Balian v. Rainey

251 P.2d 731, 115 Cal. App. 2d 10, 1952 Cal. App. LEXIS 1761
CourtCalifornia Court of Appeal
DecidedDecember 22, 1952
DocketCiv. 18981
StatusPublished
Cited by3 cases

This text of 251 P.2d 731 (Balian v. Rainey) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Balian v. Rainey, 251 P.2d 731, 115 Cal. App. 2d 10, 1952 Cal. App. LEXIS 1761 (Cal. Ct. App. 1952).

Opinions

FOX, J.

By a written agreement executed .at Detroit, Michigan, in February, 1946, the parties former a partnership for the purpose of operating a machine shop, and manufacturing and selling dies, tools and other similar products. Later the partnership business was moved to Los Angeles where it continued in operation until plaintiff filed this action for dissolution and an accounting. Pursuant to stipulation, the court entered an interlocutory judgment dissolving the partnership and appointed a receiver to take over the assets of the partnership, and appointed a referee for the purpose of taking an accounting of all the partnership transactions, and to ascertain the amount that each partner was entitled to receive upon dissolution, and to report his findings to the court. The referee conducted hearings at which all parties were present and testified. Under the partnership agreement plaintiff Balian had a 20 per cent interest, defendant Rainey had a 60 per cent interest, and defendant Chakmakjian had a 20 per cent interest. They were to share profits and losses on this percentage basis. The agreement further provided that all parties should devote all their time, energy and business experience to the business of the copartnership, and that no salaries were to be paid to any of the partners. “However, in ease of extended absence of any partner, that partner shall forfeit $50 per week for the time of tbe ex[12]*12tended absence, which amount will be charged to the absent partner • and distributed to the remaining partners in the proportion that their respective shares of the profits and losses bear to one another.”

The referee found that plaintiff Balian did no work for the partnership for a period of seven weeks in 1948, that he was charged the sum of $350 for such absence, and that he did not then object to that charge; the referee also found that he did no work for the partnership at any time after January 1, 1949, a total of 91 weeks.

The question thus presented to the court was whether the account of plaintiff Balian should be charged $4,550 for such absence and the accounts of the other two partners appropriately credited. The trial court ordered such deduction and crédits. It is from this order that plaintiff appeals.

The referee further found that during various portions of 1949 plaintiff engaged in building operations constructing two store buildings as a partner of another person and remodeling his own home; that on various occasions he went to the plant of the partnership and obtained tools for use in his building operations.

The problem presented in this case is one of determining the intention of the parties to the partnership agreement. Effect must be given to such intention where it is not wholly at variance with correct legal interpretations of the terms of the contract. Where a contract is ambiguous, the “practical construction placed by the parties upon the instrument is the best evidence of their intention.” (Universal Sales Corp. v. California etc. Mfg. Co., 20 Cal.2d 751, 761-762 [128 P.2d 665]; Moore v. Wood, 26 Cal.2d 621, 629 [160 P.2d 772]; Vogel v. Bankers Bldg. Corp., 112 Cal.App.2d 160, 166-167 [245 P.2d 1069].)

As a result of plaintiff’s absence for seven weeks in 1948 a charge was made against him of $350 and he did not then make any objection to that charge, and the accounts of the parties were adjusted upon that basis. Such interpretation of the partnership agreement by the parties is “cogent and persuasive evidence” of their intent and the true meaning of the agreement (Vogel v. Bankers Bldg. Corp., supra), and supports the order of the trial court.

Plaintiff argues that a charge of $50 per week covering the period of his absence is in the nature of a penalty and its imposition works a forfeiture of his capital investment. He points out that the law abhors a forfeiture and that where [13]*13there are two possible constructions of a contract, one of which leads to a forfeiture and the other avoids it, the construction which avoids the forfeiture must be made if at all possible. (Ballard v. MacCallum, 15 Cal.2d 439, 444 [101 P.2d 692].) He then argues that a forfeiture may be avoided by saying that this clause “was intended to be a withholding from the profits distributed during a profit and loss period of $50 per week for extended absences of any partner during that period.”

There is no suggestion in the agreement that the $50 per week which is to be “charged to the absent partner” who is on an “extended absence” is contingent upon the partnership ’s making a profit; nor is there any logic to reading such a condition into the agreement. In fact, the absent partner’s “business experience” might be more sorely needed when the firm was operating in the red. It might well be in such circumstances that if the absent partner were actively participating in the partnership business the investments of the other partners would not suffer.

The fact that the firm was making a profit when plaintiff was absent for a period of seven weeks in 1948 and his account accordingly charged for such period at the rate of $50 per week does not justify an implication that charges for such absences were to be made only in the event the firm was making a profit. It was a mere coincidence that such was the fact during that particular “extended absence.”

No significance should be attached to the fact that this provision for charging an absent partner $50 per week is in the paragraph of the agreement entitled Division of Profits. The correct title for that paragraph should be Division of Profits and Losses, because it sets out how the parties “shall divide all profits and losses.” The real explanation for this provision being in this particular paragraph is that the amount charged against a partner on an extended absence is to be “distributed to the remaining partners in the proportion that their respective shares of profit and losses bear to one another.” The amount of the charges against a partner as a result of his “extended absence” was thus to be divided between the other two partners on the same basis that profits and losses of the firm’s operations were to be shared.

By the terms of the partnership agreement the parties were required to “devote all their time, energy and business experience to the business of the Co-partnership.” No salary was to be paid to any of the parties. Their “time, energy and [14]*14business experience” may therefore be considered a partnership asset. It was recognized that one or more of the parties might have occasion for an “extended absence” thereby withdrawing such asset from the partnership for a period of time.

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Bluebook (online)
251 P.2d 731, 115 Cal. App. 2d 10, 1952 Cal. App. LEXIS 1761, Counsel Stack Legal Research, https://law.counselstack.com/opinion/balian-v-rainey-calctapp-1952.