McGURK
v.
MOORE et ux.
No. 110.
Supreme Court of North Carolina.
October 10, 1951.*55 Sanford W. Brown and William V. Burrow, Asheville, for plaintiff, appellant.
No counsel contra.
ERVIN, Justice.
Under the statute, a notice of lis pendens can be filed against real property only in an action affecting its title. G.S. § 1-116. The appeal, therefore, presents this primary question: Does the complaint state a cause of action affecting the title to the land held by the defendants as tenants by the entirety?
In passing on this inquiry, we accept as true the factual averments of the complaint. We are not bound, however, by the legal conclusions of the pleader.
When one partner wrongfully takes partnership funds and uses them to buy or improve property, his co-partners may obtain redress in one of these alternative ways:
1. They may compel him to account to the partnership for the funds, and enforce the resulting claim as an equitable lien on the property. Hanna v. McLaughlin, 158 Ind. 292, 63 N.E. 475; Holmes v. Gilman, 138 N.Y. 369, 34 N.E. 205, 20 L.R.A. 566, 34 Am.St.Rep. 463, 30 Abb.N.Cas. 213; Brown v. Orr, 110 Va. 1, 65 S.E. 499, 135 Am.St. Rep. 912.
2. They may charge the property with a constructive trust in favor of the partnership to the extent of the partnership funds used in its purchase or improvement. G.S. § 59-51; The American Law Institute: Restatement of the Law of Restitution. section 202. See, also, in this connection: Crone v. Crone, 180 Ill. 599, 54 N.E. 605, and 68 C.J.S., Partnership, § 88.
The plaintiff invokes these principles in the case at bar. He concludes as a matter of law that the contract of May 1, 1947, creates a partnership between him and the male defendant in the business designated as Capitol Motors. Starting with this legal conclusion as a premise, he advances these interdependent arguments to sustain the notice *56 of lis pendens: That the male defendant wrongfully took funds of the partnership existing between him and the plaintiff under the firm name of Capitol Motors, and used them to improve the land and to pay off instalments of its purchase price; that by reason thereof the plaintiff is entitled to a decree under the principles invoked by him charging the land with a constructive trust in favor of the partnership to the extent of the funds of the partnership thus misappropriated and used by the male defendant; and that in consequence the action affects the title to the land.
The plaintiff's position is valid if, and only if, his premise is sound. The contract of May 1, 1947, is in writing, and the question of whether or not the plaintiff and the male defendant are partners in the business known as Capitol Motors depends upon the legal effect of the written contract under the provisions of the Uniform Partnership Act, which was adopted in North Carolina in 1941.
The Uniform Partnership Act defines a partnership as "an association of two or more persons to carry on as coowners a business for profit." G.S. § 59-36(1). When the written agreement is tested by this definition, it is manifest that there is no partnership between the plaintiff and the male defendant in the business designated as Capitol Motors, for the very simple reason that the indispensable requisite of co-ownership of the business is lacking. City of Wheeling v. Chester, 3 Cir., 134 F. 2d 759; Spier v. Lang, 4 Cal.2d 711, 53 P.2d 138; Cook v. Lanten, 335 Ill.App. 92, 80 N.E.2d 280; Smith v. Maine, 145 Misc. 521, 260 N.Y.S. 409, 425; Provident Trust Co. of Philadelphia v. Rankin, 333 Pa. 412, 5 A.2d 214. Under the contract, the male defendant is the sole owner and operator of Capitol Motors. The plaintiff merely made repayable "advances and loans" of money to defendant for use in the business. Bankers Mortgage Co. v. Commissioner of Internal Revenue, 5 Cir., 142 F.2d 130; B. J. Carney & Co. v. Murphy, 68 Idaho 376, 195 P.2d 339. Indeed, all of the indicia of a partnership are wanting in the contract except that of sharing profits. It is plain, however, that the plaintiff is entitled to receive a share of the profits simply as compensation or interest for the use of his money by the male defendant. In re Mission Farms Dairy, 9 Cir., 56 F.2d 346; Black v. Brundige, 125 Cal.App. 641, 13 P.2d 999. Consequently, the stipulation as to the sharing of profits falls within the following provision of the Uniform Partnership Act: "In determining whether a partnership exists, these rules shall apply: * * *
"(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment: * * *
"(d) As interest on a loan, though the amount of payment vary with the profits of the business * * *." G.S. § 59-37.
When all is said, the relation between the plaintiff and the male defendant under the contract is simply that of creditor and debtor. For this reason, the plaintiff is not entitled to charge the land held by the defendants as tenants by the entirety with a constructive trust, and this action does not affect the title to such land.
This brings us to this secondary and final question: May an unauthorized notice of lis pendens against land held by a husband and wife as tenants by the entirety be canceled on motion of the wife alone?
A motion for the cancelation of an unauthorized notice of lis pendens must be made by some person aggrieved by the continuance of the notice on the records. Painter v. Gunderson, 123 Minn. 342, 143 N.W. 911. Manifestly the owner of the property involved is such a person. Faber v. Hanbury, 159 App.Div. 59, 144 N.Y.S. 381. Inasmuch as each tenant by the entirety is deemed seized of the whole estate, Winchester-Simmons Co. v. Cutler, 199 N. C. 709, 155 S.E. 611, either of them may move to cancel an unauthorized notice of lis pendens against the property held by the entirety. This conclusion finds substantial support in a well reasoned decision of the Appellate Court of Indiana, holding that one tenant by the entirety may apply for *57 the judicial protection of his rights in the property. Humberd v. Collings, 20 Ind. App. 93, 50 N.E. 314.
The order canceling the notice of lis pendens is affirmed.
VALENTINE, J., took no part in the consideration or decision of this case.