Ristine v. Ruml
| Decision Date | 05 February 1924 |
| Docket Number | No. 35397.,35397. |
| Citation | 197 N.W. 27,197 Iowa 1193 |
| Parties | RISTINE v. RUML. |
| Court | Iowa Supreme Court |
OPINION TEXT STARTS HERE
Appeal from District Court, Linn County; Ralph Otto, Judge.
Action for an accounting of a partnership business. The opinion states the facts. From a judgment dismissing the petition the plaintiff appeals. Affirmed.John A. Reed, John Redmond, Ralph Maclean, and D. C. Chase, Jr., all of Cedar Rapids, for appellant.
Deacon, Sargent & Spangler, of Cedar Rapids, for appellee.
This action is for an accounting, and has to do with the affairs of a corpartnership that continued over a period of more than 20 years. As set forth in the abstracts and arguments it presents a very formidable array of figures. The facts, however, save in respect to the terms of the voluntary dissolution of the partnership, are not in dispute, and the case is controlled, in the main, by a single proposition of law. This question can be presented without going into the account between the partners in any great detail.
The plaintiff and appellant is the executrix of the will of Dr. J. M. Ristine, deceased. On May 1, 1893, Dr. Ristine and Dr. Ruml, the defendant and appellee, by written agreement formed a copartnership for the purpose of engaging in the practice of medicine. The partnership continued, under the original agreement and others subsequently entered into, until its dissolution about May 1, 1916. The interests of the respective partners in the profits of the business were fixed by these agreements and varied at different times; and the amounts that each drew out of the firm did not correspond with the percentages to which they were entitled.
The books of account kept by the firm were destroyed by fire in December, 1916, some eight months after the dissolution of the firm, when the building where the office was located burned. There is in existence, however, an abstract or audit of the books from May 1, 1903, to the dissolution of the firm, made by an expert accountant employed by the firm for that purpose. Copies of this accountant's audit were given to each of the partners, and those in evidence were found among Dr. Ristine's papers after his death, and were produced on the trial by the appellant. These audits or abstracts of the books show for each year, commencing May 1, 1903, to May 1, 1916, when the partnership was dissolved, the amount of money actually drawn out of the firm by each partner, and the amount to which he was entitled according to the percentages fixed by the various contracts. It thus appears that on May 1, 1904, Dr. Ristine had during the preceding year drawn out $499.42 more than he was entitled to, and Dr. Ruml less than he was entitled to by the same amount, and that Dr. Ristine was indebted to him in that amount. It appears that Dr. Ristine continued to overdraw in varying amounts up to and including the year ending May 1, 1910. Interest at 6 per cent. per annum was computed on these various amounts to the last named date, and at that time he was indebted to Dr. Ruml, including interest, in the amount of $6,681.54. During the year ending May 1, 1911, Dr. Ruml drew more than he was entitled to by $549.47 and on that date this amount was deducted from the amount of Dr. Ristine's previous overdraft and interest thereon. The balance was carried forward, and on May 1, 1912, Dr. Ruml's overdraft was again deducted after adding interest. During the year ending May 1, 1913, Dr. Ruml again overdrew, and Dr. Ristine made two payments to him aggregating $1,500. These payments were deducted as of the date when made, and the amount of Dr. Ruml's overdraft was deducted at the end of the year. This method was pursued during the following years down to May 1, 1915. No further cash payments were made by Dr. Ristine. On May 1, 1916, Dr. Ristine's overdraft, including interest to that date, but with no addition or subtraction of any amount overdrawn by either of the parties during the preceding year, amounted, according to the audit, to $6,408.95, and he thus appeared to be indebted to Dr. Ruml in that amount.
On May 1, 1916, the partnership, as has been said, was dissolved. At that time a large amount was owing to the firm on account. The terms of the dissolution seem to have been agreed upon between the partners alone; and, owing to the death of Dr. Ristine, and the fact that thereby Dr. Ruml became incompetent to testify to the transaction, they were difficult of competent proof. It is the claim of the appellee that he was to take the unpaid accounts of the preceding five years, and have whatever could be collected on them to apply on the $6,408.95 then due him from Dr. Ristine, as shown by the audit of the books. Dr. Ruml, after the dissolution, collected on these accounts the sum of $7,199.00.
