Shannon v. Hudson

FOX, P. J.

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.

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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 and 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

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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

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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.