Vangel v. Vangel

• Decision Date: 11 March 1953
• Citation: 116 Cal.App.2d 615,254 P.2d 919
• Court: California Court of Appeals Court of Appeals
• Parties: VANGEL et al. v. VANGEL. Civ. 19180.

Page 919

254 P.2d 919

116 Cal.App.2d 615

VANGEL et al. v. VANGEL.

Civ. 19180.

District Court of Appeal, Second District, Division 2, California.

March 11, 1953.

Pacht, Tannenbaum & Ross, Isaac Pacht, Clore Warne, Jerry Pacht, Maxwell E. Greenberg, Los Angeles, for appellant.

J. Howard Sullivan and Joseph T. Enright, Los Angeles, for respondents.

FOX, Justice.

The parties, who are brothers, entered into a partnership agreement in May, 1944, in contemplation of the purchase of the Cascade Ranch of some 330 acres. Approximately one half thereof consisted of producing orange and lemon groves. Each was to furnish his pro rata share of the down payment. It was provided, however, that in the event one of the group could not otherwise raise his one third of such required payment and one of the other brothers should advance sufficient money to pay the same, that the one for whom the advance should be made would execute a promissory note for such amount, bearing interest at a rate to be agreed upon, in favor of the brother who had made the loan. Such note was to be secured by a mortgage or trust deed covering his interest in the property. Any such note, however, was to be paid only out of funds accumulated from the operation of the ranch or realized from its sale. After specifying the order in which the revenues from the ranch should be applied in payment of its operations the agreement finally provided that the balance should be divided equally between the parties, except that in the event one of the parties advanced a portion of the down payment for one of the others, the amount that would normally be paid to the latter should be paid to the one who made the advance until such loan had been liquidated. Each party agreed to devote his entire time to the operation of the ranch as soon as he liquidated his current business. The parties were to agree from time to time upon a fixed amount to be drawn by each party by way of a drawing account, living expenses or wages.

During the following June the three brothers made a contract with the owners of the Cascade Ranch for its purchase for $340,000, including a down payment of $120,000. Charles did not have available his one third of this amount. As a consequence Nick and Ernest were required to advance $25,000.00 to him to make up his share of the initial payment. In order to raise the funds it was necessary for Nick and Ernest to sell their restaurant in Los Angeles, which they did in September. Charles, too, was in the restaurant business in Hollywood. Some months prior, however, to this deal he had acquired another but much smaller ranch. Although all the down payment had not been made, Charles, on October 1st, moved onto the ranch where he has since resided.

Because of the lack of experience of the purchasers in the management of citrus properties and because the down payment had not been made in full, a Mr. Culbertson, who had originally planted the citrus groves and managed the ranch for 20 years and who was a representative of the sellers, was employed as manager and adviser until the Vangels completed their down payment in April, 1945.

The parties almost immediately began to have difficulties. Nick and Ernest claimed that Charles usurped the managerial responsibilities excluding them from participating therein. Charles complained because they would not agree upon the amount he should be paid for operating the partnership enterprise. Nick and Ernest insisted that Charles execute a note, together with a mortgage on his interest, to secure the $25,000 they had advanced for him. This he refused to do until they agreed upon his salary. The result was that Nick and Ernest filed this action in April, 1946, for a dissolution of the partnership and for an accounting.

Following a protracted second trial, the court decreed a dissolution as of June 15, 1950, and permitted the parties to participate in the profits of the ranch until January 1, 1951, excluding therefrom, however, expenses for pruning and fertilizing the groves. Charles was found to have wrongfully caused the dissolution. As a consequence the plaintiffs were given the privilege, pursuant to the provisions of section 15038(2)(b), of the Corporations Code, to purchase defendant's interest. The court found the value of the partnership property to be $235,000 as of the date of dissolution. After making various adjustments in the accounts of the parties the court determined that defendant's total interest in the assets of the partnership was $58,600.25, and plaintiffs were given the privilege of buying Charles' interest for that amount. Defendant appeals from this judgment.

