Kaufman v. Catzen
| Decision Date | 02 October 1917 |
| Docket Number | 3352. |
| Citation | 94 S.E. 388,81 W.Va. 1 |
| Parties | KAUFMAN v. CATZEN ET AL. |
| Court | West Virginia Supreme Court |
Submitted September 26, 1917.
Rehearing Denied Dec. 4, 1917.
Syllabus by the Court.
If the performance of the obligation of a contract furnishes temptation to use improper influence with a public official the contract is contra bonos mores and illegal, and no right or obligation can be founded upon it.
A partner or coadventurer does not forfeit his interest in joint property or assets acquired in whole or in part with money he has paid or advanced, by his abandonment of the enterprise, failure to contribute to expenses, or opposition to the prosecution of the social purpose.
But, in the settlement and accounting, he is chargeable with the consequences of his derelictions and other misconduct.
A decree in favor of one partner or coadventurer against another, awarding him right of full participation in the property and profits, entered in a cause in which the pleadings allege, and the evidence tends to prove, breaches of the social contract, and referring it to a commissioner for the taking of an account, is erroneous. Such a decree should either leave open the question of the extent of the right of participation, or dispose of the issues raised by the evidence of dereliction and misconduct, as bearing, not on the right of participation, but the extent thereof.
If a party to an agreement for a joint adventure contributes money or purchases property therefor, and expressly agrees that his associate shall have sole and exclusive management and control thereof, he has no right to demand more than an accounting as to profits, while the enterprise continues and is solvent, in the absence of proof of misappropriation fraud, insolvency, or the like, on the part of his associate.
In a suit for such an accounting, he is not entitled to the appointment of a receiver for the control and management of the property and business, even though his interest therein has been denied, and he has been wrongfully excluded from participation in profits, and the managing partner has attempted to dispose of the entire property by a sale, in the absence of proof of fraud, insolvency, or some other sufficient ground.
A purchaser of social property and business from one partner or adventurer, with knowledge of the right and title of the other who has been excluded from the enjoyment thereof, or of facts sufficient to put him upon inquiry as to the rights of the excluded party, takes it subject to such rights.
Appeal from Circuit Court, McDowell County.
Suit by L. Kaufman against Aaron Catzen and others. Decree for plaintiff, and defendants appeal, and plaintiff takes a cross-appeal. Reversed in part and affirmed in part, and cause remanded.
Alfred G. Fox, Sanders & Crockett, and Russell S. Ritz, all of Bluefield, for appellants.
Lawson Worrell, of Roanoke, Va., Chapman, Peery & Buchanan, of Tazewell, Va., and Anderson, Strother, Hughes & Curd, of Welch, for appellee.
The pleadings in this cause have developed issues as to a $30,000 money demand and a one-third interest in a right or privilege in the entire body of real estate on which the town of Clark in McDowell county, is situated, herein designated a leasehold and the instrument creating it a lease, for convenience, and all of the rents and profits derived from buildings erected, and enterprises conducted by the lessee, on said leasehold. These demands are asserted by the plaintiff against Aaron Catzen, his brother-in-law, and the Clark Development Company, a corporation, to which Catzen assigned the lease. By a decree in the cause substantially disposing of these issues, the trial court has disappointed all of the interested parties. Accordingly the defendant has appealed from the decree and the plaintiff has cross-assigned errors therein.
The tract of land upon which the lease was taken, containing 46.05 acres, less two reservations, one the right of way of the Norfolk & Western Railway Company and the other lot No. 4 of block C, making a net area of about 44 acres, adjoins the town of Northfork and belongs to the Northfork Realty Company, a corporation. It is separated from the town of Northfork by the Elkhorn creek. The Northfork Realty Company executed to Catzen a lease thereof, dated August 27, 1907, and a recital of the instrument says it had been previously laid out in town lots and designated South Side addition to the town of Northfork. The term of the lease was 25 years, and the rental thereunder $30,000, cash in advance, for the first five years, $10,000 per year for the next ten years and $12,500 per year for the last ten years, total $225,000. It gives the lessee, on the termination of the lease, the option of renewal for another period of 25 years, on a rental of $12,500 per year.
