Potts v. Lux
| Decision Date | 09 March 1946 |
| Docket Number | 36555. |
| Citation | 161 Kan. 217,166 P.2d 694 |
| Parties | POTTS et al. v. LUX et al. |
| Court | Kansas Supreme Court |
Appeal from District Court, Shawnee County; Dean McElhenny, Judge.
Appeal from District Court, Shawnee County; Dean McElhenny, Judge.
Action by Harry W. Potts, revived in the name of Ila Belle Potts and another, executors of the last will and testament of Harry W Potts, deceased, against S.E. Lux, Jr., and others for purpose of obtaining an accounting and liquidation of alleged partnership. From a judgment overruling demurrers to the petition, defendants appeal.
Syllabus by the Court.
1. In an action instituted for the purpose of obtaining an accounting and liquidation of a partnership, the petition is examined, and it is held to state a cause of action against all of the parties to the agreement upon which the plaintiff based his right to relief.
2. A demurrer to a petition on the ground of misjoinder of causes of action is properly overruled when on examination of such pleading it appears the causes of action united therein affect all parties to the action.
Tinkham Veale, of Topeka, for appellants.
Randal C. Harvey, of Topeka (John S. Dean, Jr., of Topeka, on the brief), for appellees.
This appeal involves the propriety of orders of the trial court in overruling several demurrers to a petition.
The action was commenced by Harry W. Potts against S.E. Lux, Jr Ralph T. McKnaught and George Listz, for the purpose of obtaining an accounting and liquidation of the affairs of a business relationship characterized by plaintiff as a partnership. Shortly after its institution Potts died and the cause was revived in the name of Ila Belle Potts and John H Potts, executors of the last will and testament of such decedent. Hereafter, in the interest of convenience, we shall ignore the persons substituted as plaintiffs and refer to the parties to the action as plaintiff and defendants except when it becomes necessary to refer to them individually in which event we will use the surname of the parties to the business venture involved herein.
When the petition was first filed it was motioned and plaintiff was required to separately state and number his causes of action. The amended petition contains four causes of action and an addendum in which are general allegations pertaining to all such causes of action. To detail allegations of the present pleading would take up about six pages of our reports and the result attained would not justify the space required. For that reason we shall summarize them as briefly as the circumstances permit.
The first cause of action alleges: That in 1929 Potts and Lux entered into an oral agreement to engage in the wholesale mercantile business; Potts had experience and Lux had capital, moderate experience and the right to use the name Lux-Witwer Company; Potts learned of an opportunity to rent a well located building and suggested to Lux that the latter rent it and re-establish business in the name of such company; Lux agreed to do so on condition Potts engage in the business with him as a partner and assume the major portion of the management of the business; Lux advanced capital in the sum of $100,000 and such parties made arrangements with McKnaught and Listz to engage in the business with them, McKnaught to supervise the operation of the business and bookkeeping and Listz to supervise the warehouse; at the time it was agreed by all parties profits would be divided, as follows: five percent would first be paid to Lux on his investment before any division of profits and the remainder would be divided, sixty percent to Lux, twenty percent to Potts, five percent to McKnaught and five percent to Listz and ten percent would be put back into the business as a reserve; none of the profits would be divided until one year after they were earned, so that the money could remain in the business; at the end of each year the profits for the preceding year were to be divided only if the business had earned $2,500 over the $5,000 interest charge during the preceding year and any losses would be charged against accumulated profits; in the event of the liquidation of the business the percentages agreed upon were to prevail and in that event the assets of the business were to be distributed by repayment of original capital advanced by Lux and division of the remainder among the parties in proportion to such percentages.
It then avers: That under the agreement the parties engaged in and, with minor alterations, carried on the business for fifteen years. Potts and Lux exercised managerial authority. All parties drew fixed salaries which were agreed upon and charged as expenses. Business conditions became bad in 1933 and Potts, McKnaught and Listz agreed to take reductions in salaries, with the understanding that if a profit of $1,000 was earned during the year such reductions would be restored in the form of salary bonuses to be paid at the end of the year; salary bonuses were paid during 1933 and thereafter all parties were paid the regular salaries theretofore agreed upon. In 1933 the parties decided to reduce their original oral agreement to writing, and its general terms were repeated in such written agreement; the business was carried on under such agreement until September 15, 1944, at which time the partnership between Potts and the defendants was dissolved by mutual agreement; since that date Lux has had exclusive control of the business, including assets and the records.
Finally it charges that due to investments made in the business in the form of undistributed profits which were left therein, all of which had been accumulated by the joint efforts of Potts and defendants and were substantially in excess of the original investment of Lux, Potts under the terms of the agreement between the parties had a 20/90 interest in such undistributed profits amounting to $27,777.76.
Made a part of such cause of action and attached to the amended petition is the 1933 written agreement. Its terms disclose a business relationship similar in import to that revealed by the terms of the pleaded oral contract and it would serve no useful purpose to describe them at length.
The second cause of action makes all allegations of the first a part thereof and avers that Lux in the years 1941, 1942 and 1943 had charged to the business as expenses, and taken from such business, his personal income taxes in the amount of $70,000 and that by reason of such improper deduction Potts was entitled to 20/90 of such sum amounting to at least $15,555.54.
The third cause of action by reference includes the allegations of the first and charges that Lux had transferred to S.E. Lux, III, $15,000 of the cash reserve of the business and that the interest of Potts therein amounted to $3,333.32.
The fourth cause of action also includes the allegations of the first and in addition alleges that under the agreement Potts was entitled to 20/90 of the net profits of the business from January 1, 1944, to September 18, 1944, and that his share thereof amounted to at least $8,888.88.
Allegations in the addendum with reference to all causes of action are in substance as follows: None of the amounts alleged by Potts to be due from the business has been paid; defendants have in their possession the books and records showing such amounts; on September 15, 1944, Potts demanded of defendants an accounting and settlement which was refused unless he agreed to accept an amount less than was due him; defendants McKnaught and Listz are necessary parties to the action, including the first, second, third and fourth causes of action set out in the petition, because they are parties to the partnership agreement and claim some interest in the property, assets and profits of the business.
The prayer of the amended petition is for a full and complete accounting on each of the four causes of action, for personal judgment against Lux for the amounts found to be due, for a further judgment declaring the sum total of such amounts to be a lien upon the property and assets of the Lux-Witwer Company, or, in lieu thereof, for liquidation of the business in an equitable manner.
With the amended petition, hereafter referred to as the petition in form as related Lux filed a general demurrer to the first cause of action on the ground it failed to state a cause of action against him. McKnaught and Listz demurred to...
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