Masterson v. Hubbert

MR. JUSTICE HOLLOWAY delivered the opinion of the court. In September, 1917, plaintiffs and defendant entered into a contract in writing by the terms of which plaintiffs agreed to pay defendant $3,491.93 for a one-half interest in a restaurant business in the city of Havre. The sum of $1,150 was paid in cash and the balance was represented by four notes, each for $500 and one note for $341.93, due, respectively, in two, four, six, eight and ten months. In February, 1918, plaintiffs commenced this action and in their complaint allege that by the agreement a partnership was formed; that plaintiffs entered into possession and control of the business with defendant and have continued in such possession and control; that they have realized as their proportion of the profits, the sum of $1,000 which has [616] been applied to the discharge of their first two notes under the terms of the agreement; that the business is profitable and, if properly conducted, will increase in volume and value; that defendant made certain false representations concerning some of the property; that he has abused plaintiffs, treated them with disrespect and refuses to talk with them; that he has appropriated to his own use $700 over and above his just proportion of the partnership profits; that he continues to appropriate partnership property to his individual use and benefit, and refuses to account. The prayer is for a dissolution of the partnership, for an accounting and, as ancillary relief, for the appointment of a receiver. Upon this complaint alone and before summons had been served, the trial court appointed a receiver without notice, and defendant appealed from the order. For the purpose of this appeal only we assume that the allegations of the complaint are true and that sufficient facts are stated to warrant a dissolution and an accounting. Section 6698, Revised Codes, authorizes the appointment of a receiver in an action “between partners or others jointly owning or interested in any property or fund, on the application of the plaintiff, or of any party whose right to or interest in the property or fund, or the proceeds thereof, is probable, and where it is shown that the property or fund is in danger of being lost, removed or materially injured.” Section 6699 requires that notice [1] of the application must be given the adverse party unless “it shall appear to the court that there is immediate danger that the property or fund will be removed beyond the jurisdiction of the court, or lost, materially injured, destroyed or unlawfully disposed of.” In other words, to justify the appointment without notice, it must be made to appear that the delay resulting from giving notice would defeat the very right which plaintiffs seek to protect, or imperil the property involved in the litigation. (State v. Clancy, 20 Mont. 284, 50 Pac. 852.) To give notice would involve a delay of only five days at the utmost, which period might be shortened by the court or judge (sec. 7141, Rev. Codes). [617] "What, then, is the emergency disclosed by the complaint which does not brook delay for the brief period necessary to give notice? (a) It is alleged that at the time the contract was entered [2] into, defendant falsely represented that he owned the cash register in the restaurant and the electric sign in front of it and deceived the plaintiffs as to the rental paid for the premises; but it is not contended that by reason thereof a delay of a few days will work prejudice to plaintiffs’ interest. Such a representation, if relied upon by plaintiffs to their injury, might be made the foundation for a rescission of the contract, but it furnishes no ground for the appointment of a receiver. (b) It is alleged that defendant has treated plaintiffs with [3] abuse and disrespect and refuses to talk with them. But courts of equity will not interfere merely because of quarrels or disagreements between persons jointly interested in business (High on Receivers, 4th ed., sec. 474), and it is not one of the functions of a receiver to establish or maintain the entente cordiale between partners. It is not alleged that this lack of harmony injuriously affects the business; on the contrary, it is alleged that it is proceeding successfully. (c) Finally, it is charged that the defendant has appropriated [4] and continues to appropriate to his individual use funds and other property belonging to the partnership. As a general partner the defendant has the right to participate in the management and control of the business (sec. 5482, Rev. Codes), and while his fraudulent misappropriation of the common funds would furnish justification for a dissolution of the partnership and for an accounting, it is not sufficient ground for the appointment of a receiver that he has in his hands funds of the firm for which he refuses to account, in the absence of a showing that there is danger that money in which plaintiffs are interested will ultimately be lost to them, and particularly in the absence of any allegation that defendant is insolvent and unable to respond for the amount found due upon an accounting. (High on Receivers, sec. 497.) [618] The remedy here sought is an extraordinary one, never available except upon a showing of necessity. (Prudential Securities Co. v. Three Forks etc. R. Co., 49 Mont. 567, 144 Pac. 158.) If the defendant is solvent — and there is no allegation that he is not — a receiver would serve no purpose which could not be subserved equally as well in the due course of this litigation in the enforcement of whatever decree may be entered. The purpose of appointing a receiver in an action of this [5] character is to prevent the partner at fault dissipating the common property and thereby defeating the object of the suit. (20 R. C. L. 962.) It is not the province of a court through its receiver to become the general manager of private enterprise or conduct the business of a partnership. (Murphy v. Patterson, 24 Mont. 591, 63 Pac. 380.) Where the appointment is made before final adjudication upon the merits, as in this instance, it amounts in effect to the levy of an execution in limine, entailing expense and other hardships often out of proportion to the value of the right sought to be protected (Hickey v. Parrot Silver & Copper Co., 25 Mont. 164, 64 Pac. 330), and for [6] this reason the power should be exercised sparingly, with extreme caution, and only to prevent manifest wrong immediately impending, or in case it is made to appear clearly that the complaining party is in danger of suffering irreparable injury and there is no other plain, speedy or adequate remedy available. (Montana Ranches Co. v. Dolan, 53 Mont. 397, 164 Pac. 306.) There is not any allegation that this partnership has any [7] debts, and therefore the receivership could not be employed for the benefit of creditors that they might come in pari passu and share equitably in the distribution of the proceeds. The only substantial ground of complaint is that plaintiffs are not receiving their full share of the partnership profits and that certain funds are being misappropriated. It is not alleged that they have been ousted or denied participation in the management and control of the business; on the contrary, the complaint [619] discloses affirmatively that plaintiffs are in possession of, and are actively engaged in managing, the business with defendant, and that the enterprise is being conducted successfully. There is therefore no ground for appointing a receiver, since plaintiffs are authorized to protect their interests fully and to realize on firm assets their just proportion of the profits. (See. 5482, Rev. Codes; High on Receivers, sec. 490.) The order is reversed. Reversed. Mr. Chief Justice Brantly and Mr. Justice Sanner concur.