Scott v. Prescott
| Decision Date | 11 February 1924 |
| Docket Number | 5320. |
| Citation | 223 P. 490,69 Mont. 540 |
| Parties | SCOTT v. PRESCOTT. |
| Court | Montana Supreme Court |
Appeal from District Court, Lewis & Clark County; W. H. Poorman Judge.
Suit by W. H. Scott against A. K. Prescott. Judgment for plaintiff and defendant appeals. Modified, and as so modified affirmed.
Gunn, Rasch & Hall and T. B. Weir, all of Helena, for appellant.
Henry C. Smith, of Helena, Pray & Toole, and J. A. McDonough, all of Great Falls, and E. E. Sweitzer, of Brady, for respondent.
LENTZ District Judge (sitting in place of CALLAWAY, C.J.).
This is a suit for a partnership accounting. Plaintiff was awarded a judgment for $53,887.87, and a decree entitling him to an undivided one-third interest in about 3,000 acres of land. Defendant has appealed from the judgment and decree. The pleadings, transcript of the evidence, decree, and briefs cover more than 2,000 pages. Owing to their length it seems inadvisable to attempt a summary of the issues presented and the points raised by this appeal at this place, but reference to them will be made in the body of the opinion as necessity arises.
The complaint, among other things, alleges that on October 1, 1907, plaintiff and defendant formed a partnership for the purpose of engaging in ranching and stock raising in Teton county; that the partnership continued in active business until March 19, 1918, when it was dissolved by the defendant.
The answer denies that any partnership relation was ever entered into, and among other things alleges that plaintiff merely sustained the relation of employee or servant of the South Pondera Ranch Company, a corporation, of which defendant was the principal stockholder; that on February 20, 1908, defendant agreed to sell to plaintiff 2,400 shares, or one-third of the capital stock, of the said South Pondera Ranch Company for the sum of $24,741.76; that of this amount $1,701.76 was paid, and that plaintiff gave his note for the balance due in two years, at 9 per cent. interest per annum; that the stock was placed in escrow, title to which was to pass and delivery to be made when the note with accrued interest was fully paid, and that as a further term and condition of said contract of sale of said stock, plaintiff and his wife, Elizabeth F. Scott, did agree with defendant that plaintiff and his wife should during the existence of said agreement work for and devote their time and attention exclusively to the interests of said corporation at said ranch in Teton county, Mont., and reside thereon, and that they should receive as wages the sum of $100 per month; that no other payments were made on said note except the sum of $3,796.60, paid on December 31, 1912, making a total of $5,498.36; that plaintiff has forfeited his right to demand and receive said shares of stock. Defendant offers to return the said sum of $5,498.36 paid on the note, and prays for judgment for costs of suit.
The case was tried before the court sitting with a jury. At the conclusion of all the evidence both plaintiff and defendant moved for a directed verdict, whereupon the court discharged the jury and made findings, among other things, that on October 1, 1907, at Brady, Mont., plaintiff and defendant entered into a copartnership for the purpose of engaging in ranching and raising live stock and dealing and trading in real and personal property; that the partnership property consisted of a ranch of 1,560 acres, 10,500 head of sheep, and some horses, cattle, and ranch equipment, all inventoried at the agreed value of $72,278.23, of which plaintiff purchased a one-third interest at $24,000, defendant retaining a two-thirds interest at $48,000, and receiving a personal credit for the balance of $278.23; that plaintiff received a credit of $1,701.76 on the purchase price of his one-third interest on account of wages then found to be due from defendant, and that the balance, at 9 per cent. interest, was to be paid out of plaintiff's share in the net profits; that plaintiff was to manage the ranch and live stock as a going concern for the mutual advantage of himself and defendant, and was to receive $100 per month, as partial compensation for his services, and one-third of the net profits, if additional funds were needed they were to be loaned by defendant to the partnership at 9 per cent. interest; that plaintiff immediately went into full and complete physical possession and control of said real and personal property, and devoted his personal skill and labor and special services in making extensive and valuable improvements on the same; that the plaintiff, although well skilled and experienced in managing ranches and particularly in operating bands of sheep was lacking in financial experience and wholly unfamiliar with the method of operating a partnership or corporation; that the defendant was a business man of long experience and well skilled in