New v. Wright

Peytou, C. J.: It appears from the record in this case, that Charles B. New and Charles A. Wright, on the 13th day of July, 1865; formed a partnership in the mill and lumber business, for the term of five years from that date. The bill of complaint of Charles B. New, filed In the chancery court of Jefferson county, on the 19th day of March, 1869, states that he was possessed of a large tract of land in said county of Jefferson, commonly called his “ Buena Vista” plantation, on which was a great number of cypress trees, well suited and valuable for the purpose of being sawed into lumber, and that on said tract there was a valuable site for a saw-mill, convenient to said cypress timber, and to the Mississippi river, for shipping lumber from such mill site, and that on said place he had material and machinery suitable for the construction of a saw-mill in part. That by the terms of said partnership, the said Charles A. Wright, was to use the cypress timber on said tract of land, for the said term of five years, to such an extent as might be necessary to carry on the saw-mill and lumber business, and to dispose of the same, according to the terms of the contract of partnership; that complainant was to allow said Wright, the use of the machinery, then on said place, as part of the machinery of said saw mill, to be erected by said Wright, on said mill site, as soon as was practicable, and he was to place therein, circular saws, and also machinery necessary and usual for the purpose of sawing lumber, personally to superintend the construction of said mill, the arrangement of the machinery, the hiring of laborers, and to defray all expenses incurred in the building of the mill, the purchase of machinery, wages of laborers, and all other expenses incident to the running of the said mill, and for which the complainant was not in any way to be responsible. But one-half of the sum thus expended in the construction of the mill, the purchase of the machinery, and the hire of labor by the said Wright, is to be paid to him, and one-half of the machinery, other property and labor furnished by complainant, to be paid to him — 207 — out of the proceeds of the first sales of lumber, sawed in said mill, and when such payments were so made to the said parties, the mill and machinery should be the joint property of the complainant and said Wright, who was to continue to run -the mill, and the profits resulting therefrom, to be equally divided between them; that complainant was not to be liable for any of the debts contracted by said Wright, in the purchase of machinery, hiring of. labor, running the mill, or in any other manner whatever. The bill states that complainant was in part paid for his half of the machinery, materials and labor, furnished by him in the erection of said mill, and that said Wright was also paid his entire half of the outlay in the purchase and erection of machinery, labor and materials in building said mill. And when these several outlays were paid to complainant and said Wright out of the proceeds of the sales of the first lumber sawed, the said mill was to be run by the said Wright, as their joint property, at his sole expense, and that complainant was entitled to one-half of the proceeds of the lumber sold; that by the terms of the partnership, the complainant’s capital, to-wit: The mill site and cypress timber, were to be set-off against the services of said Wright and expenses of running said mill and selling the lumber made thereat, for which complainant was to be in no manner bound, and that he is entitled to one-half of the proceeds of all the lumber sawed by the said mill, and sold by the said Wright, and to one-half of the lumber remaining unsold; and notwithstanding said mill has been constantly engaged in sawing-lumber ever since the same went into operation until the present time, and is still engaged in sawing, and large quantities of lumber sawed therein have been sent to market, and sold by said Wright, and the money therefor received by him, and that he is still engaged in sawing and selling the lumber, the products of the said mill, he has hitherto wholly failed to account with complainant for his share of the products of said mill, or of the proceeds of the sales of said lumber, or to pay one cent thereof to complainant, except as be — 208 — fore stated, as part of the one-half interest of the complainant in the machinery, labor, and materials furnished in the erection of said mill; that complainant has in vain sought a settlement of his share of the said proceeds with the said Wright, who pretends that the expenses of running said mill consumed all the proceeds of the sales of the lumber, and that more money is paid for the running of said mill, in outlay for labor and other pretended charges and expenses, than the amount of the sales of lumber sawed by said mill, and in excess of such proceeds of lumber, to the sum of several thousand dollars ; that there is due complainant, as his share of the proceeds of the lumber sold from said mill by said Wright, a large sum of money, subject to no abatement for expenses incurred by said Wright in running said mill, and the precise amount of which can only be ascertained by referring the whole matter to a master or commissioner of the court to take and state an.account of the sum due complainant ; that neither party, in entering into the partnership, contemplated any other use of the said prill, than to the cypress timber on said tract of land, on which it was erected, and for the sawing of no other timber on any other tract of land or grown elsewhere ; and the said Wright in violation of the contract of partnership, and without the consent of complainant, has ceased to procure cypress timber from the said “ Buena Yista” tract of land of the complainant for the use of said saw-mill thereon, and has been for some time heretofore, and now is procuring other cypress timber from other persons to saw, and is sawing the same into lumber on said mill, and thereby defeating one of the objects the complainant had in view in entering into the partnership, to-wit: To turn his own cypress timber into productive capital; and that such provision justifies a dissolution of the partnership, and winding up the business thereof. The bill further charges that said Wright, upon a fair settlement of said business, will be found in debt to complainant in an amount so large that he will not be able to pay the same, unless the stock of timber now on hand at said mill or — 209 — elsewhere belonging to the said Wright, procured from others, and lumber on hand in which he has half interest, and the interest he has in said mill, would be sufficient to pay and satisfy such indebtedness, and which complainant does not believe, and that he is in danger of losing a portion of what, is due him. He therefore prays for an injunction to restrain the said Wright and his agents from removing any saw logs, cypress, or lumber belonging to said firm, or to the said Wright, out of the jurisdiction of