Opinion
Nos. 7809, 7810.
February 15, 1977. Rehearings Denied March 15, 1977. Writs Refused May 6, 1977.
APPEAL FROM CIVIL DISTRICT COURT, PARISH OF ORLEANS, STATE OF LOUISIANA, HONORABLE THOMAS A. EARLY, JR., J.
Chaffe, McCall, Phillips, Toler Sarpy (George A. Kimball, Jr. and James P. Farwell), New Orleans, for plaintiffs-appellants.
Reynolds, Nelson Theriot (Charles W. Nelson, Jr.), New Orleans, for defendants-appellees, Brown, Duffy, Kremer Odence.
Mark W. Malloy, New Orleans, for defendant-appellee, Edgar L. Braud.
Flanders Flanders (Dudley D. Flanders), New Orleans, Breazeale, Sachse Wilson (Victor A. Sachse), Baton Rouge, Baldwin, Haspel, Rainold, Meyer, Reso, Dussom Little (Michael F. Little), New Orleans, for amici curiae.
Before REDMANN, STOULIG, BOUTALL, SCHOTT and BEER, JJ.
Plaintiffs, as the liquidators of a partnership, instituted these proceedings against ten general partners alleging that the partnership agreement provided in pertinent part as follows:
"The net losses of the partnership annually shall be . . . borne by the general partners in the proportions set opposite their respective names . . ."
They alleged further that the partnership suffered losses in each of the years from 1969 through 1974 and prayed for judgment against each defendant in various amounts.
Six of the defendants filed various peremptory, declinatory and dilatory exceptions. One of these defendants settled his case. With respect to the remaining five, the trial judge maintained their exceptions of no cause of action and dismissed plaintiffs' suit against them. From this judgment plaintiffs have appealed.
The basis for the exceptions of no cause of action filed by defendants is that a partner is not liable for the payment of a specific sum before there has been a final accounting and settlement of partnership affairs. They cite a plethora of cases in our jurisprudence which stand for the proposition that a partner cannot be required to account to his other partners for a debt arising out of their relationship as partners until the partnership has been completely liquidated and there has been a final accounting for all partnership assets and liabilities and a final settlement of all partnership affairs. However, they acknowledge that the jurisprudence has supplied an exception in that the rule does not apply where the parties have by express agreement segregated a particular item of account from the partnership settlement. Parker v. Davis, 225 La. 359, 72 So.2d 877 (La. 1954), Rondeau v. Pedesclaux, 3 La. 510 (1832).
Plaintiffs have alleged that there was a special agreement among the partners with respect to each bearing his proportion of the annual losses of the partnership so that they allege facts which give rise to the principle enunciated in the cited cases. Defendants attempt to distinguish the Rondeau case on the theory that the partnership agreement there provided that the partners would sign a note for their indebtedness, the defendant partner in the case did sign such a note and this constituted a true segregation from other partnership accounts of the particular indebtedness involved; but the basis for the decision in the Rondeau case was the partnership agreement itself, just as in this case the partnership agreement itself imposed an obligation on defendants to put up their proportionate shares for the losses in the years in question.
Defendants would make a distinction because this case is brought by the liquidators with the connotation that the affairs of this partnership are now being wound up so that the theory of preventing actions against individual partners until a final settlement is especially appropriate. LSA-C.C.P. Art. 692 provides that a liquidator is the proper plaintiff to sue to enforce a right of a partnership. Surely if the partnership itself had the right to insist under the partnership agreement that the defendants put up their proportionate shares of the losses, the liquidators now have the same right.
Finally, defendants have contended that the agreement is unclear since the word "borne" might be interpreted to mean that the losses might be charged to the partners but not necessarily collected. If the language is unclear evidence might be admissible to show the intention of the parties and perhaps the manner in which this particular part of the partnership agreement had been implemented in the past. None of this is before us since we are dealing only with the exception of no cause of action.
Accordingly, the judgment appealed from is reversed and set aside, the exceptions of no cause of action are overruled and the case is remanded to the trial court for further proceedings. All costs of this appeal are to be borne by defendants. Liability for other costs is to be determined by the trial court.
REVERSED AND REMANDED.
