Kaufman v. Lombard

197 P. 314, 100 Or. 378, 1921 Ore. LEXIS 119

• Court: Oregon Supreme Court
• Decided: April 26, 1921
• Status: Published

Opinion

BEAN, J.

1. It is difficult to- discover a real dispute between the principal parties, John P. Kaufman, plaintiff, and Norman Lombard. Neither seems to have been injured in a business way. The partnership of John E. Kaufman & Company has been dissolved. The assets of the partnership are held by the Agricultural Credit Corporation of Oregon. There is no dispute as to the share of the net assets that each of the parties are to receive. As to the possession and control of the notes and mortgages, which constitute a large portion of the partnership assets held in the name of the corporation, there is some controversy on the part of the members of the partnership. Mr. Kaufman is unwilling that Mr. Lombard shall be in a position to transfer the assets to the state of California, where he resides. Mr. Lombard evinces no desire to do so, and as we understand the record, is willing that a decree shall provide that such assets shall not be removed from the State of Oregon. By an order of the Circuit Court these assets were placed in the custody of the Portland Trust Company of Portland, Oregon. As far as we can discover, such disposition is satisfactory to both of the parties. There appears to be but one thing necessary to be done. That is to settle up the partnership affairs. This is the third suit that has been instituted involving some phase of the partnership or corporation interests. We concur in the findings of the Circuit Court that the election of Norman Lombard, Ben C. Dey and Alfred A. Hampson, as directors of the Agricultural Credit Corporation, on January 9, 1919, should not be annulled.

It is the contention of plaintiff that by virtue of a clause in the partnership contract he should have been elected as a director and then as president of the corporation. The partnership stipulation in this regard reads as follows:

“John F. Kaufman shall he elected president of the said corporation and shall devote his entire time and energies to the operation of the business, receiving therefor from the corporation a salary of thirty-six hundred dollars ($3,600) per annum, payable monthly, and reimbursement for legitimate expenses. Norman Lombard shall be elected a director, and sufficient shares shall be issued to other parties to qualify them as directors under the laws of the State of Oregon. ’ ’

Mr. Kaufman was elected president of the corporation and held that position for a long time. During 1918, on account of an action against the ■Agricultural Credit Corporation for the collection of certain notes, secured by a large amount of collateral, which Mr. Lombard understood to have been brought at the instigation of Mr. Kaufman, Lombard desired the holding of a special meeting of the stockholders of the corporation in order to facilitate arrangements for taking care of the notes. He instituted proceedings to compel Kaufman, as president of the corporation, to call such meeting. A peremptory writ of mandamus requiring a meeting to be held was adjudged to be issued. While an appeal was pending therefrom the time for the holding of the regular stockholders’ meeting of the corporation, as provided for in its by-laws, arrived, and Norman Lombard, who owned 75 per cent of the shares of stock in the corporation, and Ben C. Dey and Alfred A. Hampson, to whom a share of stock had been assigned in order to qualify them to act as directors, appeared at the office where the business of the corporation had been transacted for the purpose of holding an election. Mr. John F. Kaufman was present. He had for a long time had charge of the office. Mr. Lombard, as vice-president of the corporation, called the meeting to order and Lombard, Dey and Hampson were elected as directors, and at a subsequent directors’ meeting the following officers of the corporation were chosen: Norman Lombard, president and treasurer; Alfred A. Hampson, vice-president; Ben C. Dey, secretary. Mr. Kaufman refused to participate in the election. It is asserted on behalf of Mr. Lombard that had he been willing to act at the election he would have been elected a director and president. The partnership agreement provides that John F. Kaufman shall be elected president of the corporation, and he was so elected. The agreement does not attempt to provide for all future contingencies and does not stipulate that Mr. Kaufman should hold the office of president in perpetuity. Under the circumstances, Lombard could not well compel Kaufman to act as a director and president of the corporation. We find no reason for annulling the election. The interests of plaintiff do not demand that such proceedings should be vacated. An executory contract between stockholders that they will elect a certain person as a director of the corporation will rarely be enforced specifically by the courts: Cook on Corporations, 1834.

The prosperity of the partnership business has not borne the fruit of business love between the partners. Diplomatic relations between the two seem to have ceased. What appears to be necessary is that the partnership affairs should, if possible, be settled in this proceeding. The restraining order prayed for by plaintiff in his complaint and the injunction asked in the answer of defendants should not be granted, except in part. The cause should be remanded, to the Circuit Court for a decree to the effect as follows: That the Portland Trust Company of Portland, Oregon, shall continue to take and hold all the assets of the partnership of John F. Kaufman & Company, held in the name of Agricultural Credit Corporation of Oregon, and all the assets of that corporation as fiscal agent, the Portland Trust Company, acting in consultation and conjunction with Mr. John F. Kaufman, the former managing partner, and the directors of the corporation, to marshal the assets and collect the same as soon as it can be done consistently with business principles, and pay and liquidate the liabilities of the corporation, including the amounts, if any, due to Norman Lombard and John F. Kaufman partners, and after deducting expenses thereof, pay the balance to the members of the partnership, or stockholders of the corporation, that is, three fourths to Norman C. Lombard and one fourth to John F. Kaufman, or as their interest represented by the shares»: of stock in the corporation may appear at that time; and that all of the affairs of the partnership and those of the corporation be fully adjusted and settled. All of such proceedings shall be had under and pursuant to the general orders and direction of the Circuit Court, the Circuit Court to make all necessary ancillary orders and decrees that may be deemed appropriate at any time.

Such decree shall be without prejudice to the rights of any of the parties to litigate, either in the present suit or in separate proceedings, any disputed questions or matters that may arise in relation to the corporation of partnership affairs. Such decree may be modified by the Circuit Court, as to the disposition and control of the assets, at any time on motion of either party and notice to the other, as circumstances may demand, and as may appear for the best interests of the partnership and corporation.

As so modified, the decree of the lower conrt is affirmed. The canse will be remanded to the Circuit Court for such further proceedings, each party to bear their own costs and disbursements upon this appeal. Affirmed as Modified and Remanded.

Burnett, C. J., and Johns and Brown, JJ., concur.