Smith v. Hancock , 163 Ga. 222 ( 1926 )

Hines, J.

The petition sets out a cause of action. This will fully appear from the statement of facts preceding this opinion. This being so, the court below did not err in overruling the demurrer upon the ground that the petition set forth no cause of action; and this would render any further consideration of the case by us unnecessary, but for the fact that this court would have no jurisdiction to determine any of the assignments of error if the petition does not make a case in equity.

Does the petition make a case in equity? It was framed upon the theory that the contract between the plaintiff and J. A. Smith created a partnership, and was brought for the purpose of winding up the partnership, affairs, and for an accounting between the partners. The defendants demurred to the petition, on the grounds that this contract created the relation of creditor and debtor between the parties, and, as the relief sought by the plaintiff can only be granted in the event that a partnership existed, that the petition was demurrable upon the grounds that it set forth no cause of action; and because the plaintiff had an adequate and complete remedy at law for the collection of the indebtedness of the defendants to the plaintiff. It does not necessarily follow that the petition was subject to these grounds of demurrer, if this contract did not create a partnership between the parties. Since the passage of the uniform procedure act of 1887 (Civil Code of 1910, § 5406), a petition which sets forth a legal cause of action, though using terms appropriate to an equitable proceeding, is not demurrable on the grounds that it sets forth no cause of action, that there is no equity in the petition, and that the plaintiff has an adequate remedy at law. DeLacy v. Hurst, 83 Ga. 223 (4) (9 S. E. 1052); Teasley v. Bradley, 110 Ga. 497 (4) (35 S. E. 782, 78 Am. St. R. 113); Booth v. Mohr, 122 Ga. 333 (50 S. E. 173); Logue v. Gardner, 152 Ga. 356 (110 S. E. 25); Smith v. Manning, 155 Ga. 209 (116 S. E. 813). A demurrer to the whole petition should be overruled if any part thereof be sustainable. Hudson v. Hudson, 119 Ga. 637 (46 S. E. 874); Georgia Peruvian Ochre Co v. Cherokee Ochre Co., 152 Ga. 150 (108 S. E. 609); Logue v. Gardner, supra. If a petition alleges a cause of action, good either at law or in equity; it is not demurrable on the ground that it sets forth no cause of action. If it sets up an action at law, • it is not subject to demurrer on the ground that there is no equity in the petition. Smith y. Manning, supra. If the contract between "the plaintiff and J. A. Smith created a partnership, the plaintiff could, at the expiration of the term of partnership, bring an equitable petition against Smith for an accounting, where the latter was the active manager of the affairs of the partnership, kept its records, had possession of all of its assets, declined to give the plaintiff any information as to the affairs of the firm, and declined to come to any settlement with him. Equity jurisdiction over matters of account extends to accounts between partners. Civil Code (1910), § 4586. “It seems that no adequate remedy exists at law for one partner who seeks an account against his copartner.” Bennett v. Woolfolk, 15 Ga. 213. A court of equity has jurisdiction in all cases of an accounting and settlement between partners. Epping v. Aiken, 71 Ga. 682; Neel v. Morris, 73 Ga. 406; Bennett v. Smith, 108 Ga. 466 (34 S. E. 156); Huger v. Cunningham, 126 Ga. 684 (56 S. E. 64); Mathewson v. Reed, 149 Ga. 217 (99 S. E. 854).

