 years thereafter, nothing else appearing, plaintiffs' action for an accounting would have been barred by G.S. § 1-52(1). Prentzas v. Prentzas, supra; Weisman v. Smith, 59 N.C. 124; 40 Am.Jur., Partnership § 345 (1942). Plaintiffs contend, however, that here something else appears from their evidence: that in the lifetime of C. C. Bennett, his surviving partner, P. R. Bennett, the brother-in-law and uncle of plaintiffs, had fraudulently misappropriated partnership funds; that after C. C. Bennett's death he fraudulently concealed from plaintiffs the existence of their cause of action against him for his prior defalcations, which he had actively continued while making positive misrepresentations to plaintiffs that no such assets existed and that an accounting would be a futile thing.

In order to exercise their right to an accounting 26 years after it accrued, plaintiffs must establish that they exercised it within 3 years of the time they discovered or ought by reasonable diligence under the circumstances to have discovered the fraud of P. R. and Rosalie P. Bennett. In 1937, plaintiffs knew of their right to require P. R. Bennett to account. If we take their evidence as true, as we must in passing upon a motion for nonsuit, National Spinning Co. v. McLean Trucking Co., 263 N.C. 807, 140 S.E.2d 534, their failure to exercise this right was the result of P. R. Bennett's statement that the partnership had no assets--'that there was nothing to settle.' If this statement was true--and plaintiffs say they believed it--, the institution of an action to require an accounting would have been a vain and an expensive gesture.

Under the circumstances here, plaintiffs' evidence must, in order to repel the bar of the statute, tend to establish (1) the falsity of P. R. Bennett's statement that there were no partnership assets; (2) that they reasonably relied upon the statement; and (3) that P. R. Bennett had misappropriated the assets and was actively concealing his breaches of trust. In other words, the facts which plaintiffs say caused them not to require the accounting are also the facts upon which they base their action to recover partnership assets. If P. R. Bennett misled plaintiffs so as to repel the bar of the statute, he had converted partnership assets. To prove the first is to prove the second.

Defendant contends that plaintiffs should have insisted on their legal right to an accounting in 1937; that, had they done so and had P. R. Bennett been guilty of the misappropriations with which plaintiffs now charge him, such an accounting would have disclosed the misappropriations; that in failing to require the accounting plaintiffs failed to exercise reasonable diligence to discover the fraud they allege, and they are therefore barred by G.S. § 1-52(9) from any relief whatever.

Plaintiffs' evidence, should the jury accept it, would support but not compel a finding that C. C. Bennett and P. R. Bennett were general partners; that P. R. Bennett was the business manager of the partnership, which was 'land poor'; that, in order to dispose of land, the partnership borrowed $100,000 from the Bank of Wadesboro; that this money was fraudulently misappropriated by P. R. Bennett and his wife, both of whom led C. C. Bennett and his heirs to believe that it had been lost by unfortunate investments; that 3,284.09 acres, plus two lots and a ...