REDMANN, J., dissents with written reasons.
BOUTALL, J., dissents with written reasons.
Even if "borne" means "paid in cash", plaintiff's petition alleges nothing more than that a partnership which is in liquidation suffered losses which the partners are supposed to pay. That petition does not state a cause of action.
One supposes that the partners would be paying themselves, and that the liquidators would ultimately return to each partner 100% of his partnership capital. Surely the liquidators who may already have 75% of the capital of each cannot demand the other 25% in order to return 100%. Or does one suppose that the partnership has creditors to whom the partner's payments must be paid? If the latter is the case, then the petition should allege the facts that justify the partners being forced to pay capital deficits into a partnership which is already in liquidation. It does not allege such facts. The exception of no cause of action was proper, although leave to amend to state a cause of action might properly be allowed.
BOUTALL, Judge, dissenting.
The majority opinion has accurately described the issue herein. If Article 10 of the partnership agreement is interpreted to require that each partner shall pay into the partnership the amount of the loss experienced for that year as a special yearly payment, then a partner could be made to pay under the agreement, just as in the case of Rondeau v. Pedesclaux, 3 La. 510 (1882). Basically, my disagreement is that the quoted provision of Article 10 does not require payment as was the case in Rondeau.
At the outset I must point out that the petition is rather vague, and I believe necessarily so, in order that the petitioners may make a better showing of compliance with the Rondeau exception. Although the petition makes frequent references to the partnership agreement, it does not make the agreement a part of the petition so that the court may use the document for an examination of that particular section of Article 10 in light of the entire agreement between the parties. However, my interpretation of Article 10 is simply that annually, (presumably at the end of the calendar or fiscal year) an audit will be made to determine whether the company made money or lost money, and that amount will then be either credited to or deducted from whatever other assets or credits of the partner are held by the partnership. The petition in itself discloses that no demands have ever been made of any of the partners in either suit to pay at the end of any year such amount as may have been claimed as a loss.
It should be kept in mind that this is not an ongoing partnership such as the Rondeau situation. This is a liquidation to wind up the affairs of the partnership, the net result of which will be to distribute to each partner his proportionate share of the assets or debts of the partnership. Thus in effect, it is in the nature of a partial accounting, which is denounced by numerous jurisprudential cases. The petition, although particularized to losses for specific years, shows in itself that it is not just an assessment of a specific year's loss in accordance with a proportionate division amongst the partners. An analysis of the sums mentioned show that there is no proportionate correlation amongst them from year to year, and this, coupled with the allegations that the losses are adjusted subject to certain credits, etc., demonstrate that this is simply a guise to enforce contribution from particular partners without an accounting of their overall standing in the partnership. Specifically, it is noted that in the suit against partner Wolf, the petition alleges that he was a partner since 1966, and although it states that in each specific year in which there was a loss an adjustment was made of credits and debits resulting in a certain figure, there is no statement that his account anywhere along the way was in arrears, or even is in arrears at the time of filing of the suit. In the suit against the several partners, there is no statement as to when they became partners, but a similar set of allegations prevail.
Thus, under the allegations of this petition, any of these partners may be in a capital position superior to that of the partners not party to the suit and yet they are being asked to contribute money to the liquidation of the partnership. I can only consider this as an attempt to defeat the final adjustment of account owed to the partners under the law. Presumably, if this suit is permitted to proceed, not one of these defendants would be able to use as a defense the fact that the partnership owes him money, and presumably he will be unable to require that the account of other partners be considered in relationship to his. Any accounting between the partners or interrelation of their accounts can hardly be considered without reference to the entire partnership agreement, only a few selected words of which are placed before us in this petition. It may be that reference to the entire partnership agreement would support plaintiff's position that it has a cause of action. If so, then the exception should be maintained, but plaintiff given an opportunity to amend.
However we have before us only the bare allegations as noted above. One can glean from the allegations that the partnership is in liquidation, that the affairs are being wound up, and the accounts of the various partners are being settled. To bring this suit, requiring the defendants to pay specific year's losses without regard to the partners' overall status in the partnership and without an accounting, is representative of the very evil that the general rule of partnership suits is designed to prevent. The judgment of the trial court should be affirmed.