Did the contract between the plaintiff, O. C. Hancock, and the defendant, J. A. Smith, create a partnership? This contract recited that Smith is the owner of a certain peach orchard, which is fully described in said contract, and that Smith was desirous of having Hancock furnish the money to operate and cultivate the same, prune and spray the peach trees, and to pick, pack, haul, and deliver on board of cars all peaches grown on said trees. Hancock agreed “to furnish all the necessary money to plow, spray, prune and fertilize, and to properly cultivate said peach trees; also to furnish the necessary money to pick, pack, crate, and deliver on board of cars . . all of the peaches grown on said peach orchard.” For the furnishing of said money Smith agreed “to pay to” Hancock “one half of the net proceeds arising from the sale of any and all peaches grown on the peach trees described as aforesaid. All of said money so advanced for the necessary cultivation of said peach trees . . to be a charge against said orchard, and to be first paid before any of the proceeds from said peach orchard shall be divided between the parties, . . that is to say,” Hancock “is to have all the advances that ho may make in the operation of said peach orchard . : first repaid to him, then whatever is left is to be divided equally between the parties.” The contract further provides that “all moneys advanced hereunder” by Hancock to Smith “for the purpose of operating said peach orchard, or otherwise, shall be a personal indebtedness to” Hancock by Smith. Hancock contends that this agreement creates a partnership between him and Smith. Smith contends that it creates the relation of debtor and creditor between him and Hancock. “A partnership may be created either by written or parol contract, or it may arise from a joint ownership, use, and enjoyment of the profits of undivided property, real or personal.” Civil Code (1910), § 3155. A partnership is not expressly created by this instrument. There is no “joint ownership, use, and enjoyment of the profits of undivided property.” Hancock and Smith did not own jointly the peach orchard which was to be operated under this agreement. “A joint interest in the partnership property, or joint interest in the profits and losses of the business, constitutes a partnership as to third persons. A common interest in profits alone does not.” Civil Code (1910), § 31.58.

Many efforts have been made to formulate a definition of partnership which at once would be both brief and comprehensive; but owing to the great diversity between partnership agreements this has been found difficult if not impossible. For a collection of these definitions, see 30 Cyc. 349(1), note 1. No one of these definitions has commanded universal approval and acceptance. An agreement to share both the profits and the losses of a business lias been held in some cases to be conclusive evidence of a partnership. Where such an agreement exists, the parties have usually been held to be partners, many cases holding that the sharing of both profits and losses is the true test of the existence of a partnership. But an agreement to share profits and losses does not absolutely, as a matter of law, create a partnership. If other circumstances in the transaction show that the parties did not intend to create a partnership, none is created. Such an agreement is merely prima facie evidence of a partnership. 22 Am. & Eng. Enc. Law (2d ed), 40. Joint ownership of the capital is a strong circumstance tending to prove the existence of a partnership; but its absence is not conclusivo proof that there is no partnership. It is often difficult to determine whether a loan or advance of money for the use of which the lender is to have interest, and also a share in the profits, or a share in the profits in lieu of interest, creates the relation of partners or that of debtor and creditor. In some cases it has been held that if nothing appears but the furnishing of money by one of the parties and a sharing in the profits by both, a partnership may be presumed. But the point 'on which those decisions has generally rested is, whether the alleged loan was to be repaid at all events, or whether it was risked in the business, or was to bo repaid only from it, and was subject to be lost in whole or in part, according to the results of the business. Whenever a joint enterprise, a joint risk, a joint sharing of expenses, and a joint interest in the profits and losses concur, a partnership exists. For a full discussion of this subject see Floyd v. Kicklighter, 139 Ga. 133 (16 S. E. 1011). A joint interest in partnership property is another and a very distinct thing from a common interest in the profits alone. The former interest is that of an owner, who has a right to dispose of the profits, and that makes him a partner; but a common interest in the profits confers no title jointly with the other and gives no power to control and dispose of the profits as owner. Sankey v. Columbus Iron Works, 44 Ga. 228. There may be a legal and valid partnership, although one or more of the parties are guaranteed by the others against loss. Camp v. Montgomery, 15 Ga. 195; Brandon v. Conner, 117 Ga. 759 (45 S. E. 371, 63 L. R. A. 260). In such case, however, there must be present the essentials which constitute a partnership; and it must bo borne in mind that a partnership may exist as to third persons, when it would not exist between the parties. Floyd v. Kicking liter, supra. Generally, to constitute a partnership, there must exist risk, either of capital or profits. In most of the cases in which it has been held that a partnership may exist although one of the partners was guaranteed against risk by the others, there was a joint ownership in the partnership property or capital. In such cases, there was a risk of loss of profits. Applying the above principles, how does the present case stand? Smith contributed the peach orchard. .Hancock furnished the capital to operate the same. Both wore to share equally the profits. Both were interested in the profits. If there were losses Smith bore them. If the earnings equaled the expenses, he got nothing for his pains in managing the enterprise. So he was interested in profits and losses. For the use of his capital the plaintiff got nothing if there were no profits. So he had an interest in profits and losses. It follows, therefore, that this contract created a partnership between the plaintiff and J. A. Smith. For a case very much in point, see Epping v. Aiken, supra.

