Gaynes v. Conn, 41415

• Decision Date: 12 December 1959
• Docket Number: No. 41415,41415
• Citation: 185 Kan. 655,347 P.2d 458
• Parties: Albert GAYNES and Rose Gaynes, Appellees, v. Al J. CONN and Martha Conn, Carl W. Bechtel, Marie S. Bechtel, and Al J. Conn, V. E. Peterson, Elmer Fleming, Eddie Botterman, W. Lee Sanders, E. C. Glitzke, Co-Partners Under the Firm Name and Style of LaSalle Real Estate Holding Company, Alice Peterson, Mildred Botterman, Christie I. Sanders, Florence Glitzke, Missouri Division of Employment Security, Kansas Division of Employment Security, Standard Printing Company, Inc., Marsh Steel Corporation, Nurre Companies, Inc., Appellees, and Earle G. Wallingford, Defendant in Lower Court, Appellant.
• Court: Kansas Supreme Court

Page 458

347 P.2d 458

185 Kan. 655

Albert GAYNES and Rose Gaynes, Appellees, v. Al J. CONN and Martha Conn, Carl W. Bechtel, Marie S Bechtel, and Al J. Conn, V. E. Peterson, Elmer Fleming Eddie Botterman, W. Lee Sanders, E. C. Glitzke, Co-Partners Under the Firm Name and Style of LaSalle Real Estate Holding Company, Alice Peterson, Mildred Botterman, Christie I Sanders, Florence Glitzke, Missouri Division of Employment Security, Kansas Division of Employment Security, Standard Printing Company, Inc., Marsh Steel Corporation, Nurre Companies, Inc., Appellees and Earle G. Wallingford, Defendant in Lower Court, Appellant.

No. 41415.

Supreme Court of Kansas.

Dec. 12, 1959.

Syllabus by the Court.

1. A court of equity once having acquired jurisdiction of a subject matter will reach out and draw into its consideration and determination the entire subject matter and bring before it the parties interested therein, so that a full, complete, effectual and final decree adjusting the rights and equities of all the parties in interest may be entered and enforced.

2. Where the affairs of a partnership are unsettled and its assets are before a district court in a proceeding in aid of execution against one of its members to ascertain his interest in the partnership assets, consisting solely of real estate, and the court has before it all the parties claiming an interest in such assets, it is proper to take an accounting and settle the affairs of the partnership.

3. The corpus of the assets is partnership property, and neither partner separately has anything in that corpus; the interest of each is only his share of what remains after the payment of all partnership debts and all accounts between the partners are settled.

4. Each partner has an equitable lien on partnership property for the purpose of having it applied in discharge of the debts of the firm, and has a similar lien on the surplus assets to have them applied in payment of whatever may be due to the partners respectively, after deducting whatever indebtedness they may owe to the firm as partners.

5. Real property belonging to the partnership is treated in equity as part of the partnership fund, and is disposed of and distributed the same as the personal assets.

6. Where real estate is the sole asset of a partnership, an individual judgment creditor of one of the partners acquires no lien upon the partnership real estate by virtue of his judgment; the property is first liable to payment of the debts of the firm and the settlement of accounts between the partners, before the judgment debtor partner's interest can be ascertained and subjected to the lien of the individual judgment creditor.

7. The record in a proceeding such as is described in paragraph No. 2 of the syllabus, in which an accounting and settlement of the partnership affairs was made by the district court upon the impleading cross-petition of certain of the partners, is examined and it is held: As more fully set forth in the opinion, the district court did not err in overruling the appellant's demurrer to the cross-petitioners' evidence; in permitting the partners individually to offer evidence as to debts owed by the partnership, and of a debt owed by one of the partners to the firm; in ordering the sale of partnership real estate and directing the clerk of the court to pay, subject to costs of the action, ad valorem taxes and certain mortgage liens, debts of the partnership and directing the surplus assets, if any, of the judgment debtor partner's share to be paid pro rata to his co-partners to the extent of his indebtedness to the partnership, or in overruling the appellant's motion for a new trial.

W. C. Jones, Olathe, for appellant.

David W. Wheeler, Marion, Edwin G. Westerhaus, Marion, and James A. Wheeler, Olathe, for appellees.

FATZER, Justice.

On September 15, 1954, the action out of which this appeal arises was commenced in the district court of Johnson County, Kansas, by Albert Gaynes and Rose Gaynes against Al J. Conn and Martha Conn on an Illinois judgment. Personal service of summons was had upon the Conns and on October 27, 1954, judgment was rendered in favor of the Gaynes in the sum of $6,295.39.

