Taplett v. Khela

• Decision Date: 01 April 1991
• Docket Number: No. 25195-3-I,25195-3-I
• Citation: 60 Wn.App. 751,807 P.2d 885
• Court: Washington Court of Appeals
• Parties: Rawland F. TAPLETT and Mary L. Taplett, husband and wife, Respondents, v. Bhag Singh KHELA and Nachhatter Kaur Khela, husband and wife, Appellants, v. Jackie Don PRESTRIDGE and Carol Ann Prestridge, husband and wife, Third Party Defendants. Division 1

Page 751

60 Wn.App. 751

807 P.2d 885

Rawland F. TAPLETT and Mary L. Taplett, husband and wife, Respondents, v. Bhag Singh KHELA and Nachhatter Kaur Khela, husband and wife, Appellants, v. Jackie Don PRESTRIDGE and Carol Ann Prestridge, husband and wife, Third Party Defendants.

No. 25195-3-I.

Court of Appeals of Washington,

Division 1.

April 1, 1991.

Brink, Todd & Clayton, Daniel Brink, Seattle, for appellants.

Armstron, Alsdorf, Bradbury & Maier, Timonthy Bradbury, Seattle, for respondents.

GROSSE, Chief Judge.

Rawland Taplett and Mary Taplett (Taplett) brought this action against Bhag Singh Khela and Nachhatter Kaur Khela (Khela) for contribution on partnership debts and recovery on a promissory note. Khela counterclaimed for a partnership winding up and accounting. The trial court concluded that Taplett's claim was not barred by the statute of limitation, ordered Khela to pay Taplett $46,390 and awarded Taplett reasonable attorney fees. Khela appeals. We reverse.

In September of 1978, Khela, Taplett, and Jackie Don Prestridge and Carol Ann Prestridge (Prestridge) entered into an oral partnership agreement that was subsequently reduced to writing in February of 1979. The partners agreed to acquire and operate the Shasta Valley Inn in California. In an amendment to the partnership agreement dated July 20, 1979, Prestridge was removed as a partner. A foreclosure action was brought against the partnership real property and on July 21, 1980 Khela and Taplett agreed to allow the property to go back to the seller by forfeiture. Following this decision, the partners split the cash between them. Khela closed out the on-site operation and moved some partnership property back to Renton where it was stored in the home of the Khela's son. Both parties had opportunities to inventory the property and neither did so. Neither party maintained adequate books or annual accountings, although the partnership agreement required it.

During the partnership, funds were borrowed from Rainier Bank and $150,000 was due in September 1980. The partners refinanced the loan to $100,000 after each party paid $25,000. Both parties signed a new note and Taplett posted security, but Khela did not. The partners each agreed to pay one half of the note in quarterly installments. Both parties paid through September 9, 1981. Subsequently Khela made three partial payments, the last on March 20, 1982.

Taplett brought an action on the note in 1982 which action was dismissed because Khela was not properly served. The current action commenced July 28, 1987. Khela asserted three defenses: accord and satisfaction, failure to join necessary parties, and action barred by statute of limitation. After a bench trial of 4 days, the trial court issued a memorandum decision that determined the cause of action for an accounting accrued on the last payment by Khela to the third party bank (June 7, 1982). In findings of fact and conclusions of law the trial court confirmed its decision and concluded that Taplett's claim was not barred by the statute of limitation nor the doctrine of unclean hands. Further, the court concluded that Khela's demand for affirmative relief constituted a waiver of the statute of limitation defense. Finally, the court calculated an accounting of the partnership and determined that Khela paid $154,291.43 and Taplett $247,071.67 for a difference of $92,780.24, and ordered Khela to pay Taplett $46,390.12 with interest. Based on the partnership agreement, the trial court also awarded Taplett reasonable attorney fees of $18,500. Khela appeals.

The main issue presented in this case is whether Taplett's claims were barred by the statute of limitation for an accounting, RCW 25.04.430. Following the language of the uniform partnership act, the statute provides:

Accrual of actions. The right to an account of his interest shall accrue to any partner, or his legal representative, as against the winding up partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution, in the absence of any agreement to the contrary.

Because the trial court concluded that the partnership dissolved on approximately July 21, 1980 (conclusion of law 23), RCW 25.04.430 and RCW 4.16.040 ¹ would bar the action since it was filed after July 21, 1986. The trial court erred in determining that the partners' activities during the winding up process tolled the statute of limitation.

No Washington case has interpreted RCW 25.04.430 on the issue presented here, although in Skok v. Snyder, 46 Wash.App. 836, 733 P.2d 547 (1987), the court assumed without deciding that the statute would preclude an action for an accounting if raised more than 6 years after the dissolution of the partnership.