But, if this contract did not create a partnership, we think that the petition makes a case of equitable accounting. Equity has jurisdiction over mutual accounts growing out of privity of contract, of accounts which are complicated and intricate, where discovery is prayed and granted, where the account is of a trust fund, of accounts between partners and tenants in' common, or where a multiplicity of suits would render a trial difficult, expensive, or unsatisfactory at law. Civil Code (1910), § 4586. Accounting is one of the ancient heads of equity jurisdiction. While this is true, a plaintiff may not come into equity to recover for demands which he may have, founded on account, where he has a plain and adequate remedy at law. McLaren v. Steapp, 1 Ga. 376. We think the facts of this case bring it within the jurisdiction of equity over accounts. While the petition does not allege that the accounts are complicated and intricate, this may fairly be inferred from the fact that the plaintiff is seeking an account of partnership transactions which ran through three years, and which involved large expenditures of money. Besides, under the contract between the plaintiff and J. A. Smith, the advances made by the plaintiff to Smith were to be a charge upon the orchard, that is, upon the peaches grown in the orchard by Smith, with advances of money furnished by the plaintiff. One purpose of the proceeding was to enforce this charge of the plaintiff upon the proceeds of the peaches grown during the year 1925, and which were in the hands of the other defendant, S. D. Smith. Furthermore, the plaintiff was seeking to enforce an express trust between him and S. D. Smith. By the close of the season of 1924 differences arose between the plaintiff and J. A. Smith, in reference to the management of the partnership affairs, and plaintiff notified Smith that he would exercise his right, under the contract between them, to discontinue said business and terminate the same. Smith finally prevailed upon the plaintiff to continue the business, upon the understanding and agreement that S. D. Smith should handle the finances, and repay plaintiff for the advances which he might make for the year 1925, out of the proceeds of the peaches raised that year. Under said agreement S. D. Smith received the proceeds of the peach crop for that year, amounting to a large sum. Instead of holding said proceeds and applying the same to the payment of plaintiff for his advancements, S. D. Smith placed the proceeds in a bank, subject to the joint check of himself and J. A. Smith. In consequence of this situation, S. D. Smith can not pay the plaintiff for his advances to make the peach crop for 1925. Besides, J. A. Smith will not pay to the plaintiff one half of the not proceeds of the crop of that year. This proceeding by the plaintiff is to have an accounting from the defendants for this trust fund arising under the above agreement. In view of these facts the plaintiff does not have a full, complete, and adequate remedy at law; and for this reason he could resort to equity, because the accounts are complicated, because they are mutual accounts growing out of privity of contract, and because he was entitled to have an accounting for the trust funds in the hands of S. D. Smith, arising from the proceeds of the peach crop of 1925, and taken possession of by him under the agreement hereinbefore referred to. So we are of the opinion that the petition makes a case in equity, and that the court did not err in overruling the demurrer; and for this reason this court has jurisdiction to pass upon and determine all the assignments of error raised by the bill of exceptions.

The defendants further demurred to the petition, upon the ground that it is multifarious in that there is a misjoinder of causes of action and a misjoinder of parties defendant. While multifariousness is a ground of demurrer (Civil Code of 1910, § 5631), it is not favored by the courts. Graham v. Dahlonega Gold Mining Co., 71 Ga. 296 (3). A petition is not multifarious because all of the defendants are not interested in all of the matters contained in the suit. It is sufficient if each party has an interest in some matter in the suit which is common to all, and that they are connected with the others. Blaisdell v. Bohr, 68 Ga. 56; Cowan v. Nicholson, 158 Ga. 425 (123 S. E. 681). An equitable petition, filed for a general account and settlement of a partnership, may embrace any object necessary to the complete adjustment of its affairs. Wells v. Strange, 5 Ga. 22 (1); City Bank of Macon v. Bartlett, 71 Ga. 798. As S. D. Smith was in the joint possession with J. A. Smith of funds of said partnership, which plaintiff is seeking to have ajoplied to his claims against the latter, he was a proper party.

