LESSER SON v. SEYMOUR (1949)

In this action for dissolution of a partnership and sale of partnership assets, the defendants appeal from an order of sale of receivership assets made at the conclusion of hearings had on a petition by the receiver for confirmation of sale.

Plaintiffs and defendants purchased the property known as ‘Forbes Farms Nos. 1, 2, 3 and 4’, near Thermal in Riverside County, on June 6, 1946. The farms were operated as a partnership by the parties and on October 2, 1947, the plaintiffs filed an action in superior court for the dissolution and termination of the copartnership; for an accounting; for appointment of a receiver; and for a sale of the partnership assets. It was alleged, among other things, that the purchase price of the property was the sum of $616,000.00, of which $177,100.00 was advanced by the plaintiffs; that the balance of the purchase price was covered by a promissory note of the defendants, which note was secured by trust deed and chattel mortgage; that the defendants had been guilty of conduct tending to affect prejudicially the carrying on of the, business of the copartnership and various acts of the defendants in that respect are specifically set forth. It is alleged that both plaintiffs and defendants are unskilled in the operation of ranches; that no accounting has been had between the parties and that the appointment of a receiver is necessary to prevent damage and depreciation in value of the property and to prevent waste and irreparable injury to the plaintiffs; that the defendants are not financially responsible and that it is necessary that a receiver be appointed to collect the income of the copartnership and to apply such income to the payment of partnership obligations.

On October 2, 1947, upon motion of the plaintiffs, a receiver was appointed of all of the assets of the partnership. On December 15, 1947, an order for sale of partnership property was issued by Hon. Wm. D. Dehy, Judge assigned. This order was entitled ‘Order for sale of partnership property within six months from December 2, 1948 or for sale upon the notice and in the manner prescribed by law for the sale of such property under execution’. It provided that the receiver sell the Forbes Farms therein described, together with personal property consisting of machinery, equipment, supplies and miscellaneous personal property, partially described in said order. It was provided therein that in the event an offer of purchase was procured prior to the 2nd day of June, 1948, the receiver was ordered to file a petition for confirmation of sale; that in the event an offer was received from any person for the purchase of the property, the offer was to be communicated to the receiver and if it was the highest offer received by him to the date thereof, that he should file a petition for confirmation; that all sales were subject to confirmation of the court and that upon the hearing of any petition for confirmation, any person might rise the offer returned in the petition. Paragraph VII of the order reads as follows: ‘VII. In the event that the aforedescribed receivership property or any part or portion thereof shall not be sold in the manner as above set forth prior to the 2nd day of June, 1948, the Receiver in the above-entitled cause is now hereby ordered to sell said receivership property or the unsold portion thereof in the manner and upon the notice prescribed by law for the sale of such property under execution. Such sale shall not be final until confirmed by this court upon a petition for confirmation by the Receiver herein.’

On or about the 24th day of December, 1947, an offer to purchase was submitted to the receiver by one Anita Short. The offer was in writing and was in the total sum of $450,000.00. On receiving the said offer, the receiver filed a petition for confirmation of sale and an order to show cause was issued thereon returnable before the court on the 5th day of March, 1948. The defendants filed a motion for the continuance of the hearing and also filed objections to the petition of the receiver for the sale of the property. Plaintiffs filed affidavits in opposition to the motion for continuance and filed an answer to the objections filed by the defendants to the petition for confirmation.

The motion fo continuance was denied and evidence for and against the petition for confirmation was received by the court at various hearings commencing on the 5th day of March, 1948, and terminating on June 5th of that year. The continuances were necessary by reason of the inability of the parties to complete the taking of testimony.

Pursuant to agreement of counsel, the court set the 25th day of March, 1948, as the time to receive bids for the properties involved and ordered the properties advertized for sale in newspapers of national circulation by notices of sale approved in form by all of the parties to the action, which notices, among other things, provided that bids would be accepted for the property at said time.

On March 25, 1948, at the time noticed, the court asked for bids on the property and the plaintiffs submitted a bid in the sum of $478,301.04, which bid was thereafter during the course of the proceedings amended by the plaintiffs to the sum of $518,065.20, that being the sum bid by the plaintiffs for all of the assets and properties of the receivership estate. The bid of the plaintiffs was the only bid submitted on the 25th of March and the hearing was continued until April 13, 1948. At that time a bid was submitted by a Mr. Wiseman, which bid apparently satisfied the parties who were present in court, the hearing was adjourned and the attorneys proceeded to prepare the necessary papers to effect a disposition of the entire matter. However, the parties were unable to agree upon the terms of the settlement and met again in court on May 3, 1948, and again on May 10, 1948, at which time the hearing on the petition for confirmation was continued without objection to June 2, 1948, and thereafter to June 3rd and June 5th, when the fixed bid submitted by the plaintiffs in the sum of $518,065.20 was accepted by the court and the sale of all of the assets was confirmed to the plaintiffs, Lesser and Son, a copartnership.

