Shannon v. Hudson
| Citation | 325 P.2d 1022,161 Cal.App.2d 44 |
| Court | California Court of Appeals Court of Appeals |
| Decision Date | 02 June 1958 |
| Parties | Leonora SHANNON, Plaintiff and Appellant, v. W. Asa HUDSON and Helen Moore Hudson, Defendants and Respondents. Civ. 22914. |
Neil D. McCarthy, Philip A. Cramer, Beverly Hills, for appellant.
Lester Wm. Roth, Beverly Hills, for respondent.
This is a suit for dissolution of a joint venture. The trial court determined that a dissolution would be inequitable, and therefore denied any relief. Plaintiff has appealed.
Plaintiff and defendants, Mr. and Mrs. Hudson, were friends. In 1952 the parties entered upon a joint venture. The purpose of this venture was to acquire certain land in Morro Bay, California, and to construct thereon a motel. The parties planned to equip and furnish the motel, operate it for a time, and then sell it. They discussed the future widening of the road in front of the property in question as well as the construction of a Pacific Gas & Electric Company plant in the vicinity. Mr. Hudson, who was a certified architect, was to supervise the construction of the motel and the Hudsons were to operate it. Plaintiff was to supply the major portion of the money.
The parties entered into an agreement 1 in August, 1952, and the real property was acquired in September. Mr. Hudson designed the motel and supervised its construction, receiving no fee therefor. The total cost of the motel, including land, building, furnishings and equipment, was around $53,000. The amounts invested to date by the various parties are: $40,636.40 by plaintiff; $7,308.63 by Mr. Hudson; and $7,308.64 by Mrs. Hudson. Since its completion in June, 1953, the operation of the motel has been supervised by defendants; they have received no compensation therefor. Mr. Hudson kept all receipts from the operations in a separate bank account and drew all checks for the operation of the motel upon this account. Periodic financial statements for the motel were prepared by a firm of certified public accountants.
From the time the motel opened in June, 1953, until March 31, 1957 (the date of the accountants' last report), its books show a net loss of $11,102.14; however, $9,989.50 of this loss has been due to the deductions for depreciation. Thus, the out-of-pocket loss was about $1,100. The motel bank account contained approximately $1,600 at the time of trial, all current bills having been paid. From March 31 until the time of trial three months later, the motel receipts did not drop below $80 a week, and for the week preceding the trial the receipts were $187. Receipts in the immediate future were expected to be between $500 and $700 per month--receipts were always greater during the summer months. Although there was no evidence as to the market value of the property, its replacement value was $65,000. Mr. Hudson had long been trying to sell the property at a figure which would permit the parties to obtain a profit or at least a return of their investment, but he had not received any reasonable offers by the time the case was tried.
Although delays had been experienced, at the time of trial the widening of the road in front of the property had been completed and work was progressing on the Pacific Gas & Electric Company plant. In addition, a school was going to be built near the motel.
From the above facts the trial court concluded that 'it would be inequitable and unjust to all of the parties * * * to order a sale of the joint venture assets and a liquidation of said joint venture.'
The basic question in this case is whether or not the trial court abused its discretion in refusing to order a dissolution of the joint venture. In view of the factual picture here presented, we cannot hold as a matter of law that the trial court abused its discretion. The evidence showed that during the four years the motel had been operating there had been an out-of-pocket loss of only $1,100. The motel had a bank balance of some $1,600 at the time of trial. The weekly receipts during the three months preceding the trial were substantially in excess of the average weekly receipts during the previous year. And the receipts were expected to rise sharply in the immediate future because of the usual increase in business during the summer months. Moreover. at the time of trial the road in front of the motel had been widened and work was progressing on the nearby plant. These improvements, which had been slow in materializing, had been expected by the parties to raise the value of their property and to increase the business of the motel. To replace the land and motel at the time of trial would cost $65,000. From these facts the trial court properly could infer that the venture had a reasonable prospect of success and that it was not bound to fail. In view of the completion of the highway improvement, the progress on the nearby plant, the current state of the motel's finances, the prospect of increased business and the intrinsic value of the property, the future sale of the motel at a profit was a reasonable likelihood. It is a matter of common knowledge that property seldom brings its fair market value at a forced sale. It was therefore reasonable for the trial court to conclude that a forced sale of the property at the present time would be unfair to all parties. Although plaintiff had much more money invested in the venture than the Hudsons, Mr. Hudson had supplied his services as an architect in both designing the motel and supervising its construction; also, the Hudsons have supervised the operation of the motel for four years without salary. Moreover, under the agreement the Hudsons must bear two-thirds of any loss. It is thus manifestly unfair to them to force a dissolution of the venture while it still has a reasonable chance to succeed. The facts adequately support the findings and conclusions necessary to sustain the judgment.
Plaintiff's contention that the venture was terminable at her will (see Corporations Code sec. 15031(1)(b)) is without merit. While the term of the joint venture was not fixed, it is not disputed that the parties contemplated some operation of the motel. Such operation was to continue until it...
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Page v. Page
...19 Cal.2d at page 150, 119 P.2d at page 714), or until certain property could be disposed of on favorable terms (Shannon v. Hudson, 161 Cal.App.2d 44, 48, 325 P.2d 1022). In each of these cases, however, the implied agreement found support in the In Owen v. Cohen, supra, the partners borrow......
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...by execution of a note and deed of trust thereon for $35,000, which sum he used for his own purposes. The facts in Shannon v. Hudson, 1958, 161 Cal.App.2d 44, 325 P.2d 1022, which held that the trial court did not err in refusing to dissolve a joint venture for the construction of a motel a......
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Page v. Page
...be terminated at will until this was accomplished. This court again had occasion to apply the Owen rule in the case of Shannon v. Hudson, 161 Cal.App.2d 44, 325 P. 2d 1022. In the Shannon case, the partners agreed to construct, operate and sell a motel. We concluded that the agreement to ev......