Ex parte Master Boat Builders, Inc.

Decision Date15 September 2000
Citation779 So.2d 192
PartiesEx parte MASTER BOAT BUILDERS, INC., and James Michael Rice and Ex parte Elton O. Tanner, Jr. (Re Wayne R. Mitchell v. Master Boat Builders, Inc., et al.)
CourtAlabama Supreme Court

J.W. Goodloe, Jr., of Vickers, Riis, Murray & Curran, L.L.C., Mobile, for petitioners Master Boat Builders, Inc., and James Michael Rice.

Robert H. Smith of Galloway, Smith, Wettermark & Everest, Mobile, for petitioner Elton O. Tanner, Jr.

James A. Yance, Gregory B. Breedlove, David G. Wirtes, Jr., and George M. Dent III of Cunningham, Bounds, Yance, Crowder & Brown, L.L.C., Mobile; and Allen A. Ritchie of Walton, Ritchie & Green, L.L.C., Mobile, for respondent.

MADDOX, Justice.

These petitions for the writ of mandamus arise out of a pending lawsuit between a partner and his copartners; the plaintiff has alleged multiple claims arising out of partnership business. The controlling legal issue presented by these petitions is whether the plaintiff must seek an equitable accounting before proceeding with his action at law for damages. Our answer to this question depends on whether the Alabama Partnership Act ("APA"), in effect at the time of the formation of the partnership, applies, or whether the Alabama Uniform Partnership Act ("AUPA") (repealing the APA) applies. The trial court concluded that the provisions of the AUPA applied; it therefore denied the defendants' motions for a summary judgment and their alternative motions to strike the plaintiff's jury demand, each of which raised this legal issue.

Facts and Procedural History

Wayne R. Mitchell, the plaintiff in this action, and Elton O. Tanner, James Michael Rice, and Master Boat Builders, Inc. ("MBB"), the defendants, formed several partnerships during the mid 1980s; these petitions relate to two of them. The first partnership, entitled MASCO I, was formed on December 28, 1984, in order to manage the operation of an oil supply vessel, for which the partnership was named. The managing partners of MASCO I included Tanner and Rice. According to the MASCO I partnership agreement, Mitchell and MBB were general partners only. The second partnership, MASCO IV, was formed on March 18, 1985. Although MASCO IV's partnership agreement listed MBB as its only managing partner, Rice, as MBB's president, actually managed MASCO IV's affairs. The general partners of MASCO IV included Mitchell and Tanner.

Mitchell held a 10% interest in each partnership, based on his contributions of $18,500 to MASCO I and $19,500 to MASCO IV. His capital contributions gave him proportional shares in the vessels owned by each partnership and entitled him to 10% of the income from both operations after the deduction of certain expenses.

In October 1996, Mitchell was notified by the other partners of MASCO I and MASCO IV that they wished to dissolve the partnership. Mitchell, unhappy with the dissolutions, balked at the offers of $20,000 for his shares in each partnership and requested that Tanner, who provided accounting services for MASCO I and MASCO IV (as well as for Mitchell individually), provide him with information explaining his distributions. Tanner refused to do so. Mitchell also requested similar information from the defendants, but was refused by them as well.

Mitchell sued Tanner, Rice, and MBB (sometimes collectively referred to herein as "the defendants") in May 1997, alleging suppression, breach of fiduciary duty, conversion, and misrepresentation.1 Mitchell also alleged that Tanner, in his capacity as Mitchell's personal accountant, had committed accounting malpractice with respect to his handling of Mitchell's investment in the partnership. Mitchell sought damages for each of these claims, all of which—with the exception of the accounting-malpractice claim—arise out of partnership affairs, but he did not seek an equitable accounting before requesting such damages. Each of the defendants answered by affirmatively asserting that Mitchell's failure to request an equitable accounting before filing an action for damages precluded the action against them. The defendants moved to dismiss Mitchell's complaint on that basis, or, alternatively, to strike Mitchell's jury demand. The record before us suggests that the trial court denied those motions.

In August 1999, the defendants, in motions for summary judgment, again argued that an equitable accounting was necessary before Mitchell's claims could proceed to a jury trial, and again the trial court disagreed and denied the motions. The defendants then filed these petitions, seeking writs of mandamus directing the trial court to set aside its orders denying the motions for summary judgment. In their petitions, the defendants seek writs instructing the trial court to either enter judgments in their favor or strike Mitchell's jury demand. We grant parts of the relief requested.