Whatever might be found as to the terms of the dissolution--whether the contention of appellee that he was to have the accounts be sustained or not--it is plain that so far nothing appears to be due appellant. Dr. Ristine was, at the time of dissolution, indebted to Dr. Ruml, as shown by the audit of the books, in the sum of $6,408.95, while his share of the amount collected on the accounts, being 40 per cent. for the period covered by the accounts, according to the written agreement of the parties, would amount to but $2,879.60. To meet this situation and to sustain the claim that something is due from appellee the appellant relies upon certain written instruments executed by the former.
On April 12, 1894, Dr. Ruml gave to Dr. Ristine his promissory note for $2,400 due six months after date with interest at 7 per cent. per annum. Numerous payments endorsed on the back of the note it is unnecessary to set out.
On May 1, 1901, and before the annual audits began, there had been a settlement between the partners, and Dr. Ruml then executed a so-called duebill to the firm for $4,259.24, which was by the firm transferred by indorsement to Dr. Ristine. The instrument is as follows:
“Cedar Rapids, May 1, 1901.
Due Ristine & Ruml $4,259.24 on account of settlement, with 6 per cent. interest from date.
[Signed] W. Ruml.”
On the back the following indorsement appears:
“Pay J. M. Ristine or order.
[Signed] Ristine & Ruml.”
A number of payments are indorsed on the back of this also, which we do not set out.
It is the contention of the appellant that this duebill should be considered as a part of the account between the partners and as representing the amount of Dr. Ruml's overdraft on the date when it was given; that the subsequent overdrafts of Dr. Ristine, as shown by the account, should be applied to the liquidation of the amount called for by the duebill, as was done by the parties with respect to the overdrafts during subsequent years. The same claim, in effect, is made as to the note, although it is admitted there is no evidence that it grew out of or had anything to do with the partnership.
It is conceded by appellee that the duebill was given in settlement of the partnership account at the date of its execution, but it is claimed that upon its transfer by the firm to Dr. Ristine it became a mere obligation of one partner to another, and was segregated from the partnership affairs; and that an action at law might have been brought upon it at any time and before the dissolution of the firm, and that it is therefore barred by the statute of limitations. The same claim is made in respect to the note, except it is not admitted it grew out of the partnership relation. These conflicting claims present the principal question in the case.
[1] The general rule is that an action in law cannot be maintained by one partner against another with respect to partnership transactions until there has been an accounting or settlement of the partnership affairs. Wycoff v. Purnell, 10 Iowa, 332;Cooper v. Nelson, 38 Iowa, 440;Newberry v. Gibson, 125 Iowa, 575, 101 N. W. 428;Simons v. Douglas, 189 Ky. 644, 225 S. W. 721;Kunneke v. Mapel, 60 Ohio St. 1, 53 N. E. 259; 30 Cyc. 471. See, also, a note in 21 A. L. R. 34.
[2] An exception to this rule is recognized where the transaction out of which the liability arises has been made the subject of an express promise, or relates to a single venture, or has been segregated from the partnership affairs. Vapereau v. Holcombe, 122 Iowa, 406, 98 N. W. 279; Newberry v. Gibson, supra; 30 Cyc. 466; note in 21 A. L. R. 57. We will have occasion to refer further to other cases so holding.
[3][4] Since the duebill in question arose out of partnership business, no right of action upon it accrued until the dissolution of the partnership, or it was, by act of the parties, segregated from the affairs of the partnership. That the statute of limitations did not commence to run against it until a cause of action upon it accrued is clear upon principle. But see Richards v. Grinnell, 63 Iowa, 44, 18 N. W. 668, 50 Am. Rep. 727;Broderick v. Beaupre, 40 Minn. 379, 42 N. W. 83.
[5] Was the duebill so segregated from the business of the partnership by the act of the parties that a cause of action upon it accrued before the dissolution of the firm? The act relied upon as effecting such a segregation was its transfer to Dr. Ristine, the claim being, as has been said, that thereafter it was an obligation of one partner to another, and, as such, an action at law might have been brought upon it, notwithstanding the continuation of the partnership. The appellant contends that there was no segregation. Aside from the claim that the facts, generally speaking, do not show a segregation, the argument is grounded upon certain propositions, the soundness of which cannot, we think, be doubted. It is well said that the duebill is not a negotiable instrument. It was executed before the Negotiable Instrument Law was enacted, and does not come within the purview of section 3046 of the Code, then in force. It is not payable to order or bearer, and there is nothing in its terms manifesting an intention on the part of the maker that it...
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