A statute that is clear and unambiguous is not open to judicial interpretation. Hines v. Data Line Sys., Inc., 114 Wash.2d 127, 143, 787 P.2d 8 (1990). As Khela argues, the clear and unambiguous language of RCW 25.04.430 establishes that the action accrues at dissolution and not during or after the winding up period. The use of the term "shall" in the statute mandates that the action accrue at dissolution. See Nichols v. Snohomish Cy., 109 Wash.2d 613, 619, 746 P.2d 1208 (1987). We are not at liberty to construe unambiguous statutes or add language we feel the Legislature omitted unintentionally. Bennett v. Hardy, 113 Wash.2d 912, 926, 784 P.2d 1258 (1990). Further, it is clear that the Legislature was aware that it was choosing dissolution instead of the winding up process to begin accrual since dissolution is defined and distinguished from the winding up process in a different section of the act, RCW 25.04.290. ² Applying the unambiguous language of RCW 25.04.430 to the facts of this case, we conclude that Taplett's claim was barred.

Two out of state decisions support the result we reach. In re Estate of Peebles, 27 Cal.App.3d 163, 103 Cal.Rptr. 560 (1972) and Schlossberg v. Corrington, 80 Ill.App.3d 860, 35 Ill.Dec. 936, 400 N.E.2d 73 (1980). Although conflict exists among different jurisdictions whether the statute of limitation accrues at dissolution, these two decisions are based on the language of statutes comparable to RCW 25.04.290. In both cases the courts relied on the statute and held that the statute of limitation accrued at dissolution.

Taplett's attempt to distinguish these cases based on the fact that the partnerships dissolved due to the death of a partner or the lack of activity during the winding up process is not meaningful. In each case the courts followed the language of the statute and the amount of activity was not relevant. In re Estate of Peebles, 103 Cal.Rptr. at 563-64 and Schlossberg v. Corrington, 35 Ill.Dec. at 939, 400 N.E.2d at 76. These cases support our conclusion that the statute of limitation period commences at dissolution.

We reject Taplett's argument that even if RCW 25.04.430 establishes that the statute of limitation period begins at dissolution, RCW 25.04.220, another provision of the partnership act, authorizes an accounting after the statute of limitation had run. The statute reads:

Right to an account. Any partner shall have the right to a formal account as to partnership affairs:

(1) If he is wrongfully excluded from the partnership business or possession of its property by his copartners,

(2) If the right exists under the terms of any agreement,

(3) As provided by RCW 25.04.210,

(4) Whenever other circumstances render it just and reasonable.

(Emphasis added.) RCW 25.04.220. Taplett claims, and the trial court agreed, that under section (4) the trial court has the discretion to determine when an action for an accounting accrues. The trial court noted the conflict among other jurisdictions whether an action for an accounting accrues at dissolution and relied on an Idaho case, Heileson v. Cook, 108 Idaho 236, 697 P.2d 1250 (1985) to support its decision. We decline to adopt the novel approach of Heileson.

In Heileson, the Idaho Court of Appeals reversed the trial court's ruling that the claim was barred by Idaho Code (I.C.) § 53-343, a statute identical to RCW 25.04.430. ³ Four years after winding up the partnership Heileson brought an action for an accounting against his former partner and for a money judgment based on partnership liabilities. The partnership had dissolved in September 1977, the winding up was completed in December 1979, and the claim was filed on September 1, 1983. The Heileson court asserted that Heileson may have a right to an accounting based on two other provisions of the Idaho partnership act, I.C. § 53-321and I.C. § 53-322 ⁴ but remandedthe case to resolve a factual dispute regarding Heileson's role in winding up the partnership. The parties had disputed whether Heileson was left to wind up the partnership or whether the partners agreed to terminate the partnership with Heileson receiving certain partnership property and assuming the partnership debts. Heileson has not been followed by any court outside Idaho.

The Heileson decision purported to follow an Idaho Supreme court case, Ramseyer v. Ramseyer, 98 Idaho 47, 558 P.2d 76 (1976). In that case, the court noted that in some jurisdictions a cause of action for an accounting does not accrue until the cessation of the partnership transactions, including transactions during the winding up process, but rejected such an approach because of the specific statutory language that stated that actions for accounting accrue at dissolution. However, the court reached its conclusion only after determining that another section of the partnership act, comparable to RCW 25.04.220, was not applicable to the dispute. It was this language on which the Heileson court relied. Taplett argues the rationale of these Idaho cases applies and that the comparable Washington statute could give rise to an accounting.

Heileson and Ramseyer are the only cases that could conceivably support the trial court's conclusion...