Hall v. Lommasson

• Decision Date: 18 April 1942
• Docket Number: 8279.
• Citation: 124 P.2d 694,113 Mont. 272
• Parties: HALL et al. v. LOMMASSON et al.
• Court: Montana Supreme Court

124 P.2d 694

113 Mont. 272

HALL et al. v. LOMMASSON et al.

No. 8279.

Supreme Court of Montana

April 18, 1942

Appeal from District Court, Eleventh District, Flathead County; Dean King, Judge.

Action by J. E. Hall and another against Thomas Lommasson and another for specific performance of a partnership agreement wherein defendants filed a counterclaim. From a judgment for defendants, plaintiffs appeal.

Affirmed.

Lloyd I. Wallace, of Polson, for appellants.

Pope & Smith, of Missoula, for respondents.

MORRIS Justice.

This action involves the onstruction of a partnership agreement. The litigants were before this court in the case of Lommasson v. Hall, 111 Mont. 142, 106 P.2d 1089. The provisions of the agreement were set out with particularity in that case and will not be repeated here except to recite section 29 thereof. The plaintiff in the former action is the defendant in this case and brought that action to have the agreement rescinded. The trial court held that plaintiff did not establish his right to have the ocntract rescinded and sustained a demurrer to the complaint, and upon the failure of the plaintiff to plead further, gave judgment for the defendant. On appeal we affirmed the judgment.

The plaintiffs and defendant in the case at bar were the first and second parties, respectively, to the agreement, section 29 of which is as follows: "In event party of the second part fails, neglects or refuses to make mortgage loan payments for a period of six months then and in that event this agreement shall terminate and parties of the first part shall become the sole owners thereof and any sums that party of the second part has paid into said business or applied on said mortgage shall be returned to him at the rate of $1000.00 per year, plus six per cent interest per annum during the time the same has been invested, minus whatever dividends or payments he shall have received out of said business, and it is further agreed that should party of the second part become disabled or otherwise unable to continue with said payments as in this agreement provided, he may then, upon registered mail notice to parties of the first part, withdraw from said partnership and all sums paid out by him on account of said mortgage or into said business shall be returned to him at the rate of $1000.00 per year, plus six per cent per annum interest from the time the said sums have been invested or advanced."

On the termination of the litigation in the former action, Lommasson "failed and refused" for more than six months to make any further payments on the mortgage lien of the Home Owners Loan Corporation, and the Halls commenced this action to enforce specific performance of the contract. The phase of the controversy as to whether this is an action for specific performance or one to remove a cloud from the title will be adverted to later.

The pleadings develop no material issue of fact between the parties. Plaintiffs allege and defendant admits that the defendant made no payments on the mortgage loan mentioned in the agreement after October, 1939; the defendant alleges by counterclaim and plaintiffs admit payment to the partnership by the defendant of $4,332.49. The only issue raised by the pleadings arises from an allegation in the affirmative defense wherein the defendant charges the plaintiff J. E Hall with the sale or disposal of assets without defendant's consent, failure to account for proceeds of sales, and other irregularities in the management of the enterprise. Such charges are denied in the reply. The defendant is ready and willing to reconvey all his interest in the property now owned by the partnership to the plaintiffs, but refuses to make such conveyances except on the condition that he be given a lien upon all the partnership property to secure the amount due him, and likewise to secure such further advances as it shall become necessary for him to make to protect the partnership property. Both stand upon the agreement, but disagree as to the time the first installment shall be made to the defendant on the amount found due him, and the plaintiffs vigorously contend that no authority can be found in the agreement to justify that part of the court's decree directing the plaintiffs to execute mortgages in favor of the defendant as a condition precedent to reconveyance of the property to them. The defendant does not contend that giving such security is an obligation that arises out of the contract, but is a clear right to which the defendant is entitled as a matter of equity by reason of the financial condition of the plaintiffs and of the partnership for which financial condition the defendant obviously believes J. E. Hall is solely responsible.

