Drummond v. Batson

• Court: Arkansas Supreme Court
• Writing for the Court: HART, J.
• Citation: Drummond v. Batson, 162 Ark. 407, 258 S.W. 616 (Ark. 1924)
• Decision Date: 04 February 1924
• Docket Number: 142
• Parties: DRUMMOND v. BATSON

258 S.W. 616

162 Ark. 407

DRUMMOND v. BATSON

No. 142

Supreme Court of Arkansas

February 4, 1924

Appeal from Union Chancery Court; J. Y. Stevens, Chancellor affirmed.

STATEMENT OF FACTS.

This is an appeal from a decree of the chancery court winding up and settling the affairs of a partnership and distributing its assets to the persons entitled thereto.

The suit was commenced in the chancery court by N.W. Drummond against S. H. Batson on June 7, 1922. Drummond asked for a judgment against Batson upon certain promissory notes for the amount of $ 5,000, and for the foreclosure of a lien on Batson's half interest in the furniture and fixtures of the Garrett Hotel in El Dorado, Arkansas, to secure said indebtedness.

Batson filed an answer and cross-complaint against Drummond on June 19, 1922. He defended the suit on the ground that a partnership existed between himself and Drummond in operating the Garrett Hotel, and that his share of the profits of the partnership was more than sufficient to pay the notes sued on. By way of cross-complaint he alleged that Drummond had unlawfully prevented him from taking any part in running the partnership business, and had denied that he had any interest therein. He asked that the business of the partnership be wound up and that an account be stated between them. He asked for the appointment of a master to state the account, and for a receiver to take charge of the partnership property and wind up its affairs and distribute the proceeds arising from the sale of the partnership property to the partners.

On the 11th day of April, 1922, N.W. Drummond and S. H. Batson entered into a written agreement whereby the former sold to the latter a half interest in all furniture, fixtures and other property used in operating the Garrett Hotel in El Dorado, Arkansas, and also a half interest in a lease on the Garrett Hotel, which Drummond had already secured, and which terminated on the first day of January, 1923.

According to the testimony of Batson, a partnership was formed between them for the purpose of operating the hotel, and both of them proceeded to discharge their respective duties in operating the hotel under the partnership. Subsequently Drummond denied that any partnership existed between them, ,and excluded Batson from any share in the management of the hotel.

On the other hand, Drummond denied that any partnership existed between them, and claimed that Batson owed him for the purchase price of a half interest in the furniture and fixtures of the hotel, and had given him a lien on said property to secure the payment thereof.

The chancery court refused to appoint either a receiver or a master, as prayed for in the cross-com-plaint of Batson. The chancellor, however, did undertake to state an account between the parties, and, after entering a decree in favor of Drummond for the balance found to be due upon the notes sued on, ordered a sale of Batson's interest in the property in satisfaction thereof. This decree was entered of record on the 22d day of June. 1922. To reverse that decree Batson appealed to this court.

Upon appeal it was held that, under the facts established in the chancery court, a partnership existed between Drummond and Batson for the operation of the Garrett Hotel. The decree of the chancery court was reversed, and the cause remanded with directions to appoint a master to state an account between the parties, in accordance with the opinion, and to appoint a receiver to take charge of and wind up the partnership business. The opinion of the court was delivered by Judge SMITH on March 26, 1923. Batson v. Drummond, 158 Ark. 29.

Upon the remand of the case to the chancery court; a receiver and a master were appointed on the 26th day of April, 1923. The receiver was directed to take charge of the hotel and the partnership business, and to wind up the partnership affairs. The master was directed to state an account between the partners.

During the pendency of the former appeal to this court, N.W Drummond secured from R. N. Garrett, the owner of the hotel a new lease, in writing, on it. The lease is dated November 3, 1922, and runs from January 1, 1923, to December 31, 1923. On February 3, 1923, N. W. Drummond, by a contract in writing, assigned and transferred to R. E. Harland the new lease, and, in the same instrument, conveyed to him all of the furniture, fixtures, and other personal property forming a part of the Garrett Hotel as then maintained and operated by N.W. Drummond. N.W. Drummond had been operating the hotel during all of this time, and turned the same over to R. E Harland on February 3, 1923. R. E. Harland then operated the hotel until May 1, 1923, when, by the orders of the chancery court, he turned it over to the receiver. The receiver continued to operate it until it was sold by him, under orders of the court, on June 30, 1923. During all of this time there was an oil boom in El Dorado, Arkansas, and the hotel was operated at a profit. There was a continued rise in the rental value of property, especially of good hotel property like that in question.

