Arouani v. Battistic

• Decision Date: 22 January 1938
• Docket Number: No. 12553.,12553.
• Parties: AROUANI et al. v. BATTISTIC.
• Court: Texas Court of Appeals

Page 667

113 S.W.2d 667

AROUANI et al. v. BATTISTIC.

No. 12553.

Court of Civil Appeals of Texas. Dallas.

January 22, 1938.

Rehearing Denied February 19, 1938.

Appeal from District Court, Dallas County; Sarah T. Hughes, Judge.

Suit for dissolution and settlement of partnership by Khalil Arouani and another against Charles Battistic, wherein defendant filed a cross-action and Marie Arouani filed plea of intervention. From the final decree, plaintiffs and intervener appeal.

Reformed and affirmed.

Storey, Sanders, Sherrill & Armstrong, of Dallas, for appellants.

John A. Erhard and Dick P. Wood, both of Dallas, for appellee.

LOONEY, Justice.

This suit was brought for the dissolution and settlement of a partnership, and, as an incident thereto, plaintiffs sought the appointment of a receiver. A chronological statement of the events giving rise to the lawsuit and the progress of the litigation will, we think, lead to a correct understanding and decision of the questions presented.

The partnership agreement between Abdullah Arouani and Khalil Arouani (brothers), first parties, and Charles Battistic, second party, was entered into at San Diego, Cal., on March 12, 1936. Its style was "Egyptian Art Gallery, A. & K. Arouani & Company"; the business to be pursued was the sale of merchandise, particularly Oriental and Egyptian merchandise—rugs, etc. First parties agreed to contribute to the firm merchandise of the value of $15,000, and were to own a 50 per cent. interest; second party agreed to contribute $10,000 in merchandise and $5,000 in cash, and was to own a 50 per cent. interest. The business was to be conducted jointly by Khalil Arouani and Battistic (Abdullah Arouani, during the period here involved, resided in Cairo, Egypt). First parties agreed to place with the partnership from time to time merchandise "owned by them in connection with their other business" (the "other business" referred to being A. & K. Arouani, Inc., a California corporation), to be held on consignment and sold by the partnership; stipulating for monthly audits, "and that, after the payment of expenses of operation, twenty (20) percent of the money derived from the sale of merchandise was to be paid monthly to A. & K. Arouani, to apply on the purchase price of goods delivered on consignment." The contract contained other provisions, not deemed material here, concluding as follows: "This agreement shall be in force and effect as soon as the stocks of merchandise to be contributed, as herein provided, have been approved and accepted and the cash to be paid in has been paid into the funds of said partnership."

On May 10, 1936, the parties entered into a supplemental agreement in writing, stating: "That the stock of merchandise on hand partly checked amounts to approximately $42,831.00 to which shall be added 15% per cent to be considered as duty and freight plus $800.00 that Charles Battistic still owes to complete his share of $15,000.00, which makes a grand total of $50,055.65. Thus out of the aforesaid total amount Charles Battistic and Khalil Arouani will have an equal share in the company of $15,000.00 each, and the balance of approximately $20,000.00 will be considered as merchandise consigned to the Company by Arouani of Cairo, Egypt."

While the agreement stated that the consigned merchandise would be considered as consigned to the company by Arouani of Cairo, Egypt, nevertheless, it is a fact that the merchandise consigned was not by Arouani of Cairo, Egypt, but was from the stock of merchandise formerly owned by A. & K. Arouani, Inc., of Cal.

In July of 1936, in Dallas, Tex., after referring to the partnership agreement of March 12, 1936, executed at San Diego, Cal., the parties stated in writing that, in furtherance of the partnership, they had rented space and obtained a concession from the Texas Centennial Central Exposition, for the purpose of operating therein; that second party (Battistic), in addition to his original investment, had furnished $5,000 to the partnership, and was willing to furnish up to $5,000 additional, the money to bear interest at 6 per cent. per annum; providing a method of payment out of "income received from the sale of any and all merchandise by said partnership, after deducting necessary expenses, and after the payment of the twenty (20) percent due on the consigned merchandise," etc. Omitting several immaterial provisions, the writing continues: "It is further agreed that Khalil Arouani and Abdullah Arouani obligate themselves, during the remainder of the Texas Centennial Central Exposition, to furnish and keep on hand for the benefit of said partnership merchandise on consignment of the value of not less than Fifteen Thousand ($15,000.00) Dollars at prices, kind and quality acceptable to all parties herein, and that at the present time it is understood that the merchandise now held on consignment by said partnership is acceptable and is hereby accepted." The instrument concludes with an affidavit by Khalil before a notary public of Dallas county, to the effect that he executed the agreement on behalf of his brother, Abdullah, and was fully authorized to contract in such capacity. The above comprehends the substance of all written agreements executed by the parties pertaining to the partnership.