Defendants first contend that the court improperly accepted a new bid made on June 5th and improperly confirmed a sale pursuant thereto instead of ordering the receiver to sell the property in the manner and upon the notice as upon execution.

This contention is based on the assumption that the court was bound by the order of sale which provided that if the property was not sold prior to the 2nd day of June, 1948, the receiver was required to conduct a sale of the partnership assets in the manner and upon the notice prescribed by law for the sale of such property under execution and the contention is that the order so made having become final, the court was without power to order the sale made on June 5th. In our opinion the point is not well taken. The court undoubtedly had the power to direct the terms of the sale in the first instance but it also had the power to change the terms at a later date, and by confirming the sale, ratify the changes; provided, of course, that the terms so ratified were such as the court had power to impose in the first instance. Bechtel v. Wier, 152 Cal. 443, 445, 93 P. 75, 15 L.R.A.,N.S., 549. As was said in Los Angeles Auto Tractor Co. v. Superior Court, 94 Cal.App. 433, 440, 271 P. 363, 366, ‘The power of a chancery court to supervise the execution of its orders, and even to modify them in ways affecting only the details of their performance, has long been recognized.’ Moreover, the court has at all times such control of its process as to prevent it from becoming a source of injury, and in the absence of some showing that injury has resulted from a delay in making the sale, it should not be set aside merely because it was not made before the time limit specified in the first order. Southern California Lumber Co. v. Ocean Beach Hotel Company, 94 Cal. 217, 224, 29 P. 627, 28 Am.St.Rep. 115.

In the instant action the delay occasioned by the protracted hearings on the petition for confirmation resulted in the submission and acceptance of a bid which was in excess of that submitted by the first bidder, Anita Short. The court found on conflicting evidence that the partnership was being operated as a substantial loss to the parties; that the bid of Lesser and Son, which was finally accepted, was the reasonable market value of all of the assets and properties of the receivership estate and that unless the receivership estate be sold, further loss might be sustained by the receiver in the operation thereof and in the event of and upon the harvesting of the grape crop, the net proceeds which would be derived therefrom would with reasonable certainty be only sufficient to pay liabilities of the receivership estate and of the copartnership and would not provide a fund with which to continue to operate said estate; that the continued operations of said farms and the receivership estate was speculative; that the defendants had not and would not advance any funds for the operation of the receivership estate; that it was, therefore, for the best interests of the creditors of the receivership estate and of the copartnership that said receivership estate be sold; that it was for the best interests of the estate, the copartnership and the creditors that the bid of Lesser and Son for the sum of $518,065.20 be accepted. It would seem, therefore, that the order for the sale was necessary to prevent injury to all of the parties to the action. In fact, the entire record supports the assertion that the parties were all endeavoring to effect a sale by the receiver.

The sale of the partnership assets in the manner and upon the notice prescribed by law for sales under execution was not urged by the defendants during the many hearings had prior to June 5, 1948. The hearings on the receiver's petition for confirmation of sale were commenced long prior to June 2, 1948, a fixed bid of Lesser and Son was made prior thereto and the proceedings commenced upon the petition finally resulted in a definite, fixed and final bid.

The objection is made that the final order of sale included properties which were not mentioned in the first order obtained. However, the receiver was appointed to take charge of all of the assets of the partnership estate and the court was authorized to and did dispose of the entire properties.

Defendants next argue that the final bid was not fixed and certain. As we read the record, the bid was definite and for the entire properties involved. The order of sale provided that Lesser and Son should be entitled to credit for payments made by them to the estate and also payments necessary to take care of indebtedness of the partnership. We find no error in the provisions which were apparently calculated to facilitate the settlement of the partnership affairs, the credits being permissible in lieu of cash. Owen v. Cohen, 19 Cal.2d 147, 153, 119 P.2d 713.

Finally, it is urged by the defendants that the final order of sale was void because it was entered nunc pro tunc as of the 2nd day of June, 1948. In view of what we have here said relative to the power of the court to change orders of sale, we see no prejudicial error in entering such order.

The order is affirmed.

MUSSELL, Justice.

GRIFFIN, Acting P. J., concurs.