The court considered the new lease for the year 1923, which Drummond had secured in his own name, to be a part of the partnership's assets, and directed it to be sold, and it was sold by the receiver in connection with the other assets of the partnership.

The chancellor held that Batson was entitled to one-half of the net profits derived from the operation of the hotel from the time he was excluded from the partnership until the sale by the receiver of the partnership assets under directions of the court. This included the time that the hotel was operated by N.W. Drummond, by R. E. Harland, and by the receiver.

Other facts will be stated in the opinion.

A decree was entered in accordance with the findings of the chancellor, and the proceeds derived from the sale of the property were directed to be distributed to the parties found to be entitled to them.

N. W. Drummond and R. E. Harland have both appealed from the decree of the chancery court.

Decree affirmed.

Geo R. Haynie and Goodwin & Goodwin, for appellant Drummond.

1. Batson estopped himself from claiming any interest in the lease for the year 1923. 136 Ark. 405; 153 Ark. 432, 243 S.W. 811.

2. The partnership was dissolved as of the date of the filing of the cross-complaint by Batson, June 19, 1922, and thereafter, until the expiration of the then existing lease on the Garrett Hotel, Drummond was a trustee of the lease for Batson until its expiration on December 31, 1922. 72 S.E. 638; 153 N.W. 522; 45 Pa.Super. Ct. 575; 110 Miss. 553.

3. Since the contract which created the partnership was not a contract for any definite time, the relationship created was a partnership at will. 58 Mich. 476, 25 N.W. 472; 138 P. 544; 15 Ari. 280; 142 P. 194; 114 S.W. 260; 168 U.S. 328; 148 N.Y.S. 801, 85 Misc. 510; 81 Ark. 68, 98 S.W. 685.

U. L. Meade, W. H. Hawkins and Marsh & Marlin, for appellant Harland.

1. When, on February 3, 1923, Drummond sold to Harland the lease for the remainder of the year 1923 and the fixtures and furnishings, Harland thereby procured a good title to the lease for that year, and a good title to a one-half interest in the furnishings and fixtures. In none of the cases relied on by appellee has it been held that, when partners fall out and a suit is filed for dissolution of the partnership, either of them from that time is precluded from dealing solely for himself with respect to any property not then a part of the partnership assets. The litigation at once ends the relation of trust and confidence. The relation is broken when one partner sues the other for an accounting and winding up the affairs of the partnership. 60 S.W. 619.

2. Notice of lis pendens was never filed concerning this lease, or calling it into question. C. & M. Digest, § 6979. While it has been held that actual notice of the pendency of a suit involving certain property given to one who expects to deal in it is as effectual as would be the filing of a notice of lis pendens, yet that does not extend to the point of holding that notice so given that a thing was involved in a certain suit, which was not in fact involved or described in such suit, was of any effect. Notice of a fact that does not exist cannot bind any one. 27 L. R. A. 449; 31 S.C. 527. There was no express agreement as to the duration of the time the partnership should last. By implication it was to cease when the lease that was jointly owned by Batson and Drummond terminated. 227 U.S. 57 Law. ed. 608. The suit pending was notice to Harland that the lease for the year 1922 was jointly owned by Batson and Drummond, that they were partners in the operation of the hotel under that lease, and that Batson owned a half interest in the furniture and fixtures, etc. It could not have been construed as notice that Batson claimed any interest in a lease for 1923. 8 Barb. 122, 27 L. R. A. 467, note, 1st col.; 12 Jones & S. 116; Collyer on Partnership, par. 160; 27 L. R. A. 483, note, 1st col.; 50 Mich. 401; 27 L. R. A. 484, note, col. 2.

3. The procedure adopted against Harland amounted to depriving him of his property without due process of law. 47 L. R. A. 744. See also 42 Mich. 272; 124 F. 61; 84 Cal. 327; 103 Cal. 297; 113 Ky. 751; 64 F. 443; 83 Ill.App. 514; 16 How. Pr. 527. The proceeding was summary, instead of a suit in equity wherein the issues between Harland and the receiver could be tried out apart from the rights of the other parties in the main proceeding. 107 F. 898, 899.

McKay & Smith, Mahony, Yocum & Sage, and J. N. Saye, for appellee.

1. The partnership owned the lease for 1923. All assets of the partnership which the plaintiff seized and converted to his own use remained...