Ludwig v. Walter

331 S.E.2d 177 (1985)

David J. LUDWIG v. Larry L. WALTER and wife, Suzanne R. Walter.

No. 8425SC1135.

Court of Appeals of North Carolina.

July 2, 1985.

*178 Bryce O. Thomas, Jr., Hickory, for plaintiff.

Rudisill & Brackett, P.A. by J. Steven Brackett, Hickory, for defendant.

WELLS, Judge.

Defendant Suzanne Walter had only a nominal interest in these proceedings and we allowed her motion to dismiss the appeal as to her on 6 May 1985. That portion of the court's order dismissing the case as to her is therefore affirmed. All references hereinafter to "defendant" are to Larry Walter.

Plaintiff first assigns error to the court's refusal to award him a one-half interest in the Mount Pleasant property. Plaintiff claimed that upon formation of the partnership, defendant promised to convey *179 to him the interest in exchange for cash contributions to capital. Defendant denied any such agreement and timely pleaded the Statute of Frauds. N.C.Gen. Stat. § 22-2 (1965). That statute requires some written memorandum of the contract, containing all the essential features of an agreement to sell. Kidd v. Early, 289 N.C. 343, 222 S.E.2d 392 (1976). None of the documents cited by plaintiff fit these requirements. Partnership tax returns listing the Mount Pleasant property as a partnership asset may reflect nothing more than defendant's intent to give the partnership the tax benefits of its depreciation. A lease signed by defendant and plaintiff merely designates them as "partners in common" without defining that term or indicating their ownership of the property or any arrangement for the partnership to operate it. The lease never took effect in any event. The other documents cited by plaintiff also fail to satisfy the Statute of Frauds. We note in this context that the evidence clearly showed that defendant purchased the property in his own right and consistently received the rent payments under oral agreement between himself and the tenants. We conclude that the court could and did properly find that plaintiff had failed to satisfy the statute's requirement of some written memorandum evidencing a contract or agreement to sell an interest in the Mount Pleasant property.

Relying principally on the provisions of N.C.Gen.Stat. § 59-40(c) (1982), which recognizes that partnership property may be held by one but not all partners, read in conjunction with N.C.Gen.Stat. § 59-56 (1982), which makes a partner's interest in partnership property, even real property, a personal property interest, plaintiff contends in essence that the Statute of Frauds does not apply. This argument presupposes that the Mount Pleasant property was originally brought into the partnership, which the court, on conflicting evidence, found did not occur. Moreover, the general rule is that land owned individually by one who enters into a partnership cannot become a partnership asset absent some written agreement sufficient to satisfy the Statute of Frauds. 60 Am.Jur.2d Partnership § 98 (1960). While we have found no North Carolina case so holding, such a rule conforms to public policy of this state. The Statute of Frauds is a firmly established feature of our real property law, and we do not believe the General Assembly intended to abrogate it implicitly by enacting the partnership statutes. The court's order denying plaintiff an interest in the Mount Pleasant property was accordingly proper.

Plaintiff's next two assignments of error concern a $12,000.00 note signed by himself and defendant. Plaintiff contends (1)(a) the court should have declared the note a partnership obligation and (b) ordered it paid out of the partnership assets and (2) the court erred in not ordering defendant to pay the interest accrued thereon. Regardless of whether the note was signed by plaintiff and defendant as individuals or as partners, its legal effect is the same. N.C. Gen.Stat. § 59-45 (1982); N.C.Gen.Stat. § 25-3-413 (1965); Grimes v. Grimes, 47 N.C.App. 353, 267 S.E.2d 372 (1980). Nothing in the record suggests that the lender has exercised its right to payment "on demand."

Nevertheless, it does appear that the note was executed in furtherance of the partnership, and that there may be partnership funds available to satisfy it. In the interest of resolving this matter, the court should have determined the nature of the note and ordered it repaid out of the partnership funds if possible. It will have an opportunity to do so, since we remand for other error. As to defendant's alleged promise to pay the interest on the note, the court had diametrically conflicting oral evidence before it. The note itself reflects no such promise. Its conclusion that there was no such promise, being supported by the evidence, is binding on this court.

Plaintiff assigns error to the court's finding of fact No. 15 as unnecessary. Since the finding did not contribute in any way to the judgment, we simply disregard it, without *180 affecting our consideration of the other assignments.

Plaintiff assigns as error the court's failure to credit his account for half the mortgage payments on the Mount Pleasant property during the life of the partnership, since these payments were made by checks from the partnership accounts. As noted above, the property belonged solely to defendant and rent payments were made solely to him. He deposited the payments in the partnership account. The fact that defendant then wrote checks from that account to pay the mortgage does not conclusively establish that he intended the payments to be on behalf of the partnership, particularly in light of the informal treatment of the property. We note that the court did not credit these deposits, nor the profit thereon (excess of rent over mortgage), to defendant's capital account. In light of the sketchy accounting and conflicting testimony as to oral agreement, we conclude that the court reached the correct result, supported by the evidence.

Finally, plaintiff assigns error to the court's failure to dissolve the partnership in accordance with his prayer for relief. It appears that the court's order resolved all differences between the parties regarding liability to each other, and that the partnership would conduct no further business. The court has authority to order dissolution. N.C.Gen.Stat. § 59-62 (1982). Dissolution will not affect the liability of the partners, N.C.Gen.Stat. § 59-64 (1982), but will relieve the parties of further liability for each other's acts. N.C.Gen.Stat. § 59-65 (1982). Dissolution will enable the court to distribute the remaining partnership assets. N.C.Gen.Stat. § 59-68 (1982). An order of dissolution, having been prayed for and not resisted, undoubtedly was appropriate. The cause is remanded for further consideration of this issue on the existing record.

Affirmed in part; reversed and remanded in part.

JOHNSON and COZORT, JJ., concur.