In executing the different instruments, and in all dealings in regard to the business, and later in instituting and prosecuting the suit for dissolution of the partnership and settlement of its affairs, Khalil acted both for himself and his brother, Abdullah, who throughout the period covered by the events involved resided in Cairo, Egypt. It will also be noted that the name of Marie, wife of Khalil (whose intervention will hereinafter be discussed), nowhere appears in either of the instruments executed by the parties, nor was her name disclosed in any of the pleadings filed, until after March 18, 1937 (the date of the first decree entered).

The record discloses that the business was operated at a loss; that, the active parties — Khalil and Battistic — having had serious disagreements, becoming very antagonistic, Khalil instituted this suit on December 10, 1936, in the name of himself and his brother, Abdullah, as plaintiffs, against Charles Battistic, defendant, for the dissolution of the partnership, for an accounting and settlement, and, as an incident, asked for the appointment of a receiver, to take charge of and sell the assets of the partnership, and on final hearing that the plaintiffs recover $15,000, or the sum to which they are shown to be entitled. The court appointed Max Rosenfield receiver, who, under the orders of court, administered the assets, as hereinafter shown.

On March 17, 1937, Battistic filed an amended answer, denying plaintiffs' allegations, and in a lengthy cross-action against A. & K. Arouani, alleged that the partnership was launched as provided in the articles of agreement, that A. & K. Arouani placed with the partnership for sale consigned merchandise of the approximate value of $20,000, as provided in the agreement; that the partnership was indebted to him (Battistic) in the sum of $7,000 and interest, for money loaned; that Khalil Arouani had abstracted and appropriated to his own use over $5,000 in cash belonging to the partnership, also a large quantity of merchandise of the value of $9,000, which should be accounted for in the partnership settlement; wherefore, Battistic prayed that he recover $16,026.72, and that the same be given the status of a prior and preferred claim against the assets in the hands of a receiver, for half the remainder of the assets, for costs of suit, and relief general and special.

On February 4, 1937, Khalil filed a supplemental pleading (styling himself plaintiff), in which he answered the cross-action of Battistic, and set up a claim against the partnership, alleging, in substance, that the consigned merchandise of the value of approximately $20,000 and $2,400 additional obtained from Cairo, Egypt, did not belong to the partnership; wherefore, he prayed that the receiver be directed to separate the consigned merchandise from the merchandise belonging to the partnership, and that the consigned merchandise be set aside to Arouani of Cairo, Egypt etc.

On March 5, 1937, Khalil also filed a pleading styling himself plaintiff, in which he prayed that the court set aside to him certain merchandise, fully described in sheets attached to the pleadings, marked Exhibit A (being an inventory of seven pages), and in connection with the application alleged that the merchandise consigned to the partnership was of the value of $20,000, was never partnership property, nor properly in the hands of the receiver; wherefore, he prayed that the receiver be directed to deliver the merchandise to him (Khalil) free of all claims of every kind, and that it be not charged with any administration expenses; also alleged that merchandise of the value of $2,513.85, shipped to him from Egypt, had never been paid for by the partnership; therefore, prayed that it also be set aside to him free of all administration expenses. The pleading also contained other allegations not deemed material here.

On March 18, 1937, after a full hearing, the court rendered a lengthy judgment of fact findings, orders final in nature, and orders administrative, in substance as follows: (a) That the partnership of Abdullah and Khalil Arouani and Charles Battistic, plaintiffs and defendant, owned and were entitled to recover 47.61 per cent. of all goods, wares, and merchandise of every kind and character held or claimed in the possession of Max Rosenfield, the receiver; (b) that Arouani, Inc. (the California corporation), owned and was entitled to recover 47.61 per cent. of said goods, wares, and merchandise; (c) that A. & K. Arouani, a partnership doing business in Cairo, Egypt, composed of Abdullah and Khalil, was entitled to have and recover 4.78 per cent. of said goods, wares, and...