the management of partnerships and corporations; that after the formation of the partnership, and while the plaintiff and defendant were operating the said ranch and personal property as copartners, on or about February 17, 1908, the defendant assumed to form a Montana corporation under the name of South Pondera Ranch Company for defendant's own personal uses, purposes, and benefits, which said company is now and at all times was absolutely owned and controlled by defendant personally and exclusively; that defendant named himself, Mary B. Prescott, his wife, and F. K. Turner, his brotherin-law, as incorporators and directors of South Pondera Ranch Company, but neither Mary B. Prescott nor F. K. Turner ever paid for, purchased, or acquired any stock in said corporation, and neither of them now has or ever did have any interest in said company or the capital stock thereof, but their names were simply used by defendant, and they were dummy shareholders and directors only, and said defendant was the sole owner of said corporation, and said corporation is and was simply a fiction of law and a sham device adopted by the defendant for the purpose and with the intent of taking advantage of, and cheating, wronging, and defrauding, plaintiff; that defendant transferred the legal title to all the partnership lands which had theretofore stood in the name of the defendant to said South Pondera Ranch Company; that at defendant's request and on his representations that said company was only a matter of form and that the signing of a note to defendant was the proper way to show the partnership transaction and to evidence the unpaid balance of the purchase price of plaintiff's one-third interest in the partnership assets, plaintiff on February 20, 1908, executed and delivered to defendant his note for $23,040, payable in two years, with interest at 9 per cent.
The court further finds that on March 19, 1918, defendant ousted plaintiff and assumed entire control of all of the partnership property, real and personal, and dissolved the partnership, that defendant disposed of all the sheep and practically all of the remaining personal property, and appropriated the proceeds to his own use.
The court then renders an accounting of the partnership affairs, as of March 19, 1918, and finds that, in addition to the real estate standing in the name of the Pondera Ranch Company, the value of the personal property belonging to the copartnership on that date was $195,246.64; that there are no partnership debts except the sum of $705.21, due plaintiff for wages. After allowing for the mutual liabilities of the partners, including the unpaid balance of plaintiff's note, the court finds there was due from defendant to plaintiff as of March 19, 1918, exclusive of his interest in the real estate, the sum of $40,081.89, to which was added interest from March 19, 1918, to the date of the judgment at 8 per cent. in the sum of $13,805.98, making a total of $53,887.87 due plaintiff from defendant, for which judgment was entered against defendant in plaintiff's favor. The court further ordered proper conveyances to be made showing plaintiff's undivided one-third and defendant's undivided two-thirds interests in the partnership lands. It was further ordered that, since the lands could not be equitably divided, they might be sold at public auction and the proceeds divided in case conveyances were not made as ordered.
Defendant insists, first, that the finding that a copartnership was brought into existence between plaintiff and defendant on October 1, 1907, is not supported by the evidence nor sustained by any rule of law, and, second, that, whatever the pretended agreement amounted to, it was abrogated by a later agreement made in January, 1908, and the carrying out of that agreement in organizing the South Pondera Ranch Company and conducting the business thereafter as a corporation; and further, that there is no evidence in the case justifying the finding that the South Pondera Ranch Company was a fiction of law and a sham device adopted by the defendant to cheat, wrong, and defraud the plaintiff; and further, that the pretended partnership agreement found by the court to have been made on October 1, 1907, is void under the statute of frauds.
At this point attention should be called to the fact that defendant has chosen to rest his case on the record as presented by the plaintiff. He called no witnesses and confined his own testimony in defense to the identification of some documents which were received in evidence in his behalf. Hence the greater part of the evidence received stands uncontradicted. Since the enactment of section 8805, Revised Codes of 1921 this court, by a uniform line of decisions has observed the rule that on appeal in equity cases the findings of the trial court will not be set aside unless there is a decided preponderance in the evidence...
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