Discussion

As we have already said, the precise issue presented in this case is this: Which one of Alabama's two partnership acts applies to Mitchell's claims, the APA or the AUPA?

Before the passage of either Act, this Court had always adhered to the common-law principle that a partner may not recover in an action at law against fellow partners for matters arising out of partnership affairs until there had been a settlement of partnership accounts. Broadmoor Realty, Inc. v. First Nationwide Bank, 568 So.2d 779, 783 (Ala.1990); Sanders v. Kirkland & Co., 510 So.2d 138, 140 (Ala.1987); Hunter v. Parkman, 254 Ala. 494, 498, 48 So.2d 878, 881 (1950). This principle was grounded in notions of equity that had long been a part of our law. The enactment of the APA in 1971 was considered by this Court to be a codification of that principle, cf. Broadmoor Realty, 568 So.2d at 783,

a position that was consistent with the position of most jurisdictions that had adopted the same basic set of partnership statutes generally known as the Uniform Partnership Act, or "UPA." See Harold Gill Reuschlein & William A. Gregory, The Law of Agency and Partnership 287 (2d ed. 1990). Indeed, the APA (or UPA) provided for an accounting as the only apparent remedy to partners for claims arising out of partnership business. See § 10-8-47, Ala.Code 1975; see also Broadmoor Realty, 568 So.2d at 782-83 (citing § 10-8-47 in footnote 4 and discussing Alabama's historical view of actions between partners).

In 1996, however, the Legislature enacted the AUPA, marking a significant departure from the previous view of intrapartnership actions. This Act provided partners with the option of forgoing an equitable accounting before pursuing actions at law against copartners. § 10-8A-405(b), Ala.Code 1975. This change reflected a rejection of the traditional view that actions between partners involving partnership affairs were exclusively equitable actions, a view that was the foundation of any remedy under the repealed APA. Thus, the question whether the APA or the AUPA applies to Mitchell's partnership claims—a question that impacts his right to a jury trial as to those claims— ultimately requires this Court to decide whether those claims lie only within the trial court's equitable jurisdiction, a question that can be determined only from an examination of the provisions of the AUPA regarding its application to partnerships formed before December 31, 2000. Because the issue presented involves a question whether the underlying claims are with the court's equitable jurisdiction, it is clear that the issues stated in the defendants' petitions are reviewable on a mandamus petition. See Ex parte SouthTrust Bank, 679 So.2d 645, 646-47 (Ala.1996)

(holding that mandamus review is proper where "the question is whether the plaintiff's claims are within the exclusive jurisdiction of equity"); see also Ex parte Merchants Nat'l Bank of Mobile, 257 Ala. 663, 665, 60 So.2d 684, 686 (1952) (holding that decisions regarding the availability of a jury are reviewable by mandamus).

The standard governing our review of an issue presented in a petition for the writ of mandamus is well established:

"[M]andamus is a drastic and extraordinary writ to be issued only where there is (1) a clear legal right in the petitioner to the order sought; (2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so (3) the lack of another adequate remedy; and (4) properly invoked jurisdiction of the court."

Ex parte Edgar, 543 So.2d 682, 684 (Ala. 1989). These petitions call for this Court to review the trial court's refusal to strike the plaintiff's jury demand and to require an accounting. We conclude that mandamus relief is available for these defendants, provided they meet the usual requirements for the issuance of the writ. We must construe § 10-8A-1106, Ala. Code 1975, which determines how the AUPA applies to partnerships that were formed before the AUPA's effective date, as these partnerships were. Section 10-8A-1106 states, in pertinent part:

"(a) Before January 1, 2001, this chapter governs only a partnership formed:
"(1) after the effective date of this chapter [January 1, 1997], unless that partnership is continuing the business of a dissolved partnership under Section 10-8-102 of the Alabama Partnership Act (1971); and
"(2) before the effective date of this chapter, that elects, as provided by subsection (c), to be governed by this chapter.
"(b) After December 31, 2000, this chapter governs all partnerships.
"(c) Before January 1, 2001, a partnership voluntarily may elect, in the manner provided in its partnership agreement or by law for amending the partnership agreement, to be governed by this chapter...."

Because the partnerships in this case were formed before December 31, 2000, and there has been no pertinent election made pursuant to subsection (c), subsection (a) is the only applicable portion of this section.

In reading subsection (a), this Court must look to the plain meaning of the language chosen by the Legislature, because that language is the...

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