Mills v. Williams

• Decision Date: 24 February 1925
• Citation: 113 Or. 528,233 P. 542
• Parties: MILLS v. WILLIAMS.
• Court: Oregon Supreme Court

233 P. 542

113 Or. 528

MILLS v. WILLIAMS.

Supreme Court of Oregon

February 24, 1925

Department 2.

Appeal from Circuit Court, Klamath County; D. V. Kuykendall, Judge.

Suit by L. O. Mills against D. O. Williams. From the decree plaintiff appeals. Reversed and rendered.

This is a suit instituted to cancel a deed, note, chattel mortgage to prevent recordation of deed and transfer of note and mortgage during pendency of suit and for damages. The suit grew out of differences arising from a partnership between the parties. In June, 1918, the parties agreed to form a partnership to engage in raising and marketing cattle. By the terms of the partnership agreement plaintiff conveyed to defendant by quitclaim deed an undivided one-half interest in a tract of land then possessed by the plaintiff, and which he held under contract of purchase from the United States government. By the terms of the partnership agreement the parties were to contribute equally to the purchase price of said land and the title to that land, and all other tracts of land, thereafter purchased for use in the partnership business, should be held for the benefit of said partnership. The defendant agreed to furnish the necessary capital to finance said business. Plaintiff agreed to execute and deliver to defendant his promissory note secured by chattel mortgage on his interest in the live stock for one-half of the money so advanced by defendant. The partnership agreement was thereafter reduced to writing and dated January 25, 1919. The parts of the agreement relevant to this suit are as follows:

"Witnesseth that, in consideration of the mutual interests and profits to be derived therefrom, the said parties hereby form and enter into a partnership under the firm name and style of Yamsay ranch, to continue after the date hereof until dissolved as hereinafter provided. Either party may retire from the partnership on giving not less than sixty days notice to the other partner of his intention so to do.

"The capital of the partnership shall be contributed by the said partners as follows: The said Dayton O. Williams has advanced and will be called upon to advance necessary sums to be invested in said partnership business, and has furnished and will furnish certain stock cattle to be used in said business, and the said Lyle O. Mills agrees to make, execute and deliver to said Dayton O. Williams, his promissory note in writing for one-half of all such cash sums advanced, and for an amount equal to one-half of the purchase price or value of the live stock furnished and delivered at the rate of seven per cent. per annum from date of their execution and in order to secure the payment of said notes, the said Lyle O. Mills agrees to and binds himself to make, execute and deliver chattel mortgages for the amount of said notes to the said Dayton O. Williams, which chattel mortgages are to cover his interest in the said live stock as a partner.

"And it is further understood and agreed that both parties to these articles, will, as soon as patent has been secured for certain lands now under contract of purchase, which lands are to be used by the partnership for grazing purposes, make execute and record for all of said lands, such deeds to go to the partnership; the value of said lands to be determined by their purchase price, and each partner to receive credit upon the books of the partnership for such amounts, as a contribution to the capital stock of said partnership business, and each hereby agrees with the other that he will so deed all of the lands which he secures for this purpose to said partnership.

"It is understood by and between the parties hereto that the said Dayton O. Williams has already advanced to said partnership the sum of twenty-five hundred dollars ($2,500.00), and that he is to advance the further sum of sixty-five hundred dollars ($6,500.00) and also advance other and necessary sums to put the said business upon a business footing, and also that he has, at the date of the execution of this contract delivered about two hundred head of calves for the use of said business, the value of said calves to be determined between the parties hereto, and that he will, and agrees to, from time to time, turn over additional stock to be used in said partnership business, and at the time of the delivery of said stock, their value is to be determined and notes given for the one-half interest of the said Lyle O. Mills, as hereinabove agreed.

"The said Lyle O. Mills hereby agrees to give his entire time and attention to the management and handling of said business, and as an item of expense, the salary of the said Lyle O. Mills, the same being ______ dollars per month, is to be charged in the expense account of running said business, and is to be paid him as any other item of expense, and is to be paid prior to a division of any profits of said partnership.

"All moneys which shall from time to time be received from or on account of said partnership, shall be deposited in a bank in the name of the partnership, such bank to be agreed upon by the partners, and all disbursements for and on account of such partnership shall be made by partnership check on said bank. * * *

"Neither partner shall buy, order or contract for any article in the name of the partnership exceeding the value of $______ without the previous consent of the other partner, and in case he does so, the other partner shall have the option of refusing to accept the same on behalf of the partnership, and it shall be paid for out of the funds of the partner ordering the same, and be charged to his individual account. * * * Neither partner shall, without the consent of the other partner, compound, release or discharge any debt or account which shall be due to the partnership, without receiving the full amount therefor. * * *

"In the books of accounts to be kept by the said firm, entries are to be made therein of all business matters and transactions that are usually entered in books of account, and such books, accounts, and all letters, papers, documents and records belonging to the partnership, shall be kept at the headquarters of the partnership, and each partner shall, at all times, have free access to and the right to examine the same, and both parties hereby bind themselves to enter in said books a true and accurate account of all moneys received by each of them on account of said partnership, and a true and accurate account of all moneys paid out or expended by each of them on account of said partnership.

"If any differences shall arise between the partners as to their rights or liabilities under these articles of copartnership, each partner shall select a representative, and the representatives so selected shall have the power to select a third representative, and all such disputes shall be arbitrated by the three representatives, and their decision shall be final and binding upon both partners hereto, and each partner agrees with the other that he will accept the decision of such board of arbitration as to the matter in dispute.

"Upon the dissolution of this partnership, a full, true and accurate account of the assets and liabilities, and the transactions, and the business of the partnership shall be made, and after the payment of all partnership debts and amounts due to either of the partners, the balance remaining shall be divided equally, and if the partners shall be unable to agree upon a valuation of the property of said partnership, the matter shall be referred to a board of arbitrators selected as above provided for.

"In case either partner shall, upon the dissolution of said partnership, be desirous of purchasing the interests of the other partner, he shall have the right to do so, and in case they are unable to agree upon the value of said interest, the question shall be determined by the board of arbitrators selected as above provided for, and both partners agree that the decision of said board shall be binding upon each of them as to such valuation.

"In case notice of dissolution of this partnership is given by one partner to the other, as herein provided, the other partner shall have the right to purchase the business and the retiring partner's interest, the value of which is to be determined as herein provided, in case of disagreement. It is not intended by these articles to make it compulsory that such interest shall be taken by the other partner, and in case the other partner decides not to purchase the entire interest, the business of the firm is to be closed up and the property sold after the expiration of the time provided for for notice of dissolution, and after the payment of all debts and liabilities of the partnership, an equal division of the proceeds is to be made."

The agreement further provides that the parties should share equally in the profits and losses.

About December 15, 1919, defendant being dissatisfied with the management of the business by plaintiff, assumed active control and management thereof. After that date, plaintiff took no part in conducting the business of the firm. On June 22, 1920, plaintiff filed his complaint in this suit. On February 19, 1921, defendant filed his answer to which plaintiff filed his reply, April 13, 1921. On October 15 1921, after this suit was instituted, plaintiff filed a supplemental complaint alleging damages caused by depasturing the land, claimed by him during 1920, with the live stock formerly belonging to the partnership and then under the control of defendant. To this supplemental complaint defendant filed his answer, according to the abstract of record, July 11, 1921. On October 14, 1921, plaintiff filed a motion for leave to file another supplemental complaint, based upon damages resulting from depasturing...