the court or from said saw-mill, or from selling the same or any part thereof, and that a receiver be appointed to take charge of said business, and that on the final hearing, an account be taken and stated between complainant and said Wright, and if, upon the coming in of said account and the confirmation thereof, the said Wright be found indebted to the complainant, that a decree be made for the payment thereof, and for •a seizure and sale of the interest of the said Wright in the said saw-mill, stock, timber, and lumber thereunto appertaining, to an amount sufficient to pay and satisfy said debt, and that said partnership be dissolved and its affairs wound up under the orders of the court. On the 29th day of March, 1869, the defendant moved the court to dissolve the injunction, which -had been granted in this case on the following grounds: 1st. Because there ig no eguity upon the face of the bill; 2d. Because no legal bond has been given in this case ; 3d. Because the penalty in said bond is, wholly insufficient, and the surety therein is insolvent. This motion was sustained by the court without stating, upon what ground, and the injunction dissolved. And at the same term of the court the complainant moved for the appointment of a receiver, which motion was overruled by the court;' and from these decrees of the court in dissolving the injunction and overruling the motion for the appointment of a receiver, the complainant appeals to this court. It appears from the affidavit of Wright, that the usual sawing of said mill per day in the best running season, was at — 210 — least sis thousand feet; and from, his testimony upon the hearing of said motions, that since the mill went into operation in September, 1865, he had sold lumber to an amount between twenty and twenty-three thousand dollars, and that the expenses of running the mill were about thirty thousand dollars, and that he had not bought any timber or saw logs himself, but his wife did buy some saw logs and lumber. The propriety of the action of the court in dissolving the injunction is impeached by the appellant, and presents the first question for our consideration. The bill of complaint charges that neither party contemplated any use of the said mill .than to saw the cypress timber on the complainant’s said tract of land, on which the mill was erected, and for the sawing of no other timber, and that the said defendant, in disregard of the terms of the partnership, and without the consent of the complainant, has ceased to procure cypress timber from the said tract of land of the complainant, for the use of the saw-mill thereon, and has been for some time heretofore? and now is, procuring other cypress from other persons to saw, and is sawing the same into lumber on said mill, and thereby defeating one of the objects the complainant had in view in entering into the partnership, and that object was to turn his own cypress timber into productive capital. And this allegation is, to some extent, corroborated by the evidence of the appellee, who testified that his wife bought saw logs and timber. This was using the mill in a manner unauthorized by the terms of the contract of partnership, and would justify an injunction, and together with the loss of seven thousand dollars in running the mill for more than three years, would-perhaps authorize a dissolution of the partnership. The injunction, therefore, could not have been properly dissolved for the want of equity on the face of the bill. But it must be conceded that the bond given on obtaining the injunction was clearly insufficient, yet the court should have given reasonable time to the appellant to make a new bond, and upon his failure to do so, within the time appointed, the injunction should be dissolved. Rev. Code, 548, art. 58. We — 211 — think the court erred in thus dissolving the injunction without giving time to make a new bond. The remaining question for our decision is, did the court err in overruling the motion for the appointment of a receiver ? “ It must be admitted,” said the master of the rolls, in Madgwith y. Winkle, 6 Beavan, 495, “ that when an application is made for a receiver in partnership cases, the court is always placed in a position of very great difficulty. On the one hand, if it grants the motion, the effect of it is to put an end to the partnership, which one of the parties claims a right to have continued ; and on the other hand, if it refuses the motion, it leaves the defendant at liberty to go on with the partnership, at the risk and probably at the great loss and prejudice of the dissenting party. Between these difficulties, it is not very easy to select the course which is best to be taken, but the .court is under the necessity of adopting some mode of proceeding to protect, according to the best view it can take of the matter, the interests of both parties.” In order to justify the dissolution of a partnership, on the ground of misconduct, abuse or ill-faith of one of the parties, it is not sufficient to show that there is a temptation to such misconduct, abuse or ill-faith, but there must be an unequivocal demonstration, by overt acts or gross departures from duty, that the danger is imminent, or the injury already accomplished. Story on Partnership, 464, § 288. Where a concern of any character or kind, covering a partnership, is broken up by controversial suits, and it is apparent that there cap be no agreement between the parties in interest for its continuance, a receiver will be appointed. Williams v. Wilson, 4 Sandf. Chan., 379; Edwards on Receivers, 330. And a dissolution of a partnership may be granted and a receiver appointed on account of the gross misconduct of one or more of the parties. 1 Story’s Eq., 635, § 672, a. To authorize the appointment of a receiver there must be some breach of the duty of a partner, or of the contract of partnership. Harding v. Glover, 18 Ves., 281. It was the duty of the appellee to take the timber used at — 212 — the mill, from the tract of land on which it was erected, belonging to the appellant; and the getting timber elsewhere? as alleged in the bill of complaint, was a breach of that duty and of the contract of partnership. And if the -mill sawed six thousand feet of lumber per day, and the running of the mill from the fall of 1865 to the commencement of this suit in the spring of 1869, brings the parties in debt seven thousand dollars, as stated by the appellee in his testimony, it would seem to be a business which neither party should desire to continue. Upon the whole, we are of opinion that the case made by the bill authorizes the appointment of a receiver, and that, therefore, the court erred in overruling the application therefor. Uor the reasons herein stated, the decrees of the court in dissolving the injunction and overruling the motion for the appointment of a receiver, will be reversed, and the cause remanded for further proceedings in accordance with this opinion, with leave to the appellee to answer the bill within sixty days from this date.