Though Kaufman, the plaintiff, is not a party to the lease, it is conceded that he paid the cash rental of $30,000, and was to have had a one-third interest in the enterprise. Between him and Catzen, the lessee, there was to have been a written collateral agreement, and two such agreements were prepared by an attorney, after consultation with them as to the terms thereof, neither of which was ever signed by both parties, the plaintiff having declined to sign the first and the defendant the second.
There were no buildings or other improvements on the property at the date of the lease, except a pesthouse. Much of it was low and subject to overflow by the Elkhorn creek. To make it practicable and available as a townsite, it was necessary to build a wall to prevent the creek from overflowing it, fill up the low places, and grade the streets. Catzen claims to have spent more than $21,000 in the first five-year period of the lease, in the making of such improvements, construction of sewers and bridges, and installation of waterworks. He claims also to have expended nearly $40,000 in the same period, in other ways, partly in the construction of buildings. Kaufman contributed nothing at all to these expenses. Of the $60,000 invested, Catzen says he borrowed $30,000 from his brother, Morris Catzen, and $20,000 from the Flat Top National Bank, and he claims the balance came from the proceeds of sales of some property he had and some his wife had, and savings accumulated by his children. According to a statement filed by him, his total receipts from ground rents of the leased property, for the same period, amounted to $9,015. Near the end of the fifth year, Catzen, having become convinced that he would be unable to pay a rental of $10,000 a year thereafter, so advised his lessor, the Northfork Realty Company, and offered to surrender the lease, unless the company would reduce the rent from $10,000 to $6,000 a year. Thereupon the board of directors passed a resolution so reducing it for the ensuing 10 years, but with the proviso that the reduction should not in anywise abrogate the contract. Finding his burden still too heavy, he procured the organization of the Clark Development Company, a corporation, to which he assigned his lease, in consideration of $95,000 of the capital stock thereof, and transferred $30,000 of that stock to his brother, Morris Catzen, in payment of his indebtedness to him, and $10,000 to Dr. L. H. Clark, to whom he was indebted in an equivalent amount, and $1,000 to Louis Shwartz to whom he was also indebted. S. Sonnenberg took $5,000 of the stock, giving the company his note in consideration thereof. The cash receipts of the Clark Development Company, from September 1, 1912, until June 30, 1916, amounted to $91,637.14, and its disbursements for the same period, amounted to $85,703.06. On June 30, 1916, it had $5,933.58 in cash and outstanding accounts amounting to $7,185. At the same time, it owed a certain bank $2,500; the Northfork Realty Company one year's rent, $6,000; Aaron Catzen $7,200, on account of his salary, as manager. It also had suretyship liabilities amounting to $30,500. Its principal income arose from house rents and ground rents, the former amounting to $36,024.18 and the latter to $16,054.01, from September 1, 1912, to June 30, 1916. Of the disbursements, $18,000 went to the Northfork Realty Company for rent. The other large items were for improvements and payment of indebtedness.
Kaufman's original bill filed against Catzen alone sought discovery from him as to the profits realized from the business, a decree for repayment of his $30,000 out of the profits accrued and to accrue, and an adjudication of his right to one-third of the accrued profits in excess of the $30,000 and one-third of the profits hereafter to be realized, and appointment of a receiver to take charge of the property and manage it. His amended bill, making the Clark Development Company and Dr. L. H. Clark, its president, parties, prayed for the same relief. Admitting his payment of the $30,000 claimed, the answers base their denial of his alleged right of repayment thereof upon their averments that the payment was made, by express agreement, for and in consideration of a one-third interest in the lease and was never to be returned. They also admit that he was to have had, for and as consideration for the payment, a one-third interest in the lease and the profits to be derived therefrom, but aver that he was also to aid in the development of the property, by a contribution of $20,000 for expenses, if needed, and otherwise; but they deny that he is now entitled to any right or interest therein whatever, because of his failure to contribute any money, labor, or influence in the development thereof, and his effort, by the use of almost every means in his power, to prevent such development and wholly defeat the enterprise. They also aver honest,...
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