Brooke v. Tucker , 149 Ala. 96 ( 1907 )

Bill to Dissolve Partnership and for an Accounting.

1. Partnership; Contract; Communion of Profit and Loss. — Under a contract by which one party put $100.00 in to the business to be applied to certain indebtedness, both parties were to work together for the interest of the business, and the profits to be divided one-third to each party and one-third to go to the liquidation of certain debts, such parties were partners inter sese, although by the same contract one was regarded as the owner of the business and was to remain in control of the business until the formation of a corporation contemplated by the contract.

2. Same; Accounting; Dissolution; Receivers. — The allegations of the bill that the defendant partner was insolvent, and that he had collected money due the firm which he had appropriated to his own use without making entry thereof on the partnership books, and without acquainting his partner of the facts, are sufficient when supported by proof to warrant a decree of dissolution and the appointment of a receiver.

3. Same: Title to Partnership Property. — The fact that under the contract of partnership the respondent partner has the legal title to the partnership property, is no obstacle to the appointment of a receiver, when such partner has converted profits to his own use in which complainant partner had an interest and to which such complainant partner had contributed money.

4. Receivers; Premature Appointment; Objections; Waiver. — Although defendant partner submitted demurrers to the application for a receiver and filed affidavits against the appointment and thereafter appealed to the chancellor from the order of the register appointing the receiver, he waived his right to insist that the appointment was premature, because appointed by the register before answer filed, when he filed his answer before the chancellor as part of the proofs against the application, on appeal to the chancellor. Whether complainant and Brooke are partners inter sese must be determined by their intention, as the same is expressed in or may be gather from the written agreement entered into by them, a copy of which is made a part of the bill. — Pollard v. Stanton, 7 Ala. 761;Couch v. Woodruff, 63 Ala. 466; Bestor v. Barker, 106 Ala. 240-250,17 South. 389; 24 Am. Eng. Ency. Law, 26. By the contract it is made to appear that complainant and Brooke associated themselves together for the publication of a newspaper. It also appears that at the time the contract was made Brooke was sole owner of the newspaper plant, and it may be conceded that by the terms of the contract he was to remain the owner or possessor of the legal title, and in control, until the formation of the contemplated corporation provided for by the contract; yet this of itself would not prevent the contract from being one of partnership. To constitute a partnership it is not necessary that there should be property forming its capital jointly owned by the partners. The property employed in the partnership business may be separate property of the partners; but if they share in the profits and losses arising from its use, a partnership exists. — McCrary v. Slaughter,58 Ala. 230, 234. According to the contract, complainant "put into the business one hundred dollars, to be applied" to the payment of certain indebtedness mentioned in the contract. The contract stipulates that complainant and respondent shall work together faithfully and diligently for the good of the paper (Critic). By these stipulations it appears that the complainant contributed, not only money to the capital of the enterprise, but his skill and industry besides. The contract provides that the profits of the enterprise are to be divided one-third to complainant, one-third to Brooke, and one-third shall be applied to the liquidation of certain debts incurred by Brooke for the paper and some personal notes held against Brooke by "divers" persons, amounting in all to $600. While nothing is said specifically about the losses, or that complainant is to share in them, yet, construing all the terms of the contract together, it is our opinion that there is created a community of profits and loss, or, as it is expressed in one of our cases, a communion of profit and loss is created. When this is the case, it isthe settled rule of law that a partnership inter sese exists. —Scott v. Campbell, 30 Ala. 728; Smith's Ex'r v. Garth, 32 Ala. 368;Chisholm v. Cowles, 42 Ala. 179; Couch v. Woodruff, 63 Ala. 466; McCrary v. Slaughter, 58 Ala. 230;Autry v. Frieze, 59 Ala. 587; Pulliam v. Schimpf, 100 Ala. 362,14 South. 488; Lee v. Ryan, 104 Ala. 125, 16 South. 2; 24 Am. Eng. Ency. Law, p. 26.

It is insisted, however, that the contract only shows that the formation of a corporation at some future day was contemplated by the parties. It is true the contract provides for the formation of a corporation after the debts of the business shall have been paid; but to say that the contract does not, or that it was not the intention of the parties that it should fix their relations — their status towards each other — during their association together before the time for forming the corporation arrived, would be placing too narrow a construction on its terms. We cannot conclude that it was the intention of the parties that while working together in the business to acquire money with which to pay off the debts, their status should be undefined. Our conclusion is that the parties to the contract are partners inter sese.

The remaining question is, do the bill and affidavits support the appointment of the receiver? As is said in Bard v. Bingham,54 Ala. 463-466: "The authorities affirm as a general rule that where a bill is filed seeking a dissolution of a partnership, and it satisfactorily appears that the complainant will be entitled to a decree for dissolution, a receiver will be appointed of course; the reason being that the same causes which would justify a decree for dissolution generally justify the appointment of a receiver." — Gillett v.Higgins, 142 Ala. 444, 38 South. 664; High on Receivers (3d Ed.) § 472. The bill avers, and we think it is supported by the proof, that Brooke is insolvent. It also avers that Brooke has collected large sums of money due the partnership, which he has appropriated to his own use, and without making any entry of them on the books of the partnership, and without acquainting complainant with the facts. This, if true, and it seems to be supported by the proof taken, constituted a breach of trust on the part of Brooke, and, taken in connection with the insolvency of Brooke, would warrant a decree for dissolution, ``and, therefore, the appointment of a receiver should follow. — Gillett v. Higgins, supra, and authorities there cited.

But it is insisted that the legal title to the plant is in Brooke; that he is in possession, and for these reasons a receiver should not be appointed. Granting that the contract provides that he is the editor and proprietor, and that he is to remain in control until the corporation is formed, yet the complainant paid into the business $100, and if the respondent without complainant's consent converted to his own use profits in which complainant has an interest, and which should have been applied to the payment of the debts, it cannot be doubted that complainant under the contract has an equitable interest in the plant, and none but a court of equity can adjust such an equity; and, this being true, the fact that respondent has the legal title of itself presents no obstacle to the appointment of a receiver. — Beach on Receivers, § 619.

The respondent appeared at the hearing, and submitted demurrers to the application for a receiver and objections to the application being heard. He also submitted affidavits against the granting of the application. From the register's appointment of the receiver he appealed to the chancellor, and on the hearing before the chancellor he lodged with the chancellor his answer to the bill as a part of his proofs against the application for a receiver. So the insistence that the receiver was prematurely appointed, because appointed by the register before answer to the bill was filed, if tenable in the outset, lost its efficacy by the filing of the answer and lodging it with the chancellor, to be considered along with the affidavits submitted to him. — Weis v.Goetter, 72 Ala. 259.

We have found no error in the record, and the decree of the chancellor overruling the motion to dismiss the bill for want of equity and appointing the receiver are affirmed.

Affirmed.

TYSON, C. J., and HARALSON and SIMPSON, JJ., concur.