There were attached to the complaint as exhibits a copy of the partnership agreement, a copy of an inventory of the personal property that was turned over to the partnership in the beginning naming the items in detail, a copy of the warranty deed conveying a half interest in the land from the plaintiffs to the defendant, and a copy of notice by the plaintiffs to the defendant of termination of the partnership agreement. Defendant set out in his counterclaim an itemized account of the several payments made by him to the partnership, giving the dates, separate amounts and the purpose for which the payments were made. The cause was tried to the court sitting without a jury. Judgment was for the defendant and the plaintiffs appealed.

The assignments of error all go to such parts of the decree as fix the time when the first installment shall be paid to the defendant, and further to the court's requiring the plaintiff to pledge all the assets of the partnership to secure the amount due the defendant, and further specifies error as to the court's requiring the plaintiff to give security on the property to protect the defendant against loss for such further advances as may become necessary for him to make in protecting the property.

The court found that the six-month period mentioned in section 29 of the agreement, relating to the time the defendant ceased to make payments on the mortgage loan, expired April 25, 1940.

Next it was found that the amount to be paid Thomas Lommasson was $4,332.49 with interest; that since Lommasson ceased to make payments on the partnership obligations, delinquencies in the paymetn of installments on the loan and taxes had occurred, and that, although the plaintiffs had been in possession of the property at all times and had sold and disposed of all the foxes, their increase and other personal assets of the partnership, still delinquencies in the payment of the partnership obligations had been permitted to occur and increase and "that a money judgment against the plaintiffs is probably uncollectible." Conclusions of law were made in accordance with the findings.

The parts of the decree directing that instruments creating a lien on the partnership property to secure the defendant being the only parts the plaintiffs challenge, such parts are set out in full:

"It is further ordered, adjudged and decreed, and this does order, adjudge and decree, that the plaintiffs be, and they are hereby, ordered and required within said period of thirty (30) days to execute and deliver to the Clerk of the Court for delivery to the defendant, Thomas Lommasson, their mortgage, mortgaging all of said property, real and personal, to said defendant to secure the due payment to the said defendant of the sum of Four Thousand Three Hundred Thirty-Two and 49/100 Dollars ($4,332.49), with interest thereon at the rate of six per cent (6%) per annum from the several dates set forth in Paragraph IV of the defendants' affirmative defense and counterclaim, which sum is payable in accordance with said agreement of October 1, 1936, in annual installments of One Thousand Dollars ($1,000.00), each, the first installment being due April 25, 1941, which said sums are adjudged owing to said defendant, Thomas Lommasson, by the plaintiffs. Said mortgage shall be executed and acknowledged in the manner provided by law, and shall be conditioned for the due payment of said sums to said Thomas Lommasson, and also for the payment by the plaintiffs of all sums due and payable and hereafter to become due and payable upon the mortgage to Home Owners Loan Corporation described in the pleadings and in said agreement of October 1, 1936, and for the due performance by plaintiffs of all other conditions of said prior mortgage, including the payment of taxes and assessments levied against said property, and shall provide that the same may be foreclosed for the full amount secured thereby in the event of any default thereunder; with the further proviso that the same not be foreclosed unless or until plaintiffs shall become delinquent in a total sum of at least $1,000.00, nor in any event prior to September 1, 1941.

It is further ordered, adjudged and decreed that in the event that either said deed or said mortgage be not executed and deposited as required by this decree, or if any of the parties hereto do not comply herewith within the time specified herein, this decree shall have the same operation and effect, and be as available, as if said instrument or instruments had been executed conformably hereto, and this decree shall be taken and deemed to have the same effect as if said instrument or instruments had been executed in accordance herewith."

Then follows a description of both the real and personal property. We think it will become obvious from the testimony of J. E Hall, and other evidence shown by the record, that the provisions of the decree to which the plaintiffs object were necessary if the defendant were to have any chance to recover any part of his investment, and that the contested...