Charles insists he did not prevent plaintiffs from participating in the management of the ranch; that he was not to blame for the dissolution of the partnership; that plaintiffs are not in court with clean hands; and that they should not be permitted to purchase his interest.

The court found that plaintiffs had been prevented by defendant from participating in the management and operation of the ranch and from putting in equal time with defendant in the partnership business although they had been at all times ready, able and willing so to do, and had frequently requested defendant that they be permitted to put their full time and efforts into the operation and conduct of the partnership enterprise. In support of this finding it appears that defendant directed the day to day operations of the ranch, determined what work was to be done, when and by whom it would be performed. Charles objected to plaintiffs' going around talking to the employees, and refused to tell Ernest what their duties were. He told Ernest to mind his own business and even threatened him with bodily harm if he interfered with the employees. He said, 'I'm going to run this ranch.'

When Culbertson's services were terminated he gave the parties instructions relative to the operation of the citrus groves. The State Agricultural Inspector also gave advice as to when the trees should be sprayed. Plaintiffs insisted that Charles should carry out these recommendations, but he refused. He told plaintiffs, 'You guys [are] sticking your nose too much in this ranch business. You are nothing but nincompoops.' He refused to employ any expert or technical services although plaintiffs requested such employment. The foregoing evidence lends support to the court's finding that defendant did not 'permit plaintiffs to participate in the operation and management of said property in relation to the cultivation, pruning, irrigation, fertilization or smudging of the orchards, excepting that he did state that they might work as laborers under him on said ranch and to that extent participate in the operation of the ranch. * * *'

Charles argues that as to the financial and executive phases of the management of the partnership venture plaintiffs participated fully. He bases this argument upon the finding that plaintiffs participated in particular phases of the partnership business and had access to certain of its financial records. These findings recite that plaintiffs, since this action was filed, have examined all bills from concerns with which the partnership did business and the periodic statements of the orange and lemon organizations through which the partnership marketed its citrus products, but prior thereto plaintiffs were permitted to examine only a portion of the statements from the marketing groups; that they have been permitted to inspect all payrolls, and, since the filing of the action, one of plaintiffs has signed with defendant all checks drawn on the partnership bank account, and have discussed with defendant the purpose for which the checks were drawn and the propriety or impropriety of their issuance. After the employment of a certified public accountant plaintiffs, from time to time, received copies of the periodic audits. They joined in the execution of marketing agreements covering all the orange crops with one exception, joined in the execution of crop mortgages, promissory notes and refinancing arrangements. In this connection it is to be noted that the court further found that 'said acts of the plaintiffs have been in the nature of checking on or examining the acts of the defendant after they were done, and they have been prevented by defendant from consulting with him and participating with him in decisions relating to expenditures or the operation of the ranch before they were done.'

This explanatory finding derives inferential support from the nature of the items in which plaintiffs participated and the character of their participation. For example, it is plain that the participation of all partners in the execution of promissory notes and the refinancing program was essential to the very existence of the enterprise. On the other hand inspection of the payrolls, cancelled checks, and reports from the marketing organizations, while important, obviously falls short of managerial participation.

Further support of this explanatory finding is furnished by the testimony that in February, 1946, defendant, without consulting plaintiffs, borrowed $10,000 from Mr. Chess, who owned a large citrus packing plant, securing the same be a crop mortgage, and that Charles endorsed plaintiffs' names on three checks totaling more than $8,000 and opened a new bank account without their knowledge so that the plaintiffs would not know what defendant was doing. Defendant's position in this entire matter appears to be accurately reflected in his statements to one of plaintiffs' attorneys, prior to the filing of this action, to the effect that he was manager of the ranch and as manager he would decide matters of policy; that he was the oldest brother and his younger brothers had no right to ask him any questions regarding their dealings, and that being the oldest brother it was his province to make the decisions for the 'brotherhood' as he called it. This attitude undoubtedly...