Webb v. Butler

• Decision Date: 22 April 1915
• Docket Number: 772
• Citation: 192 Ala. 287,68 So. 369
• Parties: WEBB et al. v. BUTLER et al.
• Court: Alabama Supreme Court

68 So. 369

192 Ala. 287

WEBB et al. v. BUTLER et al.

No. 772

Supreme Court of Alabama

April 22, 1915

Appeal from Chancery Court, Jackson County; W.H. Simpson Chancellor.

Bill by J.C. Butler and another against H.A. Webb and others. From a decree overruling demurrers to the bill, defendants appeal. Reversed and remanded.

Lawrence E. Brown, of Scottsboro, for appellants.

Bouldin & Wimberly, of Scottsboro, for appellees.

THOMAS J.

This is an appeal from a decree of the chancery court overruling demurrers to the amended bill.

One of the appellants and the appellees, with other parties, as partners, on the 14th day of April, 1906, organized and became engaged in a banking business under the firm name of the Bank of Paint Rock, and continued therein until the time of the bank's insolvency on October 21, 1910. Each partner's interest was evidenced by a certificate for the amount of shares held by him. The bill alleges that:

"The shares or interests of the different holders were transferred from time to time and the business continued by taking in new partners on transfer of such stock. At the time of the dissolution of the partnership, the complainants and defendants were the existing partners in said business."

It is further alleged that, subsequent to the closing of the business, some of the surviving partners, by a written agreement, designated complainants, J.C. Butler and J.T Wilburn, trustees, to collect the assets and close the partnership affairs. The agreement was confirmed by order of the chancery court, in the case of Garber, Attorney General v. Bank of Paint Rock. Under the agreement the trustees accepted the trust, and are seeking by this bill to wind up said trust and make a final settlement of the partnership affairs. The trust agreement contained the following clause:

"It is expressly understood that the arrangement evidenced hereby is made for the purpose of effecting the payment and discharge of said debts and obligations of said Bank of Paint Rock as speedily and economically as the same may be accomplished, and that no party to this agreement is to be in any manner prejudiced as to his rights to require any person who may be liable to make contribution for or on account of such liability, and that the equities or rights among the persons who may contribute towards the payment or satisfaction of such debts and obligations of said bank, or against any other party who may be liable to make contribution, shall not in any manner be prejudiced hereby provided for, and nothing herein contained, and nothing contained in any other papers, contracts, or agreements made contemporaneous herewith, for the purpose of effecting a satisfaction of said debts, shall be held to waive or release any other person or any other estate from its just proportion of the losses and indebtedness of said bank, which might be ascertained to be due by such person or estate on an accounting among the partners engaged in said banking business, neither shall anything herein, aforesaid, operate to prevent such accounting among said partners, at law or in equity, as they may be advised."

By amendment a party respondent was made a complainant, and it was further alleged that on the 20th of October, 1910, W.H. Bridges, one of the organizers and the active manager and cashier of the bank, died; that thereafter the complainants and respondents, as surviving partners of said firm, settled with and discharged from further accounting the Bridges estate, and that the greater part of the contributions from the surviving partners had been made by the complainant J.C. Butler, and the other partners are indebted to him on final settlement of the partnership.

The bill further alleges that appellant H.A. Webb became a member of the partnership April 4, 1906, and continued a member until the dissolution, owning one-tenth of the interest therein; that his share of the indebtedness would be about $2,000, for which he is liable to contribute; that on September 16, 1905, appellant and his wife undertook to convey to their daughter Mrs. Freeman, upon a voluntary consideration, their homestead of 120 acres of land in Jackson county, Ala., reserving to themselves the use and occupation thereof for life; that on December 29, 1910, they reconveyed the same lands to the same daughter Dovie M. Freeman; that the first deed was defectively executed, and that the second deed was "voluntary and void as to his then existing liability as a member of said partnership"; that "the said Dovie M. Miller Freeman is now in the possession of said lands, but the said H.A. Webb has reserved a benefit therein and is in the perception of the rents and profits until this date."