On November 4, 1954, execution was issued upon the Gaynes judgment and returned on November 9, 1954, with the endorsement that no property could be found. Proceedings in aid of execution were commenced (G.S.1949, 60-3485 et seq.), and Conn appeared personally before the court and testified he owned a one sixth interest in a one-acre tract in the northeast corner of the southeast quarter (SE 1/4) of Section 36, Township 13, Range 24, Johnson County, Kansas, together with improvements thereon. As is later developed in the opinion, this is the property in controversy.

In the course of Conn's examination, it developed that other lienholders and judgment creditors claimed an interest in the one-acre tract and the court ordered that an impleading petition be filed and that all creditors, lienholders and those claiming an interest in the property be impleaded as parties defendant in the action. Personal service of summons or service of summons by publication was obtained upon all the impleaded defendants. Counsel for Al J. Conn and Martha Conn filed an application to set aside the property in question as a homestead, and later filed an answer in the proceeding.

Various judgment creditors, lienholders and others claiming an interest in the real property filed answers or otherwise pleaded to the impleading petition, among which were the Mid-City National Bank of Chicago, Chicago, Illinois, and the appellees, V. E. Peterson, Elmer Fleming also known as Elmer Flaming, Eddie Botterman, W. Lee Sanders and Florence Glitzke.

In its answer, the Mid-City National Bank of Chicago alleged it had obtained a judgment in the district court of Johnson County, Kansas, against Al J. Conn on November 9, 1954, in the sum of $2,417.46, which lien was prior in right to any claim of the plaintiffs Gaynes, or to the claim of any intervening or impleaded defendants, including that asserted by Peterson, Fleming, Botterman, Sanders and Glitzke individually and on behalf of the LaSalle Real Estate Holding Company, a co-partnership, hereafter referred to. The bank's answer predicated the priority of its lien upon the fact that its action against Conn was commenced on May 13, 1954, upon which personal service had been obtained, and that its judgment, it claimed, became a lien upon the property in question on September 2, 1954, the first day of the September 1954 term of the district court, and that execution had been issued on November 9, 1954, and returned unsatisfied that same day.

V. E. Peterson, Elmer Fleming, Eddie Botterman, W. Lee Sanders and Florence Glitzke filed an amended answer and amended cross-petition to the impleading petition. The amended answer alleged that the one-acre tract, together with the improvements thereon, was owned by the LaSalle Real Estate Holding Company, a co-partnership of Johnson County, Kansas, consisting of Al J. Conn, V. E. Peterson, Elmer Fleming, Eddie Botterman, W. Lee Sanders and Florence Glitzke, each of said partners being a partner to the extent of a one sixth interest therein; that the one-acre tract was owned by the partnership in fee simple, free and clear of any claims of the plaintiffs Gaynes or any of the other defendants, and that they were entitled to a judgment quieting the title of the LaSalle Real Estate Holding Company against the claims of plaintiffs and all other defendants. For their amended cross-petition against Al J. Conn, the plaintiffs Gaynes, and all other defendants, the partners other than Conn, individually and as the partnership, alleged that Conn, as one of the partners, was indebted to the partnership for rent of the property in question for a period of 30 months at $400 per month, and that Conn's interest should be impressed with an equitable lien to the extent of $12,000, such lien to be prior to any claim of Conn, his creditors or assigns. Other allegations concerned liens claimed by the United States of America which were alleged to be junior, inferior and subsequent to the claim and lien of the partnership, but, not being here material, no further reference to them is made.

The appellant, Earle G. Wallingford, replied to the amended answer and amended cross-petition of the partnership and members of the partnership individually, and alleged that the Mid-City National Bank of Chicago, for a valuable consideration, sold and assigned to him its judgment against Al J. Conn; that such judgment was a prior lien against all impleaded defendants, as alleged in the bank's answer, the allegations of which were adopted and affirmed by him. The reply further denied the new matters alleged, and also contained a demurrer upon various grounds, which presents nothing for appellate review, since the notice of appeal particularly specified the orders from which the appeal was made, but did not include the order overruling the demurrer to the amended answer and amended cross-petition (Nicholas v. Latham, 179 Kan. 348, 295 P.2d 631; Dryden v. Rogers, 181 Kan. 154, 156, 309 P.2d 409; Jeffers v. Jeffers, 181 Kan. 515, 517, 313 P.2d 233).

The action was tried to the court. Over the objection of Wallingford, Fleming and Peterson testified individually and on behalf of the LaSalle Real Estate Holding Company to facts which, if believed by the court, would support the allegations contained in the amended answer and amended cross-petition and further, that the partnership was indebted to various persons including Gertrude Hett for $10,000, Signa Anderson for $3,000, Emma McDowell for $10,000, and certain partners in the following amounts: E. W. Fleming $6,350, W. Lee Sanders $1,375, Eddie Botterman $480, and V. E. Peterson $2,611; further, that the sole assets of the partnership consisted of the equity in the property, and the $12,000 which Conn...