19 Cal. 2d 147, 119 P.2d 713
On or about January 2, 1940, plaintiff and defendant entered into an oral agreement to become partners in the operation of a bowling-alley business in Burbank, California, without expressly fixing any definite period for its duration.1 Plaintiff advanced the sum of $6,986.63 to the partnership as a loan to be repaid from prospective profits as soon as reasonably possible.2 The partnership purchased an undivided one-half interest in an existing bowling-alley establishment for $2,500, paying $1,250 in cash and executing a promissory note for the balance, while plaintiff assumed payment of a $4,650 trust deed obligation on the property titled in his name.3 The partners also purchased alleys and furnishings, executing promissory notes totaling $4,596 secured by a chattel mortgage on the equipment.4
The partnership opened the bowling-alley business on March 15, 1940.5 From opening until the filing of the action on June 28, 1940, a period of approximately three and one-half months, the business operated at a profit, allowing partial repayment of capital indebtedness and payment of $50 weekly salaries to each partner.6 Shortly after opening, differences arose between the partners concerning management of the business and their respective rights and duties, causing a continuing lack of harmony that led to steadily declining gross receipts while much of the partnership indebtedness, including plaintiff's loan, remained unpaid.7
On July 5, 1940, in response to plaintiff's complaint and upon order to show cause, the court appointed a receiver to take charge of the partnership business, which remained under the receiver's control and management thereafter.8 After trial, the court found that the partners had not agreed upon any definite term for the partnership.9 The court also found that the parties disagreed on practically all matters essential to the operation of the business.10 Defendant had committed breaches of the partnership agreement.11 He had so conducted himself in affairs relating to the business that it was not reasonably practicable to carry on the partnership business with him.12
Pursuant to these findings, the trial court entered a decree adjudging the partnership dissolved and ordering the receiver to sell the assets.13 The decree directed that sale proceeds and receiver's operating funds, after receiver's fees and expenses, be applied first to partnership debts including the $6,986.63 loaned by plaintiff, with one-half the remainder paid to plaintiff along with $100.17 in costs and the balance to defendant.14 The decree further permitted either party to bid at the sale using credit in lieu of cash to the extent of sums accruing to that party from the proceeds.15 It also provided for a personal judgment against defendant for any deficiency in plaintiff's costs.16
Defendant appealed from the decree.17
Whether the evidence warrants a decree of dissolution of the partnership?18
Under Civil Code § 2426, on application by or for a partner the court shall decree a dissolution whenever a partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business, a partner wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him, or other circumstances render a dissolution equitable.19
Yes. The evidence established that the partners disagreed on practically all matters essential to the operation of the business and upon matters of policy in connection therewith.20 Defendant committed breaches of the partnership agreement.21 Defendant so conducted himself in affairs relating to the business that it was not reasonably practicable to carry on the partnership business with him.22 These facts satisfy the elements of Civil Code § 2426 for a judicial decree of dissolution.23
The evidence warrants a decree of dissolution of the partnership.24
Whether the decree properly directed payment of plaintiff's loan from the proceeds of the sale of partnership assets?25
Although a party to a contract may absolutely limit his right to receive a sum of money from a specified source, that limitation yields here.26 When a partner's conduct creates a condition of disharmony in derogation of the best interests of the partnership, the court may order dissolution.27 The court may then properly direct payment of the loan from the sale proceeds.28
Yes. The evidence shows that the defendant's persistence in the commission of acts provocative of dissension and disagreement between the partners made it impossible for them to carry on the partnership business.29 The appointment of a receiver and the decree of dissolution support the order directing the sale of the assets for the purpose of forwarding the settlement of the partnership affairs.30 The defendant is in no position to insist on continued operation of the business.31
The decree properly directed payment of plaintiff's loan from the proceeds of the sale of partnership assets.32
Whether the provision permitting credit bidding at the receiver's sale is proper?33
The procedure for bidding at a receiver's sale of partnership assets, including the use of credit in lieu of cash to the extent of sums accruing to the party from the proceeds, is a matter within the trial court's discretion in equity proceedings.34 Both parties are placed on an equal footing.35 The credit is fixed after the sale.36
Yes. The decree's provision permitted either party to bid using credit in lieu of cash to the extent of sums accruing to that party from the proceeds.37 This procedure placed the parties on an equal footing, with the credit ascertained after the sale.38 No abuse of discretion appears from the record.39
The provision permitting credit bidding at the receiver's sale is proper.40
Whether the trial court erred in its allowance of costs to plaintiff?41
Under Code of Civil Procedure § 1032(e), the assessment of costs in a proceeding in equity is a matter whose disposition rests in the discretion of the trial court. The action of such tribunal will not be disturbed where there is no showing of an abuse of discretion.42
No. The decree provided for plaintiff's recovery of his costs out of the proceeds of the sale of the partnership assets.43 It also provided for a personal judgment against defendant for the payment of this item to the extent that it is not satisfied upon distribution of the proceeds.44 There is no showing of an abuse of discretion in the record.45
The trial court did not err in its allowance of costs to plaintiff.46