The' defendants further demurred upon the ground that it does not appear from the petition that the plaintiff complied with the obligations resting upon him under his contract with J. A. Smith, and especially because it is not alleged that petitioner has paid the rents due S. D. Smith under the lease contract, and because it is not alleged that he had made the payments according to the bond for title. The petition alleges that there is a balance due plaintiff of $6,621.91, on the advances made by him to J. A. Smith for the operation of the peach orchard for the year 1923, and that he advanced to Smith for the same purpose for the year 1924 $17,398.00, or a total of $24,019.91 for the years 1923 and 1924; that, from the best records obtainable, he has received from said business for said years a total of $12,055.16; that for the year 1925 he advanced, for the purpose of making the peach crop for that year, $4,964.40, and has- been repaid by the said S. D. Smith $4,206.40. While he does not in so many words allege that he complied with the obligations assumed by him in his contract with J. A. Smith, he does to all intents and purposes so allege. For the purpose of the accounting sought in this proceeding, we do not think it was necessary for the plaintiff to have alleged that he had paid the rent due under the lease contract between J. A. Smith and S. D. Smith, nor the purchase-money due to S. D. Smith under his bond for title to J. A. Smith. Plaintiff is not asserting any rights under the lease and the bond for title, nor does it appear that under the transfers which he took of these instruments he undertook, and agreed to pay the rents due under the lease, nor the purchase-money due under the bond for title. For these reasons we do not think that the petition in this case was demurrable because it does not appear therefrom that he had made these payments. Furthermore, as the plaintiff is seeking an accounting of all claims and counter-claims between him and the defendants, and as upon such accounting the plaintiff may not be due the defendants, or either of them, any amount, it is no.t necessary for his petition to allege that he paid demands which, the defendants might hold against him. Wynne v. Fisher, 156 Ga. 656 (119 S. E. 605).

The defendants further demur on the ground that the petition does not set forth the sundry advances made by petitioner to J. A. Smith for the purpose of operating the peach orchard during the years 1923, 1924, and 1925. They specially demur to the ninth paragraph of the petition, in which it is alleged that the plaintiff paid the Kingman & Everett bill, $136, spraying bill, $325, Dunlap Hardware Company bill, $110, Ware & Simmons bill, $130, and McCook Lumber Company bill, $157, because the same are not itemized. In a proceeding to obtain an accounting, the plaintiff is not obliged to set out an itemized statement showing the amount claimed by him, or to aver how much is due him upon an accounting. All the petitioner in such a proceeding has to do is to aver facts sufficient to indicate that-something will be. found to be due him by the defendant. Gould v. Barrow, 117 Ga. 458 (43 S. E. 702). For this reason, the court did not err in overruling these grounds of the demurrer.

The defendants made a motion to dismiss the petition, on the ground that the plaintiff, on June 2, 1925, had made a written assignment of all his interest in the peach crop then growing and being harvested on the premises described in the above contract between Hancock and J. A. Smith. This transfer was made to secure certain notes given by Hancock to said bank. The plaintiff was suing to recover advances of money made by him to J. A. Smith for the operation of the latter’s peach orchard for the years 1923, 1924, and 1925. The bulk of his claim was for the two former juars. Clearly, the assignment to the Fourth National Bank of his interest in the peach crop for 1925 would not defeat his right to recover advances made for the above purpose for the years 1923 and 1924. For this reason the court did not err in overruling the motion to dismiss the entire petition. Even if the motion had been limited to striking so much of the petition as sought to recover the advances made for the year 1925, we do not think that it should have been sustained.

Applying the above principles, the. court did not err in overruling the demurrer to the petition, and the judgment of the court below is Affirmed.

All the Justices concur.