Chapter 8-4 Accounting

• Jurisdiction: United States

8-4 Accounting

8-4:1 Overview

A suit for an accounting is an equitable remedy which seeks to ascertain the amount or the identity of property one party owes another. A plaintiff must first obtain an order authorizing an accounting, which may then be carried through to final judgment following the formal accounting. An action for accounting may be a suit in equity or a particular remedy sought in conjunction with or as a remedy for another cause of action.

8-4:1.1 Related Causes of Action

Sworn Account, Account, Judicial Winding up of Partnership, Breach of Formal Fiduciary Duty, Breach of Contract, Attorney Breach of Fiduciary Duty

MUST READ CASES

Sauceda v. Kerlin, 164 S.W.3d 892 (Tex. App.—Corpus Christi 2005), review granted, judgment vacated, 05-0653, 2006 WL 4706002 (Tex. Mar. 10, 2006), rev'd, 263 S.W.3d 920 (Tex. 2008)

T.F.W. Mgmt., Inc. v. Westwood Shores Prop. Owners Ass'n, 79 S.W.3d 712 (Tex. App.— Houston [14th Dist.] 2002, pet. denied)

8-4:2 Elements

8-4:2.1 Equitable Accounting

(1) The parties must usually have a pre-existing contractual or fiduciary relation-ship.¹⁰⁴

(2) The facts and accounts presented are so complex that there is no adequate remedy at law, such as:¹⁰⁵

(2)(a) A close fiduciary relationship

• A close fiduciary relationship is a situation in which a court may order an accounting, such as:

• Executor of an estate and beneficiaries or heirs;¹⁰⁶
• Partners;¹⁰⁷
• Remaindermen and holder of a life estate.¹⁰⁸

• However, there must be such complexity within the account(s) that no adequate remedy at law exists.¹⁰⁹

• When a party can obtain adequate relief at law through the use of standard discovery procedures, a trial court does not err in refusing to order an accounting.¹¹⁰

(2)(b) Mutual accounts between the parties

• Parties having mutual accounts between them is a situation in which a court may order an accounting.¹¹¹
• However, there must be such complexity within the account(s) that no adequate remedy at law exists.¹¹²

• Where parties can obtain adequate relief at law through the use of standard discovery procedures, a trial court does not err in refusing to order an accounting.¹¹³

(2)(c) Non-mutual accounts

• When the parties have non-mutual accounts is a situation in which a court may order an accounting.¹¹⁴
• However, there must be such complexity within the account(s) that no adequate remedy at law exists.¹¹⁵

• When a party can obtain adequate relief at law through the use of standard discovery procedures, a trial court does not err in refusing to order an accounting.¹¹⁶

8-4:2.2 Other Grounds for an Accounting

(1) Certain statutes authorize or require an accounting

• Certain statutes authorize an accounting, including but not limited to:

• Trustees of an express trust;¹¹⁷
• Custodians under the Uniform transfers to Minors Act;¹¹⁸
• Guardians of the estate of an incapacitated person;¹¹⁹ and
• Partners in a business venture.¹²⁰

8-4:3 Damages and Remedies

8-4:3.1 Order Requiring Accounting

The order requiring an accounting is a means of ascertaining the amount or the identity of property one party owes another.¹²¹

Whether a court will grant a request for an accounting is within the court's discretion.¹²²

8-4:3.2 Judgment for Payment

A plaintiff must first establish his right to an accounting before a judgment for payment can be rendered.¹²³

Final judgment will be entered on the amount determined to be owed by one party to the other.¹²⁴

8-4:3.3 Interest

Prejudgment interest is an appropriate remedy.¹²⁵

8-4:3.4 Attorney's Fees

Attorney's fees are only appropriate if the underlying controversy allows for their recovery.¹²⁶

8-4:4 Defenses

8-4:4.1 Statute of Limitations

The four-year limitations period controls a suit for an accounting between partners.¹²⁷

8-4:4.2 Laches

Laches is an appropriate equitable defense.¹²⁸

8-4:4.3 Unclean Hands

Unclean hands is an appropriate equitable defense.¹²⁹

8-4:4.4 Other Equitable Defenses

Other equitable defenses would be appropriate, given the remedy's equitable nature.¹³⁰

8-4:5 Procedural Implications

8-4:5.1 Jurisdiction

A suit for an accounting is to be brought in an appropriate court determined in accordance with the amount in controversy.¹³¹

• Specifically, the amount in controversy pleaded must be within the jurisdiction of the district court.¹³²

8-4:5.2 Appeal of Order Granting or Denying Accounting

Generally, an order granting or denying an accounting is interlocutory in nature and is not appealable.¹³³

An order that denies an accounting and disposes of all parties and claims is final and appealable.¹³⁴

8-4:5.3 Abandonment of the Remedy

If the petition for an accounting contains a specific prayer for relief in the form of legal damages, any related claim for an accounting will be deemed to have been aban-doned.¹³⁵

8-4:5.4 Separate Trials

A party may move for a separate trial on...