The prayer of the bill makes appellants H.A. Webb and Dovie M. Freeman parties respondent, together with five other members of the partnership, and prays:

(1) That "an accounting be had and a settlement be made of the trust herein above stated, and that an accounting be had between said trustees and said partnership." (2) "That the total liabilities of said banking firm in excess of its assets be ascertained; that an accounting be stated between the several members of said partnership, and the amount due from each of them in payment of said liability to be ascertained and decrees be rendered in favor of those who have contributed more than their share toward the payment of said indebtedness and against those who have not contributed their full share." (3) "That the deeds marked exhibits B and C be vacated and set aside as fraudulent and void, and said lands be subjected to the payment of the amount found to be due from said H.A. Webb on said accounting."

1. The demurrer of respondent Webb that the statute provided an exclusive method of settling the affairs of an insolvent bank is answered by the allegation that the agreement appointing the trustees for the administration of the estate of the Bank of Paint Rock was signed by him, and was confirmed by the chancery court. He will not now be permitted to question by demurrer the ruling of the chancery court. Stephens' Dig.Law of Ev. art, 102, p. 161; 3 Eng.Rul.Cas. 310; Garrett v. Lyle, 27 Ala. 586; 6 Mayf. Dig. p. 330.

2. The second class of demurrer is based on the failure to make parties to the bill all the partners of the insolvent bank during the conduct of the banking partnership from April 14, 1906, to October 20, 1910. It is obvious that a partner has the right to an accounting from his copartners at any time, and particularly upon the dissolution. Without it, it is impossible to know whether any particular partner of the business is a debtor or a creditor of his copartners. Courts of equity, in an action to dissolve a partnership, will force an accounting between the partners, even though the accounts are not complicated. Cruikshanks v. McVicar, 8 Bevan's Rolls, 106. Where a partnership was conducted as a joint-stock company, "and the shares or interests of the different holders were transferred from time to time," without the consent or knowledge of the other partners, no inquiry, short of a complete reference in a court of equity, could determine whether a partner was debtor or creditor to his copartners.

The second paragraph of the bill alleges that the interests of individual partners were thus conveyed.

In the agreement, Exhibit A, attached, is the following recital of the parties at interest:

"Now, therefore, in consideration of the premises, we, J.C. Butler, J.G. Cunningham. W.H. Hill, C.C. Keel, H.A. Webb, J.T. Wilburn, S.H. Kennamer, Wallace W. Bridges, each of whom is now or has heretofore been interested in said bank as a partner therein, our several shares or interest varying in amount, and recognizing our liability to contribute ratably towards the satisfaction and discharge of the indebtedness of said bank, do hereby agree and bind ourselves," etc.

The agreement was executed on the day after the bank's failure, and was signed by W.H. Hill and the other partners. Hill is not made a party to the bill, nor is excuse given for his nonjoinder.

It is then clear, from an inspection of the bill and exhibits, that all debtor or creditor partners of the insolvent banking partnership were not made parties. This would have been necessary in a bill filed by a partner against the copartners in the banking enterprise. It was the more necessary that all parties interested be brought before the court in a bill filed by J.C. Butler, individually, and by J.C. Butler and J.T. Wilburn, as the two trustees, for the threefold purpose of having a settlement of the trust, requiring the contribution by the debtor partners, and of obtaining a cancellation of the deeds made by one of the partners, conveying his homestead to a daughter.

Every change in the personnel of a partnership works a dissolution. Warren v. Cash, 143 Ala. 158, 39 So. 124. In First National Bank v. Cheney, 114 Ala. 536, 21 So. 1002, it was declared that a retiring partner is not released from liability to the creditors, unless the creditors agree with the new firm, or its members, for such release. Hall v. Jones, 56 Ala. 493. An agreement of a new firm, formed from an old one by the addition of a new member, to pay the debts of the old firm, must be with the consent of all the members of the new firm. Kling v. Tunstall, 109 Ala. 608, 19 So. 907; Humes v. Higman, 145 Ala. 215, 40 So. 128; Spaunhorst v. Link, 46 Mo. 197.

In a suit between the creditors and the partners of a firm, the creditors may discharge one partner and prosecute the suit against the other partner to a judgment, for the reason that his credit was extended to the firm on each individual liability. Browning v. Grady, 10 Ala. 999; Roberts v. Strang, 38 Ala. 566, 82 Am.Dec. 729; First National Bank v. Cheney, ...